The following management's discussion and analysis of financial condition and
results of operations should be read in conjunction with our historical
consolidated financial statements and their notes included elsewhere in this
Annual Report on Form 10-K. This discussion contains forward-looking statements
that reflect our current views with respect to future events and financial
performance. Our actual results may differ materially from those anticipated in
these forward-looking statements or as a result of certain factors such as those
set forth in our Forward Looking Statements disclaimer on page ii of this Annual
Report on Form 10-K.
General
During 2019, volatility in oil prices continued as WTI and Brent prices ranged
from $45 to $75 per barrel throughout the year. While the Company expected
generally improved market conditions to take hold during 2020, the outbreak and
ensuing global pandemic related to COVID-19 silenced those expectations. A
global decline in demand for oil resulting from COVID-19 economic closures
combined with a temporary but significant increase in production by Saudi Arabia
and Russia following the COVID-19 outbreak conspired to cause a collapse in oil
prices during April 2020 that was unprecedented. While oil prices have recovered
somewhat, there remains a significant overhang in supply and lingering weak
demand on a global basis. The decrease in oil prices caused major, international
and independent oil companies with deepwater operations to significantly reduce
their offshore capital spending budgets for the worldwide exploration or
production of oil and gas, prolonging the industry downturn that has prevailed
since late 2014. Reduced spending by our customers combined with the already
global oversupply of OSVs, including high-spec OSVs in our core markets,
resulted in significant reductions in our dayrates and utilization. These
factors ultimately resulted in the Company's determination to seek bankruptcy
protection on May 19, 2020. The principal question facing the offshore oilfield
industry is the remaining duration of the current downturn in offshore
activities. The continuation of the COVID-19 pandemic is expected to continue to
depress demand and the timing of a global economic recovery is unclear. In
addition, there can be no assurance regarding the production levels of oil and
gas by Russia, Saudi Arabia, and other oil producing countries and, therefore,
the price of oil.

On May 19, 2020, in accordance with the RSA, the Company initiated the Chapter
11 Cases with the Bankruptcy Court. On June 19, 2020, after a confirmation
hearing, the Bankruptcy Court entered a confirmation order approving the Plan.
The Plan will become effective after the conditions to its effectiveness have
been satisfied. The effect of the Plan is to de-lever the Company's balance
sheet through a conversion into equity or warrants or both of 1) a portion of
the $350 million in first-lien term loans that mature in June 2023; 2) $121
million in second-lien term loans that mature in February 2025; 3) $224 million
outstanding under our 2020 senior notes indenture, and; 4) $450 million
outstanding under our 2021 senior notes indenture. The holders of first-lien
term loans will also receive their pro rata portion of the second-lien term
loans issued as part of the Exit Financings. All pre-petition equity interests
in the Company will be canceled, released, and extinguished on the effective
date of the Plan, and will thereafter be of no further force or effect. See
"Item 1 - Joint Prepackaged Chapter 11 Plan of Reorganization" and Note 2 of our
consolidated financial statements included herein for further discussion.
In late 2019, we had observed leading indicators that signaled the potential for
improved conditions - including larger offshore capital budget announcements by
our customers, a growth in the number of final investment decisions,

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or FIDs, made public by our customers for offshore projects, recently announced
deepwater discoveries, a growing contract backlog announced by several drilling
contractors and increased customer inquiries for our services, principally in
the Greater GoM Operating Region. Most of these plans have not proceeded in
2020. We expect some to be cancelled altogether while others are being
postponed. The duration of postponement is expected to be determined by the
ability to operate during the COVID-19 pandemic and oil price recovery. We have
experienced multiple charter cancellations and non-renewals.
During 2019, we did not observe any significant change in the anticipated supply
of high-spec U.S.-flagged OSVs. In the U.S. GoM, two high-spec OSVs were
delivered into the domestic market during the year and we currently expect two
additional high-spec OSV to be delivered into domestic service during the
remainder of 2020. There were three high-spec, Jones-Act qualified OSVs under
construction by industry participants on June 30, 2020 and as of that date there
were no options to build additional high-spec Jones-Act qualified OSVs. We do
not anticipate significant growth in the supply of high-spec U.S.-flagged OSVs
beyond the currently anticipated level of 178 of such vessels by the end of
2020. We continue to monitor the overhang of the dormant supply of stacked
U.S.-flagged high-spec OSVs. There are approximately 95 stacked domestic vessels
and all of these vessels will require intermediate or special surveys in order
to return to service. We believe that the cost to industry participants to
reactivate high-spec OSVs, including survey costs, crewing costs, training costs
and unanticipated events, will range between $2 million and $5 million per
vessel, on average. During the first half of 2020, we have observed an
additional 23 high-spec OSVs go into stack, including six of our own.
During 2019, there was an average of 25.8 floating rigs working in the Greater
GoM Operating Region. We believe that the number of active drilling units in the
Greater GoM Operating Region will decline in 2020. As of June 30, 2020, there
were 26 rigs available and 20 were working. During the second half of 2020, we
expect that the active floating rig count could drop to as low as 10 to 15.

Unlike our OSVs, whose utilization is tied principally to drilling activities,
demand for our MPSVs is also driven by other offshore activities. These vessels
are used for a wide variety of oilfield applications that are not necessarily
related to drilling. Because of the need to continuously inspect, repair and
maintain offshore infrastructure, our MPSVs have, at times, partially
counter-acted weakness in overall drilling activities. However, we have not yet
seen a significant pick up in the expansion of offshore infrastructure, such as
the installation of new floating and subsea infrastructure and field development
that more meaningfully drive MPSV utilization. Project cancellations and delays
have driven extremely weak utilization for our MPSVs during 2020. While peak
activity normally occurrs in late spring through early fall, we see little
evidence that MPSV utilization will improve seasonally during 2020.

Since October 1, 2014, we stacked OSVs and MPSVs on various dates. As of
December 31, 2019, we had 34 OSVs and two MPSVs stacked. As of June 30, 2020, we
had 44 OSVs and two MPSVs stacked and such stacked vessels represent 62% of our
fleetwide vessel headcount, and 51% of our total OSV and MPSV deadweight
tonnage. The Company reactivated one MPSV during the first quarter of 2020. We
may consider stacking additional vessels or reactivating vessels as market
conditions warrant. By stacking vessels, we have significantly reduced our
on-going cash outlays and lowered our risk profile; however, we also have fewer
revenue-producing units in service that can contribute to our results and
produce cash flows to cover our fixed costs and commitments. While we may choose
to stack additional vessels should market conditions warrant, our current
expectation is to retain our active fleet in the market to accept contracts at
the best available terms even if such contracts are below our breakeven cash
cost of operations.
Mexico and Brazil continue to comprise our two core international markets. In
order to support customer requirements in Mexico, and based on our long-term
view that Mexico will continue to invest directly or allow foreign investment in
its offshore energy sector, and increasingly in deepwater prospects, we elected
to Mexican-flag five HOSMAX 300 class OSVs, three 280 class OSVs, two 240 class
OSVs and one MPSV since January 1, 2018. At present, our Mexican-flagged fleet
is comprised of ten high-spec OSVs, five low-spec OSVs and one MPSV, which is
the second largest concentration of vessels we have committed to any single
national market. Mexico has undergone significant transformation as a market for
offshore energy over the last several years. IOCs appear to be proceeding with
drilling plans in Mexico, despite current industry conditions. While we have
experienced some cancellations from drilling customers in Mexico, most of our
customers appear to be proceeding with their plans. A significant factor
affecting the health of the Mexican offshore market is the weakening financial
condition of Pemex. While we are not currently working for Pemex directly, like
many contractors, we work for customers who are working for Pemex. Pemex
recently announced a suspension of contracts and has disclosed a significant
level of financial distress that is impacting its ability to pay offshore
contractors, many of which are our customers. We are affected by slow- or
non-payment by some of these customers and our unwillingness to work for
customers that have significant Pemex credit

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risk. Offshore activity driven by Pemex is likely to decline overall, and we are
likely to see less work in Mexico due to this decline and are, thus, unlikely to
work for customers that have extensive Pemex exposure.
In Brazil, we presently own and operate one Brazilian-flagged high-spec OSV. We
have flexibility under Brazilian law to import and flag into Brazilian registry
an additional vessel of similar DWT. In 2019, our Vanuatu-flagged MPSV worked as
a flotel in Brazil on an IOC project that ended in the first quarter of 2020.
Brazil is the single largest deepwater market in the world. Recent measures to
expand the role of IOCs in its "pre-salt" prospects are taking hold and we
believe Brazilian activity in the offshore energy space will be a significant
contributor to the overall recovery in global offshore E&P activities.
Our Vessels
All of our current vessels are qualified under the Jones Act to engage in U.S.
coastwise trade, except for 19 foreign-flagged new generation OSVs and two
foreign-flagged MPSVs. As of December 31, 2019, our 32 active new generation
OSVs, six MPSVs and four managed OSVs were operating in domestic and
international areas as noted in the following table:
Operating Areas
Domestic
GoM                      24
Other U.S. coastlines(1)  5
                         29
Foreign
Brazil                    2
Mexico                    9
Caribbean                 2
                         13
Total Active Vessels(2)  42

(1) Comprised of one owned vessel and four managed vessels that are currently

supporting the U.S. military.

(2) Excluded from this table are 34 OSVs and two MPSVs that were stacked as of

December 31, 2019.




During the first quarter of 2018, the Company notified Gulf Island, the shipyard
that was constructing the remaining two vessels in the Company's fifth OSV
newbuild program, that it was terminating the construction contracts for such
vessels based on the shipyard's statements that it would be more than one year
late in the delivery of the vessels, among other reasons. On October 2, 2018,
Gulf Island filed suit against the Company in the 22nd Judicial District Court
for the Parish of St. Tammany in the State of Louisiana. Gulf Island claims that
it has the right to complete the vessels or, alternatively, the Company owes
Gulf Island compensation for unpaid work. The Company disputes these claims and
has asserted counter-claims against Gulf Island seeking to recover liquidated
and other damages. The Company has also sued for conversion, claiming that Gulf
Island has wrongfully detained the vessels in its possession, which has delayed
the Company's ability to contract for their completion at a replacement
shipyard. On November 5, 2019, the district court denied a preliminary motion
for summary judgment to require the Gulf Island to release its possession of the
vessels. The Company has also sued the sureties that issued the performance
bonds in respect of the shipbuilding contracts. The Company claims that the
sureties wrongfully denied the Company's claims under the bonds and have refused
to perform their obligations under the bonds. The Company has also claimed that
the sureties' conduct has been in bad faith.
As of the date of termination of the construction contracts, these two remaining
vessels, both of which are domestic 400 class MPSVs, were projected to be
delivered in the second and third quarters of 2019, respectively. These
projected delivery dates were subsequently amended, for guidance purposes, to be
the second and third quarters of 2020; and then later extended to be the second
and third quarters of 2021. Due to the continued uncertainty of the timing and
location of future construction activities, the Company is now updating its
forward guidance for the delivery dates related to these vessels to be the
second and third quarters of 2022, respectively. However, the timing of the
remaining construction draws remains subject to change commensurate with any
potential further delays in the delivery dates of such vessels. The cost of this
nearly completed 24-vessel newbuild program, before construction period
interest, is expected to be approximately $1,335.0 million, of which $22.9
million and $34.6 million are currently expected to be incurred in 2021 and
2022, respectively. The foregoing amounts do not reflect any potential
additional payments to the shipyard in respect of the aforementioned claim. From
the inception of this program through December 31, 2019, the Company had
incurred $1,277.5 million, or 95.7%, of total expected project costs.

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Operating Costs
Our operating costs are primarily a function of fleet size, areas of operations
and utilization levels. The most significant direct operating costs are wages
paid to vessel crews, maintenance and repairs, and marine insurance. Because
most of these expenses are incurred regardless of vessel utilization, our direct
operating costs as a percentage of revenues may fluctuate considerably with
changes in dayrates and utilization. As of December 31, 2019, we had 36 stacked
vessels. By removing these vessels from our active operating fleet, we have been
able to significantly reduce our operating costs, including crew costs. If
market conditions worsen, we may elect to stack additional vessels. Our fixed
operating costs are now spread over 38 owned and operated vessels and four
vessels managed for the U.S. Navy.
In certain foreign markets in which we operate, we are susceptible to higher
operating costs, such as materials and supplies, crew wages, maintenance and
repairs, taxes, importation duties, and insurance costs. Difficulties and costs
of staffing international operations, including vessel crews, and language and
cultural differences generally contribute to a higher cost structure in foreign
locations compared to our domestic operations. We may not be able to recover
higher international operating costs through higher dayrates charged to our
customers. Therefore, when we increase our international complement of vessels,
our gross margins may fluctuate depending on the foreign areas of operation and
the complement of vessels operating domestically.
In addition to the operating costs described above, we incur fixed charges
related to the depreciation of our fleet and amortization of costs for routine
drydock inspections to ensure compliance with applicable regulations and to
maintain certifications for our vessels with the USCG and various classification
societies. The aggregate number of drydockings and other repairs undertaken in a
given period determines the level of maintenance and repair expenses and marine
inspection amortization charges. We capitalize costs incurred for drydock
inspection and regulatory compliance and amortize such costs over the period
between such drydockings, typically between 24 and 36 months. Applicable
maritime regulations require us to drydock our vessels twice in a five-year
period for inspection and routine maintenance and repair. If we undertake a
disproportionately large number of drydockings in a particular year,
comparability of results may be affected. While we can defer required
drydockings of stacked vessels, we will be required to conduct such deferred
drydockings prior to such vessels returning to service, which could delay their
return to active service.
Critical Accounting Estimates
Our consolidated financial statements included in this Annual Report on Form
10-K have been prepared in accordance with accounting principles generally
accepted in the United States. In many cases, the accounting treatment of a
particular transaction is specifically dictated by GAAP. In other circumstances,
we are required to make estimates, judgments and assumptions that we believe are
reasonable based upon available information. We base our estimates and judgments
on historical experience and various other factors that we believe are
reasonable based upon the information available. Actual results may differ from
these estimates under different assumptions and conditions. We believe that of
our significant accounting policies discussed in Note 3 to our consolidated
financial statements, the following may involve estimates that are inherently
more subjective.
Carrying Value of Vessels. We depreciate our OSVs and MPSVs over estimated
useful lives of 25 years each. Salvage value for our new generation marine
equipment is estimated to be 25% of the originally recorded cost for these asset
types. In assigning depreciable lives to these assets, we have considered the
effects of both physical deterioration largely caused by wear and tear due to
operating use and other economic and regulatory factors that could impact
commercial viability. To date, our experience confirms that these policies are
reasonable, although there may be events or changes in circumstances in the
future that indicate that recovery of the carrying amount of our vessels might
not be possible.
We presently review the carrying values of our vessels for impairment using the
following asset groups: OSVs and MPSVs. We believe that these two vessel groups
are appropriate because our vessels are highly mobile among disparate
geographies and are directed centrally from our headquarters. Our OSVs share
multiple forms of direct and indirect common costs and are marketed on a
portfolio basis as an integrated (multi-vessel) marine solution to our customers
primarily supporting drilling and exploration activities in various deepwater
and ultra-deepwater markets worldwide to our customers. We manage, market,
operate and maintain our vessels in a unified manner because we are performing
the same services to the same client group across the same geographic regions -
i.e., primarily the transportation of the same fungible types of cargo. We
believe that our unified approach to operating the vessels within each group is
among the most important factors and strategic advantages that drive our
customers to utilize our vessels, irrespective of the type or size of vessel
that the customer requires on a given engagement. Therefore,

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management has concluded that the lowest level for which identifiable cash flows
are largely independent of the cash flows of other assets and liabilities is at
the OSV and MPSV groupings.
When analyzing asset groups for impairment, we consider both historical and
projected operating cash flows, operating income, and EBITDA based on current
operating environment and future conditions that we can reasonably anticipate,
such as inflation or prospective wage costs. These projections are based on, but
not limited to, job location, current and historical market dayrates included in
recent sales proposals, utilization and contract coverage; along with
anticipated market drivers, such as drilling rig movements, results of offshore
lease sales and discussions with our customers regarding their ongoing drilling
plans.
If events or changes in circumstances as set forth above were to indicate that
the asset group's carrying amount may not be recoverable over the vessels'
useful lives for such groups, we would then be required to estimate the future
undiscounted cash flows expected to result from the use of the asset group and
its eventual disposition. If the sum of the expected future undiscounted cash
flows was determined to be less than the carrying amount of the vessels, we
would be required to reduce the carrying amount to fair value. Examples of
events or changes in circumstances that could indicate that the recoverability
of the carrying amount of our asset groups should be assessed might include a
significant change in regulations such as OPA 90, a significant decrease in the
market value of the asset group and current period operating or cash flow losses
combined with a history of operating or cash flow losses or a projection or
forecast that demonstrates continuing losses associated with the asset group.
During the second quarter of 2016, we identified indicators of impairment
relating to our vessels as a result of operating losses occurring for the first
time in our history due to the rapid decline in market conditions. In accordance
with GAAP, we calculated the undiscounted cash flows using a probability
weighted forecast for each of our asset groups over their respective remaining
useful lives. Included in the cash flow projections were assumptions related to
the current mix of active and stacked vessels, the estimated timing of stacked
vessels returning to active status along with projected dayrates, operating
expenses and overhead expenses related to each of the groupings. We view vessel
stackings as a temporary status and a prudent business strategy. Stacking
vessels does not imply that we have ceased marketing such vessels or intend to
never reactivate such vessels when market conditions improve. In fact, we have
unstacked vessels in recent quarters and will continue to do so as warranted.
The total of the undiscounted cash flows was greater than the net book values of
our asset groups and, therefore, we concluded that we did not have an impairment
of our long-lived assets as of June 30, 2016, and in such analysis, noted a
significant cushion for each of our asset groups as a result of the long
remaining useful lives of our vessels.
While we have not observed any new impairment indicators since the second
quarter of 2016, each quarterly period, we assess whether there are any new
indicators present and whether there have been any events or developments that
would indicate that our most recent undiscounted cash flow analysis warrants
being updated to reflect a change in inputs or assumptions. During 2019, we
reviewed and updated, as necessary, the assumptions used in determining our
undiscounted cash flow projections for each asset group to reflect current and
projected market conditions, and also prepared and updated our sensitivity
analysis relating to such assumptions. After reviewing the result of our most
recent undiscounted cash flow projections, which were prepared in mid-2019, we
have determined that each of our asset groups continues to have sufficient
projected undiscounted cash flows to recover the remaining book value of our
long-lived assets within such group. In the development of the undiscounted cash
flows, in addition to the previously discussed considerations above and in light
of current market conditions, we estimate the length of time it will take for
the market to absorb our stacked vessels such that we can return those vessels
to active status. Any significant revisions to this estimate would have the
greatest impact in the development of the undiscounted cash flows. However, as
part of our most recent analysis, we determined that if we extended the downturn
(and, thus, the unstacking of vessels) by two years from the most recent
estimate, this would reduce our undiscounted cash flows by less than 15%, still
providing us with substantial excess undiscounted cash flow coverage of the
assets' net book values given the length of remaining useful lives for the
assets. Further, we also perform a look-back analysis each quarter to compare
our actual performance to that of our most recently prepared undiscounted cash
flow analysis. In each case since June 2016, we have noted that our actual
quarterly performance has outperformed the applicable estimated undiscounted
cash flow calculations used in completing the latest impairment analysis for
such comparable period. See Note 3 to our consolidated financial statements
included herein for further discussion. We will continue to closely monitor
market conditions and potential impairment indicators as long as this market
downturn persists.
Recertification Costs. Our vessels are required by regulation to be recertified
after certain periods of time. These recertification costs are incurred while
the vessel is in drydock where other routine repairs and maintenance are
performed and, at times, major replacements and improvements are performed. We
expense routine repairs and

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maintenance as they are incurred. Recertification costs can be accounted for
under GAAP in one of two ways: (1) defer and amortize or (2) expense as
incurred. We defer and amortize recertification costs over the length of time
that the recertification is expected to last, which is generally 30 months on
average. Major replacements and improvements, which extend the vessel's economic
useful life or increase its functional operating capability, are capitalized and
depreciated over the vessel's remaining economic useful life. Inherent in this
process are judgments we make regarding whether the specific cost incurred is
capitalizable and the period that the incurred cost will benefit.
Revenue Recognition. The services that are provided by the Company represent a
single performance obligation under its contracts that are satisfied at a point
in time or over time. Revenues are earned primarily by (1) chartering the
Company's vessels, including the operation of such vessels, (2) providing vessel
management services to third party vessel owners, and (3) providing shore-based
port facility services, including rental of land.
Allowance for Doubtful Accounts. Our customers are primarily national oil
companies, major and independent, domestic and international, oil and gas and
oilfield service companies. Our customers are granted credit on a short-term
basis and related credit risks are considered minimal. We usually do not require
collateral. We provide an estimate for uncollectible accounts based primarily on
management's judgment. Management uses the relative age of receivable balances,
historical losses, current economic conditions and individual evaluations of
each customer to make adjustments to the allowance for doubtful accounts. Our
historical losses have not been significant. However, because amounts due from
individual customers can be significant, future adjustments to the allowance can
be material if one or more individual customer's balances are deemed
uncollectible.
Income Taxes. We follow accounting standards for income taxes that require the
use of the liability method of computing deferred income taxes. Under this
method, deferred income taxes are provided for the temporary differences between
the financial reporting basis and the tax basis of our assets and liabilities.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The assessment of the
realization of deferred tax assets, particularly those related to tax net
operating loss, or NOL, carryforwards and foreign tax credit, or FTC,
carryforwards, is based on the weight of all available evidence, both positive
and negative, including future reversals of deferred tax liabilities. Due to a
cumulative three-year book loss, ASC 740 precludes us from using projected
operating results in determining the realization of deferred tax assets. We are
using the existing taxable temporary differences that will reverse and create
taxable income in the future to determine the realizability of these NOL and FTC
carryforwards. We have valuation allowances of $33.3 million and $52.9 million
as of December 31, 2019 and 2018, respectively. Such valuation allowances were
established because we determined that it was more likely than not such NOL and
FTC carryforwards may not be fully utilized prior to their expiration. In
addition, each reporting period, we assess and adjust for any significant
changes to our liability for unrecognized income tax benefits. We account for
any interest and penalties relating to uncertain tax positions in general and
administrative expenses.
Legal Contingencies. We are involved in a variety of claims, lawsuits,
investigations and proceedings, as described in Notes 7 and 14 to our
consolidated financial statements. We determine whether an estimated loss from a
contingency should be accrued by assessing whether a loss is deemed probable and
can be reasonably estimated. We assess our potential liability by analyzing our
litigation and regulatory matters using available information. We develop our
views on estimated losses in consultation with outside counsel handling our
defense in these matters, which involves an analysis of potential results,
assuming a combination of litigation and settlement strategies. Should
developments in any of these matters cause a change in our determination such
that we expect an unfavorable outcome and result in the need to recognize a
material accrual, or should any of these matters result in a final adverse
judgment or be settled for a significant amount, they could have a material
adverse effect on our results of operations in the period or periods in which
such change in determination, judgment or settlement occurs.

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Results of Operations
The tables below set forth the average dayrates, utilization rates and effective
dayrates for our owned new generation OSVs and the average number and size of
such vessels owned during the periods indicated. These vessels generate a
substantial portion of our revenues. Excluded from the OSV information below is
the results of operations for our MPSVs, our shore-base facility, and vessel
management services, including the four non-owned vessels managed for the U.S.
Navy. The Company does not provide average or effective dayrates for its MPSVs.
MPSV dayrates are impacted by highly variable customer-required cost-of-sales
associated with ancillary equipment and services, such as ROVs, accommodation
units and cranes, which are typically recovered through higher dayrates charged
to the customer. Due to the fact that each of our MPSVs have a workload capacity
and significantly higher income generating potential than each of the Company's
new generation OSVs, the utilization and dayrate levels of our MPSVs could have
a very large impact on our results of operations. For this reason, our
consolidated operating results, on a period-to-period basis, are
disproportionately impacted by the level of dayrates and utilization achieved by
our six active MPSVs.
                                                    Years Ended December 31,
                                                      2019             2018
Offshore Supply Vessels:
Average number of new generation OSVs(1)                 66.0

64.5


Average number of active new generation OSVs(2)          30.7

23.9

Average new generation OSV fleet capacity (DWT) 238,895 231,715 Average new generation OSV capacity (DWT)

               3,620

3,593


Average new generation OSV utilization rate(3)           28.3 %          26.3 %
Effective new generation OSV utilization rate(4)         61.0 %          70.9 %
Average new generation OSV dayrate(5)            $     18,679       $  19,150
Effective dayrate(6)                             $      5,286       $   5,036

(1) We owned 66 new generation OSVs as of December 31, 2019. Excluded from this

data are eight MPSVs owned and operated by the Company as well as four

non-owned vessels managed for the U.S. Navy.

(2) In response to weak market conditions, we elected to stack certain of our

new generation OSVs on various dates since October 2014. Active new

generation OSVs represent vessels that are immediately available for service


     during each respective period.


(3)  Utilization rates are average rates based on a 365-day year. Vessels are
     considered utilized when they are generating revenues.


(4)  Effective utilization rate is based on a denominator comprised only of
     vessel-days available for service by the active fleet, which excludes the
     impact of stacked vessel days.

(5) Average new generation OSV dayrates represent average revenue per day, which

includes charter hire, crewing services and net brokerage revenues, based on

the number of days during the period that the OSVs generated revenues.

(6) Effective dayrate represents the average dayrate multiplied by the average


     new generations utilization rate.



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     YEAR ENDED DECEMBER 31, 2019 COMPARED TO YEAR ENDED DECEMBER 31, 2018
Summarized financial information for the years ended December 31, 2019 and 2018,
respectively, is shown below in the following table (in thousands, except
percentage changes):
                                                  Year Ended
                                                 December 31,              Increase (Decrease)
                                              2019           2018         $ Change      % Change
Revenues:
  Vessel revenues
Domestic                                  $  108,166     $  136,574     $  (28,408 )      (20.8 )  %
Foreign                                       80,153         39,193         40,960         >100    %
                                             188,319        175,767         12,552          7.1    %
  Non-vessel revenues                         37,343         36,637            706          1.9    %
                                             225,662        212,404         13,258          6.2    %
Operating expenses                           164,630        147,642         16,988         11.5    %
Depreciation and amortization                114,313        108,668          5,645          5.2    %
General and administrative expenses           53,880         43,530         10,350         23.8    %
                                             332,823        299,840         32,983         11.0    %
Gain on sale of assets                            62             59              3          5.1    %
Operating loss                              (107,099 )      (87,377 )      (19,722 )       22.6    %
Loss on early extinguishment of debt, net        (71 )            -            (71 )     (100.0 )  %
Interest expense                              83,380         63,566         19,814         31.2    %
Interest income                                4,488          2,228          2,260         >100    %
Other income (expense), net                   10,255            (29 )       10,284     >(100.0)    %
Income tax benefit                           (36,993 )      (29,621 )       (7,372 )       24.9    %
Net loss                                  $ (138,814 )   $ (119,123 )   $  (19,691 )       16.5    %


Revenues. Revenues for 2019 increased by $13.3 million, or 6.2%, to $225.7
million compared to $212.4 million for 2018. Our weighted-average active
operating fleet for 2019 was approximately 36.6 vessels compared to 31.1 vessels
for 2018.
Vessel revenues increased $12.6 million, or 7.1%, to $188.3 million for 2019
compared to $175.8 million for 2018. The increase in vessel revenues primarily
resulted from the full-year contribution of four acquired OSVs added to our
operating fleet during the second quarter of 2018 and the unstacking of one MPSV
in early 2019. Revenues earned from our MPSV fleet increased $3.5 million, or
6.1%, for 2019 compared to 2018. For 2019, we had an average of 37.4 vessels
stacked compared to an average of 41.4 vessels stacked in the prior year.
Average new generation OSV dayrates were $18,679 for 2019 compared to $19,150
for 2018, a decrease of $471, or 2.5%. Our new generation OSV utilization was
28.3% for 2019 compared to 26.3% for 2018. Our new generation fleet of OSVs
incurred 590 days of aggregate downtime for regulatory drydockings and certain
vessels were stacked for an aggregate of 12,897 days during 2019. Excluding
stacked vessel days, our new generation OSV effective utilization was 61.0% and
70.9% during 2019 and 2018, respectively. Domestic vessel revenues decreased
$28.4 million during 2019 compared to 2018 primarily due to lower revenue earned
by our MPSVs operating domestically during 2019. Foreign vessel revenues
increased $41.0 million. The increase in foreign revenues is attributable to an
average of 2.3 additional OSVs and an average of 1.2 additional MPSVs working in
foreign locations during 2019. Foreign vessel revenues comprised 42.6% of our
total vessel revenues for 2019 compared to 22.3% for 2018.
Non-vessel revenues increased $0.7 million, or 1.9%, to $37.3 million for 2019
compared to $36.6 million for 2018. The increase in non-vessel revenues is
primarily attributable to higher revenues earned from vessel management services
during 2019 compared to the year-ago period.
Operating expenses. Operating expenses were $164.6 million, an increase of $17.0
million, or 11.5%, for 2019 compared to $147.6 million for 2018. Operating
expenses were primarily higher due to an increased number of active vessels in
our fleet along with a full-year contribution by four vessels added to our
active fleet in May 2018 compared to the year-ago period. This unfavorable
variance was partially offset by $3.2 million related to the settlement of the
VT Halter arbitration.

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Depreciation and Amortization. Depreciation and amortization expense of $114.3
million was $5.6 million, or 5.2%, higher for 2019 compared to 2018.
Amortization expense increased $6.2 million, which was driven higher mainly by
recertifications for certain of our stacked OSVs that were reactivated, costs
associated with the initial special surveys for vessels that were placed in
service under the Company's fifth OSV newbuild program, costs associated with
the drydocking of two vessels that were acquired in 2018 and the amortization of
an intangible asset that was included with the acquisition of four OSVs during
2018. Depreciation expense is expected to increase from current levels when the
two remaining vessels under our current newbuild program are placed in service.
We expect amortization expense to increase temporarily whenever market
conditions warrant reactivation of currently stacked vessels, which will then
require us to drydock such vessels, and thereafter to revert back to historical
levels.
General and Administrative Expenses. General and administrative expenses of
$53.9 million were $10.4 million higher during 2019 compared to 2018. The
increase in G&A expense was primarily attributable to higher short-term
incentive compensation expense and higher bad debt reserves.
Operating Loss. Operating loss increased by $19.7 million to an operating loss
of $107.1 million during 2019 compared to 2018 for the reasons discussed above.
Operating loss as a percentage of revenues was 47.5% for 2019 compared to an
operating loss margin of 41.1% for 2018.
Loss on Early Extinguishment of Debt, Net. During 2019, we exchanged $142.6
million in face value of 2020 senior notes for $121.2 million of second-lien
term loans and we exchanged $21.0 million in face value of our 2019 convertible
senior notes for $19.9 million of first-lien term loans. In accordance with
applicable accounting guidance, these debt-for-debt exchanges were accounted for
as debt modifications, requiring the Company to defer the gains on such
exchanges and record a loss on early extinguishment of debt of $3.7 million
related to deal costs for the exchanges. During 2019, we arranged for the
repurchase of $52.9 million of our outstanding 2019 convertible senior notes for
an aggregate total of $47.6 million of cash. We recorded a net gain on early
extinguishment of debt of $3.6 million ($2.9 million or $0.08 per diluted share
after-tax) related to these repurchases.
Interest Expense. Interest expense of $83.4 million increased $19.8 million
during 2019 compared to 2018 primarily due to incremental interest expense
associated with the issuance of additional first-lien and the second-lien term
loans, as well as the senior credit facility since 2018. During 2019, we did not
capitalize any construction period interest compared to capitalizing $2.3
million, or roughly 3.5%, of our total interest costs for 2018.
Interest Income. Interest income was $4.5 million for 2019, which was $2.3
million higher than 2018. Our average cash balance increased to $239.7 million
for 2019 compared to $147.8 million for 2018. The average interest rate earned
on our invested cash balances was approximately 1.9% and 1.5% during 2019 and
2018, respectively. The increase in average cash balance was primarily due to
cash inflows associated with the $50 million expansion of the first-lien term
loans, as well as the issuance of the senior credit facility, since December 31,
2018. These inflows were partially offset by the repurchase of our 2019
convertible senior notes for cash during 2019.
Other Income (Expense), Net. Other Income was $10.3 million for 2019, which was
due primarily to damages awarded in the VT Halter arbitration matter. During the
fourth quarter of 2019, the Company recognized $10.5 million of the total award
as Other Income upon receipt of payment from VT Halter.
Income Tax Benefit. Our effective tax benefit rate was 21.0% and 19.9% for 2019
and 2018, respectively. Our income tax benefit for 2019 was higher than the
benefit rate for 2018 due to a reduction of net operating loss carryforward
valuation allowances due to state tax law changes enacted during the second
quarter of 2019. Our income tax benefit primarily consists of deferred taxes.
Our income tax rate differs from the federal statutory rate primarily due to
expected state tax liabilities and items not deductible for federal income tax
purposes.
Net Loss. Operating performance decreased year-over-year by $19.7 million for a
reported net loss of $138.8 million for 2019 compared to a net loss of $119.1
million for 2018. This unfavorable variance in net loss was primarily driven by
increased operating expenses for our vessels and interest expense, partially
offset by increased revenue earned by such vessels and other income recognized
from the VT Halter settlement during 2019.
Liquidity and Capital Resources
Despite volatility in commodity prices, we remain confident in the long-term
viability of our business model upon improvement in market conditions. Since the
fall of 2014, our liquidity has been indirectly impacted by low oil and natural
gas prices, which together with oil and natural gas being produced in greater
volumes onshore, has unfavorably impacted the extent of offshore exploration and
development activities, resulting in lower than normal cash flow from
operations. The COVID-19 pandemic is expected to continue to depress demand and
the timing of a global economic

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recovery is unclear. In addition, oil prices have been negatively impacted by
the recent oil price war initiated by Russia and Saudi Arabia.
As of December 31, 2019 , we had total cash and cash equivalents of $121.5
million and restricted cash of $52.1 million. As of June 30, 2020, we had total
cash and cash equivalents of $89.6 million and restricted cash of $0.2 million.
Our capital requirements have historically been financed with cash flows from
operations, proceeds from issuances of our debt and common equity securities,
borrowings under our revolving and term loan agreements and cash received from
the sale of assets. We require capital to fund on-going operations, remaining
obligations under our expanded fifth OSV newbuild program, vessel
recertifications, discretionary capital expenditures and debt service and may
require capital to fund potential future vessel construction, retrofit or
conversion projects, acquisitions, stock repurchases or the retirement of debt.

In 2020, we experienced multiple events of defaults under the existing 2020
Senior Notes and 2021 Senior Notes, which included non-payment of principal and
interest on the 2020 Senior Notes, nonpayment of interest on the 2021 Senior
Notes and related cross-defaults. Cross-defaults were also triggered under our
existing senior credit agreement, first lien term loan agreement and second lien
term loan agreement. We, together with the administrative agents and certain of
its lenders under its existing senior credit agreement, first lien term loan
agreement and second lien term loan agreement, and certain holders of the
Company's 2020 Senior Notes and 2021 Senior Notes entered into
separate forbearance agreements, which were subsequently extended to May 19,
2020 pursuant to which such lenders and noteholders agreed to forbear from
exercising certain of their rights and remedies with respect to certain defaults
by us.

Despite our extensive efforts to negotiate and launch an out-of-court
debt-for-debt exchange transaction to address our outstanding 2020 Senior Notes
and 2021 Senior Notes and such events of default, after the advent of the
COVID-19 pandemic and the oil price war in March 2020, it became evident that an
in-court process would be necessary to maximize value for us and our
stakeholders while positioning us for long-term success. As a result of the
commencement of the Chapter 11 Cases on May 19, 2020, we are operating as a
debtor-in-possession pursuant to the authority granted under
the Bankruptcy Code. On June 19, 2020, after a confirmation hearing, the
Bankruptcy Court entered a confirmation order approving the Plan. As a
debtor-in-possession, certain of our activities are subject to review and
approval by the Bankruptcy Court. For additional information, see "Item 1 -
Business - Recent Developments - Joint Prepackaged Chapter 11 Plan of
Reorganization".

In connection with the filing of the Plan, on May 22, 2020, we entered into the
DIP Credit Agreement, pursuant to which, certain lenders thereunder agreed to
provide us with loans in an aggregate principal amount not to exceed $75 million
that, among other things, was used to repay in full the $50 million in loans
outstanding under our senior credit agreement, and to finance our ongoing
general corporate needs during the course of the Chapter 11 Cases.
The maturity date of the DIP Credit Agreement is six months following the
effective date of the DIP Credit Agreement. The DIP Credit Agreement contains
customary events of default, including events related to the Chapter 11 Cases,
the occurrence of which could result in the acceleration of our obligation to
repay the outstanding indebtedness under the DIP Credit Agreement. Our
obligations under the DIP Credit Agreement are secured by a first priority
security interest in, and lien on, substantially all of our present and after
acquired property (whether tangible, intangible, real, personal or mixed) and
has been guaranteed by our material subsidiaries.

The Company has received subscriptions pursuant to the Rights Offering with
respect to shares of the Company's new common stock, including under the
Backstop Commitment Agreement. It is contemplated that the Rights Offering of
$100 million will be closed on the effective date of the Plan. The Plan also
provides for the Company to enter into the Exit Financings upon emergence from
the Chapter 11 Cases consisting of a first-lien senior secured term loan credit
facility and a second-lien senior secured term loan credit facility, each in an
aggregate principal amount to be determined.
Cash Flows
Operating Activities. We rely primarily on cash flows from operations to provide
working capital for current and future operations. Net cash used in operating
activities was $(88.0) million in 2019 and $(42.4) million in 2018. Operating
cash flows in 2019 and 2018 continue to be unfavorably affected by weak market
conditions for our vessels operating worldwide.

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Investing Activities. Net cash used in investing activities was $7.6 million in
2019 and $52.5 million in 2018. Cash used in 2019 consisted primarily of capital
improvements to our operating fleet, as well as construction costs paid for our
fifth OSV newbuild program. Cash used in 2018 consisted primarily of the
purchase of four high-spec Jones Act-qualified OSVs and related equipment from
Aries Marine Corporation.
Financing Activities. Net cash provided by financing activities was $44.3
million in 2019 and $133.8 million in 2018. Net cash provided by financing
activities in 2019 resulted from the senior credit facility and the incremental
first-lien term loans, partially offset by the repurchase of the remainder of
the 2019 convertible senior notes on their due date. Net cash provided by
financing activities in 2018 resulted from net proceeds from the first-lien term
loans.
Commitments and Contractual Obligations
The following table and notes set forth our aggregate contractual obligations as
of December 31, 2019 (in thousands).
                                                   Less than
Contractual Obligations               Total          1 Year       1-3 Years      3-5 Years       Thereafter
Vessel construction
commitments(1)                    $    57,521     $   22,900     $   34,621     $        -     $          -
5.000% senior notes due
2021(2)(3)(4)                         450,000              -        450,000              -                -
5.875% senior notes due
2020(4)(5)                            224,313        224,313              -              -                -
First-lien term loans(4)(6)           350,000              -              -        350,000                -
Second-lien term loans(4)(7)          121,235              -              -              -          121,235
Senior credit facility(4)(8)          100,000              -         50,000              -           50,000
Interest payments(9)                  232,527         78,115        107,615         43,945            2,852
Total                             $ 1,535,596     $  325,328     $  642,236     $  393,945     $    174,087

(1) Vessel construction commitments reflect our current projection of cash

outlays for our fifth OSV newbuild program. The total project costs for the

currently contracted 24-vessel program are expected to be $1,335 million,

excluding capitalized construction period interest. From the inception of

this program through December 31, 2019, we have incurred $1,277.5 million,

or 95.7%, of total expected project costs.

(2) Our 2021 Senior Notes, with a fixed interest rate of 5.000% per year, mature

on March 1, 2021 and currently include $1,203 of deferred financing costs.

(3) The Company did not make an interest payment on the 2021 Senior Notes in the


     amount of $11,250, which was due on March 2, 2020.


(4)  See "Item 1 - Joint Prepackaged Chapter 11 Plan of Reorganization" for

discussion of various defaults and cross-defaults under our credit documents

and the proposed impact of the Chapter 11 Cases on the Company's commitments

and contractual obligations.

(5) Our 2020 Senior Notes, with a fixed interest rate of 5.875% per year, mature

on April 1, 2020 and currently include $262 of deferred financing costs.

(6) As of December 31, 2019, the first-lien term loans were fully drawn with a

$350 million balance outstanding that matures on June 15, 2023 and currently

includes $3,084 of non-cash original issue discount, $3,256 of deferred

financing costs and $13,040 of deferred gain.

(7) Our second-lien term loans with a fixed interest rate of 9.500% per year,

mature on February 7, 2025 and currently include $18,678 of deferred gain.

(8) On June 28, 2019, the Company entered into a new $100.0 million senior

secured asset-based revolving credit facility, or the senior credit

facility. The senior credit facility is comprised of two tranches that will

rebalance each month based on a variable receivables-backed borrowing base.


     The unrestricted receivables-backed tranche will mature in 2022, and the
     restricted cash-backed tranche will mature in 2025. The senior credit
     facility currently includes $5,571 of deferred financing costs.

(9) Interest payments relate to our 2021 Senior Notes, our 2020 Senior Notes,

and our second-lien term loans with semi-annual interest payments of $11,250

payable March 1 and September 1, $6,589 payable April 1 and October 1, and

quarterly interest payments of $2,879 payable January 31st, April 30th, July

31st, and October 31st, respectively. Also, the interest rate on the

first-lien term loans is variable based on our election and the interest

payments reflected in this table are based on the outstanding amount as of

December 31, 2019 using the applicable 30-day LIBOR interest rate that was

elected and in effect on such date plus an applicable margin, which is

currently 7.00%. The interest rate on the senior credit facility is variable

based on the 30-day LIBOR interest rate plus a fixed margin of 5.00%, and

the interest payments reflected in this table are based on the outstanding

amount as of December 31, 2019. Non-cash interest expense has been excluded

from the table above. The Company did not make an interest payment on the

2021 Senior Notes in the amount of $11,250, which was due on March 2, 2020.







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Debt

As of December 31, 2019, the Company had the following outstanding debt (in thousands, except effective interest rate):

Effective Cash Interest


                                               Total Debt(4)     Interest Rate       Payments      Payment Dates
5.875% senior notes due 2020, net of                                                               April 1 and

deferred financing costs of $262 (1) $ 224,051 6.08 %

$      6,589     October 1
5.000% senior notes due 2021, net of                                                               March 1 and
deferred financing costs of $1,203 (1)               448,797         5.21 %             11,250     September 1
First-lien term loans due 2023, plus                 356,700         9.16 %              2,652     Variable
deferred gain of $13,040, net of original                                                          Monthly
issue discount of $3,084 and deferred
financing costs of $3,256 (2)
Second-lien term loans due 2025, including           139,913         9.50 %              2,879     January 31,
deferred gain of $18,678                                                                           April 30, July
                                                                                                   31, and
                                                                                                   October 31
Senior credit facility, net of deferred                                                            Variable
financing costs of $5,571 (3)                         94,429         7.32 %                578     Monthly
                                             $     1,263,890

(1) The senior notes do not require any payments of principal prior to their

stated maturity dates, but pursuant to the indentures under which the 2020

and 2021 Senior Notes were issued, we would be required to make offers to

purchase such senior notes upon the occurrence of specified events, such as

certain asset sales or a change in control.

(2) The interest rate on the first-lien term loans is variable based on the

Company's election. The amount reflected in this table is the monthly amount

payable based on the 30-day LIBOR interest rate that was elected and in

effect on December 31, 2019 plus an applicable margin, which is currently

7.00%. Please see Note 9 for further discussion of the variable interest


     rate applicable to the first-lien term loans.


(3)  The interest rate on the senior credit facility is variable based on the

30-day LIBOR interest rate plus a 5.00% margin. The amount reflected in this

table is the monthly amount payable based on the 30-day LIBOR interest rate

that was in effect on December 31, 2019. Please see Note 9 for further

discussion of the variable interest rate applicable to the senior credit

facility.

(4) See "Item 1 - Joint Prepackaged Chapter 11 Plan of Reorganization" regarding

the proposed impact of the Chapter 11 Cases on the Company's long-term debt

including current maturities.




The credit agreements governing our senior credit facility, our first-lien term
loans and second-lien term loans and the indentures governing our 2020 and 2021
Senior Notes impose certain operating and financial restrictions on us. Such
restrictions affect, and in many cases limit or prohibit, among other things,
our ability to incur additional indebtedness, make capital expenditures, redeem
equity, create liens, sell assets and pay dividends or make other restricted
payments. During 2019, we were in compliance with all applicable financial
covenants.

Capital Expenditures and Related Commitments



During the first quarter of 2018, the Company notified the shipyard that was
constructing the remaining two vessels in the Company's fifth OSV newbuild
program that it was terminating the construction contracts for such vessels. See
additional discussion in Note 7 of our consolidated financial statements
included herein for further discussion and in Legal Proceedings. The cost of
this nearly completed 24-vessel newbuild program, before construction period
interest, is expected to be approximately $1,335.0 million, of which $22.9
million and $34.6 million are currently expected to be incurred in 2021 and
2022, respectively. As of the date of termination, these two remaining vessels,
both of which are domestic 400 class MPSVs, were projected to be delivered in
the second and third quarters of 2019, respectively. These projected delivery
dates were subsequently amended, for guidance purposes, to be the second and
third quarters of 2020; and then later extended to be the second and third
quarters of 2021. Due to the continued uncertainty of the timing and location of
future construction activities, the Company has now updated its forward guidance
for the delivery dates related to these vessels to be the second and third
quarters of 2022, respectively. The Company has not revised its estimate of the
cost to complete the vessels to reflect the disputed claims asserted by the
shipyard. In addition, the Company has not included any potential costs to
complete the vessels in excess of the original contract price that may not be
covered by surety bonds due to the sureties' denial of claims or for any other
reasons. The timing of remaining construction draws remains subject to change
commensurate with any potential further delays in the delivery dates of such
vessels. From the inception of this program through December 31, 2019, the
Company had incurred construction costs of approximately $1,277.5 million, or
95.7%, of total expected project costs. During 2019, the Company incurred $3.3
million related to the construction of these vessels.

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The following table summarizes the costs incurred, prior to the allocation of
construction period interest, for the purposes set forth below for the years
ended December 31, 2019 and 2018, and a forecast for the year ending December
31, 2020 (in millions):
                                                      Year Ended December 31,
                                                         2019                 2018
                                                       Actual               Actual
Maintenance and Other Capital Expenditures:
Maintenance Capital Expenditures
Deferred drydocking charges                   $        33.1                $    10.9
Other vessel capital improvements(1)                    1.1

6.4


                                                       34.2

17.3


Other Capital Expenditures
Commercial-related vessel improvements(2)               2.8

5.5


Miscellaneous non-vessel additions(3)                   0.4                      0.1
                                                        3.2                      5.6
Total:                                        $        37.4                $    22.9

(1) Other vessel capital improvements include costs for discretionary vessel

enhancements, which are typically incurred during a planned drydocking event

to meet customer specifications.

(2) Commercial-related vessel improvements include items, such as cranes, ROVs,

helidecks, living quarters, and other specialized vessel equipment, which

costs are typically included in and offset, in whole or in part, by higher


     dayrates charged to customers.


(3)  Non-vessel capital expenditures are primarily related to information
     technology and shoreside support initiatives.

Inflation


To date, general inflationary trends have not had a material effect on our
operating revenues or expenses.
Item 7A-Quantitative and Qualitative Disclosures About Market Risk
Not required.
Item 8-Financial Statements and Supplementary Data
The financial statements and supplementary information required by this Item
appear on pages F-1 through F-39 of this Annual Report on Form 10-K.
Item 9-Changes in and Disagreements with Accountants on Accounting and Financial
Disclosures
None.
Item 9A-Controls and Procedures
Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief
Financial Officer, has evaluated the effectiveness of our disclosure controls
and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under
the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the
end of the period covered by this report. Based on that evaluation, our Chief
Executive Officer and Chief Financial Officer have concluded that, as of the end
of such period, our disclosure controls and procedures were effective to ensure
that information required to be disclosed by us in reports that we file or
submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission's
rules and forms, and that such information is accumulated and communicated to
our management, including our Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required
disclosures.

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Management's Report on Internal Control Over Financial Reporting
Management of the Company is responsible for establishing and maintaining
adequate internal control over financial reporting, as such term is defined in
Rule 13(a)-15(f) or Rule15d-15(f) under the Exchange Act. Internal control over
financial reporting is a process to provide reasonable assurance regarding the
reliability of our financial reporting for external purposes in accordance with
U.S. generally accepted accounting principles. Internal control over financial
reporting includes maintaining records that, in reasonable detail, accurately
and fairly reflect our transactions; providing reasonable assurance that
transactions are recorded as necessary for preparation of our financial
statements in accordance with U.S. generally accepted accounting principles;
providing reasonable assurance that receipts and expenditures of Company assets
are made in accordance with authorizations of the Company's management and board
of directors; and providing reasonable assurance that unauthorized acquisition,
use or disposition of Company assets that could have a material effect on our
financial statements would be prevented or detected on a timely basis. Because
of its inherent limitations, internal control over financial reporting is not
intended to provide absolute assurance that a misstatement of our financial
statements would be prevented or detected. In addition, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer, we conducted an
evaluation of the effectiveness of our internal control over financial reporting
as of December 31, 2019, utilizing the criteria set forth in the report entitled
Internal Control-Integrated Framework issued in 2013 by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). Based upon such
assessment, our management concluded that our internal control over financial
reporting was effective as of December 31, 2019.
There were no changes in our internal controls over financial reporting that
occurred during the year ended December 31, 2019 that have materially affected,
or are reasonably likely to materially affect, our internal control over
financial reporting.


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