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Article by DailyStocks_admin    (11-28-13 11:39 PM)

Description

SAEXPLORATION HOLDINGS, INC. Director, 10% Owner ERIC ROSENFELD bought 147,357 shares on 11-20-2013 at $ 7.32

BUSINESS OVERVIEW

Introduction

Formation

Trio was incorporated on February 2, 2011 for the purpose of effecting a merger, capital stock exchange, asset acquisition or other similar business combination with one or more businesses or entities. In connection with its formation, Trio issued an aggregate of 1,437,500 shares of common stock for $25,000 in cash, at a purchase price of approximately $0.02 per share. On June 21, 2011, we effected a stock dividend of 0.2 shares for each outstanding share of common stock, resulting in 1,725,000 shares outstanding immediately prior to our initial public offering. We sometimes refer to these shares as our “initial shares” and the holders of these shares immediately prior to our initial public offering as our “initial stockholders.”

Initial Public Offering

On June 24, 2011, we closed our initial public offering of 6,000,000 units, with each unit consisting of one share of our common stock, and one warrant, each to purchase one share of our common stock at an exercise price of $7.50 per share. Each warrant will become exercisable upon the completion of an initial business combination and will expire three years after the completion of an initial business combination, or earlier upon redemption. On June 27, 2011, we consummated the sale of an additional 900,000 units which were subject to an over-allotment option granted to the underwriters of our initial public offering. The units from the initial public offering (including the units subject to the over-allotment option) were sold at an offering price of $10.00 per unit, generating total gross proceeds of $69,000,000. EarlyBirdCapital, Inc. acted as the representative of the underwriters for the initial public offering. The shares of common stock and warrants comprising the units commenced separate trading on August 2, 2011. We sometimes refer to the shares and warrants sold in our initial public offering as the “public shares” and the “public warrants,” and to the holders thereof as the “public stockholders” and “public warrantholders.”

Simultaneously with the consummation of our initial public offering, we consummated the private sale of 6,500,000 warrants to our initial stockholders and 600,000 warrants to EarlyBirdCapital, Inc. and its designees, in each case at $0.50 per warrant for an aggregate purchase price of $3,550,000. We sometimes refer to the warrants issued to our initial stockholders as the “insider warrants” and the warrants issued to EarlyBirdCapital, Inc. as the “EBC warrants.” The insider warrants and the EBC warrants are identical to the warrants sold in our initial public offering, except that they are exercisable for cash or on a cashless basis, at the holders’ option, and are not redeemable by us, in each case so long as such warrants are held by the initial purchasers or their affiliates. The purchasers have agreed that these warrants will not be sold or transferred by them (except to certain permitted transferees) until after we have completed an initial business combination.

Offering Proceeds Held in Trust

Of the net proceeds from our initial public offering, $65,660,000, plus the $3,550,000 we received from the sale of the insider warrants and EBC warrants, for an aggregate of $69,210,000, was placed in a trust account at UBS Financial Services Inc. and JPMorgan Chase Bank, N.A., and maintained by Continental Stock Transfer & Trust Company, acting as trustee. Except as described below, in the prospectus for our initial public offering and in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” these proceeds will not be released until the earlier of the completion of an initial business combination and our redemption of 100% of the outstanding public shares upon our failure to consummate a business combination by June 24, 2013.

As provided in the prospectus for our initial public offering, in accordance with our 10b5-1 share repurchase plan which was in effect until March 14, 2012, Trio released $7,539,736 from the trust account in order to repurchase 783,145 public shares. On March 14, 2012, Trio’s board elected to terminate the 10b5-1 share repurchase plan in order to pursue a national securities exchange listing.

Nasdaq Listing

Commencing after our initial public offering, our common stock, warrants and units were traded on the OTCBB. Effective March 26, 2012, our common stock was listed on the NASDAQ Capital Market. As a condition to listing, our units ceased public trading and were mandatorily separated into their component parts (one share of common stock and one warrant to purchase one share of common stock). Our warrants continue to trade on the OTCBB.

Merger Agreement

On December 10, 2012, Trio entered into an Agreement and Plan of Reorganization (the “Merger Agreement”) with Trio Merger Sub, Inc., a wholly-owned subsidiary of Trio (“Merger Sub”), SAExploration Holdings, Inc. (“SAE”) and CLCH, LLC, the holder of a majority of SAE’s outstanding common stock and all of SAE’s outstanding Series A Preferred Stock (“CLCH”). Upon the consummation of the transactions contemplated by the Merger Agreement, SAE will be merged with and into Merger Sub, with Merger Sub surviving the merger and remaining a wholly-owned subsidiary of Trio. Upon the consummation of the merger contemplated by the Merger Agreement, Trio will change its name to “SAExploration Holdings, Inc.”

SAE is a geophysical services company offering seismic data acquisition services to the oil and gas industry in North America, South America, and Southeast Asia. SAE provides a full range of services related to the acquisition of 2D, 3D and 3C (Multi-Component) seismic data projects on land, in transition zones between land and water and in shallow water.

The merger is expected to be consummated in the second quarter of 2013, after the required approval by the stockholders of Trio and the fulfillment of certain other conditions, as described in our Current Report on Form 8-K filed on December 11, 2012 (the “Merger Form 8-K”) and in the Merger Agreement.

The description of the Merger Agreement and the transactions contemplated thereby contained in the Merger Form 8-K is incorporated herein by reference.

Warrant Exchange

As a condition to entering into the Merger Agreement, SAE required that we effectuate certain changes with respect to our outstanding warrants. Accordingly, to accommodate such requirement and induce SAE to enter into the Merger Agreement, we obtained the written consent from registered holders of a majority of our outstanding warrants to increase the exercise price of such warrants to $12.00 per share and increase the redemption price of such warrants to $15.00 per share. Such amendments will become effective upon consummation of the merger with SAE. Additionally, Trio has agreed to offer holders of Trio’s warrants the right to exchange their warrants for shares of Trio common stock, at the rate of ten warrants for one share of Trio common stock. We sometimes refer to this exchange offer as the “warrant exchange.” The parties will seek to commence the warrant exchange as soon as practicable after the closing of the merger. The warrantholders who consented to the amendment to the warrants also have agreed to participate in the warrant exchange with respect to the warrants held by them. Any warrants remaining outstanding after the consummation of the warrant exchange will continue to have the same terms as currently set forth in such warrants except as modified by the amendments to the exercise and redemption prices described above. Additionally, the holders of the unit purchase options to purchase 600,000 units (each consisting of one share of our common stock and one warrant) at $11.00 per unit, which were issued to the underwriters at the closing of our initial public offering, have agreed to exchange their purchase options for an aggregate of 100,000 shares at the closing of the merger with SAE.

Effecting a Business Combination

Fair Market Value of Target Business

The target business or businesses that we acquire must collectively have a fair market value equal to at least 80% of the balance of the funds in the trust account at the time of the execution of a definitive agreement for our initial business combination, although we may acquire a target business whose fair market value significantly exceeds 80% of the trust account balance. Trio’s board of directors determined that this test was met in connection with its business combination with SAE.

Approval of Business Combination

Under our amended and restated certificate of incorporation, in connection with any proposed business combination, we may either (i) seek stockholder approval of an initial business combination at a meeting called for such purpose at which stockholders may seek to convert their shares, regardless of whether they vote for or against the proposed business combination, or (ii) provide our stockholders with the opportunity to sell their shares to us by means of a tender offer (and thereby avoid the need for a stockholder vote), in each case subject to the limitations described in the prospectus for our initial public offering. Trio’s board of directors has determined to seek stockholder approval of its business combination with SAE. Accordingly, in connection with the business combination with SAE, stockholders may seek to convert their shares at the stockholder meeting to be called to approve the business combination. Trio will not provide stockholders the opportunity to sell their shares to it by means of a tender offer.

Voting Restrictions in Connection with Stockholder Meeting

In connection with the vote for the proposed business combination with SAE, all of our initial stockholders, as well as all of our officers and directors, have agreed to vote the initial shares as well as any shares of common stock acquired in the aftermarket in favor of such proposed business combination.

None of our officers, directors, initial stockholders or their affiliates has purchased any shares of common stock in the open market or in private transactions. However, at any time prior to the meeting, during a period when they are not then aware of any material nonpublic information regarding Trio or its securities, Trio, the Trio initial stockholders, SAE or SAE’s stockholders and/or their respective affiliates may purchase shares from institutional and other investors who vote, or indicate an intention to vote, against the business combination with SAE, or execute agreements to purchase such shares from them in the future, or they may enter into transactions with such persons and others to provide them with incentives to acquire shares of Trio’s common stock or vote their shares in favor of the business combination with SAE. Trio may use the funds disbursed from the trust account upon the closing of the merger to fund such agreements and transactions.

The purpose of such share purchases and other transactions would be to increase the likelihood of satisfaction of the requirements that the holders of a majority of the public shares present and entitled to vote at the meeting to be called to approve the business combination with SAE vote in its favor and that holders of 5,620,923 or fewer of the public shares demand conversion of their public shares into cash, where it appears that such requirements would otherwise not be met. All shares repurchased by us or our affiliates pursuant to such arrangements would be voted in favor of the proposed business combination. As of the date of this Form 10-K, there have been no such discussions and no agreements to such effect have been entered into with any such investor or holder.

Conversion Rights

Under our amended and restated certificate of incorporation and in connection with the business combination with SAE, public stockholders may seek to convert their shares, regardless of whether they vote for or against the proposed business combination, for a portion of the funds in the trust account.

Any stockholder holding public shares as of the record date of the meeting to be called to approve such business combination who affirmatively votes against the business combination may demand that we convert such shares into $10.00 in cash. Any stockholder holding public shares as of the record date of such meeting who votes in favor of the business combination may demand that we convert such shares into a full pro rata portion of the trust account (which was approximately $10.08 per share as of December 31, 2012), calculated as of two business days prior to the anticipated consummation of the business combination. In this way, we provide a financial incentive to public stockholders to vote in favor of the business combination with SAE, thereby making it more likely that the business combination will be approved and consummated. If a holder properly seeks conversion as described in this section and the business combination is consummated, we will convert these shares into $10.00 in cash or a pro rata portion of funds deposited in the trust account, as applicable.

Notwithstanding the foregoing, a public stockholder, together with any affiliate of his or any other person with whom he is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act), will be restricted from seeking conversion rights with respect to more than 12.5% of the public shares. Accordingly, all public shares in excess of 12.5% held by a public stockholder will not be converted to cash.

Our initial stockholders will not have conversion rights with respect to any shares of common stock owned by them, directly or indirectly, whether initial shares or shares purchased by them in the aftermarket.

We may also require public stockholders, whether they are a record holder or hold their shares in “street name,” to either tender their certificates to our transfer agent at any time through the vote on the business combination or to deliver their shares to the transfer agent electronically using Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, at the holder’s option. There is a nominal cost associated with this tendering process and the act of certificating the shares or delivering them through the DWAC system. The transfer agent will typically charge the tendering broker $45 and it would be up to the broker whether or not to pass this cost on to the converting stockholder. In the event the proposed business combination is not consummated this may result in an increased cost to stockholders.

Any request to convert such shares once made, may be withdrawn at any time up to the vote on the proposed business combination. Furthermore, if a holder of a public share delivered his certificate in connection with an election of their conversion and subsequently decides prior to the applicable date not to elect to exercise such rights, he may simply request that the transfer agent return the certificate (physically or electronically).

If the initial business combination is not approved or completed for any reason, then our public stockholders who elected to exercise their conversion rights will not be entitled to convert their shares into $10.00 or a full pro rata portion of the trust account, as applicable, in connection with the initial business combination. In such case, we will promptly return any shares delivered by public holders.

Liquidation if No Business Combination

Under our amended and restated certificate of incorporation, if we do not complete the business combination with SAE or another initial business combination by June 24, 2013, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than five business days thereafter, redeem 100% of the outstanding public shares, at a per-share price, payable in cash, equal to an amount described below, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject (in the case of (ii) and (iii) above) to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.

If the merger with SAE or another proposed business combination that Trio presents to its stockholders for approval ultimately is not completed, the public stockholders that either voted against the last proposed business combination before redemption or did not vote on such business combination or sought to sell their shares to us in any tender offer commenced in connection with such proposed business combination shall be entitled to receive only $10.00 per share, and those public stockholders who either voted for the proposed business combination or did not seek to sell their shares to us in any tender offer and continued to hold their shares until redemption shall be entitled to receive a pro rata share of the trust account (which is approximately $10.08 per share as of December 31, 2012) plus any additional pro rata interest earned on the funds held in the trust account and not released to us for our working capital requirements or necessary to pay our taxes.

Each of our initial stockholders has agreed to waive its rights to participate in any distribution from our trust account or other assets with respect to the initial shares. There will be no distribution from the trust account with respect to our warrants, which will expire worthless if we are liquidated.

The proceeds deposited in the trust account could, however, become subject to the claims of our creditors which would be prior to the claims of our public stockholders. Although we have obtained waiver agreements from certain vendors and service providers we have engaged and owe money to, and the prospective target businesses we have negotiated with, including SAE, whereby such parties have waived any right, title, interest or claim of any kind they may have in or to any monies held in the trust account, and although we will seek such waivers from vendors we engage in the future, there is no guarantee that they or other vendors who did not execute such waivers will not seek recourse against the trust account notwithstanding such agreements. Eric S. Rosenfeld, our Chairman and Chief Executive Officer, has agreed, pursuant to an agreement with us and EarlyBirdCapital, Inc. that he will be personally liable to ensure that the proceeds in the trust account are not reduced by the claims of target businesses or claims of vendors or other entities that are owed money by us for services rendered or contracted for or products sold to us, but only if such a vendor or target business has not executed such a waiver. We cannot assure you that he would be able to satisfy those obligations. Accordingly, the actual per-share redemption price could be less than approximately $10.08, plus interest, due to claims of creditors. Additionally, if we are forced to file a bankruptcy case or an involuntary bankruptcy case is filed against us which is not dismissed, the proceeds held in the trust account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the trust account, we cannot assure you we will be able to return to our public stockholders at least approximately $10.08 per share.

Our public stockholders shall be entitled to receive funds from the trust account only in the event of our failure to complete a business combination within the required time periods or if the stockholders seek to tender or have us convert their respective shares for cash upon a business combination which is actually completed by us. In no other circumstances shall a stockholder have any right or interest of any kind to or in the trust account.

Under the Delaware General Corporation Law, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. The portion of our trust account distributed to our public stockholders upon the redemption of 100% of our outstanding public shares in the event we do not complete our initial business combination by June 24, 2013 may be considered a liquidation distribution under Delaware law. If the corporation complies with certain procedures set forth in Section 280 of the Delaware General Corporation Law intended to ensure that it makes reasonable provision for all claims against it, including a 60-day notice period during which any third-party claims can be brought against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution.

Furthermore, if the portion of our trust account distributed to our public stockholders upon the redemption of 100% of our public shares in the event we do not complete our initial business combination by June 24, 2013 is not considered a liquidation distribution under Delaware law and such redemption distribution is deemed to be unlawful, then pursuant to Section 174 of the Delaware General Corporation Law, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidation distribution. If we are unable to complete a business combination within the prescribed time frame, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than five business days thereafter, redeem 100% of the outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject (in the case of (ii) and (iii) above) to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. Accordingly, it is our intention to redeem our public shares as soon as reasonably possible following the expiration of the time periods described above and, therefore, we do not intend to comply with the procedures required by Section 280 of the Delaware General Corporation Law. As such, our stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend well beyond the third anniversary of such date.

Because we will not be complying with Section 280 of the Delaware General Corporation Law, Section 281(b) of the Delaware General Corporation Law requires us to adopt a plan, based on facts known to us at such time that will provide for our payment of all existing and pending claims or claims that may be potentially brought against us within the subsequent 10 years. However, because we are a blank check company, rather than an operating company, and our operations will be limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, etc.) or prospective target businesses.

We will pay the costs of any subsequent liquidation from our remaining assets outside of the trust account. If such funds are insufficient, Mr. Rosenfeld has agreed to pay the funds necessary to complete such liquidation (currently anticipated to be no more than approximately $15,000) and has agreed not to seek repayment for such expenses.

MANAGEMENT DISCUSSION FROM LATEST 10K

Overview

We are a Delaware blank check company incorporated on February 2, 2011 in order to serve as a vehicle for the acquisition of a target business. Our efforts to identify a prospective target business are not limited to any particular industry or geographic region. We intend to utilize cash derived from the proceeds of our public offering, our capital stock, debt or a combination of cash, capital stock and debt, in effecting a business combination.

Critical Accounting Policies

For a more detailed discussion of the Critical Accounting Policies, please see Note 2 to the consolidated financial statements included in this Form 10-K.

Basis of Presentation

The accompanying financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) pursuant to the rules and regulations of the SEC. The company has selected December 31 as its fiscal year end.

Principles of consolidation

The accompanying Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiary. All intercompany balances and transactions have been eliminated in consolidation.

Cash and Cash Equivalents

The Company considers all short-term investments with a maturity of three months or less when purchased to be cash equivalents.

Income Taxes

The Company accounts for income taxes under Accounting Standards Codification (“ASC”) 740 Income Taxes (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.

Loss Per Share

The Company complies with accounting and disclosure requirements of ASC 260, “Earnings Per Share.” Loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. Common shares subject to possible conversion at December 31, 2012 of 5,620,923 have been excluded from the calculation of basic loss per share since such shares, if converted, only participate in their share of the trust earnings. At December 31, 2012, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised and converted into common stock and then share in the earnings of the Company. As a result, diluted loss per common share is the same as basic loss per common share for the period. The Company has not considered the effect of warrants to purchase 14,000,000 shares of common stock or the unit purchase option in the calculation of diluted loss per share, since the exercise of the warrants and the unit purchase option are contingent upon the occurrence of future events.

Common stock subject to possible conversion

The Company accounts for its common stock subject to possible conversion in accordance with the guidance enumerated in ASC 480 “Distinguishing Liabilities from Equity”. Common stock subject to mandatory conversion (if any) is classified as a liability instrument and is measured at fair value. Conditionally convertible common stock (including common stock that features conversion rights that are either within the control of the holder or subject to conversion upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock features certain conversion rights that are considered by the Company to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly at December 31, 2012, the common stock subject to possible conversion is presented as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheet.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

Recent Accounting Pronouncements

Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.

Results of Operations

Our entire activity since inception up to the closing of our initial public offering on June 24, 2011 was in preparation for that event. Since the offering, our activity has been limited to the evaluation of business combination candidates and negotiating, structuring and pursuing the consummation of the business combination with SAE, and we will not be generating any operating revenues until the closing and completion of our business combination with SAE or another target business. We expect to generate small amounts of non-operating income in the form of interest income on cash and cash equivalents. Interest income is not expected to be significant in view of current low interest rates on risk-free investments (treasury securities).

We incurred a net loss of $985,441 for the fiscal year ended December 31, 2012. This net loss was largely composed of Nasdaq listing fees of approximately $67,900, monthly administrative fees to Crescendo Advisors II, LLC (which is owned by our Chairman and Chief Executive Officer, Eric S. Rosenfeld) of $120,000, Delaware Franchise Taxes of $154,350, New York state capital taxes of approximately $110,800, services relating to the rendering of a fairness opinion of $75,000, accounting expenses of $42,500 and legal expenses of approximately $328,400.

We incurred a net loss of $347,995 for the period from February 2, 2011 (inception) until December 31, 2011. This net loss was largely composed of marketing expenses of approximately $49,700, monthly administrative fees to Crescendo Advisors II, LLC of $62,000, Delaware Franchise Taxes of approximately $83,000, New York state capital taxes of $70,000, accounting expenses of $22,500 and legal expenses of approximately $16,400.

We incurred a net loss of $1,333,436 for the period from February 2, 2011 (inception) until December 31, 2012. This net loss was largely composed of marketing expenses of approximately $49,700, monthly administrative fees to Crescendo Advisors II, LLC of $182,000, Delaware Franchise Taxes of approximately $237,350, New York state capital taxes of $180,800, accounting expenses of $65,000, NASDAQ listing fees of $72,900, a services related to the rendering of a fairness opinion of $75,000 and legal expenses of approximately $344,800.

Financial Condition and Liquidity

The net proceeds from our initial public offering, after deducting offering expenses of approximately $465,000 and underwriting discounts of $2,415,000, were approximately $66,120,000. Of this amount, $65,660,000 and the $3,550,000 we received from the sale of the insider warrants and the EBC warrants, was placed in the trust account. The remaining net proceeds not in trust became available for use for working capital purposes. Generally, the proceeds held in the trust account will not be released to us until the earlier of our completion of an initial business combination and our redemption of 100% of the outstanding public shares upon our failure to consummate a business combination within the required time period. Notwithstanding the foregoing:

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There can be released to us from the trust account any interest earned on the funds in the trust account that we need to pay our income or other tax obligations.

•
There can be released to us from the trust account any remaining interest earned on the funds in the trust account that we need for our working capital requirements.

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Prior to the termination of the 10b5-1 plan on March 14, 2012, Trio was required to release from the trust account such amounts necessary to repurchase up to 25% of the shares sold in our initial public offering (including the shares sold pursuant to the over-allotment option). On June 21, 2011, we entered into a 10b5-1 plan pursuant to which we maintained a limit order for the repurchase of up to 1,725,000 shares in the open market at $9.60 per share during the period specified above. When this plan was terminated, $7,539,736 had been released to us from the trust account in order to fund the repurchase of 783,145 shares.

Prior to our initial public offering, we issued a $100,000 principal amount unsecured promissory note to Eric S. Rosenfeld, our Chairman and Chief Executive Officer and one of our initial stockholders, on February 25, 2011. The loan was payable without interest on the earlier of February 25, 2012 or the closing of our initial public offering. We repaid this loan from the proceeds of our initial public offering that were not placed in the trust account. Commencing on June 21, 2011 and ending upon the consummation of a business combination or our liquidation (including the business combination with SAE), we began incurring a fee from Crescendo Advisors II, LLC of $10,000 per month for providing us with office space and certain general and administrative services.

As of December 31, 2012, we had approximately $8,400 in our operating bank account and approximately $61,698,900 in restricted cash and equivalents held in trust to be used for an initial business combination or to repurchase or convert our common shares. As of December 31, 2012, we had withdrawn approximately $12,750 of interest income from the trust account for working capital. As of December 31, 2012, approximately $28,300 of the amount on deposit in the trust account represented interest income, which is available to be withdrawn by us for working capital or tax purposes. In January of 2013, we withdrew an additional $27,500 of interest income for working capital. As of December 31, 2012, U.S Treasury Bills with one month, three month, and six month maturities were yielding approximately 0.02%, 0.05%, and 0.11%, respectively. While we may invest in other securities, we believe such rates are representative of those we may receive on the balance of the trust account.

As of December 31, 2012, we had used $7,539,736 of trust funds to repurchase 783,145 common shares in accordance with our 10b5-1 plan. As a result of these repurchases and the interest earned on the trust account and not released to us as described above, as of December 31, 2011, the full pro rata redemption price had increased from $10.03 per share at the time of our initial public offering to approximately $10.08 per share. On March 14, 2012, Trio’s Board of Directors elected to terminate the 10b5-1 share repurchase plan in order to pursue a listing on a national securities exchange. Between December 31, 2011 and March 14, 2012, we made no further repurchases of shares in accordance with our 10b5-1 plan.

On each of April 25, 2012, September 26, 2012 and November 21, 2012, Eric S. Rosenfeld, our chairman of the board and chief executive officer and one of the Trio initial stockholders, loaned us $100,000, for an aggregate of $300,000 in loans. The loans are non interest bearing and are payable at the consummation of a business combination. If we fail to consummate a business combination, the loans would become unsecured liabilities of the company; however, Mr. Rosenfeld has waived any claim against the trust account. The principal balance of the notes may be converted, at Mr. Rosenfeld’s option, to warrants at a price of $0.50 per warrants. The terms of these warrants will be identical to the private warrants sold in connection with our initial public offering. If we do not complete a business combination, the loans will be forgiven.

On December 10, 2012, we entered into the Merger Agreement with Merger Sub, SAE and CLCH, pursuant to which SAE will be merged with and into Merger Sub, with Merger Sub surviving as a wholly-owned subsidiary of Trio.

We have incurred and expect to incur significant costs in pursuit of our business combination with SAE. We will use the remainder of our funds not held in the trust account and the interest earned on the funds held in the trust account to pay such costs. In addition, we may need to enter into contingent fee arrangements with our vendors or raise additional capital through loans or additional investments from our initial shareholders, officers, directors, or third parties. None of the initial shareholders, officers or directors or any third party is under any obligation to advance funds to, or invest in, us. Accordingly, we cannot provide any assurance that additional financing will be available to us on commercially acceptable terms, if at all. If we are unable to raise additional capital, we may be required to take additional measures to conserve liquidity. Furthermore, there can be no assurance that our plans to consummate a business combination with SAE will be successful or successful within the required time period. We have no present revenue, and our cash and working capital as of December 31, 2012 are not sufficient to complete our planned activities for the current year. These conditions raise substantial doubt about our ability to continue as a going concern.

While none of the initial shareholders, officers or directors or any third party is under any obligation to advance funds to, or invest in, us, if necessary to meet our working capital needs, our officers, directors, initial stockholders or their affiliates may loan us funds, from time to time or at any time, in their sole discretion. Each loan would be evidenced by a promissory note. The notes would either be paid upon consummation of our initial business combination, without interest, or, at the holder’s discretion, up to $500,000 of the notes may be converted into warrants at a price of $0.50 per warrant. The warrants would be identical to the insider warrants. If we do not complete a business combination, the loans will be forgiven.

If the business combination with SAE is consummated within the required time period, we intend to use funds held in the trust account to pay the cash merger consideration to SAE’s common stockholders and the holder of the SAE’s preferred stock, to pay the holders of the public shares who exercise conversion rights, to pay expenses incurred in connection with the business combination with SAE, and for working capital and general corporate purposes of the combined company. If we are unable to complete a business combination within the required time period, Eric S. Rosenfeld, our chairman of the board and chief executive officer, will be personally liable to ensure that the proceeds in the trust account are not reduced by the claims of target businesses or claims of vendors or other entities that are owed money by us for services rendered or contracted for or products sold to us, but only if such a vendor or target business has not executed such a waiver.

MANAGEMENT DISCUSSION FOR LATEST QUARTER

Introduction

We are a geophysical services company offering a full range of seismic data acquisition services in North America, South America and Southeast Asia. We were initially formed on February 2, 2011 as a blank check company in order to effect a merger, capital stock exchange, asset acquisition or other similar business combination with one or more business entities. On December 10, 2012, we entered into an Agreement and Plan of Reorganization as amended by a First Amendment to Agreement and Plan of Reorganization dated as of May 23, 2013 (the “Merger Agreement”), with Trio Merger Sub, Inc. (“Merger Sub”), the entity formerly known as SAExploration Holdings, Inc. (“Former SAE”) and CLCH, LLC (“CLCH”), which contemplated Former SAE merging with and into Merger Sub with Merger Sub surviving as our wholly-owned subsidiary (the “Merger”). The Merger was consummated on June 24, 2013, at which time our business became the business of Former SAE.

The Merger was accounted for as a reverse acquisition in accordance with GAAP. Under this method of accounting, we were treated as the “acquired” company for financial reporting purposes. This determination was primarily based on Former SAE comprising the ongoing operations of the combined entity, Former SAE senior management comprising the senior management of the combined company, and the Former SAE common stockholders having a majority of the voting power of the combined entity. In accordance with guidance applicable to these circumstances, the Merger was considered to be a capital transaction in substance. Accordingly, for accounting purposes, the Merger was treated 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 no goodwill or other intangible assets recorded. Operations prior to the Merger are those of Former SAE. The equity structure after the Merger reflects Former SAE’s equity structure.

Overview

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 and in shallow water, as well as seismic data field processing. Our customers include national oil companies, major international oil companies and independent oil and gas exploration and production companies. Our services are primarily used by our customers to identify and analyze drilling prospects and to maximize successful drilling, making demand for such services dependent upon the level of customer spending on exploration, production, development and field management activities, which is influenced by the fluctuation in oil and natural gas commodity prices. Demand for our services is also impacted by long-term supply concerns based on national oil policies and other country-specific economic and geo-political 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 over our competitors and providing us with opportunities for growth. Many of the areas of the world where we work have limited seasons for seismic data acquisition, requiring high utilization of key personnel and redeployment of equipment from one part of the world to another. All of our remote area camps, drills and support equipment are easily containerized and made 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, we are 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 North America than in other regions, and our North American revenues tend to be more dependent upon data acquisition services rather than our full line of services.

While our revenues from services are mainly affected by the level of customer demand for our services, operating revenue is also affected by the bargaining power of our customers relating to our services, as well as the productivity and utilization levels of our data acquisition crews. Our logistical expertise can be a mitigating factor in service price negotiation with our customers, allowing us to maintain larger margins in certain regions of the world, particularly in the most 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 and size 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 maintaining margins in the various regions in which we operate. Specifically, we are investing in equipment that is lighter weight and more easily shipped between the different regions. The ability to reduce both the costs of shipment and the amount of shipping time increases our operating margins and utilization of equipment. Similar logic applies to the utilization of personnel. We focus on employing field managers who are mobile and have the expertise and knowledge of many different markets within our operations. This allows for better timing of operations and the ability of management staff to run those operations while at the same time minimizing personnel costs. An added benefit of a highly mobile field management team is better internal transfer of skill and operational knowledge and the ability to spread operational efficiencies rapidly between the various regions.

Generally the choice of whether to subcontract out services depends on the expertise available in a certain region and whether that expertise is more efficiently obtained through subcontractors or by using our own labor force. For the most part, services are subcontracted within North America and our personnel are used in other regions where we operate. When subcontractors are used, we manage them and require that they comply with our work policies and Quality, Health, Safety and Environmental objectives. Our customers continue to request increased recording channel capacity on a per crew or project basis in order to produce higher resolution images, to increase crew efficiencies and to allow us to undertake larger scale projects. In order to meet these demands, we continue to invest in additional land and marine channels, and routinely deploy a variable number of channels with multiple crews in an effort to maximize asset utilization and meet customer needs. We believe that increased channel counts and more flexibility of deployment will result in increased crew efficiencies, which we believe should translate into higher revenues and margins.

Contracts

We conduct data acquisition services under master service agreements with our customers that set forth certain obligations of us and our customers. A supplemental agreement setting forth the terms of a specific project, which may be cancelled by either party on short notice, is entered into for every data acquisition 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. While our current projects are operated under a close to even mix of turnkey agreements and term agreements, we expect that the number of turnkey agreements will grow, particularly as our management continues to better evaluate the costs and risks associated with fixed fee arrangements.

How We Generate Revenues

Our customer service package is designed to provide full service to our customers and, if so desired, to collect seismic data from remote and logistically difficult areas with little or no infrastructure. The services provided by us include the following:

Program Design, Planning and Permitting . Thorough planning and designing of our customer’s seismic program is key to reducing exploration risk. We offer to our customers an experienced design team, which includes geophysicists with extensive experience in 2D, 3D, and 4D survey design. We assess and recommend data acquisition parameters and technologies that best accomplish the customer’s geological objectives while remaining within overall budget and project plans.

The advance work on a customer’s seismic project begins with a comprehensive project plan. The scope of this plan will vary depending on the environment and operating region. Our team has extensive experience in planning seismic programs in heavily cultured areas (i.e., farm land, sensitive tropical regions, or populated areas, in logistically challenging land programs, in transition zones and in shallow water). Our project plans address overall working conditions, cultural and environmental concerns, permitting, regulatory approvals, camp requirements, and emergency response plans. Our project plans also include, where appropriate, plans for working with local indigenous communities to describe the work being performed, answering community concerns regarding the potential impact of the project, and explaining opportunities that may be available to the community through employment or other local services that may be provided for the project.

Once a seismic program is designed, we work with the customer to obtain the necessary permits from governmental authorities and access rights of way from surface and mineral estate owners or lessees where the survey is to be conducted. In most cases, the customer takes the lead in obtaining permits for seismic operations but we supplement these efforts in providing our expertise with the local communities and government agencies.

Camp Services . With many land seismic data acquisition projects being undertaken in remote areas, we employ streamlined processes for setting up and dismantling our field camps. Regardless of the environment, our camps are operated to maximize the safety, comfort and productivity of the team working on the customer’s project. Minimizing the environmental impact of each project is accomplished through the use of wastewater treatments, trash management, water purification, generators with full noise isolation and recycling areas.

We take safety at our camps very seriously and focus on the comfort of our teams. Each of our base camps contains a medical facility complete with doctors and nurses in the remote chance there is need to stabilize any potential injuries for medical transport. The camps are equipped 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. We utilize either vibrator energy sources or explosives depending on the nature of the program. Survey crews establish the source and receiver placements in accordance with the survey design agreed to by the customer, and lay out the line locations to be recorded and, if explosives are being used, identify the sites for shot-hole placement. The drilling crew creates the holes for the explosive charges that produce the necessary acoustical impulse. Our team has extensive experience in survey and line cutting services and uses the latest technologies to ensure accuracy. In markets where the survey phase is completed by third parties, we manage the subcontractors to ensure overall project timelines are being met. Our senior drilling staff has a combined work experience of over 50 years in some of the most challenging environments in the world. This experience has helped us develop and implement numerous innovations in drilling techniques. We use drilling equipment that is versatile and portable, allowing us to operate in a variety of terrains and under widely varying weather conditions. Having such versatile equipment allows for minimal down time during a project when a change in weather or environmental conditions makes it necessary to implement different drilling techniques.

Recording . Our experience with logistically challenging programs on land, in transition zones and in shallow water ensures that the technology that best meets our customer’s program requirements will be utilized. As data quality in a seismic program is paramount and receiver decisions are critical, we use a variety of equipment capable of collecting 2D, 3D, time-lapse 4D and multi-component seismic data. We have over 26,000 land and marine seismic channels and other equipment available through rental or long-term leasing sources. All of our systems record equivalent seismic information but vary in the manner by which seismic data is transferred to the central recording unit, as well as in operational flexibility and channel count expandability. We continually monitor technological developments, and use our expertise to implement more complex and sometimes unique technology applications in our operations.

Processing . Our knowledgeable and experienced team provides our customers with high-quality field processing. Using the latest hardware and software, our technical and field teams electronically manage customer data from the field to our processing office, minimizing the time between field production and processing.

For full seismic processing, we use software from a variety of global suppliers. The data processing services provided by us range from just compilation of data and quality-control services to full interpretive services. All the steps employed in our basic processing sequence are tailored to the particular customer project and objectives, using the strictest quality control processes to meet or surpass industry-established standards. Once the data is processed as contracted, it is transferred to the customer for further processing or internal use.

Capital Investments in 2012 and 2013 and Impact on Operations

Our focus on providing leading edge technology will be at the forefront of our capital expenditure plans in the coming years, which investments will continue to strengthen our position and growth in the global oil and gas exploration services market. During fiscal year 2012, in line with our focus on wireless land data acquisition, we purchased a cableless seismic data acquisition system which allows up to three crews to operate under the system at the same time. Following customer needs for higher density land programs using a single point receiver application and to answer the demand for conventional and unconventional oil and gas exploration, we purchased high sensitivity geophones and two types of vibrators, further strengthening our position as a full solution provider for land data acquisition methods and technologies. Additional equipment investments were made for ongoing operations in Alaska in order to increase efficiency. We also invested in cable equipment in order to provide customers in Latin America with cable systems as wireless technology is slower to take hold in that market. Total capital investment for equipment in 2012 was $38.9 million.

For the three and nine months ended September 30, 2013, our capital expenditures totaled $1.2 million and $3.9 million, respectively. These capital expenditures consisted primarily of camp and drilling equipment purchases in Peru and Colombia in line with our focus on South American operations and a combination of mechanical equipment, computer equipment and electronics associated with our wireless strategy in Southeast Asia and North and South America. Total capital investment for equipment in the three and nine months ended September 30, 2012 was $2.0 million and $28.1 million, respectively.

Focusing on current trends in the worldwide oil and gas markets, we will continue to employ and expand our wireless equipment on a worldwide basis while maintaining the ability to provide services to the still existing cable markets. Our capital purchases have and will allow us to take advantage of all aspects of the geophysical exploration services market, ranging from land, marine and transition zone data acquisition; 2D, 3D, 4D and multi-component data acquisition; use of different methods to acquire data such as using vibroseis (vibrating) and impulsive sources; as well as vertical seismic profiling and reservoir monitoring. Investments in expanding further into our South America and Southeast Asia markets will also focus upon survey, drilling and base camp operations.

2013 Third Quarter Highlights
Three Months Ended September 30, 2013 Compared to Three Months Ended September 30, 2012
Highlights comparing the quarters ended September 30, 2013 to September 30, 2012:
•
Revenues from services were $47.4 million in 2013 compared to $75.5 million in 2012.
•
Gross (loss) margin decreased to (8.7%) in 2013 from 14.4% in 2012.
•
Operating (loss) was $(12.7) million in 2013 compared to operating income of $3.3 million in 2012.
•
Net loss of $(29.7) million, or $(2.22) (1) per basic and diluted share in 2013, compared to net income of $2.5 million, or $0.44 per basic and diluted share, in 2012.
•
Modified EBITDA was $(8.0) million in 2013 compared to $6.9 million for 2012.
•
Cash and cash equivalents totaled $16.8 million and working capital was $24.4 million compared to $13.9 million and $(0.6) million, respectively, for 2012.

(1) Number of shares of common stock increased by 6,954,221 as a result of the Merger.

Revenues for third quarter 2013 decreased to $47.4 million from $75.5 million in 2012. Much of this revenue variation was due to project delays relating to the environmental permitting process in Colombia and Bolivia and failure of a customer in Alaska to resume a project that was previously paused. This same project during the third quarter 2012 had a large amount of third-party pass-through revenues of $31.1 million which were outside of our normal seasonality of projects and on which we only charge a small administrative fee.

Gross (loss) profit was $(4.1) million, or (8.7%) of revenues, compared to gross profit of $10.9 million, or 14.4% of revenues, in third quarter 2012. The primary causes of the gross loss in the third quarter 2013 were the costs incurred on a shallow-water fixed-fee project in Malaysia when one of our lead vessels experienced more than a week’s downtime for repair as well as the fact that 52% of our revenues were in Canada, which had lower margins due to the off-seasonal timing of mid-year projects that produce a more competitive market than is typical of SAE’s winter operations in the region. The downtime in Malaysia resulted in the entire seismic acquisition crew being placed on stand-by for the duration of the repairs. These costs amounted to approximately $6.3 million. Gross (loss) profit for the quarters ended September 30, 2013 and 2012 included depreciation of $3.4 million and $3.3 million, respectively. Excluding depreciation, gross margins for the quarters ended September 30, 2013 and 2012 were (1.5%) and 18.7%, respectively.

Selling, general and administrative (“SG&A”) expenses were $7.7 million compared to $7.6 million in third quarter 2012.

Operating (loss) income was $(12.7) million compared to $3.3 million of income in third quarter 2012.

Interest expense in third quarter 2013 rose to $4.7 million from $0.6 million in third quarter 2012, due to a higher level of growth-related borrowing.

Net (loss) for third quarter 2013 was $(29.7) million, or $(2.22) per basic and diluted share, compared to net income of $2.5 million, or $0.44 per basic and diluted share, in third quarter 2012. The decline in net income was due to a number of factors including:
•
High percentage of revenues at lower than typical margin;
•
Losses experienced on the crew in Malaysia due to the downtime from repair of the lead vessel;
•
Project delays experienced in Bolivia, Colombia and Alaska;
•
Higher interest expense in third quarter 2013; and
•
Recording a valuation allowance for deferred tax assets.

Weighted average diluted shares outstanding in third quarter 2013 rose to 13.4 million shares from 5.7 million shares in third quarter 2012, due primarily to the issuance of shares to Former SAE stockholders in the Merger in June 2013. The number of shares from third quarter 2012 reflects only our shares and not those of Former SAE.

Modified EBITDA was $(8.0) million compared to $6.9 million in third quarter 2012. The decrease was due mainly to the factors discussed above.

At September 30, 2013, cash and cash equivalents totaled $16.8 million, working capital was $24.4 million, long-term debt was $91.8 million, and stockholders’ equity totaled $6.8 million.

Nine Months Ended September 30, 2013 Compared to Nine Months Ended September 30, 2012
Highlights comparing the nine months ended September 30, 2013 to the same period ended September 30, 2012:
•
Revenues from services were $174.6 million in 2013, a decrease of $37.1 million, or 17.5% from 2012.
•
Gross profit was $26.1 million for 2013 versus $38.7 million, a decrease of $12.6 million or 32.6% from 2012.
•
Income from operations was $3.7 million for 2013 versus $18.5 million, a decrease of 79.8% from 2012.
•
Modified EBITDA was $15.0 million for 2013 versus $28.2 million for 2012, a decrease of 47.0% from 2012.

Revenues for the nine months ended September 30, 2013 totaled $174.6 million, a 17.5% decrease from $211.6 million in the comparable prior year period. The decline was due primarily to the reasons cited above for the third quarter decline in revenue as well as significant low margin subcontracted North American revenue in the second quarter of 2012.

Gross profit was $26.1 million or 15.0% of revenues for the nine months ended September 30, 2013, compared to gross profit of $38.7 million, or 18.3% of revenue, in the comparable prior year period due to a lower level of revenues as well as additional public company costs.

SG&A expenses for the nine months ended September 30, 2013 were $20.3 million, or 11.6% of revenues, compared to $19.6 million, or 9.2% of revenues in the comparable prior year period.

Operating income for the nine months ended September 30, 2013 was $3.7 million, down 79.8% from $18.5 million in the comparable prior year period.

Interest expense rose to $11.5 million for the nine months ended September 30, 2013 from $1.5 million in the comparable prior year period. This increase was as a result of the 2012 Credit Agreement and the Former SAE stockholders’ note discussed in Note 4.

Net loss for the nine months ended September 30, 2013 was $(24.1) million, or $(2.72) per basic and diluted share, compared to net income of $15.3 million, or $2.69 per basic and diluted share, in the comparable prior year period. The per share amounts for the nine months ended September 30, 2013 were impacted by an increase in common shares of 6,954,221 as a result of the Merger.

Modified EBITDA for the nine months ended September 30, 2013 was $15.0 million, a 47.0% decrease from Modified EBITDA of $28.2 million in the comparable prior year period.

2013 Third Quarter Results of Operations

Three Months Ended September 30, 2013 Compared to Three Months Ended September 30, 2012

North America: The primary decrease in revenues was a reflection of the crew that was operating in Alaska for the third quarter of 2012 that did not resume working in 2013. This decrease was partially offset by increased third-party revenues in Canada.

South America: The decrease in revenues was due mainly to having no active projects in Bolivia for the third quarter of 2013 compared to third quarter of 2012. Bolivia is not an area of high activity and tends to be project specific activity versus continuous work. In addition, there were environmental permitting process related delays in a major project in Colombia that was expected to start in the first part of the third quarter 2013 but got started later in the quarter.

Southeast Asia: The increase in revenue for Southeast Asia was due primarily to the commencement of the shallow-water project in Malaysia which began in second quarter 2013. There were no projects in Malaysia in 2012.

Revenue from Services. Our revenue from services decreased by $28.0 million, from $75.5 million in 2012 to $47.4 million in 2013, or 37.2%, primarily due to the reasons stated above.

Direct Operating Expenses. Our direct operating expenses decreased by 20.2% or $13.0 million. This decrease largely followed the decrease in revenues and represented the decrease in operations in the United States, Bolivia, and Colombia of $24.3 million, $18.8 million, and $8.6 million, respectively, from 2012 to 2013. These decreases in revenues were partially offset by increases in Canada, mostly third-party revenues, and Malaysia of $22.8 million and $5.4 million, respectively, from 2012 to 2013.

Gross Profit. Gross profit decreased by $15.0 million and gross margin percentage decreased to (8.7%) from 14.4%. The gross margin in third quarter 2013 included stand-by costs as a result of more than a week's downtime on one of our lead vessels for its shallow-water project in Malaysia.

Selling, General and Administrative Expenses. SG&A expenses were consistent with the prior year with an increase of only $0.1 million.

Merger Costs. We incurred $0.6 million related to the Merger in the three months ended September 30, 2013. There was no comparable charge in third quarter 2012.

Depreciation and Amortization. Depreciation for the three months ended September 30, 2013 was consistent with the comparable prior year period. Approximately $3.4 million and $3.3 million of depreciation expense was included in direct operating costs for the three months ended September 30, 2013 and 2012, respectively.

Total Operating Costs. Total operating costs also decreased by $12.1 million or 16.8% principally because of the decrease in direct operating expenses.

Total Other Income and (Expense). Total other income and (expense) increased to other income of $0.2 million for the third quarter of 2013 versus other expense of $(0.3) million for the third quarter of 2012. This increase was due mainly to the sale of camp supplies in Southeast Asia of approximately $0.2 million. Interest expense, net, increased to $4.7 million for the third quarter of 2013 versus $0.6 million for the third quarter of 2012. This increase was as a result of the 2012 Credit Agreement and the Former SAE stockholders’ note. In the third quarter of 2013, we experienced a foreign currency gain of $0.1 million compared to a gain of $0.5 million in the third quarter of 2012.

Income Taxes. Our income tax provision increased $12.3 million in the three months ended September 30, 2013 compared to the three months ended September 30, 2012 primarily as a result of pre-tax losses in the U.S., the recording of a valuation allowance of approximately $11.0 million for the prior year deferred tax assets, the current period U.S. losses and foreign tax credits. The pre-tax losses in the U.S. increased primarily due to the increased operating loss and the increased interest incurred in the three months ended September 30, 2013, related to the 2012 Credit Agreement and the Former SAE stockholders’ note .

Nine Months Ended September 30, 2013 Compared to Nine Months Ended September 30, 2012

North America: The decrease in revenues was a reflection of the crew that was operating in North America for the first nine months of 2012 that did not work in 2013. Having this crew working in North America in the second quarter of 2012 was an anomaly and did not exemplify the normal seasonality of our business as seen in 2013.

South America: The decrease in revenues was due mainly to having no active projects in Bolivia for the first nine months of 2013 compared to 2012. Bolivia is not an area of high activity and tends to be project specific activity versus continuous work. The decrease in Bolivia was partially offset by increases in Colombia and Peru. For Colombia, the projects in the first nine months of 2013 were more complex logistically than those in the first nine months of 2012, and we had more third-party pass-through expenses on our projects in Colombia in 2013 than in 2012. In Peru, we also had more in third-party pass-through expenses on our projects in 2013 than in 2012.

Southeast Asia: The increase in Southeast Asia was due primarily to renewed operations in Papua New Guinea in the first quarter 2013, after a period of little activity in 2012 and no activity in the first nine months of 2012. In addition, we commenced one relatively complex project in Malaysia in the second quarter of 2013 but had no projects there in 2012.

Revenue from Services. Our revenue from services decreased by $37.0 million, from $211.6 million to $174.6 million, or 17.5%. As explained above, much of this revenue variation was due to projects shifting out of the U.S., Bolivia and Colombia compared to the third quarter 2012 and into Peru and Malaysia in third quarter 2013.

Direct Operating Expenses. Our direct operating expenses decreased by 14.1% or $24.4 million. This decrease largely followed the decrease in revenues.

Gross Profit. Gross profit decreased by $12.6 million, and gross margin percentage decreased to 15.0% from 18.3%. The primary cause of the decrease in gross margin was the costs incurred on a shallow-water fixed-fee project in Malaysia in 2013 when one of our lead vessels experienced more than a week’s downtime for repair.

Selling, General and Administrative Expenses. SG&A expenses increased by $0.7 million compared to the same period in 2012. Such expenses increased as a result of the need to hire personnel able to support our worldwide operations and the additional hiring related to becoming a public company. General and administrative cost as a percentage of revenues increased by 2.4% compared to the same period in 2012. This increase was due mainly to decreased revenues due to a crew that was operating in North America for the first nine months of 2012 that did not work in 2013.

Merger Costs. We incurred $1.2 million related to the Merger in the nine months ended September 30, 2013. There was no comparable charge in the first nine months of 2012.

Depreciation and Amortization. Depreciation increased by $2.0 million in the nine months ended September 30, 2013 compared to 2012 because of the capital addition program in 2012. The increase in fixed assets is principally attributable to the opening of operations in North America, specifically in Canada and Alaska.

Total Operating Costs. Total operating costs also decreased by $22.3 million or 11.6% principally as a result of the decrease in direct operating expenses, offset by additional depreciation expense.

Total Other Income and (Expense). Total other income and (expense) increased to $(1.3) million for the nine months ended September 30, 2013 versus $(0.03) million for the nine months ended September 30, 2012. This increase was due mainly to $1.0 million in third-party debt-related fees. Interest expense, net, increased to $11.5 million for nine months ended September 30, 2013 versus $1.5 million for the nine months ended September 30, 2012. This increase was as a result of the 2012 Credit Agreement. In the nine months ended September 30, 2013, we experienced a foreign currency loss of $1.2 million, while in nine months ended September 30, 2012, we experienced a foreign currency gain of $0.5 million.

Income Taxes. Our income tax provision increased $11.6 million in the nine months ended September 30, 2013 compared to the nine months ended September 30, 2012 primarily as a result of pre-tax losses in the U.S., the recording of a valuation allowance of approximately $11.0 million for the prior year deferred tax assets, the current period U.S. losses and foreign tax credits. The pre-tax losses in the U.S. increased primarily due to the increased operating loss and the increased interest incurred in the nine months ended September 30, 2013, related to the 2012 Credit Agreement and the Former SAE stockholders’ note.

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