Surveying services firm SAExploration Holdings announced Aug. 15 the Securities and Exchange Commission has launched an investigation into areas of its accounting from 2015-16. The company also disclosed a significant reshuffling of its senior leadership team.
On Aug. 14, the board concluded the company’s previously issued financial statements relating to each of the fiscal years ended Dec. 31, 2015, through 2018 and for the quarters ended June 30, 2015, through March 31, 2019, contained errors and should be restated.
The board’s decision to restate these financial statements arose from the company’s re-evaluation of its relationship with data library firm Alaska Seismic Ventures (ASV), which SAExploration performed seismic services for in 2015 and 2016. SAExploration determined ASV was a variable interest entity and that it had a controlling financial interest in ASV that required it to consolidate ASV during the non-reliance periods in accordance with accounting principles generally accepted in the United States.
As a result, SAExploration determined a material weakness exists in its internal control over financial reporting and disclosure controls and procedures were ineffective during the non-reliance periods. Accordingly, the company will amend any disclosures pertaining to its evaluation of such controls and procedures as appropriate in connection with the restated filings.
The audit committee discussed the foregoing matters with Pannell Kerr Forster of Texas, the company’s independent registered public accounting firm, which supports its determination.
SAExploration said it “has been cooperating, and will continue to cooperate, in good faith with the SEC and has retained legal counsel and an accounting advisor to assist the company with respect to this matter.” Additionally, SAExploration’s board of directors has established a special committee of independent directors to oversee the company’s own internal investigation.
Reporting directly to the special committee is SAExploration’s legal counsel and accounting adviser. “The audit committee also has undertaken an assessment of the accuracy of the company’s historical financial statements and related disclosures that were contained in certain previously filed annual reports on Form 10-K and quarterly reports on Form 10-Q,” the company said in a securities filing.
“We have taken swift action on each of these matters and will continue to do so until they are resolved,” said Michael Faust, the newly appointed chairman of the board. Chief Executive Officer Jeffrey Hastings, who was placed on administrative leave, resigned as former chairman of the board. The company said it expects to name a new CEO shortly.
Faust “brings to SAE deep industry experience, combined with a working knowledge of our operations, customers, and employees,” the company said. Prior to being appointed chairman, Faust was serving as lead independent director. Since March, he has served as the interim president and CEO of Obsidian Energy, a Canadian-listed public company in the oil and natural gas industry, and has also served on its board since April 2018.
Additionally, the company has terminated Brent Whiteley as chief financial officer, general counsel, and secretary. Kevin Hubbard, a partner at Ham, Langston & Brezina, has been named interim CFO and interim secretary of the company.
Class action filed
On Aug. 18, a shareholder class-action lawsuit was filed against the company and certain current and former executive officers in the U.S. District Court for the Southern District of Texas.
The complaint generally alleges the company and these officers violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 by making false and misleading statements in the periodic reports the company filed with the SEC during the covered period. The complaint requests damages, including interest, and an award of reasonable costs and expenses, including counsel and expert fees.