Dawson Geophysical Company
Annual Report 2015

Plain-text annual report

Use these links to rapidly review the documentTABLE OF CONTENTS TABLE OF CONTENTS 2Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549Form 10-KCommission File No. 001-32472DAWSON GEOPHYSICAL COMPANY(Exact name of registrant as specified in its charter)Texas(State or other jurisdiction ofincorporation ororganization) 74-2095844(I.R.S. EmployerIdentification No.)508 West Wall, Suite 800, Midland, Texas 79701(Address of Principal Executive Office) (Zip Code)Registrant's Telephone Number, including area code: 432-684-3000 Securities registered pursuant to Section 12(b) of the Act:Title of Each Class Name of Exchange on Which RegisteredCommon Stock, $0.01 parvalue The NASDAQ Stock Market Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No ý Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ý Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filingrequirements for the past 90 days. Yes ý No o Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data Filerequired to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232 405 of the chapter) during the preceding 12 months (or for such shorterperiod that the registrant was required to submit and post such files). Yes ý No oý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934For the Fiscal Year Ended December 31, 2015o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934For the Transition Period From to  Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, tothe best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment tothis Form 10-K. o Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. Seethe definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one): Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No ý As of June 30, 2015, the aggregate market value of Dawson Geophysical Company common stock, par value $0.01 per share, held by non-affiliates(based upon the closing transaction price on Nasdaq) was approximately $94,238,000. On March 11, 2016, there were 21,629,310 shares of Dawson Geophysical Company common stock, $0.01 par value outstanding. As used in this report, the terms "we," "our," "us," "Dawson" and the "Company" refer to Dawson Geophysical Company unless the context indicatesotherwise.DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's Proxy Statement for its 2016 Annual Meeting of Shareholders are incorporated by reference into Part III of this AnnualReport on Form 10-K. Large accelerated filer o Accelerated filer ý Non-accelerated filer o(Do not check if asmaller reporting company) Smaller reporting company oTable of Contents TABLE OF CONTENTS 1 Page PART I Item 1. Business 2 Item 1A. Risk Factors 7 Item 1B. Unresolved Staff Comments 17 Item 2. Properties 17 Item 3. Legal Proceedings 17 PART II Item 5. Market for Our Common Equity and Related Stockholder Matters 18 Item 6. Selected Financial Data 21 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 22 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 33 Item 8. Financial Statements and Supplementary Data 34 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 34 Item 9A. Controls and Procedures 34 Item 9B. Other Information 35 PART III Item 10. Directors, Executive Officers and Corporate Governance 36 Item 11. Executive Compensation 36 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 36 Item 13. Certain Relationships and Related Transactions and Director Independence 36 Item 14. Principal Accounting Fees and Services 36 PART IV Item 15. Exhibits and Financial Statement Schedules 37 Signatures 38 Index to Financial Statements F-1 Index to Exhibits Table of Contents DAWSON GEOPHYSICAL COMPANY FORM 10-KFor the Fiscal Year Ended December 31, 2015 DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS Statements other than statements of historical fact included in this Form 10-K that relate to forecasts, estimates or other expectations regarding futureevents, including without limitation, statements under "Management's Discussion and Analysis of Financial Condition and Results of Operations" and"Business" regarding technological advancements and our financial position, business strategy and plans and objectives of our management for futureoperations, may be deemed to be forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the SecuritiesExchange Act of 1934, as amended (the "Exchange Act"). When used in this Form 10-K, words such as "anticipate," "believe," "estimate," "expect," "intend"and similar expressions, as they relate to us or our management, identify forward-looking statements. Such forward-looking statements are based on thebeliefs of our management, as well as assumptions made by and information currently available to management. Actual results could differ materially fromthose contemplated by the forward-looking statements as a result of certain factors, including but not limited to the volatility of oil and natural gas prices,dependence upon energy industry spending, industry competition, delays, reductions or cancellations of service contracts, reduced utilization, crewproductivity, the type of contracts we enter into, external factors affecting our crews such as weather interruptions and inability to obtain land access rights ofway, high fixed costs of our operations and our high capital requirements, limited number of clients, credit risk related to our clients, the availability ofcapital resources, operational disruptions, the risk that the benefits from the business combination pursuant to the Merger (as defined below) may not be fullyrealized or may take longer to realize than expected, the ability to promptly and effectively integrate our combined business and the diversion ofmanagement time on transaction-related issues. See "Risk Factors" for more information on these and other factors. These forward-looking statements reflectour current views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to our operations, results ofoperations, growth strategies and liquidity. The cautionary statements made in this Form 10-K should be read as applying to all related forward-lookingstatements wherever they appear in this Form 10-K. All subsequent written and oral forward-looking statements attributable to us or persons acting on ourbehalf are expressly qualified in their entirety by this paragraph. We assume no obligation to update any such forward-looking statements. Part I Item 1. BUSINESS General Dawson Geophysical Company, a Texas corporation (the "Company"), is a leading provider of North America onshore seismic data acquisition serviceswith operations throughout the continental United States and Canada. We acquire and process 2-D, 3-D and multi-component seismic data for our clients,ranging from major oil and gas companies to independent oil and gas operators as well as providers of multi-client data libraries. Our principal business officeis located at 508 West Wall, Suite 800, Midland, Texas 79701 (Telephone: 432-684-3000), and our internet address is www.dawson3d.com. We makeavailable free of charge on our website our annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K as soon asreasonably practicable after filing or furnishing such information with the Securities and Exchange Commission. On February 11, 2015, the Company, which was formerly known as TGC Industries, Inc. ("Legacy TGC"), consummated a strategic business combinationwith Dawson Operating Company, which was formerly known as Dawson Geophysical Company ("Legacy Dawson"), pursuant to which a wholly-owned2Table of Contentssubsidiary of Legacy TGC merged with and into Legacy Dawson, with Legacy Dawson continuing after the merger as the surviving entity and a wholly-owned subsidiary of Legacy TGC (the "Merger"). In connection with the Merger, Legacy Dawson changed its name to "Dawson Operating Company" andLegacy TGC changed its name to "Dawson Geophysical Company." Legacy TGC was formed in 1980. Legacy Dawson was formed in 1952. Except as otherwise specifically noted herein, references herein to the "Company," "we," "us" or "our" refer to post-combination Dawson GeophysicalCompany and its consolidated subsidiaries, including Legacy Dawson. We provide our seismic data acquisition services primarily to onshore oil and natural gas exploration and development companies for use in the onshoredrilling and production of oil and natural gas in the continental United States and Canada as well as providers of multi-client data libraries. The main factorsinfluencing demand for seismic data acquisition services in our industry are the level of drilling activity by oil and natural gas companies and the sizes ofsuch companies' exploration and development budgets, which, in turn, depend largely on current and anticipated future crude oil and natural gas prices anddepletion rates of the companies' oil and natural gas reserves. As of December 31, 2015, we operated ten seismic crews, consisting of eight crews in the United States and two crews in Canada, and one seismic dataprocessing center. During the three months ended December 31, 2015, we operated a maximum of ten crews in the United States and two in Canada. We arecurrently operating five crews in the United States with limited activity in Canada as the Canadian winter operating season comes to an end. We anticipateoperating between four and six crews in the United States with limited activity in Canada into the second quarter of 2016. Visibility for active crew countbeyond the second quarter is limited due to uncertainty in oil prices and demand levels. Demand for our services is likely to be at reduced levels in NorthAmerica in response to the reduced expenditures by our clients related to the recent drop in crude oil prices. Our seismic crews supply seismic data primarilyto companies engaged in the exploration and development of oil and natural gas on land and in land-to-water transition areas. Seismic acquisition services ofour wholly-owned subsidiary, Eagle Canada, Inc. ("Eagle Canada"), are also used by the potash mining industry in Canada, and Eagle Canada has particularexpertise through its heliportable capabilities. Our clients rely on seismic data to identify areas where subsurface conditions are favorable for theaccumulation of existing hydrocarbons, to optimize the development and production of hydrocarbon reservoirs, to better delineate existing oil and naturalgas fields, and to augment reservoir management techniques. We acquire geophysical data using the latest in 3-D seismic survey techniques. We introduce acoustic energy into the ground by using vibrationequipment or dynamite detonation, depending on the surface terrain, area of operation, and subsurface requirements. The reflected energy, or echoes, isreceived through geophones, converted into a digital signal at a multi-channel recording unit, and then transmitted to a central recording vehicle. Subsurfacerequirements dictate the number of channels necessary to perform our services. We generally use thousands of recording channels in our seismic surveys.Additional recording channels enhance the resolution of the seismic survey through increased imaging analysis and provide improved operationalefficiencies for our clients. With our state-of-the-art seismic equipment, including computer technology and multiple channels, we acquire, on a cost effectivebasis, immense volumes of seismic data that, when processed and interpreted, produce precise images of the earth's subsurface. Our clients then use ourseismic data to generate 3-D geologic models that help reduce drilling risks, finding and development costs and improve recovery rates from existing fields. In addition to conventional 2-D and 3-D seismic surveys, we provide what the industry refers to as multi-component seismic data surveys. Multi-component surveys involve the recording of alternative seismic waves known as shear waves. Shear waves can be recorded as wave conversion ofconventional energy sources (3-C converted waves) or from horizontal vibrator energy source units (shear wave vibrators). Multi-component data are utilizedin further analysis of subsurface rock type, fabric and3Table of Contentsreservoir characterization. We own equipment required for onshore multi-component surveys. The majority of the projects in Canada require multi-component recording equipment. We have operated one to two multi-component equipped crews in the United States routinely over the past few years. Theuse of multi-component seismic data could increase in North America over the next few years if industry conditions improve and potentially require capitalexpenditures for additional equipment. In recent years, we have begun providing surface-recorded microseismic services utilizing equipment we currently own. Microseismic monitoring is usedby clients who use hydraulic fracturing to extract hydrocarbon deposits to monitor their hydraulic fracturing operations. We market and supplement our services in the continental United States from our headquarters in Midland, Texas and from additional offices in threeother cities in Texas (Denison, Houston and Plano) as well as two additional states, Oklahoma (Oklahoma City) and Colorado (Denver). In addition, wemarket and supplement our services in Canada from our facilities in Calgary, Alberta.The Industry Technological advances in seismic equipment and computing allow the seismic industry to acquire and process, on a cost-effective basis, immensevolumes of seismic data which produce precise images of the earth's subsurface. The latest accepted method of seismic data acquisition, processing, and thesubsequent interpretation of the processed data is the 3-D seismic method. Geophysicists use computer workstations to interpret 3-D data volumes, identifysubsurface anomalies, and generate a geologic model of subsurface features. In contrast with the 3-D method, the 2-D method involves the collection ofseismic data in a linear fashion, thus generating a single plane of subsurface seismic data. 3-D seismic data are used in the exploration and development of new reserves and enable oil and natural gas companies to better delineate existing fieldsand to augment their reservoir management techniques. Benefits of incorporating high resolution 3-D seismic surveys into exploration and developmentprograms include reducing drilling risk, decreasing oil and natural gas finding costs, and increasing the efficiencies of reservoir location, delineation, andmanagement. In order to meet the requirements necessary to fully realize the benefits of 3-D seismic data, there is an increasing demand for improved dataquality with greater subsurface resolution. Currently, the North American seismic data acquisition industry is made up of a number of companies divided into two groups. The first group is madeup of publicly-traded companies. This group includes us, SAExploration Holdings, Inc. ("SAE") and Tesla Exploration, Ltd. ("Tesla"). The second group ismade up of Geokinetics, Inc. ("Geokinetics"), Global Geophysical Services, Inc. ("Global Geophysical"), Breckenridge Geophysical Inc. ("Breckenridge"),Paragon Geophysical Services, Inc. ("Paragon"), LoneStar Geophysical Surveys ("LoneStar"), and smaller companies which generally run one or two seismiccrews and often specialize in specific regions or types of operations.Equipment and Crews In recent years, we have experienced continued increases in recording channel capacity on a per crew or project basis. This increase in channel countdemand is driven by client needs and is necessary in order to produce higher resolution images, increase crew efficiencies and undertake larger scale projects.Due to the increase in demand for higher channel counts, we have continued our investments in additional channels. In response to project-based channelrequirements, we routinely deploy a variable number of channels on a variable number of crews in an effort to maximize asset utilization and meet clientneeds. While the number of recording systems we own may exceed the number utilized in the field at any given time, we maintain the excess equipment toprovide additional operational flexibility and to allow us to quickly deploy additional recording channels and energy source units as needed to respond toclient demand and desire for improved data quality with greater subsurface images. We believe we will realize the4Table of Contentsbenefit of increased channel counts and flexibility of deployment through increased crew efficiencies, higher revenues and margins in improved conditions. In addition, since 2011, we have purchased or leased a significant number of cable-less recording channels. We have utilized this equipment primarily asstand-alone recording systems, but on occasion we have utilized it in conjunction with our cable-based systems. As a result of the introduction of cable-lessrecording systems, we have realized increased crew efficiencies and increased revenue on projects using this equipment. We believe we will experiencecontinued demand for cable-less recording systems in the future. While we have replaced cable-based recording equipment with cable-less equipment oncertain crews, the cable-based recording equipment continues to be deployed on existing crews. As of December 31, 2015, we owned equipment for 22 land-based seismic data acquisition crews, 217 vibrator energy source units, approximately248,000 recording channels and 22 central recording systems. Of the 22 recording systems we owned at December 31, 2015, 12 were Geospace TechnologiesGSR cable-less recording systems, eight were ARAM ARIES cable-based recording systems, one was a Wireless Seismic RT System 2 system, and one was acable-less INOVA Hawk system. Each crew consists of approximately 40 to 100 technicians with associated vehicles, geophones, a seismic recording system,energy sources, cables, and a variety of other equipment. Each ARAM crew has one central recording vehicle which captures seismic data. The GSR, GSX andINOVA Hawk crews utilize a recorder to manage the data acquisition while the individual system captures and holds the data until they are placed in the DataTransfer Module. The data is then transferred to various data storage media, which are delivered to a data processing center selected by the client.Equipment Acquisition and Capital Expenditures We monitor and evaluate advances in geophysical technology and commit capital funds to purchase the equipment we deem most effective to maintainour competitive position cost-effectively. Purchasing and updating seismic equipment and technology involves a commitment to capital spending. We alsotie our capital expenditures closely to demand for our services. As a result of the continuing softening in demand for seismic services beginning in early 2014and the Company's belief that its current equipment base is sufficient to meet current demand, the Company has adopted a maintenance capital expendituresprogram and has generally curtailed large equipment purchases.Clients Our services are marketed by supervisory and executive personnel who contact clients to determine geophysical needs and respond to client inquiriesregarding the availability of crews or processing schedules. These contacts are based principally upon professional relationships developed over a number ofyears. Our clients range from major oil and gas companies to small independent oil and gas operators and also providers of multi-client data libraries. Theservices we provide to our clients vary according to the size and needs of each client. During the twelve months ended December 31, 2015, sales to twoclients represented more than 36% of our revenue. The remaining balance of our revenue was derived from varied clients and none represented 10% or moreof our revenues. We anticipate that sales to these two clients will represent a smaller percentage of our overall revenues during 2016. We do not acquire seismic data for our own account or for future sale, maintain multi-client seismic data libraries or participate in oil and gas ventures.The results of seismic surveys conducted for a client belong to that client. It is also our policy that none of our officers, directors or employees activelyparticipate in oil and natural gas ventures. All of our clients' information is maintained in the strictest confidence.5Table of ContentsDomestic and Foreign Operations We derive our revenue from domestic and foreign sources. Total revenues for the twelve months ended December 31, 2015 were approximately$234,685,000, of which $222,154,000 were earned in the United States and $12,531,000 were earned in Canada. Total revenue for the twelve months endedDecember 31, 2014 were approximately $244,304,000, of which $240,751,000 were earned in the United Stated and $3,553,000 were earned in Canada. Long lived assets as of December 31, 2015 were approximately $345,619,000, with $329,467,000 owned in the United States and $16,152,000 owned inCanada. Long lived assets as of December 31, 2014 were approximately $339,245,000, with $337,945,000 owned in the United States and $1,300,000 ownedin Canada.Contracts Our contracts are obtained either through competitive bidding or as a result of client negotiations. Our services are conducted under general serviceagreements for seismic data acquisition services which define certain obligations for us and for our clients. A supplemental agreement setting forth the termsof a specific project, which may be canceled by either party on short notice, is entered into for every project. We currently operate under supplementalagreements that are either "turnkey" agreements providing for a fixed fee to be paid to us for each unit of data acquired or "term" agreements providing for afixed hourly, daily, or monthly fee during the term of the project or projects. Currently, as in recent years, most of our projects are operated under turnkey agreements. Turnkey agreements generally provide us more profit potential,but involve more risks because of the potential of crew downtime or operational delays. We attempt to negotiate on a project-by-project basis some level ofweather downtime protection within the turnkey agreements. Under the term agreements, we forego an increased profit potential in exchange for a moreconsistent revenue stream with improved protection from crew downtime or operational delays.Competition The acquisition of seismic data for the oil and natural gas industry is a highly competitive business. Contracts for such services generally are awarded onthe basis of price quotations, crew experience, and the availability of crews to perform in a timely manner, although factors other than price, such as crewsafety, performance history, and technological and operational expertise, are often determinative. Our competition includes publicly traded competitors, suchas Tesla and SAE. Our other major competitors include Geokinetics, Global Geophysical, Breckenridge, Paragon and LoneStar. In addition to thesepreviously named companies, we also compete for projects from time to time with smaller seismic companies which operate in local markets with only one ortwo crews. Further, the barriers to entry in the seismic industry are not prohibitive, and it would not be difficult for seismic companies outside of the UnitedStates to enter the United States market and compete with us.Employees As of December 31, 2015, we employed over 1,125 full-time employees, of which approximately 150 consisted of management, sales, and administrativepersonnel with the remainder being crew and crew support personnel. Our employees are not represented by a labor union. We believe we have good relationswith our employees. See "Item 2. Properties" for a description of our material properties utilized in our business.6Table of Contents Item 1A. RISK FACTORS An investment in our common stock is subject to a number of risks, including those discussed below. You should carefully consider these discussions ofrisk and the other information included in this Form 10-K. These risk factors could affect our actual results and should be considered carefully whenevaluating us. Although the risks described below are the risks that we believe are material, they are not the only risks relating to our business, our industryand our common stock. Additional risks and uncertainties, including those that are not yet identified or that we currently believe are immaterial, may alsoadversely affect our business, financial condition or results of operations. If any of the events described below occur, our business, financial condition orresults of operations could be materially adversely affected. We derive substantially all of our revenues from companies in the oil and natural gas exploration and development industry, as well as providers ofmulti-client data libraries which serve common clients in the industry. The oil and natural gas industry is a historically cyclical industry which is currentlyexperiencing a severe downturn, with levels of activity that are significantly affected by the levels and volatility of oil and natural gas prices. Demand for our services depends upon the level of expenditures by oil and natural gas companies for exploration, production, development and fieldmanagement activities, which depend primarily on oil and natural gas prices. The oil and natural gas industry is currently experiencing a severe downturn.Significant declines in oil and natural gas exploration activities and oil and natural gas prices have adversely affected the demand for our services and ourresults of operations in the past as well as currently and will continue to do so if the level of such exploration activities and the prices for oil and natural gaswere to decline in the future or if the current downturn is extended or becomes more severe. In addition to the market prices of oil and natural gas, thewillingness of our clients to explore, develop and produce depends largely upon prevailing industry conditions that are influenced by numerous factors overwhich our management has no control, including general economic conditions and the availability of credit. Any prolonged reduction in the overall level ofexploration and development activities, whether resulting from changes in oil and natural gas prices or otherwise, could adversely impact us in many ways bynegatively affecting:•our revenues, cash flows, and profitability; •our ability to maintain or increase our borrowing capacity; •our ability to obtain additional capital to finance our business and the cost of that capital; and •our ability to attract and retain skilled personnel whom we would need in the event of an upturn in the demand for our services. Worldwide political, economic, and military events have contributed to oil and natural gas price volatility and are likely to continue to do so in thefuture. Depending on the market prices of oil and natural gas, oil and natural gas exploration and development companies may cancel or curtail their capitalexpenditure and drilling programs, thereby reducing demand for our services, or may become unable to pay, or have to delay payment of, amounts owed to usfor our services. Oil and natural gas prices have been highly volatile historically and, we believe, will continue to be so in the future. Many factors beyondour control affect oil and natural gas prices, including:•the cost of exploring for, producing, and delivering oil and natural gas; •the discovery rate of new oil and natural gas reserves; •the rate of decline of existing and new oil and natural gas reserves; •available pipeline and other oil and natural gas transportation capacity; •the ability of oil and natural gas companies to raise capital and debt financing;7Table of Contents•actions by OPEC (the Organization of Petroleum Exporting Countries); •political instability in the Middle East and other major oil and natural gas producing regions; •economic conditions in the United States and elsewhere; •domestic and foreign tax policy; •domestic and foreign energy policy including increased emphasis on alternative sources of energy; •weather conditions in the United States, Canada and elsewhere; •the pace adopted by foreign governments for the exploration, development, and production of their national reserves; •the price of foreign imports of oil and natural gas; and •the overall supply and demand for oil and natural gas. We and our clients may be adversely affected by an economic downturn. An economic downturn could have a material adverse effect on our financial results and proposed plan of operations and could lead to further significantfluctuations in the demand for and pricing of oil and gas. Reduced demand and pricing pressures could adversely affect the financial condition and results ofoperations of our clients and their ability to purchase our services. We are not able to predict the timing, extent, and duration of the economic cycles in themarkets in which we operate. The oil and natural gas industry is currently experiencing a severe downturn and prices for oil and natural gas have been indecline since the fourth quarter of 2014. If the current downturn continues for an extended period of time, or if it becomes more extreme, it may have materialadverse effects on our planned operations, level of capital expenditures and financial condition. A limited number of clients operating in a single industry account for a significant portion of our revenues, and the loss of one of these clients couldadversely affect our results of operations. We derive a significant amount of our revenues from a relatively small number of oil and gas exploration and development companies and providers ofmulti-client data libraries. During the twelve months ended December 31, 2015, our two largest clients accounted for approximately 36% of our revenues. Ifeither of these clients, or any of our other significant clients, were to terminate their contracts or fail to contract for our services in the future because they areacquired, alter their exploration or development strategy, experience financial difficulties or for any other reason, our results of operations could be adverselyaffected. Our clients could delay, reduce or cancel their service contracts with us on short notice, which may lead to lower than expected demand and revenues. Our order book reflects client commitments at levels we believe are sufficient to maintain operations on our existing crews for the indicated periods.However, our clients can delay, reduce or cancel their service contracts with us on short notice. If the current downturn in the oil and natural gas industrycontinues for an extended period of time, or if it becomes more extreme, it may result in an increase in delays, reductions or cancellations by our clients. Inaddition, the timing of the origination and completion of projects and when projects are awarded and contracted for is also uncertain. As a result, our orderbook as of any particular date may not be indicative of actual demand and revenues for any succeeding fiscal period.8Table of Contents Our revenues, operating results and cash flows can be expected to fluctuate from period to period. Our revenues, operating results, and profitability may fluctuate from period to period. These fluctuations are attributable to the level of new business in aparticular period, the timing of the initiation, progress or cancellation of significant projects, higher revenues and expenses on our dynamite contracts, andcosts we incur to train new crews we may add in the future to meet increased client demand. Fluctuations in our operating results may also be affected byother factors that are outside of our control such as permit delays, weather delays and crew productivity. Oil and natural gas prices have continued to bevolatile, and have resulted in significant demand fluctuations for our services. The current downturn in the oil and natural gas industry and the relatedsustained declines in oil and natural gas commodity prices have resulted in declines in the demand for our services. There can be no assurance of future oiland gas price levels or stability. Our operations in Canada are also seasonal as a result of the thawing season and we have historically experienced limitedCanadian activity for the second and third quarters of each year. The demand for our services will be adversely affected by a significant reduction in oil andnatural gas prices and by climate change legislation or material changes to U.S. energy policy. Because our business has high fixed costs, the negative effectof one or more of these factors could trigger wide variations in our operating revenues, cash flows, EBITDA margin, and profitability from quarter-to-quarter,rendering quarter-to-quarter comparisons unreliable as an indicator of performance. Due to the factors discussed above, you should not expect sequentialgrowth in our quarterly revenues and profitability. We extend credit to our clients without requiring collateral and a default by a client could have a material adverse effect on our operating revenues. We perform ongoing credit evaluations of our clients' financial conditions and, generally, require no collateral from our clients. It is possible that one ormore of our clients will become financially distressed, especially in light of the current downturn in the oil and natural gas industry and low commodityprices, which could cause them to default on their obligations to us and could reduce the client's future need for seismic services provided by us. Ourconcentration of clients may also increase our overall exposure to these credit risks. A default in payment from one of our large clients could have a materialadverse effect on our operating revenues for the period involved. We incur losses. We incurred net losses of $26,279,000 and $14,714,000 for the twelve months ended December 31, 2015 and 2014, respectively. Our ability to be profitable in the future will depend on many factors beyond our control, but primarily on the level of demand for land-based seismicdata acquisition services by oil and natural gas exploration and development companies. Even if we do achieve profitability, we may not be able to sustain orincrease profitability on a quarterly or annual basis. We have indebtedness under credit facilities with commercial banks, and certain of our core assets and our accounts receivable are pledged as collateralfor these obligations. Our ability to borrow may be limited if our accounts receivable decrease. We have indebtedness under credit facilities with commercial banks, and certain of our core assets as well as our accounts receivable are pledged ascollateral for these borrowings. If we are unable to repay all secured borrowings when due, whether at maturity or if declared due and payable following adefault, our lenders have the right to proceed against the assets pledged to secure the indebtedness and may sell these assets in order to repay thoseborrowings, which could materially harm our business, financial condition and results of operations. Our ability to borrow funds under our revolving line ofcredit is tied to the amount of our eligible accounts receivable. If our accounts receivable decrease materially for any reason,9Table of Contentsincluding due to delays, reductions or cancellations by clients or decreased demand for our services, our ability to borrow to fund operations or otherobligations may be limited. Our financial results could be adversely affected by asset impairments. We periodically review our portfolio of equipment and our intangible assets for impairment. In connection with the Merger, we recorded intangiblesassociated with the combination of Legacy TGC and Legacy Dawson that are an asset on our consolidated balance sheet. Future events, including ourfinancial performance, sustained decreases in oil and natural gas prices, reduced demand for our services, our market valuation or the market valuation ofcomparable companies, loss of a significant client's business, failure to realize the benefits of the Merger, or strategic decisions, could cause us to concludethat impairment indicators exist and ultimately that the asset values associated with our equipment or our intangibles, if any, were to be impaired. If we wereto impair our equipment or intangibles, these noncash asset impairments could negatively affect our financial results in a material manner in the period inwhich they are recorded, and the larger the amount of any impairment that may be taken, the greater the impact such impairment may have on our financialresults. Our profitability is determined, in part, by the utilization level and productivity of our crews and is affected by numerous external factors that are beyondour control. Our revenue is determined, in part, by the contract price we receive for our services, the level of utilization of our data acquisition crews and theproductivity of these crews. Crew utilization and productivity is partly a function of external factors, such as client cancellation or delay of projects,operating delays from inclement weather, obtaining land access rights and other factors, over which we have no control. If our crews encounter operationaldifficulties or delays on any data acquisition survey, our results of operations may vary, and in some cases, may be adversely affected. In recent years, most of our projects have been performed on a turnkey basis for which we were paid a fixed price for a defined scope of work or unit ofdata acquired. The revenue, cost and gross profit realized under our turnkey contracts can vary from our estimates because of changes in job conditions,variations in labor and equipment productivity or because of the performance of our subcontractors. Turnkey contracts may also cause us to bearsubstantially all of the risks of business interruption caused by external factors over which we may have no control, such as weather, obtaining land accessrights, crew downtime or operational delays. These variations, delays and risks inherent in turnkey contracts may result in reducing our profitability. We face intense competition in our business that could result in downward pricing pressure and the loss of market share. The seismic data acquisition services industry is a highly competitive business in the continental U.S. and Canada. Our competitors include companieswith financial resources that are significantly greater than our own as well as companies of comparable and smaller size. Additionally, the seismic dataacquisition business is extremely price competitive and has a history of periods in which seismic contractors bid jobs below cost and therefore adverselyaffect industry pricing. Many contracts are awarded on a bid basis, which may further increase competition based primarily on price. Further, the barriers toentry in the seismic industry are not prohibitive, and it would not be difficult for seismic companies outside of the U.S. to enter the U.S. market and competewith us. Inclement weather may adversely affect our ability to complete projects and could therefore adversely affect our results of operations. Our seismic data acquisition operations could be adversely affected by inclement weather conditions. Delays associated with weather conditions couldadversely affect our results of operations. For example,10Table of Contentsweather delays could affect our operations on a particular project or an entire region and could lengthen the time to complete data acquisition projects. Inaddition, even if we negotiate weather protection provisions in our contracts, we may not be fully compensated by our clients for the delay caused by theinclement weather. Our operations are subject to delays related to obtaining land access rights of way from third parties which could affect our results of operations. Our seismic data acquisition operations could be adversely affected by our inability to obtain timely right of way usage from both public and privateland and/or mineral owners. We cannot begin surveys on property without obtaining permits from governmental entities as well as the permission of theprivate landowners who own the land being surveyed. In recent years, it has become more difficult, costly and time-consuming to obtain access rights of wayas drilling activities have expanded into more populated areas. Additionally, while landowners generally are cooperative in granting access rights, some havebecome more resistant to seismic and drilling activities occurring on their property. In addition, governmental entities do not always grant permits within thetime periods expected. Delays associated with obtaining such rights of way could negatively affect our results of operations. Capital requirements for our operations are large. If we are unable to finance these requirements, we may not be able to maintain our competitiveadvantage. Seismic data acquisition and data processing technologies historically have progressed steadily, and we expect this trend to continue. In order to remaincompetitive, we must continue to invest additional capital to maintain, upgrade and expand our seismic data acquisition capabilities. Our working capitalrequirements remain high, primarily due to the expansion of our infrastructure in response to client demand for cable-less recording systems and morerecording channels, which has increased as the industry strives for improved data quality with greater subsurface resolution images. Our sources of workingcapital are limited. We have historically funded our working capital requirements primarily with cash generated from operations, cash reserves and from timeto time borrowings from commercial banks. In recent years we have funded some of our capital expenditures through equipment term loans and capital leases.In the past, we have also funded our capital expenditures and other financing needs through public equity offerings. If we were to expand our operations at arate exceeding operating cash flow, if current demand or pricing of geophysical services were to decrease substantially or if technical advances orcompetitive pressures required us to acquire new equipment faster than our cash flow could sustain, additional financing could be required. If we were notable to obtain such financing or renew our existing revolving line of credit when needed, our failure could have a negative impact on our ability to pursueexpansion and maintain our competitive advantage. Technological change in our business creates risks of technological obsolescence and requirements for future capital expenditures. If we are unable tokeep up with these technological advances, we may not be able to compete effectively. Seismic data acquisition technologies historically have steadily improved and progressed, and we expect this progression to continue. We are in acapital intensive industry, and in order to remain competitive, we must continue to invest additional capital to maintain, upgrade and expand our seismicdata acquisition capabilities. However, we may have limitations on our ability to obtain the financing necessary to enable us to purchase state-of-the-artequipment, and certain of our competitors may be able to purchase newer equipment when we may not be able to do so, thus affecting our ability to compete. We rely on a limited number of key suppliers for specific seismic services and equipment. We depend on a limited number of third parties to supply us with specific seismic services and equipment. From time to time, increased demand forseismic data acquisition services has decreased the11Table of Contentsavailable supply of new seismic equipment, resulting in extended delivery dates on orders of new equipment. Any delay in obtaining equipment could delayour deployment of additional crews and restrict the productivity of existing crews, adversely affecting our business and results of operations. In addition, anyadverse change in the terms of our suppliers' arrangements could affect our results of operations. Some of our suppliers may also be our competitors. If competitive pressures were to become such that our suppliers would no longer sell to us, we wouldnot be able to easily replace the technology with equipment that communicates effectively with our existing technology, thereby impairing our ability toconduct our business. We are dependent on our management team and key employees, and our inability to retain our current team or attract new employees could harm ourbusiness. Our continued success depends upon attracting and retaining highly skilled professionals and other technical personnel. A number of our employees arehighly skilled scientists and highly trained technicians. The loss, whether by death, departure or illness, of our senior executives or other key employees orour failure to continue to attract and retain skilled and technically knowledgeable personnel could adversely affect our ability to compete in the seismicservices industry. We may experience significant competition for such personnel, particularly during periods of increased demand for seismic services. Alimited number of our employees are under employment contracts, and we have no key man insurance. We may fail to realize the anticipated benefits of the Merger, which could adversely affect the value of our common stock. The success of the Merger will depend, in part, on our ability to manage effectively the businesses of Legacy TGC and Legacy Dawson and realize theanticipated benefits from the combination of Legacy TGC and Legacy Dawson. We believe that these anticipated benefits, which include the expansion ofour geographic diversity, an increase in seismic crew utilization rates due to an expanded order book and the ability to enhance efficiencies because oflogistical improvements and expanded support services capabilities, are achievable. However, it is possible that we will not be able to achieve these benefitsfully, or at all, or will not be able to achieve them within the anticipated timeframe. We are subject to Canadian foreign currency exchange rate risk. We conduct business in Canada which subjects us to foreign currency exchange rate risk. Currently, we do not hold or issue foreign currency forwardcontracts, option contracts or other derivative financial instruments to mitigate the currency exchange rate risk. Our results of operations and our cash flowscould be impacted by changes in foreign currency exchange rates. Our common stock has experienced, and may continue to experience, price volatility and low trading volume. Our stock price is subject to significant volatility. Overall market conditions, including a decline in oil and natural gas prices and other risks anduncertainties described in this "Risk Factors" section and in our other filings with the Securities and Exchange Commission, could cause the market price ofour common stock to fall. Our high and low sales price following the Merger through December 31, 2015 was $7.31 and $2.93, respectively. Our common stock is listed on the Nasdaq Global Select Market under the symbol "DWSN." However, daily trading volumes for our common stock are,and may continue to be, relatively small compared to many other publicly traded securities. It may be difficult for shares to be sold in the public market atany given time at prevailing prices, and the price of our common stock may, therefore, be volatile.12Table of Contents Our common stock currently trades below $5.00 per share, and as a result it may be considered a low-priced stock and may be subject to regulations thatlimit or restrict the potential market for the stock. Our common stock may be considered a low-priced stock pursuant to rules promulgated under Section 15(g) of the Securities Exchange Act of 1934, asamended. The rules apply to non-NASDAQ listed companies whose stock trades below a price of $5.00 per share or that have tangible net worth of less than$5,000,000. These rules require, among other things, that broker-dealers participating in transactions in low-priced securities with persons other than"established customers" complete certain documentation, make suitability inquiries of investors and provide investors with certain information concerningtrading in the security, including a risk disclosure document and quote information under certain circumstances. Broker-dealers must also disclose theserestrictions in writing and provide monthly account statements to the client, and obtain specific written consent of the client. Many brokers have decided notto trade low-priced stock because of the requirements of the rules and, as a result, the number of broker-dealers willing to act as market makers in suchsecurities is limited. With these restrictions, the likely effect of a designation as a low-price stock would be to decrease the willingness of broker-dealers tomake a market for our common stock, to decrease the liquidity of the stock and to increase the transaction costs of sales and purchase of such stockscompared to other securities. As of December 31, 2015, our common stock was quoted at a closing sales price of $3.46 per share, and as of March 11, 2016,our common stock was quoted at a closing sales price of $4.34 per share. We cannot guarantee that our common stock will trade at a price greater than $5.00per share in the future. We do not expect to pay cash dividends on our common stock for the foreseeable future, and therefore only appreciation of the price of our commonstock may provide a return to shareholders. While there are currently no restrictions prohibiting us from paying dividends to our shareholders, our board of directors, after consideration of generaleconomic and market conditions affecting the energy industry in general, and the oilfield services business in particular, determined that we would not pay adividend in respect of our common stock for the foreseeable future. Payment of any dividends in the future will be at the discretion of our board and willdepend on our financial condition, results of operations, capital and legal requirements, and other factors deemed relevant by the board. Certain provisions of our amended and restated certificate of formation may make it difficult for a third party to acquire us in the future or mayadversely impact your ability to obtain a premium in connection with a future change of control transaction. Our amended restated certificate of formation, as amended, contains provisions that require the approval of holders of 80% of our issued and outstandingshares before we may merge or consolidate with or into another corporation or entity or sell all or substantially all of our assets to another corporation orentity. Additionally, if we increase the size of our board from the current eight directors to nine directors, we could by resolution of the board of directorsstagger the directors' terms, and our directors could not be removed without approval of holders of 80% of our issued and outstanding shares. Theseprovisions could discourage or impede a tender offer, proxy contest or other similar transaction involving control of us. In addition, our board of directors has the right to issue preferred stock upon such terms and conditions as it deems to be in our best interest. The terms ofsuch preferred stock may adversely impact the dividend and liquidation rights of our common shareholders without the approval of our commonshareholders. We may be subject to liability claims that are not covered by our insurance. Our business is subject to the general risks inherent in land-based seismic data acquisition activities. Our activities are often conducted in remote areasunder dangerous conditions, including the detonation of dynamite. These operations are subject to risks of injury to personnel and damage to equipment. Our13Table of Contentscrews are mobile, and equipment and personnel are subject to vehicular accidents. These risks could cause us to experience equipment losses, injuries to ourpersonnel, and interruptions in our business. In addition, we could be subject to personal injury or real property damage claims in the normal operation of our business. Such claims may not becovered under the indemnification provisions contained in our general service agreements to the extent that the damage is due to our negligence orintentional misconduct. Our general service agreements require us to have specific amounts of insurance. However, we do not carry insurance against certain risks that couldcause losses, including business interruption resulting from equipment maintenance or weather delays. Further, there can be no assurance, however, that anyinsurance obtained by us will be adequate to cover all losses or liabilities or that this insurance will continue to be available or available on terms which areacceptable to us. Liabilities for which we are not insured, or which exceed the policy limits of our applicable insurance, could have a materially adverse effecton us. We may be held liable for the actions of our subcontractors. We often work as the general contractor on seismic data acquisition surveys and, consequently, engage a number of subcontractors to perform servicesand provide products. While we obtain contractual indemnification and insurance covering the acts of these subcontractors and require the subcontractors toobtain insurance for our benefit, we could be held liable for the actions of these subcontractors. In addition, subcontractors may cause injury to our personnelor damage to our property that is not fully covered by insurance. The high fixed costs of our operations could result in operating losses. Companies within our industry are typically subject to high fixed costs which consist primarily of depreciation (a non-cash item) and maintenanceexpenses associated with seismic data acquisition and equipment and crew costs. In addition, ongoing maintenance capital expenditures, as well as newequipment investment, can be significant. As a result, any extended periods of significant downtime or low productivity caused by reduced demand, weatherinterruptions, equipment failures, permit delays, or other causes could result in operating losses. We operate under hazardous conditions that subject us to risk of damage to property or personnel injuries and may interrupt our business. Our business is subject to the general risks inherent in land-based seismic data acquisition activities. Our activities are often conducted in remote areasunder extreme weather and other dangerous conditions, including the use of dynamite as an energy source. These operations are subject to risks of injury toour personnel and third parties and damage to our equipment and improvements in the areas in which we operate. In addition, our crews often operate in areaswhere the risk of wildfires is present and may be increased by our activities. Our crews are mobile, and equipment and personnel are subject to vehicularaccidents. We use diesel fuel which is classified by the U.S. Department of Transportation as a hazardous material. These risks could cause us to experienceequipment losses, injuries to our personnel and interruptions in our business. Delays due to operational disruptions such as equipment losses, personnelinjuries and business interruptions could adversely affect our profitability and results of operations. Loss of our information and computer systems could adversely affect our business. We are heavily dependent on our information systems and computer-based programs, including our seismic information, electronic data processing andaccounting data. If any of such programs or systems were to fail or create erroneous information in our hardware or software network infrastructure, or if wewere subject to cyberspace breaches or attacks, possible consequences include our loss of communication14Table of Contentslinks, loss of seismic data and inability to automatically process commercial transactions or engage in similar automated or computerized business activities.Any such consequence could have a material adverse effect on our business. Our business could be negatively impacted by security threats, including cyber-security threats and other disruptions. We face various security threats, including cyber-security threats to gain unauthorized access to sensitive information or to render data or systemsunusable, threats to the safety of our employees, threats to the security of our facilities and infrastructure and threats from terrorist acts. Cyber-security attacksin particular are evolving and include, but are not limited to, malicious software, attempts to gain unauthorized access to data and other electronic securitybreaches that could lead to disruptions in critical systems, unauthorized release of confidential or otherwise protected information and corruption of data.Although we utilize various procedures and controls to monitor and protect against these threats and to mitigate our exposure to such threats, there can be noassurance that these procedures and controls will be sufficient in preventing security threats from materializing. If any of these events were to materialize,they could lead to losses of sensitive information, critical infrastructure, personnel or capabilities essential to our operations and could have a materialadverse effect on our reputation, financial position, results of operations or cash flows. Our business is subject to government regulation that may adversely affect our future operations. Our operations are subject to a variety of federal, state, and provincial and local laws and regulations, including laws and regulations relating to theprotection of the environment and archeological sites and those that may result from climate change legislation. Canadian operations have been historicallycyclical due to governmental restrictions on seismic acquisition during certain periods. As a result, there is a risk that there will be a significant amount ofunused equipment during those periods. We are required to expend financial and managerial resources to comply with such laws and related permitrequirements in our operations, and we anticipate that we will continue to be required to do so in the future. Although such expenditures historically have notbeen material to us, the fact that such laws or regulations change frequently makes it impossible for us to predict the cost or impact of such laws andregulations on our future operations. The adoption of laws and regulations that have the effect of reducing or curtailing exploration and developmentactivities by energy companies could also adversely affect our operations by reducing the demand for our services. Current and future legislation or regulation relating to climate change or hydraulic fracturing could negatively affect the exploration and production ofoil and gas and adversely affect demand for our services. In response to concerns suggesting that emissions of certain gases, commonly referred to as "greenhouse gases" (GHG) (including carbon dioxide andmethane) may be contributing to global climate change, legislative and regulatory measures to address the concerns are in various phases of discussion orimplementation at the national and state levels. At least one-half of the states, either individually or through multi-state regional initiatives, have alreadytaken legal measures intended to reduce GHG emissions, primarily through the planned development of GHG emission inventories and/or GHG cap and tradeprograms. Although various climate change legislative measures have been under consideration by the U.S. Congress, it is not possible at this time to predictwhether or when Congress may act on climate change legislation. The U.S. Environmental Protection Agency (the "EPA") has promulgated a series ofrulemakings and taken other actions that the EPA states will result in the regulation of GHG as "air pollutants" under the existing federal Clean Air Act.Furthermore, in 2010, EPA regulations became effective that require monitoring and reporting of GHG emissions on an annual basis, including extensiveGHG monitoring and reporting requirements. While this new rule does not control GHG emission levels from any facilities, it will cause covered facilities toincur monitoring and reporting costs. Moreover,15Table of Contentslawsuits have been filed seeking to require individual companies to reduce GHG emissions from their operations. These and other lawsuits relating to GHGemissions may result in decisions by state and federal courts and agencies that could impact our operations. This increasing governmental focus on global warming may result in new environmental laws or regulations that may negatively affect us, our suppliersand our clients. This could cause us to incur additional direct costs in complying with any new environmental regulations, as well as increased indirect costsresulting from our clients, suppliers or both incurring additional compliance costs that get passed on to us. Moreover, passage of climate change legislationor other federal or state legislative or regulatory initiatives that regulate or restrict emissions of GHG may curtail production and demand for fossil fuels suchas oil and gas in areas where our clients operate and thus adversely affect future demand for our services. Reductions in our revenues or increases in ourexpenses as a result of climate control initiatives could have adverse effects on our business, financial position, results of operations and prospects. Hydraulic fracturing is an important and commonly used process in the completion of oil and gas wells. Hydraulic fracturing involves the injection ofwater, sand and chemical additives under pressure into rock formations to stimulate gas production. Due to public concerns raised regarding potentialimpacts of hydraulic fracturing on groundwater quality, legislative and regulatory efforts at the federal level and in some states have been initiated to requireor make more stringent the permitting and compliance requirements for hydraulic fracturing operations. At the federal level, a bill was introduced in Congressin March 2011 entitled, the "Fracturing Responsibility and Awareness of Chemicals Act," or the "FRAC Act," that would amend the federal Safe DrinkingWater Act, or the "SDWA," to repeal an exemption from regulation for hydraulic fracturing. If the FRAC Act or similar legislation in the next Congress wereenacted, the definition of "underground injection" in the SDWA would be amended to encompass hydraulic fracturing activities. Such a provision couldrequire hydraulic fracturing operations to meet permitting and financial assurance requirements, adhere to certain construction specifications, fulfillmonitoring, reporting, and recordkeeping obligations and meet plugging and abandonment requirements. The FRAC Act also proposes to require thereporting and public disclosure of chemicals used in the fracturing process, which could make it easier for third parties opposing the hydraulic fracturingprocess to initiate legal proceedings based on allegations that specific chemicals used in the fracturing process could adversely affect groundwater. In early2010, the EPA indicated in a website posting that it intended to regulate hydraulic fracturing under the SDWA and require permitting for any well wherehydraulic fracturing was conducted with the use of diesel as an additive. While industry groups have challenged the EPA's website posting as improperrulemaking, the Agency's position, if upheld, could require additional permitting. In addition, in March 2010 the EPA commenced a study of the potentialadverse effects that hydraulic fracturing may have on water quality and public health, and a committee of the U.S. House of Representatives has commencedits own investigation into hydraulic fracturing practices. The EPA released a progress report in December 2012, but it did not include results of the research.In May 2014, the EPA indicated it would convene a stakeholder process to develop an approach to obtain information on chemical substances and mixturesused in hydraulic fracturing. The EPA issued a draft report in June 2015, concluding that, although hydraulic fracturing activities have the potential toimpact drinking water resources through water withdrawals, spills, fracturing directly into such resources, underground migration of liquids and gases, andinadequate treatment and discharge of wastewater, EPA did not find evidence that these mechanisms have led to widespread, systemic impacts on drinkingwater resources. However, the draft report did identify important vulnerabilities to drinking water. The draft report has not yet been finalized. Theselegislative and regulatory initiatives imposing additional reporting obligations on, or otherwise limiting, the hydraulic fracturing process could make it moredifficult or costly to complete natural gas wells. Shale gas cannot be economically produced without extensive fracturing. In the event such legislation isenacted, demand for our seismic acquisition services may be adversely affected.16Table of Contents We are subject to the requirements of Section 404 of the Sarbanes-Oxley Act. If we are unable to maintain compliance with Section 404, or if the costsrelated to maintaining compliance are significant, our profitability, stock price, and results of operations and financial condition could be materiallyadversely affected. If we are unable to maintain adequate internal controls in accordance with Section 404, as such standards are amended, supplemented, or modified fromtime to time, we may not be able to ensure that we have effective internal controls over financial reporting on an ongoing basis in accordance withSection 404. Failure to achieve and maintain effective internal controls could have a material adverse effect on our stock price. In addition, a materialweakness in the effectiveness of our internal control over financial reporting could result in an increased chance of fraud and the loss of clients, reduce ourability to obtain financing, and/or require additional expenditures to comply with these requirements, each of which could negatively impact our business,profitability, and financial condition. Item 1B. UNRESOLVED STAFF COMMENTS None. Item 2. PROPERTIES Our headquarters are located in a 34,570 square foot leased property in Midland, Texas. We have two other properties in Midland, including a 61,402square foot property that we own and use as a field office, equipment and fabrication facility and maintenance and repair shop. We also own a 6,600 squarefoot property that we use as an inventory field office and storage facility. We also have additional offices in three other cities in Texas: Denison, Houston and Plano. Our Denison warehouse facility consists of one 5,000-squarefoot building, three 10,000-square foot adjacent buildings, and an outdoor storage area of approximately 60,500 square feet. Our Houston sales office is in a10,041-square foot facility. Our office in Plano, Texas consists of 10,137 square feet of office space. We also lease a 3,443-square foot facility in Denver, Colorado, as a sales office. We lease a 7,480 and 1,094-square foot facility in Oklahoma City,Oklahoma, as sales offices. We lease 3,030 square feet of office space located in Calgary, Alberta. In addition, Eagle Canada leases a 7,423-square foot facility, also located inCalgary, Alberta, that is used as a shop and warehouse. We also lease a storage and parking area near the Eagle Canada shop and warehouse. We believe that our existing facilities are being appropriately utilized in line with past experience and are well maintained, suitable for their intendeduse and adequate to meet our current and future operating requirements. Item 3. LEGAL PROCEEDINGS From time to time, we are a party to various legal proceedings arising in the ordinary course of business. Although we cannot predict the outcomes of anysuch legal proceedings, our management believes that the resolution of pending legal actions will not have a material adverse effect on our financialcondition, results of operations or liquidity. For a discussion of certain contingencies affecting the Company, please refer to Note 16, "Commitments and Contingencies" to the ConsolidatedFinancial Statements included herein, which is incorporated by reference herein. Item 4. MINE SAFETY DISCLOSURES Not applicable.17Table of Contents Part II Item 5. MARKET FOR OUR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Our common stock trades on the Nasdaq Stock Market® under the symbol "DWSN." The table below represents the high and low sales prices per sharefor the period shown for Legacy TGC prior to the Merger and for the combined Company after the Merger. The table below represents the high and low sales prices per share for the period shown for Legacy Dawson prior to the Merger. As of March 11, 2016, the market price for our common stock was $4.34 per share, and we had 103 common stockholders of record, as reported by ourtransfer agent. Legacy Dawson paid quarterly dividends in 2014, with its last quarterly dividend paid on December 8, 2014. Legacy Dawson did not pay any dividendsto shareholders in 2015. Legacy TGC last paid cash dividends in 2012 and last paid stock dividends in 2013. Legacy TGC did not pay any dividends toshareholders in 2014 or 2015. While there are currently no restrictions prohibiting us from paying dividends to our shareholders, our board of directors, afterconsideration of general economic and market conditions affecting the energy industry in general, and the oilfield services business in particular, determinedthat we would not pay a dividend in respect of our common stock for the foreseeable future. Payment of any dividends in the future will be at the discretion ofour board and will depend on our financial condition, results of operations, capital and legal requirements, and other factors deemed relevant by the board. The following table summarizes certain information regarding securities authorized for issuance under our equity compensation plans as of December 31,2015. See information regarding material18Three Months Ended High(1) Low(1) March 31, 2014 $7.45 $5.66 June 30, 2014 $6.12 $4.24 September 30, 2014 $5.76 $3.69 December 31, 2014 $3.92 $1.93 March 31, 2015 $7.31 $1.90 June 30, 2015 $6.11 $4.22 September 30, 2015 $5.38 $3.34 December 31, 2015 $4.63 $2.93 (1)The high and low stock price provided for periods prior to February 11, 2015 was calculated by dividing the historical LegacyTGC high or low price by three to account for the 1-for-3 reverse stock split undertaken by Legacy TGC in connection withthe Merger. The high and low stock price provided for periods after February 11, 2015 reflect the stock price of the combinedCompany following the Merger as reported on the Nasdaq Stock Market under the symbol "DWSN".Three Months Ended High(2) Low(2) March 31, 2014 $19.83 $15.66 June 30, 2014 $17.55 $14.47 September 30, 2014 $16.59 $10.32 December 31, 2014 $10.66 $5.91 February 11, 2015 $7.13 $5.86 (2)The high and low stock price provided for periods prior to February 11, 2015 was calculated by dividing the historical LegacyDawson high or low price by the merger conversion factor of 1.76.Table of Contentsfeatures of the plan in Note 8, "Stock-Based Compensation," to the Consolidated Financial Statements incorporated by reference herein.Equity Compensation Plan InformationPERFORMANCE GRAPH The graph below matches Dawson Geophysical Company's cumulative 5-Year total shareholder return on common stock with the cumulative totalreturns of the S&P 500 index and the PHLX Oil Service Sector index. The graph tracks the performance of a $100 investment in our common stock and ineach index (with the reinvestment of all dividends) from 12/31/2010 to 12/31/2015. The stock prices used in the computation of the graph below reflect those of Legacy TGC from December 31, 2010 to December 31, 2014 multiplied bythree to account for the 1-for-3 reverse stock split undertaken by Legacy TGC in connection with the Merger. The stock price at December 31, 2015 reflectsthat of the combined Company following the Merger, as reported on the Nasdaq Stock Market under the symbol "DWSN".19Plan Category Number ofSecurities to beIssued UponExercise orVesting ofOutstandingOptions,Warrants andRights Weighted-AverageExercise Priceof OutstandingOptions,Warrants andRights Number of SecuritiesRemaining Availablefor Future IssuanceUnder the EquityCompensation Plan(Excluding SecuritiesReflected inColumn (a)) (a) Legacy Dawson Equity compensation plan approved by security holders 287,921(1)$10.74(2) 456,708 Equity compensation plans not approved by security holders — — — Legacy TGC Equity compensation plan approved by security holders 269,756(3)$14.34(2) 406,360 Equity compensation plans not approved by security holders — — — Total 557,677 $12.48 863,068 (1)Number of securities to be issued upon the exercise of outstanding options, warrants and rights include 158,674 options that havevested but have not yet been exercised and 129,247 restricted stock units that have not yet vested. (2)Excludes outstanding and unvested restricted stock unit awards, for which there is no exercise price. (3)Number of securities to be issued upon the exercise of outstanding options, warrants and rights include 269,756 options that havevested but have not yet been exercised.Table of Contents COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*Among Dawson Geophysical Company, the S&P 500 Indexand the PHLX Oil Service Sector Index *$100 invested on 12/31/10 in stock or index, including reinvestment of dividends.Fiscal year ended December 31. Copyright© 2016 S&P, a division of McGraw Hill Financial. All rights reserved.The stock price performance included in this graph is not necessarily indicative of future stock price performance.20 12/10 12/11 12/12 12/13 12/14 12/15 Dawson Geophysical Company 100.00 187.89 230.45 215.67 63.82 34.07 S&P 500 100.00 102.11 118.45 156.82 178.29 180.75 PHLX Oil Service Sector 100.00 85.62 87.44 114.50 96.36 74.08 Table of Contents Item 6. SELECTED FINANCIAL DATA The following selected financial data should be read in conjunction with Item 7, "Management's Discussion and Analysis of Financial Condition andResults of Operations," and the Company's consolidated financial statements and related notes included in Item 8, "Financial Statements and SupplementaryData."21 Year EndedDecember 31, Three MonthsEndedDecember 31, Year Ended September 30, 2015 2014 2014 2013 2012 2011 (In thousands, except per share amounts) Operating revenues $234,685 $50,802 $261,683 $305,299 $319,274 $333,279 Net (loss) income(1) $(26,279)$(4,991)$(12,620)$10,480 $11,113 $(3,246)Basic (loss) income per shareattributable to common stock(2)(3) $(1.27)$(0.36)$(0.90)$0.75 $0.81 $(0.24)Cash dividends declared per share ofcommon stock(4)(5) $— $0.05 $0.14 $— $— $— Weighted average equivalent commonshares outstanding 20,688 14,020 14,009 13,868 13,801 13,745 Total assets $247,787 $244,022 $256,662 $289,027 $279,175 $264,824 Revolving line of credit $— $— $— $— $— $— Current maturities of notes payable andobligations under capital leases $8,585 $6,018 $6,752 $9,258 $9,131 $5,290 Notes payable and obligations undercapital leases less current maturities $2,106 $4,209 $4,933 $3,697 $11,179 $10,281 Stockholders' equity $209,718 $194,218 $199,530 $213,060 $200,949 $188,163 (1)Net loss for the year ended September 30, 2011 includes $3,866,000 of transaction costs associated with a previously proposedtransaction with TGC. Net loss for the year ended December 31, 2015, the three months ended December 31, 2014, and the year endedSeptember 30, 2014 include transaction costs associated with the Merger of $3,314,000, $1,492,000 and $950,000, respectively. (2)The September 30, 2012 earnings per share calculation has been adjusted for the two-class method to reflect restricted shares that werenot reflected as participating in the prior period. Basic earnings per share as previously reported for the year ended September 30,2012 was $0.81. The impact on all prior period financial statements is deemed immaterial. (3)Earnings per share for the three months ended December 31, 2014 and for the years ended September 30, 2014, 2013, 2012, and 2011have been adjusted for the effect of the merger by dividing the previously reported earnings per share by the merger conversion factorof 1.76. (4)Calculated based on dividends declared in period regardless of period paid. (5)Weighted average shares for the three months ended December 31, 2014 and for the years ended September 30, 2014, 2013, 2012, and2011 have been adjusted for the effect of the merger by multiplying the previously reported weighted average shares by the mergerconversion factor of 1.76.Table of Contents Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with our financial statements and related notes thereto included elsewhere in thisForm 10-K. Portions of this document that are not statements of historical or current fact are forward-looking statements that involve risk anduncertainties, such as statements of our plans, business strategy, objectives, expectations and intentions. This discussion contains forward-lookingstatements that involve risks and uncertainties. Please see "Business," "Disclosure Regarding Forward-Looking Statements" and "Risk Factors" elsewhere inthis Form 10-K. On February 11, 2015, Legacy TGC completed the merger with Legacy Dawson pursuant to which a wholly-owned subsidiary of Legacy TGC mergedwith and into Legacy Dawson, with Legacy Dawson continuing after the merger as the surviving entity and a wholly-owned subsidiary of Legacy TGC. Thecommon stock of the merged company is listed on the NASDAQ Stock Market LLC ("NASDAQ") under the symbol "DWSN." Under the merger agreement, atthe effective time of the Merger, each issued and outstanding share of Legacy Dawson's common stock, par value $0.33 1/3 per share, including sharesunderlying Legacy Dawson's outstanding equity awards, were converted into the right to receive 1.760 shares of common stock of Legacy TGC, par value$0.01 per share (the "Legacy TGC Common Stock"), after giving effect to a 1-for-3 reverse stock split of Legacy TGC Common Stock which occurredimmediately prior to the Merger. The Merger is accounted for as a reverse acquisition under which Legacy Dawson is considered the accounting acquirer of Legacy TGC. As such, thefinancial statements of Legacy Dawson are treated as the historical financial statements of the merged company. Except as otherwise specifically provided,this discussion and analysis relates to the business and operations of Legacy Dawson and its consolidated subsidiaries for the periods prior to the closing ofthe Merger and on a consolidated basis with Legacy TGC and its subsidiaries after the closing of the Merger. You should read this discussion in conjunction with the financial statements and notes thereto included elsewhere in this Form 10-K. Unless the contextrequires otherwise, all references in this Item 7 to the "Company," "we," "us" or "our" refer to (i) Legacy Dawson and its consolidated subsidiaries, for periodsthrough February 11, 2015 and (ii) the merged company for periods on or after February 12, 2015.Overview We are a leading provider of North America onshore seismic data acquisition services with operations throughout the continental United States andCanada. Substantially all of our revenues are derived from the seismic data acquisition services we provide to our clients, mainly oil and natural gascompanies of all sizes. Our clients consist of major oil and gas companies, independent oil and gas companies, and providers of multi-client data libraries.Demand for our services depends upon the level of spending by these companies for exploration, production, development and field management activities,which depends, in a large part, on oil and natural gas prices. Significant fluctuations in domestic oil and natural gas exploration activities and commodityprices, as we have recently experienced, have and will continue to affect demand for our services and our results of operations and such fluctuations continueto be the single most important factor affecting our business and results of operations. The Company operated approximately ten crews in the United States with limited activity in Canada during the fourth quarter of 2015. Demand for ourservices in 2015 was at reduced levels from recent years and is anticipated to remain at reduced levels into 2016. During 2015, we operated a maximum offourteen crews in the United States. Quarterly and annual results were negatively impacted during the year as result of weakening demand, inclement weather(particularly in the second quarter), delays in securing land access agreements, lower crew utilization rates, reduced pricing for our services and project delayson behalf of our clients. Due to further declining and uncertain oil prices during and at the end of 2015, our crew count in the first quarter of 2016 reduced tofour to six crews in the United States and limited activity22Table of Contentsin Canada. Until there is a recovery in oil or natural gas prices, our visibility into 2016 relative to the number of active crews is uncertain. The majority of ourcrews are currently working in oil producing basins. While our revenues are mainly affected by the level of client demand for our services, our revenues arealso affected by the pricing for our services that we negotiate with our clients and the productivity and utilization level of our data acquisition crews. Factorsimpacting productivity and utilization levels include client demand, commodity prices, whether we enter into turnkey or term contracts with our clients, thenumber and size of crews and the number of recording channels per crew, as well as crew downtime related to inclement weather, delays in acquiring landaccess permits, agricultural or hunting activity, holiday schedules, short winter days and crew repositioning or equipment failure. To the extent weexperience these factors, our operating results may be affected from quarter to quarter. Consequently, our efforts to negotiate more favorable contract terms inour supplemental service agreements, to mitigate permit access delays and to improve overall crew productivity may contribute to growth in our revenues. We have experienced several client-directed delays over the last several months on certain projects primarily related to final funding approval,partnership agreements and land access agreements. We were impacted by severe weather conditions and flooding in many areas of operation, a weaker thananticipated Canadian season and reduced utilization rates of deployed data acquisition crews in the lower 48 United States. Severe weather conditions thatbegan in April 2015 and that were subsequently followed by Tropical Storm Bill later in the second quarter negatively affected our operations in Texas andthe mid-continent region where many of our crews were deployed. These multiple weather delays during the second quarter greatly impacted utilization onseven of the active crews and delayed deployment of three additional crews on new projects. Reduced demand and client delays continued in these areasduring the fourth quarter of 2015 which negatively impacted crew utilization. This negative utilization was offset by increased crew utilization as a result ofimproved weather conditions and operational discipline in the other areas we worked. Most of our client contracts are turnkey contracts. The percentage of revenues derived from turnkey contracts represented approximately three-quarters ofour revenues in 2015 and for the past few years. While turnkey contracts allow us to capitalize on improved crew productivity, we also bear more risks relatedto weather and crew downtime. We expect the percentage of turnkey contracts to remain high as we continue to expand our operations in the mid-continent,western and southwestern regions of the United States in which turnkey contracts are more common. Over time, we have experienced continued increases in recording channel capacity on a per crew or project basis. This increase in channel count demandis driven by client needs and is necessary in order to produce higher resolution images, increase crew efficiencies and undertake larger scale projects. Inresponse to project-based channel requirements, we routinely deploy a variable number of channels on a variable number of crews in an effort to maximizeasset utilization and meet client needs. Reimbursable third-party charges related to our use of helicopter support services, permit support services, specialized survey technologies and dynamiteenergy sources in areas with limited access are another important factor affecting our results. Revenues associated with third-party charges continued todecline as a percentage of revenue during 2014 and 2015. We expect that as we continue to perform our operations in the more open terrain of the mid-continent, western and southwestern regions of the United States, the level of these third-party charges will continue to be below our historical ranges of 25%to 35% of our total revenue. While the markets for oil and natural gas have been very volatile and are likely to continue to be so in the future, and we can make no assurances as tofuture levels of domestic exploration or commodity prices, we believe opportunities exist for us to enhance our market position by responding to our clients'continuing desire for higher resolution subsurface images. If economic conditions continue to weaken such that our clients continue to reduce their capitalexpenditures or if the sustained drop in oil and natural gas23Table of Contentsprices worsens, it could continue to result in diminished demand for our seismic services, could cause downward pressure on the prices we charge and wouldaffect our results of operations and cash flows.Items Affecting Comparability of Our Financial Results As discussed above, the Merger has been accounted for as a reverse acquisition under which Legacy Dawson was considered the accounting acquirer ofLegacy TGC. As such, the historical financial statements of Legacy Dawson are treated as the historical financial statements of the merged company. Further,the merged company adopted a calendar fiscal year ending December 31. Accordingly, the financial results of the merged company for the year endedDecember 31, 2015 presented in this Form 10-K are compared to the results for Legacy Dawson for the quarter ended December 31, 2014 and the years endedSeptember 30, 2014 and 2013. In order to aid in the review and comparison of our financial results, we have prepared and presented unaudited financialresults as of the year ended December 31, 2014 even though Legacy Dawson's 2014 fiscal year ended on September 30, 2014. We would not have otherwiseprepared or presented our financial results from this period in this fashion. The financial results for the year ended December 31, 2015 presented in thisForm 10-K reflect the operations of Legacy Dawson for the period January 1 through February 11, 2015 and the operations of the merged company for theperiod February 12 through December 31, 2015. Due to the foregoing, our financial results for the three months ended December 31, 2014 and the yearsended September 30, 2014 and 2013 are not comparable to our financial results for the year ended December 31, 2015 as a result of the combination of theassets and liabilities and results of operations of two previously separate companies and the change in fiscal year end.Results of Operations The table below shows our revenues and expenses for the years ended December 31, 2015 and 2014 and the years ended September 30, 2014 and 2013:CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014 AND THE YEARS ENDEDSEPTEMBER 30, 2014 AND 2013Year Ended December 31, 2015 versus Year Ended December 31, 2014 Operating Revenues. Our operating revenues for the year ended December 31, 2015 were $234,685,000 as compared to $244,304,000 for the sameperiod of 2014. The decrease was primarily due to the reduction in utilization rates in 2015 as demand for our services has decreased as a result of decreasing24 Year Ended December 31, Year Ended September 30, 2015 2014 2014 2013 (unaudited) Operating revenues $234,685,000 $244,304,000 $261,683,000 $305,299,000 Operating costs: Operating expenses 205,566,000 207,185,000 223,336,000 234,660,000 General and administrative 22,729,000 17,012,000 16,083,000 13,364,000 Depreciation and amortization 47,072,000 40,028,000 40,168,000 37,095,000 275,367,000 264,225,000 279,587,000 285,119,000 (Loss) income from operations (40,682,000) (19,921,000) (17,904,000) 20,180,000 Other income (expense) 648,000 252,000 4,000 (610,000)(Loss) income before income tax (40,034,000) (19,669,000) (17,900,000) 19,570,000 Income tax benefit (expense) 13,755,000 4,955,000 5,280,000 (9,090,000)Net (loss) income $(26,279,000)$(14,714,000)$(12,620,000)$10,480,000 Table of Contentsand uncertain commodity prices and reduced client expenditures. Severe weather conditions in several areas of operation throughout 2015 also led to short-term project delays. Reimbursed third-party charges as a percentage of revenues were below our historical ranges of 25% to 35% during the year endedDecember 31, 2015. Operating Costs. Operating expenses for the year ended December 31, 2015 decreased to $205,566,000 as compared to $207,185,000 for the sameperiod of 2014. The decrease in operating expenses did not correlate to the decrease in operating revenues due to the process of internal reorganization andconsolidation after the Merger. Although the dollar amount of operating costs decreased between the two periods, operating costs as a percentage of revenueincreased between periods due to reduced revenue. Selling, general and administrative expenses. Selling, general and administrative expenses were 9.7% of revenues in the year ended December 31,2015 compared to 7.0% of revenues in the same period of 2014. General and administrative expenses increased to $22,729,000 during the year endedDecember 31, 2015 from $17,012,000 during the same period of 2014. The primary factors for the increase in general and administrative expenses are relatedto salary costs that have increased from the same period in 2014 as a result of increased employee costs to support our combined company and additionalaccounting costs associated with the expanded Canadian operations acquired in the Merger. Accounting and consulting costs are increased from the sameperiod in fiscal 2014 relating to the Merger and new accounting software conversion implementation. Depreciation expense. Depreciation for the year ended December 31, 2015 totaled $47,072,000 compared to $40,028,000 for the same period of 2014.The increase in depreciation expense is related to the additional assets acquired in the Merger. Our depreciation expense is expected to remain flat during2016, primarily due to limited capital expenditures to maintain our existing asset base. Our total operating costs for the year ended December 31, 2015 were $275,367,000, representing a 4.2% increase from the corresponding period of 2014.This change was primarily due to the following: salary costs of the combined Company resulting from the Merger; an increase in depreciation related to theadditional assets acquired in the Merger; and comparability of the periods reported which were the combined Company for most of 2015 and Legacy Dawsonfor 2014. Income Taxes. Income tax benefit was $13,755,000 for the year ended December 31, 2015 as compared to income tax benefit of $4,955,000 for thesame period of 2014. The effective tax benefit rates for the years ended December 31, 2015 and 2014 were approximately 34.4% and 25.2%, respectively. Oureffective tax benefit rates increased as compared to the corresponding prior year primarily due to the increase in pre-tax losses that were partially offset by theeffect of permanent tax differences. Our effective tax rates differ from the statutory federal rate of 35% for certain items such as state and local taxes, valuationallowances, non-deductible expenses, discrete items and expenses related to share-based compensation that were not expected to result in a tax deduction. As discussed in "Overview," recent declines in oil and natural gas prices have impacted spending by our clients for exploration, production, developmentand field management activities, which has negatively affected demand for our services and caused the market price of our common stock to fall. In light ofthe existing market volatility, we continue to closely monitor our assets, including our equipment base, to assess possible impairment. There are numerousuncertainties factored into the estimates of the life cycle of a seismic recording system, including the future cash flows estimated to be generated by aparticular system. Estimated cash flows can be affected by, among other things, the decline in oil and natural gas prices and reduced client demand. Althoughwe do not currently anticipate an impairment of our assets, if oil and natural gas prices remain at current levels for an extended period of time or declinefurther, or if projected cash flows decline, we may be exposed to impairment charges in future periods, which could negatively affect our results of operationsin a material manner in the period in which they are recorded. If25Table of Contentswe record significant impairment charges in the future, we may also need to recognize valuation allowances on our net operating loss carry forwards and,accordingly, a tax benefit may not be recognized on such charges.Fiscal Year Ended September 30, 2014 versus Fiscal Year Ended September 30, 2013 Operating Revenues. Our operating revenues decreased 14% to $261,683,000 in fiscal 2014 from $305,299,000 in year ended September 30, 2013. Therevenue decrease in fiscal 2014 was primarily the result of a reduction in crew utilization. Third-party charges, for which we are reimbursed by clients,decreased slightly in fiscal 2014 compared to year ended September 30, 2013. Operating Costs. Our operating expenses decreased 4.8% to $223,336,000 in fiscal 2014 from $234,660,000 in year ended September 30, 2013primarily due to the slight decrease in reimbursed third-party charges. The decrease can be attributed to a reduction in survey related charges. Selling, general and administrative expenses. Selling, general and administrative expenses increased to $16,083,000 during the year endedSeptember 30, 2014 from $13,364,000 during the same period of 2013 and represented 6.1% of revenues in fiscal 2014 as compared to 4.4% of revenues inyear ended September 30, 2013. The primary factor for the increase in general and administrative expenses was transaction costs of $950,000 associated withthe Merger. The remaining increase in general and administrative expenses primarily resulted from increased administrative costs to support our operations. Depreciation expense. We recognized $40,168,000 of depreciation expense in fiscal 2014 as compared to $37,095,000 in year ended September 30,2013. Depreciation expense increased 8.3% from year ended September 30, 2013 to 2014 reflecting increased capital expenditures during year endedSeptember 30, 2013 and 2014. Our total operating costs for fiscal 2014 were $279,587,000, a decrease of 1.9% from year ended September 30, 2013 primarily due to the followingfactors: reduced operating costs, reduced selling general and administrative expenses and reduced depreciation. Income Taxes. Income tax benefit was $5,280,000 for fiscal 2014 and expense was $9,090,000 for year ended September 30, 2013. The effective taxrates for the income tax provision for fiscal 2014 and 2013 were 29.5% and 46.4%, respectively. Our effective tax rates differ from the statutory federal rate of35% for certain items such as state and local taxes, non-deductible expenses, discrete items, expenses related to share-based compensation that were notexpected to result in a tax deduction and changes in reserves for uncertain tax positions.Use of EBITDA (Non-GAAP measure) We define EBITDA as net income (loss) plus interest expense, interest income, income taxes, depreciation and amortization expense. Our managementuses EBITDA as a supplemental financial measure to assess:•the financial performance of our assets without regard to financing methods, capital structures, taxes or historical cost basis; •our liquidity and operating performance over time in relation to other companies that own similar assets and that we believe calculate EBITDAin a similar manner; and •the ability of our assets to generate cash sufficient for us to pay potential interest costs. We also understand that such data are used by investors to assess our performance. However, the term EBITDA is not defined under generally acceptedaccounting principles ("GAAP"), and EBITDA is not a measure of operating income, operating performance or liquidity presented in accordance with GAAP.When assessing our operating performance or liquidity, investors and others should not consider this data26Table of Contentsin isolation or as a substitute for net loss, cash flow from operating activities or other cash flow data calculated in accordance with GAAP. In addition, ourEBITDA may not be comparable to EBITDA or similarly titled measures utilized by other companies since such other companies may not calculate EBITDAin the same manner as us. Further, the results presented by EBITDA cannot be achieved without incurring the costs that the measure excludes: interest, taxes,depreciation and amortization. The reconciliation of our EBITDA to our net (loss) income and net cash provided by operating activities, which are the most directly comparable GAAPfinancial measures, are provided in the tables below: Liquidity and Capital Resources Introduction. Our principal sources of cash are amounts earned from the seismic data acquisition services we provide to our clients. Our principal usesof cash are the amounts used to provide these services, including expenses related to our operations and acquiring new equipment. Accordingly, our cashposition depends (as do our revenues) on the level of demand for our services. Historically, cash generated from our operations along with cash reserves andborrowings from commercial banks have been sufficient to fund our working capital requirements and, to some extent, our capital expenditures.27 Year EndedDecember 31, Year EndedSeptember 30, 2015 2014 2014 2013 (in thousands) Net (loss) income $(26,279)$(14,714)$(12,620)$10,480 Depreciation and amortization 47,072 40,028 40,168 37,095 Interest expense (income), net 450 417 462 597 Income tax (benefit) expense (13,755) (4,955) (5,280) 9,090 EBITDA $7,488 $20,776 $22,730 $57,262 Year EndedDecember 31, Year EndedSeptember 30, 2015 2014 2014 2013 (in thousands) Net cash provided by operating activities $20,612 $30,472 $10,446 $70,579 Changes in working capital and other items (11,968) (8,424) 13,509 (11,457)Noncash adjustments to net (loss) income (1,156) (1,272) (1,225) (1,860)EBITDA $7,488 $20,776 $22,730 $57,262 Table of Contents Cash Flows. The table below shows our sources and uses of cash for the years ended December 31, 2015 and 2014 and the years ended September 30,2014 and 2013:CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014 AND THE YEARS ENDEDSEPTEMBER 30, 2014 AND 2013Years Ended December 31, 2015 and 2014 Net cash provided by operating activities was $20,612,000 and $30,472,000 for the years ended December 31, 2015 and 2014, respectively. Thisdecrease primarily reflects our decline in revenues during the year ended December 31, 2015. Net cash provided by investing activities was $15,787,000 for the year ended December 31, 2015. Net cash used in investing activities was $13,438,000for the year ended December 31, 2014. The net cash provided by investing activities during the year ended December 31, 2015 represents cash of$12,382,000 acquired in the Merger, $7,750,000 of short-term investment maturities that were not reinvested and $1,501,000 in proceeds from disposal ofassets. These increases in cash provided by investing activities were offset by cash capital expenditures of $6,846,000. During the year ended December 31,2014, cash of $14,001,000 was used to purchase property and equipment and an additional $2,750,000 of excess cash was invested in short-term investments.These decreases in cash used in investing activities were offset by $3,313,000 in proceeds from disposals of assets. Net cash used in financing activities was $13,606,000 for the year ended December 31, 2015 and included principal payments of $16,348,000 on ournotes, proceeds of $5,144,000 on our New Term Loan (as defined below), payments of $1,535,000 under our capital leases, and outflows of $867,000associated with taxes related to stock vesting. Net cash used in financing activities for the year ended December 31, 2014 was $13,870,000 and was primarilycomprised of principal payments of $10,293,000 on term notes, payments of $1,014,000 under our capital leases, and cash dividends paid of $2,581,000.Fiscal Year Ended September 30, 2014 versus Fiscal Year Ended September 30, 2013 Net cash provided by operating activities was $10,446,000 for fiscal 2014 and $70,579,000 for year ended September 30, 2013. Net cash provided byoperating activities in fiscal 2014 was primarily impacted by declines in revenues between periods. Net cash used in investing activities was $36,095,000 in fiscal 2014 and $67,504,000 in year ended September 30, 2013. Net capital expenditures infiscal 2014 and 2013 were $35,281,000 and $48,485,000, respectively. During fiscal 2014 and 2013, $3,500,000 and $19,500,000, respectively, wereinvested in short-term investments. Net cash used in financing activities in fiscal 2014 of $3,658,000 primarily includes net $1,755,000 in principal payments and debt proceeds along with$1,935,000 of dividends paid. Net cash used in financing28 Year Ended December 31, Year Ended September 30, 2015 2014 2014 2013 (unaudited) Net cash provided by (used in): Operating activities $20,612,000 $30,472,000 $10,446,000 $70,579,000 Investing activities 15,787,000 (13,438,000) (36,095,000) (67,504,000)Financing activities (13,606,000) (13,870,000) (3,658,000) (8,043,000)Effect of exchange rate changes on cash (428,000) (380,000) (345,000) — Net increase (decrease) in cash and cash equivalents $22,365,000 $2,784,000 $(29,652,000)$(4,968,000)Table of Contentsactivities in year ended September 30, 2013 of $8,043,000 primarily includes net $8,651,000 in principal payments and debt proceeds. Capital Expenditures. During 2015, we made capital expenditures of $6,920,000. We limited our capital expenditures to necessary maintenancecapital requirements. The Board of Directors has approved an initial 2016 budget of $10,000,000 for capital expenditures, which is again limited primarily tonecessary maintenance capital requirements and incremental recording channel replacement or increase. In recent years we have funded some of our capitalexpenditures through cash reserves, equipment term loans and capital leases. In the past, we have also funded our capital expenditures and other financingneeds through public equity offerings. We continually strive to supply our clients with technologically advanced 3-D data acquisition recording services and data processing capabilities. Wemaintain equipment in and out of service in anticipation of increased future demand for our services. Capital Resources. Historically, we have primarily relied on cash generated from operations, cash reserves and borrowings from commercial banks tofund our working capital requirements and, to some extent, our capital expenditures. Recently, we have funded some of our capital expenditures throughequipment term loans and capital leases. From time to time in the past, we have also funded our capital expenditures and other financing needs throughpublic equity offerings. Indebtedness. Legacy Dawson and Legacy TGC each had a credit agreement in effect prior to the Merger (the "Legacy Dawson Credit Agreement" andthe "Legacy TGC Credit Agreement," respectively), which continued as our obligations following the Merger. On June 30, 2015, we entered into anamendment to the Legacy TGC Credit Agreement with our lender, Sovereign Bank, (as amended, and as further amended pursuant to the LOC Amendment (asdefined below), the "Existing Credit Agreement") for the purpose of renewing, extending and increasing our line of credit under such agreement. Inconnection with this amendment to the Legacy TGC Credit Agreement, we entered into a new term loan evidenced by a promissory note dated June 30, 2015in the aggregate principal amount of $5,144,000 (the "New Term Loan") and used the proceeds of the New Term Loan to repay in full and terminate theLegacy Dawson Credit Agreement and its master advance term note agreement in connection therewith (collectively, the "Legacy Dawson Credit Facilities").Existing Credit Agreement Our Existing Credit Agreement with Sovereign Bank includes a term loan feature and a revolving loan feature, and also allows for the issuance of lettersof credit or and other promissory notes. We can borrow up to a maximum of $20.0 million pursuant to the Existing Credit Agreement, subject to the terms andlimitations discussed below. As of December 31, 2015, we had one outstanding note payable under the term loan feature of the Existing Credit Agreement with a principal amount of$3,429,000. We had two outstanding notes payable under the Existing Credit Agreement that are not under the term loan feature (and therefore do not counttowards the maximum amounts that we may borrow) which were incurred to purchase (and are secured by) equipment, representing a remaining aggregateprincipal amount of $5,225,000 as of December 31, 2015. In addition, the Existing Credit Agreement permits us to borrow, repay and re-borrow, from time totime until June 30, 2017, up to the lesser of $20.0 million or 80% of our eligible accounts receivable less the then-outstanding principal balance of the NewTerm Loan (the "Existing Line of Credit"). We did not utilize the Existing Line of Credit during 2015, and we have the full Existing Line of Credit availablefor borrowing. Because our ability to borrow funds under our revolving line of credit is tied to the amount of our eligible accounts receivable, if our accountsreceivable decrease materially for any reason, including delays, reductions or cancellations by clients or decreased demand for our services, our ability toborrow to fund operations or other obligations may be limited.29Table of Contents On November 25, 2015, we entered into an amendment (the "LOC Amendment") to the Existing Credit Agreement to provide for the issuance of a letterof credit in the principal amount of $1,767,000 in favor of AIG Assurance Company in order to support payment of certain insurance premiums of theCompany. The principal amount of this letter of credit counts as funds borrowed under our Existing Line of Credit. The foregoing description does notpurport to set forth the complete terms of the LOC Amendment and is qualified in its entirety by reference to the full text of the LOC Amendment attachedhereto as Exhibit 10.11, which is incorporated by reference herein. Our obligations under the Existing Line of Credit are secured by a security interest in our accounts receivable, and the term notes are secured by certainof our core equipment. Interest on amounts outstanding under the Existing Credit Agreement accrues at the lesser of 4.5% or the prime rate (as quoted in theWall Street Journal), subject to an interest rate floor of 2.5%. The Existing Credit Agreement contains customary covenants for credit facilities of this type,including limitations on disposition of assets, mergers and other fundamental changes. We are also obligated to meet certain financial covenants, including(i) a ratio of (x) total liabilities minus subordinated debt to (y) tangible net worth plus subordinated debt not to exceed 1.00:1.00, (ii) a ratio of current assetsto current liabilities of at least 1.50:1.00 and (iii) required tangible net worth of not less than $150,000,000. We were in compliance with all covenants underthe Existing Credit Agreement, including specified ratios, as of December 31, 2015.Legacy Dawson Credit Facilities Prior to its repayment and termination, the Legacy Dawson Credit Facilities provided for a revolving line of credit and term loans to be made pursuant tonotes. We did not utilize the line of credit available under the Legacy Dawson Credit Facilities prior to the termination of the Legacy Dawson CreditFacilities. Prior to termination of the Legacy Dawson Credit Facilities, we had three outstanding notes payable under the term loan feature of the LegacyDawson Credit Agreement. All amounts owed under the Legacy Dawson Credit Facilities were repaid on June 30, 2015 using proceeds of the New Term Loanand totaled $5,144,000.Other Indebtedness We had one outstanding note, in the remaining principal amount of $838,000 at December 31, 2015 payable to a finance company for insurance. In addition, we lease vehicles and certain specialized seismic equipment under leases classified as capital leases. Our balance sheet as of December 31,2015 includes capital lease obligations of $1,199,000. Contractual Obligations. We believe that our capital resources, including our short-term investments, funds available under our revolving creditagreement, and cash flow from operations, will be adequate to meet our current operational needs. We believe that we will be able to finance our 2016 capitalexpenditures through cash flow from operations, borrowings from commercial lenders, and the funds available under our revolving credit agreement.However, our ability to satisfy working capital requirements, meet debt repayment obligations, and fund future capital requirements will depend principallyupon our future operating performance, which is subject to the risks inherent in our business, and will also depend on the extent to which the currenteconomic climate adversely affects the ability of our customers, and/or potential customers, to promptly pay amounts owing to us under their servicecontracts with us.30Table of Contents The following table summarizes payments due in specific periods related to our contractual obligations with initial terms exceeding one year as ofDecember 31, 2015.Off-Balance Sheet Arrangements As of December 31, 2015, we had no off-balance sheet arrangements.Critical Accounting Policies The preparation of our financial statements in conformity with generally accepted accounting principles requires that certain assumptions and estimatesbe made that affect the reported amounts of assets and liabilities at the date of our financial statements and the reported amounts of revenues and expensesduring the reporting periods. Because of the use of assumptions and estimates inherent in the reporting process, actual results could differ from thoseestimates. Allowance for Doubtful Accounts. We prepare our allowance for doubtful accounts receivable based on our review of past-due accounts, our pastexperience of historical write-offs and our current client base. While the collectability of outstanding client invoices is continually assessed, the inherentvolatility of the energy industry's business cycle can cause swift and unpredictable changes in the financial stability of our clients. Impairment of Long-Lived Assets. We review long-lived assets for impairment when triggering events occur suggesting deterioration in the assets'recoverability or fair value. Recognition of an impairment charge is required if future expected undiscounted net cash flows are insufficient to recover thecarrying value of the assets and the fair value of the assets is below the carrying value of the assets. Our forecast of future cash flows used to performimpairment analysis includes estimates of future revenues and expenses based on our anticipated future results while considering anticipated future oil andgas prices, which is fundamental in assessing demand for our services. If the carrying amounts of the assets exceed the estimated expected undiscountedfuture cash flows, we measure the amount of possible impairment by comparing the carrying amount of the asset to its fair value. If there were to be a fifteenpercent or more decline in projected cash flows the Company would be required to do further impairment analysis to determine if fair value is less than thecarrying amount of the assets at that time. No impairment charges were recognized for the year ended December 31, 2015, the three months endedDecember 31, 2014, and the years ended September 30, 2014 and 2013. Leases. We lease certain equipment and vehicles under lease agreements. We evaluate each lease to determine its appropriate classification as anoperating or capital lease for financial reporting purposes. Any lease that does not meet the criteria for a capital lease is accounted for as an operating lease.The assets and liabilities under capital leases are recorded at the lower of the present value of the minimum lease payments or the fair market value of therelated assets. Assets under capital leases are amortized using the straight-line method over the initial lease term. Amortization of assets under capital leases isincluded in depreciation expense. Revenue Recognition. Our services are provided under cancelable service contracts. These contracts are either "turnkey" or "term" agreements. Underboth types of agreements, we recognize revenues when31 Payments Due by Period (in 000's) Contractual Obligations Total Within1 Year 2 - 3 Years 4 - 5 Years After5 Years Operating lease obligations (office space) $11,271 $1,704 $2,660 $1,899 $5,008 Capital lease obligations 1,199 781 418 — — Debt obligations 9,492 7,804 1,688 — — Total $21,962 $10,289 $4,766 $1,899 $5,008 Table of Contentsrevenue is realizable and services are performed. Services are defined as the commencement of data acquisition or processing operations. Revenues areconsidered realizable when earned according to the terms of the service contracts. Under turnkey agreements, revenue is recognized on a per unit of dataacquired rate, as services are performed. Under term agreements, revenue is recognized on a per unit of time worked rate, as services are performed. In the caseof a cancelled service contract, we recognize revenue and bill our client for services performed up to the date of cancellation. We also receive reimbursements for certain out-of-pocket expenses under the terms of our service contracts. We record amounts billed to clients inrevenue at the gross amount including out-of-pocket expenses that are reimbursed by the client. In some instances, we bill clients in advance of the services performed. In those cases, we recognize the liability as deferred revenue. As services areperformed, those deferred revenue amounts are recognized as revenue. In some instances, the contract contains certain permitting, surveying and drilling costs that are incorporated into the per unit of data acquired rate. Inthese circumstances, these set-up costs that occur prior to initiating revenue recognition are capitalized and amortized as data is acquired. Income Taxes. We account for our income taxes with the recognition of amounts of taxes payable or refundable for the current year and by using anasset and liability approach in recognizing the amount of deferred tax liabilities and assets for the future tax consequences of events that have beenrecognized in our financial statements or tax returns. We determine deferred taxes by identifying the types and amounts of existing temporary differences,measuring the total deferred tax asset or liability using the applicable tax rate in effect for the year in which those temporary differences are expected to berecovered or settled. The effect of a change in tax rates of deferred tax assets and liabilities is recognized in income in the year of an enacted rate change. Thedeferred tax asset is reduced by a valuation allowance if, based on available evidence, it is more likely than not that some portion or all of the deferred taxassets will not be realized. Our methodology for recording income taxes requires judgment regarding assumptions and the use of estimates, includingdetermining our annual effective tax rate and the valuation of deferred tax assets, which can create a variance between actual results and estimates and couldhave a material impact on our provision or benefit for income taxes. Our effective tax rates differ from the statutory federal rate of 35% for certain items suchas state and local taxes, non-deductible expenses, discrete items and expenses related to share-based compensation that were not expected to result in a taxdeduction.Recently Issued Accounting Pronouncements In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-02, Leases (Topic 842)which will require organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by thoseleases. This ASU is effective for the annual period ending after December 15, 2016, and for annual interim periods thereafter. Early adoption is permitted. Weare currently evaluating the new guidance to determine the impact it will have on our consolidated financial statements. In November 2015, the FASB issued ASU No. 2015-17 to simplify income tax accounting. The update requires that all deferred tax assets and liabilitiesbe classified as noncurrent on the balance sheet instead of separating deferred taxes into current and noncurrent amounts. This update is effective for fiscalyears beginning after December 15, 2016, and interim periods within those fiscal years, and may be adopted earlier on a voluntary basis. We elected to earlyadopt this guidance during the fourth quarter of 2015 and have applied a full retrospective approach to all periods presented. Current deferred income taxassets of $5,977,000 as of September 30, 2014 have been reclassified and presented as a reduction to deferred income tax liabilities, net, in the consolidatedbalance sheet.32Table of Contents In September 2015, the FASB issued ASU 2015-16 that eliminates the requirement that an acquirer in a business combination account for measurement-period adjustments retrospectively. Instead, an acquirer will recognize a measurement-period adjustment during the period in which it determines the amountof the adjustment, including the effect on earnings of any amounts it would have recorded in previous periods if the accounting had been completed at theacquisition date. The guidance is effective for public entities for fiscal years beginning after December 15, 2015 and interim periods within those fiscal years.Early adoption is permitted. We adopted ASU 2015-16 during the quarter ended September 30, 2015. The adoption of ASU 2015-16 did not materially affectour consolidated results of operations, cash flows, financial position or financial statement disclosures. In August 2014, the FASB issued ASU No. 2014-15, "Presentation of Financial Statements — Going Concern" (Subtopic 205-40). This ASU providesguidance on management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and in certaincircumstances to provide related footnote disclosures. This ASU is effective for the annual period ending after December 15, 2016, and for annual and interimperiods thereafter. Early adoption is permitted. We do not expect the adoption of this guidance to have a material impact on our consolidated financialstatements. In May 2014, the FASB issued ASU No. 2014-09 that introduces a new five-step revenue recognition model in which an entity should recognize revenueto depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled inexchange for those goods or services. This ASU also requires disclosures sufficient to enable users to understand the nature, amount, timing, and uncertaintyof revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures about contracts with customers,significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. This standard is effective for fiscal yearsbeginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted, but only for fiscal years beginningafter December 15, 2016. The standard permits the use of either the retrospective or cumulative effect transition method of adoption. We are currentlyevaluating the new guidance to determine the impact it will have on our consolidated financial statements and the method of adoption. Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to certain market risks arising from the use of financial instruments in the ordinary course of business. These risks arise primarily as aresult of potential changes to operating concentration of credit risk and changes in interest rates. We have not entered into any hedge arrangements,commodity swap agreements, commodity futures, options or other derivative financial instruments. We conduct business in Canada which subjects ourresults of operations and cash flow to foreign currency exchange rate risk. Concentration of Credit Risk. Our principal market risks include fluctuations in commodity prices, which affect demand for and pricing of our services,and the risk related to the concentration of our clients in the oil and natural gas industry. Since all of our clients are involved in the oil and natural gasindustry, there may be a positive or negative effect on our exposure to credit risk because our clients may be similarly affected by changes in economic andindustry conditions. As an example, changes to existing regulations or the adoption of new regulations may unfavorably impact us, our suppliers or ourclients. In the normal course of business, we provide credit terms to our clients. Accordingly, we perform ongoing credit evaluations of our clients andmaintain allowances for possible losses. Our historical experience supports our allowance for doubtful accounts of $250,000 at December 31, 2015. This doesnot necessarily indicate that it would be adequate to cover a payment default by one large or several small clients. We generally provide services to certain key clients that account for a significant percentage of our accounts receivable at any given time. Our keyclients vary over time. We extend credit to various33Table of Contentscompanies in the oil and natural gas industry, including our key clients, for the acquisition of seismic data, which results in a concentration of credit risk.This concentration of credit risk may be affected by changes in the economic or other conditions of our key clients and may accordingly impact our overallcredit risk. If any of these significant clients were to terminate their contracts or fail to contract for our services in the future because they are acquired, altertheir exploration or development strategy, or for any other reason, our results of operations could be affected. Because of the nature of our contracts andclients' projects, our largest clients can change from year to year, and the largest clients in any year may not be indicative of the largest clients in anysubsequent year. During the twelve months ended December 31, 2015, our two largest clients accounted for 36% of revenue. The remaining balance of ourrevenue derived from varied clients and none represented more than 10% of revenue. Interest Rate Risk. We are exposed to the impact of interest rate changes on the outstanding indebtedness under our Existing Credit Agreement. Wegenerally have cash in the bank which exceeds federally insured limits. Historically, we have not experienced any losses in such accounts; however,volatility in financial markets may impact our credit risk on cash and short-term investments. At December 31, 2015, cash and cash equivalents totaled$37,009,000. For further information, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," and "Item 1A. RiskFactors." Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this item appears on pages F-1 through F-27 hereof and are incorporated herein by reference. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. Item 9A. CONTROLS AND PROCEDURES Management's Evaluation of Disclosure Controls and Procedures We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive, financial andaccounting officers, of the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(e) and 15d-15(e) under the Securities ExchangeAct of 1934 as of the end of the period covered by this report. Based upon that evaluation, our President and Chief Executive Officer, our Executive VicePresident, Treasurer and Chief Financial Officer and our Executive Vice President, Secretary and Chief Accounting Officer concluded that, as of December 31,2015, our disclosure controls and procedures were effective, in all material respects, with regard to the recording, processing, summarizing and reporting,within the time periods specified in the SEC's rules and forms, for information required to be disclosed by us in the reports that we file or submit under theExchange Act. Our disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in reportsfiled or submitted under the Exchange Act is accumulated and communicated to our management, including our President and Chief Executive Officer, ourExecutive Vice President, Treasurer and Chief Financial Officer and our Executive Vice President, Secretary and Chief Accounting Officer, as appropriate, toallow timely decisions regarding required disclosure. Changes in Internal Control Over Financial Reporting. We completed the Merger on February 11, 2015. We have extended our oversight andmonitoring processes that support our internal control over financial reporting to include Legacy TGC's operations. Except for this extension, there have notbeen any changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the34Table of ContentsSecurities Exchange Act of 1934) during the quarter ended December 31, 2015 that have materially affected or are reasonably likely to materially affect ourinternal control over financial reporting.Management's Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financialreporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may notprevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may becomeinadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Under the supervision andwith the participation of management, including our President and Chief Executive Officer, Executive Vice President, Treasurer and Chief Financial Officer,and our Executive Vice President, Secretary and Chief Accounting Officer, we evaluated the effectiveness of our internal controls over financial reporting asof December 31, 2015 using the criteria set forth in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of theTreadway Commission (2013 framework). Based on this evaluation, we have concluded that, as of December 31, 2015, our internal control over financialreporting was effective. Our internal control over financial reporting as of December 31, 2015 has been audited by Ernst & Young LLP, the independentregistered public accounting firm who also audited our financial statements. Their attestation report appears on page F-2.Changes in Internal Control over Financial Reporting There have not been any changes in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f) of theSecurities Exchange Act of 1934) during the quarter ended December 31, 2015 that have materially affected or are reasonably likely to materially affect ourinternal control over financial reporting. Item 9B. OTHER INFORMATION None.35Table of Contents Part III Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information required by Item 10 of Form 10-K is hereby incorporated by reference from the earlier filed of: (i) an amendment to this annual report onForm 10-K or (ii) the Company's definitive proxy statement which will be filed pursuant to Regulation 14A within 120 days after the Company's year-end forthe year covered by this report. Item 11. EXECUTIVE COMPENSATION The information required by Item 11 of Form 10-K is hereby incorporated by reference from the earlier filed of: (i) an amendment to this annual report onForm 10-K or (ii) the Company's definitive proxy statement which will be filed pursuant to Regulation 14A within 120 days after the Company's year-end forthe year covered by this report. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required with respect to our equity compensation plans is set forth in Item 5 of this Form 10-K. Other information required by Item 12 ofForm 10-K is hereby incorporated by reference from the earlier filed of: (i) an amendment to this annual report on Form 10-K or (ii) the Company's definitiveproxy statement which will be filed pursuant to Regulation 14A within 120 days after the Company's year-end for the year covered by this report. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE The information required by Item 13 of Form 10-K is hereby incorporated by reference from the earlier filed of: (i) an amendment to this annual report onForm 10-K or (ii) the Company's definitive proxy statement which will be filed pursuant to Regulation 14A within 120 days after the Company's year-end forthe year covered by this report. Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information required by Item 14 of Form 10-K is hereby incorporated by reference from the earlier filed of: (i) an amendment to this annual report onForm 10-K or (ii) the Company's definitive proxy statement, which will be filed pursuant to Regulation 14A within 120 days after the Company's year-end forthe year covered by this report.36Table of Contents Part IV Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a)The following documents are filed as part of this report: (1)Financial Statements. The following consolidated financial statements of the Company appear on pages F-1 through F-27 and are incorporated by reference into Part II, Item 8:(2)Financial Statement Schedules. All schedules are omitted because they are either not applicable or the required information is shown in the financial statements or notes thereto.(3)Exhibits. The information required by this item 15(a)(3) is set forth in the Index to Exhibits accompanying this Annual Report on Form 10-K and is herebyincorporated by reference.37Reports of Independent Registered Public Accounting FirmsConsolidated Balance SheetsConsolidated Statements of Operations and Comprehensive (Loss) IncomeConsolidated Statements of Stockholders' EquityConsolidated Statements of Cash FlowsNotes to the Consolidated Financial StatementsTable of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized, in the City of Midland, and the State of Texas, on the 15th day of March, 2016. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated.38 DAWSON GEOPHYSICAL COMPANY By: /s/ STEPHEN C. JUMPERStephen C. JumperChairman of the Board of DirectorsPresident and Chief Executive OfficerSignature Title Date /s/ STEPHEN C. JUMPERStephen C. Jumper President, Chief Executive Officer and Chairman ofthe Board of Directors (principal executive officer) 03-15-16/s/ WAYNE A. WHITENERWayne A. Whitener Vice Chairman of the Board of Directors (principalexecutive officer) 03-15-16/s/ WILLIAM J. BARRETTWilliam J. Barrett Director 03-15-16/s/ CRAIG W. COOPERCraig W. Cooper Director 03-15-16/s/ GARY M. HOOVERGary M. Hoover Director 03-15-16/s/ ALLEN T. MCINNESAllen T. McInnes Director 03-15-16/s/ TED R. NORTHTed R. North Director 03-15-16Table of Contents39Signature Title Date /s/ MARK A. VANDER PLOEGMark A. Vander Ploeg Director 03-15-16/s/ JAMES K. BRATAJames K. Brata Executive Vice President, Treasurer and ChiefFinancial Officer (principal financial officer) 03-15-16/s/ CHRISTINA W. HAGANChristina W. Hagan Executive Vice President, Secretary and ChiefAccounting Officer (principal accounting officer) 03-15-16Table of ContentsINDEX TO CONSOLIDATED FINANCIAL STATEMENTSF-1Consolidated Financial Statements of Dawson Geophysical Company PageReports of Independent Registered Public Accounting Firm, dated March 15, 2016 F-2Consolidated Balance Sheets as of December 31, 2015 and September 30, 2014 F-4Consolidated Statements of Operations and Comprehensive (Loss) Income for the year ended December 31, 2015, thethree months ended December 31, 2014, and the years ended September 30, 2014 and 2013 F-5Consolidated Statements of Stockholders' Equity for the year ended December 31, 2015, the three months endedDecember 31, 2014, and the years ended September 30, 2014 and 2013 F-6Consolidated Statements of Cash Flows for the year ended December 31, 2015, the three months ended December 31,2014, and for the years ended September 30, 2014 and 2013 F-7Notes to Consolidated Financial Statements F-8Table of ContentsReport of Independent Registered Public Accounting FirmThe Board of Directors and Stockholders ofDawson Geophysical Company We have audited Dawson Geophysical Company's internal control over financial reporting as of December 31, 2015, based on criteria established inInternal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSOcriteria). Dawson Geophysical Company's management is responsible for maintaining effective internal control over financial reporting, and for itsassessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report on Internal Control overFinancial Reporting. Our responsibility is to express an opinion on the company's internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in allmaterial respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weaknessexists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures aswe considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internalcontrol over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately andfairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary topermit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the companyare being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financialstatements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree ofcompliance with the policies or procedures may deteriorate. In our opinion, Dawson Geophysical Company maintained, in all material respects, effective internal control over financial reporting as of December 31,2015, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balancesheets of Dawson Geophysical Company as of December 31, 2015 and September 30, 2014, and the related consolidated statements of operations andcomprehensive (loss) income, stockholders' equity and cash flows for the year ended December 31, 2015, the three months ended December 31, 2014, andeach of the two years in the period ended September 30, 2014 and our report dated March 15, 2016 expressed an unqualified opinion thereon.Dallas, TexasMarch 15, 2016F-2 /s/ Ernst & Young LLPTable of Contents Report of Independent Registered Public Accounting Firm The Board of Directors and Stockholders ofDawson Geophysical Company We have audited the accompanying consolidated balance sheets of Dawson Geophysical Company as of December 31, 2015 and September 30, 2014,and the related consolidated statements of operations and comprehensive (loss) income, stockholders' equity and cash flows for the year ended December 31,2015, the three months ended December 31, 2014, and each of the two years in the period ended September 30, 2014. These financial statements are theresponsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our auditsprovide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of DawsonGeophysical Company at December 31, 2015 and September 30, 2014, and the consolidated results of its operations and its cash flows for the year endedDecember 31, 2015, the three months ended December 31, 2014, and each of the two years in the period ended September 30, 2014, in conformity with U.S.generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Dawson GeophysicalCompany's internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 15, 2016 expressed anunqualified opinion thereon.Dallas, TexasMarch 15, 2016F-3 /s/ Ernst & Young LLPTable of ContentsDAWSON GEOPHYSICAL COMPANYCONSOLIDATED BALANCE SHEETS See accompanying notes to the consolidated financial statements.F-4 December 31,2015 September 30,2014 ASSETS Current assets: Cash and cash equivalents $37,009,000 $22,753,000 Short-term investments 21,000,000 27,000,000 Accounts receivable, net of allowance for doubtful accounts of $250,000 atDecember 31, 2015 and September 30, 2014 35,700,000 39,995,000 Prepaid expenses and other assets 6,150,000 2,420,000 Total current assets 99,859,000 92,168,000 Property, plant and equipment 345,619,000 337,922,000 Less accumulated depreciation (198,052,000) (173,428,000)Net property, plant and equipment 147,567,000 164,494,000 Intangibles 361,000 — Total assets $247,787,000 $256,662,000 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $8,401,000 $10,720,000 Accrued liabilities: Payroll costs and other taxes 1,074,000 1,998,000 Other 4,604,000 4,097,000 Deferred revenue 6,146,000 801,000 Current maturities of notes payable and obligations under capital leases 8,585,000 6,752,000 Total current liabilities 28,810,000 24,368,000 Long-term liabilities: Notes payable and obligations under capital leases less current maturities 2,106,000 4,933,000 Deferred tax liability, net 5,319,000 27,831,000 Other accrued liabilities 1,834,000 — Total long-term liabilities 9,259,000 32,764,000 Commitments and contingencies Stockholders' equity: Preferred stock-par value $1.00 per share; 4,000,000 shares authorized, noneoutstanding — — Common stock-par value $0.01 per share; 35,000,000 shares authorized, 21,629,310and 14,194,810 shares issued, and 21,580,865 and 14,194,810 shares outstanding atDecember 31, 2015 and September 30, 2014, respectively 216,000 142,000 Additional paid-in capital 142,269,000 98,632,000 Retained earnings 69,057,000 100,973,000 Treasury stock, at cost; 48,445 shares at December 31, 2015 and none at September 30,2014 — — Accumulated other comprehensive loss, net of tax (1,824,000) (217,000)Total stockholders' equity 209,718,000 199,530,000 Total liabilities and stockholders' equity $247,787,000 $256,662,000 Table of ContentsDAWSON GEOPHYSICAL COMPANYCONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME See accompanying notes to the consolidated financial statements.F-5 Three MonthsEndedDecember 31,2014 Year Ended September 30, Year EndedDecember 31,2015 2014 2013 Operating revenues $234,685,000 $50,802,000 $261,683,000 $305,299,000 Operating costs: Operating expenses 205,566,000 42,957,000 223,336,000 234,660,000 General and administrative 22,729,000 5,093,000 16,083,000 13,364,000 Depreciation and amortization 47,072,000 9,736,000 40,168,000 37,095,000 275,367,000 57,786,000 279,587,000 285,119,000 (Loss) income from operations (40,682,000) (6,984,000) (17,904,000) 20,180,000 Other income (expense): Interest income 159,000 20,000 73,000 63,000 Interest expense (609,000) (93,000) (535,000) (660,000)Other income (expense) 1,098,000 154,000 466,000 (13,000)(Loss) income before income tax (40,034,000) (6,903,000) (17,900,000) 19,570,000 Income tax benefit (expense): Current (291,000) (39,000) (787,000) (817,000)Deferred 14,046,000 1,951,000 6,067,000 (8,273,000) 13,755,000 1,912,000 5,280,000 (9,090,000)Net (loss) income $(26,279,000)$(4,991,000)$(12,620,000)$10,480,000 Other comprehensive loss: Net unrealized loss on foreign exchange ratetranslation, net of tax $(1,480,000)$(127,000)$(217,000)$— Comprehensive (loss) income $(27,759,000)$(5,118,000)$(12,837,000)$10,480,000 Basic (loss) income per share attributable to commonstock $(1.27)$(0.36)$(0.90)$0.75 Diluted (loss) income per share attributable to commonstock $(1.27)$(0.36)$(0.90)$0.74 Cash dividend declared per share of common stock $— $0.05 $0.14 $— Weighted average equivalent common sharesoutstanding 20,688,185 14,019,813 14,008,635 13,868,120 Weighted average equivalent common sharesoutstanding — assuming dilution 20,688,185 14,019,813 14,008,635 13,939,841 Table of ContentsDAWSON GEOPHYSICAL COMPANYCONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY See accompanying notes to the consolidated financial statements.F-6 Common Stock AccumulatedOtherComprehensiveLoss NumberOf Shares Amount AdditionalPaid-inCapital RetainedEarnings Total Balance September 30, 2012 14,135,209 $141,000 $95,760,000 $105,048,000 $— $200,949,000 Net income 10,480,000 10,480,000 Stock-based compensation expense 1,394,000 1,394,000 Issuance of common stock as compensation 25,492 — 403,000 403,000 Forfeiture of restricted stock awards (1,584) — — — Shares exchanged for taxes on stock-basedcompensation (35,481) — (774,000) (774,000)Exercise of stock options 56,584 1,000 607,000 608,000 Balance September 30, 2013 14,180,220 142,000 97,390,000 115,528,000 — 213,060,000 Net loss (12,620,000) (12,620,000)Unrealized loss on foreign exchange rate translation (345,000) Income tax benefit 128,000 Other comprehensive loss (217,000) (217,000)Stock-based compensation expense 1,054,000 1,054,000 Issuance of common stock as compensation 9,706 — 171,000 171,000 Issurance of common stock under stock compensationplans including tax effect 2,640 — (1,000) (1,000)Shares exchanged for taxes on stock-basedcompensation (836) — (14,000) (14,000)Exercise of stock options 3,080 — 32,000 32,000 Dividends paid (1,935,000) (1,935,000)Balance September 30, 2014 14,194,810 142,000 98,632,000 100,973,000 (217,000) 199,530,000 Net loss (4,991,000) (4,991,000)Unrealized loss on foreign exchange rate translation (203,000) Income tax benefit 76,000 Other comprehensive loss (127,000) (127,000)Stock-based compensation expense 287,000 287,000 Issuance of common stock as compensation 21,730 — 165,000 165,000 Dividends paid (646,000) (646,000)Balance December 31, 2014 14,216,540 142,000 99,084,000 95,336,000 (344,000) 194,218,000 Net loss (26,279,000) (26,279,000)Unrealized loss on foreign exchange rate translation (2,106,000) Income tax benefit 626,000 Other comprehensive loss (1,480,000) (1,480,000)Shares exchanged for taxes on stock-basedcompensation (41,855) — (333,000) (333,000)Stock consideration issued in merger 7,381,476 74,000 42,828,000 42,902,000 Issurance of common stock under stock compensationplans including tax effect 14,212 — 85,000 85,000 Tax deficit recorded to hypothetical apic pool (551,000) (551,000)Stock-based compensation expense 890,000 890,000 Issuance of common stock as compensation 58,937 266,000 266,000 Balance December 31, 2015 21,629,310 $216,000 $142,269,000 $69,057,000 $(1,824,000)$209,718,000 Table of ContentsDAWSON GEOPHYSICAL COMPANYCONSOLIDATED STATEMENTS OF CASH FLOWS See accompanying notes to the consolidated financial statements. Year EndedSeptember 30, Three MonthsEndedDecember 31,2014 Year EndedDecember 31,2015 2014 2013 CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) income $(26,279,000)$(4,991,000)$(12,620,000)$10,480,000 Adjustments to reconcile net (loss) income to net cashprovided by (used in) operating activities: Depreciation and amortization 47,072,000 9,736,000 40,168,000 37,095,000 Noncash compensation 1,156,000 452,000 1,225,000 1,797,000 Deferred income tax (benefit) expense (14,046,000) (1,951,000) (6,067,000) 8,273,000 Change in other long-term liabilities 1,834,000 — — — Loss (gain) on disposal of assets 408,000 — (108,000) 657,000 Other (81,000) (614,000) 51,000 (712,000)Change in current assets and liabilities: Decrease (increase) in accounts receivable 15,883,000 2,862,000 (2,507,000) 16,168,000 Decrease (increase) in prepaid expenses and other assets 1,752,000 (3,283,000) (1,683,000) 25,000 Decrease in accounts payable (3,128,000) (4,923,000) (3,467,000) (2,952,000)(Decrease) increase in accrued liabilities (4,579,000) 78,000 (1,909,000) (223,000)Increase (decrease) in deferred revenue 620,000 951,000 (2,637,000) (29,000)Net cash provided by (used in) operating activities 20,612,000 (1,683,000) 10,446,000 70,579,000 CASH FLOWS FROM INVESTING ACTIVITIES: Cash acquired from merger 12,382,000 — — — Capital expenditures, net of noncash capital expendituressummarized below (6,846,000) (2,555,000) (35,281,000) (48,485,000)Proceeds from maturity of short-term investments 34,500,000 7,750,000 29,250,000 10,750,000 Acquisition of short-term investments (26,750,000) (9,500,000) (32,750,000) (30,250,000)Proceeds from disposal of assets 1,501,000 631,000 2,686,000 481,000 Partial proceeds on flood insurance claim 1,000,000 — — — Net cash provided by (used in) investing activities 15,787,000 (3,674,000) (36,095,000) (67,504,000)CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from promissory note 5,144,000 — — — Proceeds from notes payable — — 10,000,000 983,000 Principal payments on notes payable (16,348,000) (1,783,000) (10,823,000) (8,898,000)Principal payments on capital lease obligations (1,535,000) (288,000) (932,000) (736,000)Excess tax benefit from share-based paymentarrangement (551,000) — — — Tax withholdings related to stock based compensationawards (316,000) — — — Proceeds from exercise of stock options — — 32,000 608,000 Dividends paid — (646,000) (1,935,000) — Net cash used in financing activities (13,606,000) (2,717,000) (3,658,000) (8,043,000)Effect of exchange rate changes in cash and cashequivalents (428,000) (35,000) (345,000) — Net increase (decrease) in cash and cash equivalents 22,365,000 (8,109,000) (29,652,000) (4,968,000)CASH AND CASH EQUIVALENTS AT BEGINNING OFPERIOD 14,644,000 22,753,000 52,405,000 57,373,000 CASH AND CASH EQUIVALENTS AT END OF PERIOD $37,009,000 $14,644,000 $22,753,000 $52,405,000 SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest $620,000 $93,000 $537,000 $688,000 Cash paid for income taxes $752,000 $— $735,000 $1,665,000 Cash received for income taxes $692,000 $18,000 $3,000 $42,000 NONCASH INVESTING AND FINANCING ACTIVITIES: (Decrease) increase in accrued purchases of property andequipment $(52,000)$52,000 $(1,693,000)$288,000 Capital lease obligations incurred $126,000 $651,000 $485,000 $1,296,000 Stock consideration to consummate the merger $42,902,000 $— $— $— Financed insurance premiums $1,046,000 — — — F-7Table of ContentsDAWSON GEOPHYSICAL COMPANYNOTES TO CONSOLIDATED FINANCIAL STATEMENTS On February 11, 2015, the Company, which was formerly known as TGC Industries, Inc. ("Legacy TGC"), consummated a strategic business combination(the "Merger") with Dawson Operating Company LLC, which was formerly known as Dawson Geophysical Company ("Legacy Dawson"). Unless the contextrequires otherwise, all references in the Notes to Consolidated Financial Statements of this Form 10-K to the "Company," "we," "us" or "our" refer to(i) Legacy Dawson and its consolidated subsidiaries, for periods through February 11, 2015 and (ii) the merged company for periods on or afterFebruary 12, 2015.1. Summary of Significant Accounting PoliciesOrganization and Nature of Operations The Company is a leading provider of onshore seismic data acquisition and processing services. Founded in 1952, the Company acquires and processes2-D, 3-D and multi-component seismic data for its clients, ranging from major oil and gas companies to independent oil and gas operators as well as providersof multi-client data libraries. The Company operates in the lower 48 states of the United States and in Canada.Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Dawson Operating LLC, EagleCanada, Inc., Dawson Seismic Services Holdings, Inc., Eagle Canada Seismic Services ULC, Tidelands Geophysical Co., Inc. and Exploration Surveys, Inc.All significant intercompany balances and transactions have been eliminated in consolidation.Cash Equivalents For purposes of the financial statements, the Company considers demand deposits, certificates of deposit, overnight investments, money market fundsand all highly liquid debt instruments purchased with an initial maturity of three months or less to be cash equivalents.Allowance for Doubtful Accounts Management prepares its allowance for doubtful accounts receivable based on its review of past-due accounts, its past experience of historical write-offsand its current client base. While the collectability of outstanding client invoices is continually assessed, the inherent volatility of the energy industry'sbusiness cycle can cause swift and unpredictable changes in the financial stability of the Company's clients.Property, Plant and Equipment Property, plant and equipment is capitalized at historical cost and depreciated over the useful life of the asset. Management's estimation of this useful lifeis based on circumstances that exist in the seismic industry and information available at the time of the purchase of the asset. As circumstances change andnew information becomes available, these estimates could change. Depreciation is computed using the straight-line method. When assets are retired or otherwise disposed of, the cost and related accumulated depreciationare removed from the balance sheet, and any resulting gain or loss is reflected in the results of operations for the period.Impairment of Long-Lived Assets Long-lived assets are reviewed for impairment when triggering events occur suggesting deterioration in the assets' recoverability or fair value.Recognition of an impairment charge is required if future expected undiscounted net cash flows are insufficient to recover the carrying value of the assets andtheF-8Table of ContentsDAWSON GEOPHYSICAL COMPANYNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)fair value of the assets is below the carrying value of the assets. Management's forecast of future cash flows used to perform impairment analysis includesestimates of future revenues and expenses based on the Company's anticipated future results while considering anticipated future oil and natural gas priceswhich is fundamental in assessing demand for the Company's services. If the carrying amounts of the assets exceed the estimated expected undiscountedfuture cash flows, the Company measures the amount of possible impairment by comparing the carrying amount of the assets to the fair value. If there were tobe a fifteen percent or more decline in projected cash flows the Company would be required to do further impairment analysis to determine if fair value is lessthan the carrying amount of the assets at that time. No impairment charges were recognized for the year ended December 31, 2015, the three months endedDecember 31, 2014, and the years ended September 30, 2014 and 2013.Leases The Company leases certain equipment and vehicles under lease agreements. The Company evaluates each lease to determine its appropriateclassification as an operating or capital lease for financial reporting purposes. Any lease that does not meet the criteria for a capital lease is accounted for asan operating lease. The assets and liabilities under capital leases are recorded at the lower of the present value of the minimum lease payments or the fairmarket value of the related assets. Assets under capital leases are amortized using the straight-line method over the initial lease term. Amortization of assetsunder capital leases is included in depreciation expense.Intangibles Trademarks/tradenames resulting from a business combination are not subject to amortization. The Company tests for impairment on an annual basisduring the fourth quarter and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of thereporting unit below its carrying amount. No impairment charges were recognized for the year ended December 31, 2015.Revenue Recognition Services are provided under cancelable service contracts. These contracts are either "turnkey" or "term" agreements. Under both types of agreements, theCompany recognizes revenues when revenue is realizable and services have been performed. Services are defined as the commencement of data acquisition orprocessing operations. Revenues are considered realizable when earned according to the terms of the service contracts. Under turnkey agreements, revenue isrecognized on a per unit of data acquired rate as services are performed. Under term agreements, revenue is recognized on a per unit of time worked rate asservices are performed. In the case of a cancelled service contract, revenue is recognized and the client is billed for services performed up to the date ofcancellation. The Company receives reimbursements for certain out-of-pocket expenses under the terms of the service contracts. Amounts billed to clients are recordedin revenue at the gross amount including out-of-pocket expenses that are reimbursed by the client. In some instances, clients are billed in advance of services performed. In those cases, the Company recognizes the liability as deferred revenue. Asservices are performed, those deferred revenue amounts are recognized as revenue. In some instances, the contract contains certain permitting, surveying and drilling costs that are incorporated into the per unit of data acquired rate. Inthese circumstances, these set-up costs that occur prior to initiating revenue recognition are capitalized and amortized as data is acquired.F-9Table of ContentsDAWSON GEOPHYSICAL COMPANYNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Stock-Based Compensation The Company measures all stock-based compensation awards, which include stock options, restricted stock, restricted stock units and common stockawards, using the fair value method and recognizes compensation cost, net of estimated forfeitures, in its financial statements. The Company recordscompensation expense as operating or general and administrative expense as appropriate in the consolidated statements of operations on a straight-line basisover the vesting period of the related stock options, restricted stock awards or restricted stock unit awards.Foreign Currency Translation The U.S. Dollar is the reporting currency for all periods presented. The functional currency of the Company's foreign subsidiaries is generally the localcurrency. All assets and liabilities denominated in a foreign currency are translated into U.S. Dollars at the exchange rate on the balance sheet date. Incomeand expenses are translated at the average exchange rate during the period. Equity transactions are translated using historical exchange rates. Adjustmentsresulting from translation are recorded as a separate component of accumulated other comprehensive (loss) income in the consolidated balance sheets.Foreign currency transaction gains (losses) are included in the consolidated statements of operations as other income (expense).Income Taxes The Company accounts for income taxes by recognizing amounts of taxes payable or refundable for the current year and by using an asset and liabilityapproach in recognizing the amount of deferred tax assets and liabilities for the future tax consequences of events that have been recognized in theCompany's financial statements or tax returns. Management determines deferred taxes by identifying the types and amounts of existing temporarydifferences, measuring the total deferred tax asset or liability using the applicable tax rate in effect for the year in which those temporary differences areexpected to be recovered or settled. The effect of a change in tax rates of deferred tax assets and liabilities is recognized in income in the year of an enactedrate change. The deferred tax asset is reduced by a valuation allowance if, based on available evidence, it is more likely than not that some portion or all ofthe deferred tax asset will not be realized. Management's methodology for recording income taxes requires judgment regarding assumptions and the use ofestimates, including determining the annual effective tax rate and the valuation of deferred tax assets, which can create variances between actual results andestimates and could have a material impact on the Company's provision or benefit for income taxes. The Company's effective tax rates differ from thestatutory federal rate of 35% for certain items such as state and local taxes, valuations allowances, non-deductible expenses, discrete items and expensesrelated to share-based compensation that are not expected to result in a tax deduction.Use of Estimates in the Preparation of Financial Statements Preparation of the accompanying financial statements in conformity with generally accepted accounting principles requires management to makeestimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of thefinancial statements and the reported amounts of revenues and expenses during the reporting period. Because of the use of assumptions and estimatesinherent in the reporting process, actual results could differ from those estimates.F-10Table of ContentsDAWSON GEOPHYSICAL COMPANYNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Reclassifications Certain reclassifications have been made to the three months ended December 31, 2014 and the years ended September 30, 2014 and 2013 consolidatedfinancial statements to conform to the 2015 presentation. Current deferred income tax assets have been reclassified and presented as a reduction to deferredincome tax liabilities, net in the Consolidated Balance Sheet for the year ended September 30, 2014.2. Short-Term Investments The Company had short-term investments at December 31, 2015 and September 2014 consisting of certificates of deposit with original maturities greaterthan three months, but less than a year. Certificates of deposits with any given banking institution do not exceed the FDIC insurance limit at December 31,2015 or September 30, 2014.3. Fair Value of Financial Instruments At December 31, 2015 and September 30, 2014, the Company's financial instruments included cash and cash equivalents, short-term investments incertificates of deposit, trade and other receivables, other current assets, accounts payable, other current liabilities and term notes (defined below). Due to theshort-term maturities of cash and cash equivalents, trade and other receivables, other current assets, accounts payables and other current liabilities, thecarrying amounts approximate fair value at the respective balance sheet dates. The carrying value of the term notes approximate their fair value based on acomparison with the prevailing market interest rate. Due to the short-term maturities of the Company's investments in certificates of deposit, the carryingamounts approximate fair value at the respective balance sheet dates. The fair values of the Company's term notes and investments in certificates of depositare level 2 measurements in the fair value hierarchy.4. Merger On February 11, 2015, the Company completed the Merger. Immediately prior to the effective time of the Merger, Legacy TGC effected a reverse stocksplit with respect to its common stock, par value $0.01 per share, on a one-for-three ratio (the "Reverse Stock Split") to reduce the total number of shares ofLegacy TGC Common Stock outstanding. After giving effect to the Reverse Stock Split, at the effective time of the Merger, without any action on the part ofany shareholder, each issued and outstanding share of Legacy Dawson's common stock, par value $0.33-1/3 per share (the "Legacy Dawson Common Stock"),including shares underlying Legacy Dawson's outstanding equity awards (but excluding any shares of Legacy Dawson Common Stock owned by LegacyTGC, Merger Sub or Legacy Dawson or any wholly-owned subsidiary of Legacy Dawson), were converted into the right to receive 1.760 shares of LegacyTGC Common Stock (the "Exchange Ratio"). The Merger was accounted for as a reverse acquisition under the acquisition method of accounting in accordance with ASC No. 805, "BusinessCombinations." The Company accounted for the transaction by using Legacy Dawson's historical information and accounting policies and adding the assetsand liabilities of Legacy TGC at their respective fair values. Consequently, Legacy Dawson's assets and liabilities retained their carrying values and LegacyTGC's assets acquired and liabilities assumed by Legacy Dawson as the accounting acquirer in the Merger were recorded at their fair values measured as ofFebruary 11, 2015, the effective date of the Merger. In the fourth quarter of 2015, management finalized its valuation of assets acquired and liabilities assumed in connection with the Merger. As a result,the fair value of acquired property, plant andF-11Table of ContentsDAWSON GEOPHYSICAL COMPANYNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)equipment was ultimately concluded to be $5,055,000 higher than preliminarily estimated, the fair value of current liabilities assumed was higher by$943,000, the fair value of current assets was lower by $625,000, and the fair value of intangible assets was lower by $2,953,000. Further, the net deferred taxasset as a result of these adjustments was $534,000 lower. In the fourth quarter of 2015, we recorded a $628,000 increase to depreciation expense and a$697,000 reduction to amortization expense as compared to what we would have recorded had the final valuations of assets acquired and liabilities assumedbeen recorded as of the acquisition date in February 2015. The following table summarizes the fair values of the assets acquired and liabilities assumed at theMerger date: The value of the stock consideration was determined based on the closing price of Legacy TGC on the February 11, 2015 closing date and the 7,381,476shares outstanding. As a result of the consideration transferred being less than the book value of net assets acquired, the Company was required to analyze thepurchase price allocation and the potential reasonableness of reflecting a bargain purchase. Upon completing this analysis, the Company determined that theMerger was not an acquisition of a distressed business or a bargain purchase and accordingly reflected a substantial reduction in the property, plant andequipment to its fair value which was reflected by the value of the consideration transferred. Furthermore, in allocating the remainder of the purchase price tothe indicated fair value of the property, plant and equipment, there was not any excess purchase price to be allocated to goodwill. Measurements used todetermine fair value were deemed to be level 3 fair value measurements. Trade receivables and payables, as well as other current and non-current assets and liabilities, are recorded at their expected settlement amounts as theyapproximate the fair value of those items at the time of the Merger, based on management's judgments and estimates. Property, plant and equipment were valued using a combination of the income approach, the market approach and the cost approach which was based oncurrent replacement and/or reproduction cost of theF-12 Estimated FairValue (in 000's) Stock consideration $42,902 Interest bearing debt assumed 12,048 Debt-free current liabilities 13,590 Total purchase price consideration including liabilities assumed $68,540 Value of current assets Current assets excluding cash and cash equivalents $15,531 Cash and cash equivalents 12,382 Total current assets $27,913 Identified tangible assets Fair value of property, plant and equipment $33,867 Identified intangible assets Trademarks/trade names $400 Net deferred tax asset $6,360 Total indicated value of assets $68,540 Table of ContentsDAWSON GEOPHYSICAL COMPANYNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)asset as new, less depreciation attributable to physical, functional, and economic factors. Useful lives of the property, plant and equipment were estimated tobe between eighteen months and twelve years. Trademarks were valued using the relief from royalty method. Relief from royalty method under the income approach estimates the cost savings thataccrue to the Company which would otherwise have to pay royalties or license fees on revenues earned through the use of the asset. Trademarks areconsidered to have an indefinite life and as a result are not amortizable. Existing long term debt assumed in the Merger was recorded at fair valued based on a current market rate. Deferred income tax assets and liabilities as of the acquisition date represent the expected future tax consequences of temporary differences between thefair values of the assets acquired and liabilities assumed and their tax bases. At the acquisition date, the Company accrued approximately $865,000 forunrecognized tax benefits and contingencies related to certain tax matters. The Company incurred approximately $3,314,000 in merger-related costs on a pretax basis during the year ended December 31, 2015. This amount isreflected in the accompanying consolidated statements of operations. The Company has integrated the operations of Legacy TGC. Additionally, the Company operates in one segment and has a single company-widemanagement team that administers all service contracts as a whole rather than by discrete operating segments. The Company tracks only basic operationaldata by area and does not track results by legacy origin. Therefore, it is impracticable to disclose the amount of revenues and earnings or losses attributable toLegacy TGC during the year ended December 31, 2015.Pro Forma Information The following unaudited pro forma condensed financial information for the three and twelve months ended December 31, 2015 and 2014 gives effect tothe Merger as if it had occurred on January l, 2014. The unaudited pro forma condensed financial information has been included for comparative purposesonly and is not necessarily indicative of the results that might have occurred had the transactions taken place on the dates indicated and is not intended to bea projection of future results. The unaudited pro forma financial information reflects certain adjustments related to the acquisition, such as (1) to recordcertain incremental expenses resulting from purchase accounting adjustments, such as reduced depreciation expense in connection with the fair valueadjustments to property, plant and equipment; and (2) to record the related tax effects. Shares used in the calculations of earnings per share in the table belowwere 21,537,480 for the year ended December 31, 2015, 21,400,593 for the three months ended December 31, 2014, and 21,367,677 for the year endedSeptember 30, 2014.F-13 Year EndedDecember 31, Three MonthsEndedDecember 31, Year EndedSeptember 30, 2015 2014 2014 Pro forma total revenues $248,295,000 $76,897,000 $373,544,000 Pro forma net loss $(30,256,000)$(7,722,000)$(13,383,000)Pro forma net loss per share Basic $(1.40)$(0.36)$(0.63)Diluted $(1.40)$(0.36)$(0.63)Table of ContentsDAWSON GEOPHYSICAL COMPANYNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)5. Property, Plant and Equipment Property, plant and equipment, together with the related estimated useful lives, were as follows:6. Supplemental Consolidated Balance Sheet Information Other current liabilities consist of the following at December 31, 2015 and September 30, 2014:7. Debt Legacy Dawson and Legacy TGC each had a credit agreement in effect prior to the Merger (the "Legacy Dawson Credit Agreement" and the "LegacyTGC Credit Agreement," respectively), which continued our obligations following the Merger. On June 30, 2015, we entered into an amendment to theLegacy TGC Credit Agreement with our lender, Sovereign Bank, (as so amended, and as further amended pursuant to the LOC Amendment (as definedbelow), the "Existing Credit Agreement") for the purpose of renewing, extending and increasing our line of credit under such agreement. In connection withthis amendment to the Legacy TGC Credit Agreement, we entered into a new term loan evidenced by a promissory note dated June 30, 2015 in the aggregateprincipal amount of $5,144,000 (the "New Term Loan") and used the proceeds of the New Term Loan to repay in full and terminate the Legacy Dawson CreditAgreement and its master advance term note agreement in connection therewith (collectively, the "Legacy Dawson Credit Facilities").Existing Credit Agreement Our Existing Credit Agreement with Sovereign Bank includes a term loan feature and a revolving loan feature, and also allows for the issuance of lettersof credit or and other promissory notes. We can borrow up to a maximum of $20.0 million pursuant to the Existing Credit Agreement, subject to the terms andlimitations discussed below.F-14 December 31, September 30, 2015 2014 Useful LivesLand, building and other $16,357,000 $15,472,000 3 to 40 yearsRecording equipment 212,541,000 206,517,000 5 to 10 yearsLine clearing equipment 1,071,000 1,084,000 5 yearsVibrator energy sources 80,454,000 78,119,000 5 to 15 yearsVehicles 35,196,000 36,730,000 1.5 to 10 years 345,619,000 337,922,000 Less accumulated depreciation (198,052,000) (173,428,000) Net property, plant and equipment $147,567,000 $164,494,000 December 31, September 30, 2015 2014 Accrued self-insurance reserves $1,830,000 $1,524,000 Income and franchise taxes payable 21,000 96,000 Other accrued expenses and current liabilities 2,753,000 2,477,000 Total other current liabilities $4,604,000 $4,097,000 Table of ContentsDAWSON GEOPHYSICAL COMPANYNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) As of December 31, 2015, we had one outstanding note payable under the term loan feature of the Existing Credit Agreement with a principal amount of$3,429,000. We had two outstanding notes payable under the Existing Credit Agreement that are not under the term loan feature (and therefore do not counttowards the maximum amounts that we may borrow) which were incurred to purchase (and are secured by) equipment, representing a remaining aggregateprincipal amount of $5,225,000 as of December 31, 2015. In addition, the Existing Credit Agreement permits us to borrow, repay and re-borrow, from time totime until June 30, 2017, up to the lesser of $20.0 million or 80% of our eligible accounts receivable less the then-outstanding principal balance of the NewTerm Loan (the "Existing Line of Credit"). We did not utilize the Existing Line of Credit during 2015, and we have the full Existing Line of Credit availablefor borrowing. Because our ability to borrow funds under our revolving line of credit is tied to the amount of our eligible accounts receivable, if our accountsreceivable decrease materially for any reason, including delays, reductions or cancellations by clients or decreased demand for our services, our ability toborrow to fund operations or other obligations may be limited. On November 25, 2015, we entered into an amendment (the "LOC Amendment") to the Existing Credit Agreement to provide for the issuance of a letterof credit in the principal amount of $1,767,000 in favor of AIG Assurance Company in order to support payment of certain insurance premiums of theCompany. The principal amount of this letter of credit counts as funds borrowed under our Existing Line of Credit. Our obligations under the Existing Line of Credit are secured by a security interest in our accounts receivable, and the term notes are secured by certainof our core equipment. Interest on amounts outstanding under the Existing Credit Agreement accrues at the lesser of 4.5% or the prime rate (as quoted in theWall Street Journal), subject to an interest rate floor of 2.5%. The Existing Credit Agreement contains customary covenants for credit facilities of this type,including limitations on disposition of assets, mergers and other fundamental changes. We are also obligated to meet certain financial covenants, including(i) a ratio of (x) total liabilities minus subordinated debt to (y) tangible net worth plus subordinated debt not to exceed 1.00:1.00, (ii) a ratio of current assetsto current liabilities of at least 1.50:1.00 and (iii) required tangible net worth of not less than $150,000,000. We were in compliance with all covenants underthe Existing Credit Agreement, including specified ratios, as of December 31, 2015.Legacy Dawson Credit Facilities Prior to its repayment and termination, the Legacy Dawson Credit Facilities provided for a revolving line of credit and term loans to be made pursuant tonotes. We did not utilize the line of credit available under the Legacy Dawson Credit Facilities prior to the termination of the Legacy Dawson CreditFacilities. Prior to termination of the Legacy Dawson Credit Facilities, we had three outstanding notes payable under the term loan feature of the LegacyDawson Credit Agreement. All amounts owed under the Legacy Dawson Credit Facilities were repaid on June 30, 2015 using proceeds of the New Term Loanand totaled $5,144,000.Other Indebtedness We had one outstanding note, in the remaining principal amount of $838,000 at December 31, 2015 payable to a finance company for insurance. In addition, the Company leases vehicles and certain specialized seismic equipment under leases classified as capital leases. The Company's balancesheets as of December 31, 2015 and September 30, 2014 includes capital lease obligations of $1,199,000 and $1,321,000, respectively.F-15Table of ContentsDAWSON GEOPHYSICAL COMPANYNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following tables set forth the aggregate principal amount outstanding under our outstanding notes payable and the interest rates and monthlypayments as of December 31, 2015 and September 30, 2014. Information as of September 30, 2014 does not include indebtedness of Legacy TGC as of suchdate, due to the accounting treatment of the Merger as a reverse acquisition as described in Note 4. The aggregate maturities of the notes payable at December 31, 2015 are as follows: The Company leases vehicles and certain specialized seismic equipment under leases classified as capital leases. The aggregate maturities of obligations under capital leases at December 31, 2015 are as follows: Interest rates on these leases ranged from 3.16% to 6.88%.8. Stock-Based Compensation At December 31, 2015, the Company had two stock-based compensation plans: (i) the Amended and Restated Dawson Geophysical Company 2006Stock and Performance Incentive Plan (the "Legacy Dawson Plan"), which originated from Legacy Dawson and (ii) the Amended and Restated DawsonGeophysical Company 2006 Stock Awards Plan (formerly known as the TGC Industries, Inc. 2006 Stock Awards Plan) (the "Legacy TGC Plan"), whichoriginated from Legacy TGC. As a result of the Merger, the Company administers both the Legacy Dawson Plan and the Legacy TGC Plan. The awardsoutstanding and available under these plans and their associated accounting treatment are discussed below. In 2006, Legacy Dawson adopted the Legacy Dawson Plan. The Legacy Dawson Plan, which was amended and restated in connection with the Merger,provides for the issuance of up to 827,647 shares of authorized Company common stock (which represents the adjusted number of shares subject toF-16 Year EndedDecember 31,2015 Year EndedSeptember 30,2014Notes payable to commercial banks Aggregate principal amount outstanding $8,654,000 $10,364,000Interest rates 3.5% - 4.5% 3.2% - 3.8% Year EndedDecember 31,2015 Year EndedSeptember 30,2014 Notes payable to finance company for insurance Aggregate principal amount outstanding $838,000 — Interest rates 2.35% — January 2016 - December 2016 $7,804,000 January 2017 - December 2017 1,688,000 $9,492,000 January 2016 - December 2016 $781,000 January 2017 - December 2017 418,000 $1,199,000 Table of ContentsDAWSON GEOPHYSICAL COMPANYNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)outstanding awards and available for issuance under new awards immediately following the Merger, and the unadjusted number of shares originally reservedunder the Legacy Dawson Plan was 750,000). At the date of the Merger, 466,136 shares were available for issuance (immediately following such Merger)pursuant to new grants under the Legacy Dawson Plan to officers, directors, employees and consultants of the Company (who were not otherwise officers,directors, employees or consultants of Legacy TGC immediately prior to the Merger). The Legacy Dawson Plan provides for the issuance of stock options,common stock grants, restricted stock grants, restricted stock units and other forms of awards. Stock option grant prices awarded under the Legacy DawsonPlan may not be less than the fair market value of the common stock subject to such option on the grant date, and the term of stock options shall extend nomore than ten years after the grant date. The Legacy Dawson Plan terminates November 28, 2016. In 2006, the Company adopted the Legacy TGC Plan. The Legacy TGC Plan, which was amended and restated in connection with the Merger, providesfor the issuance of up to 1,000,000 shares of authorized Company common stock. At the date of the Merger, 412,254 shares were available for issuancepursuant to new grants under the Legacy TGC Plan to officers, directors and employees of the Company. The Legacy TGC Plan provides for the issuance ofstock options, common stock grants and restricted stock grants. Stock option grant prices awarded under the Legacy TGC Plan may not be less than the fairmarket value of the common stock subject to such option on the grant date, and the term of stock options shall extend no more than ten years after the grantdate. The Legacy TGC Plan terminates March 29, 2016. At the time of the Merger, Legacy TGC had no restricted stock grants outstanding.Impact of Stock-based Compensation: The following table summarizes stock-based compensation expense, which is included in operating or general and administrative expense as appropriatein the consolidated statements of operations, for the year ended December 31, 2015, the three months ended December 31, 2014 and years endedSeptember 30, 2014 and 2013:Stock Options: Legacy Dawson estimated the fair value of each stock option on the date of grant using the Black-Scholes option pricing model. Legacy TGC estimatedthe fair value of each stock option on the date of grant using the Binomial Lattice Model. No stock options have been awarded during the three monthsended December 31, 2014 and the year ended December 31, 2015. Actual value realized with stock options, if any, is dependent on the future performance ofthe Company's common stock and overall stock market conditions.F-17 Year EndedDecember 31, Three MonthsEndedDecember 31, Year EndedSeptember 30, 2015 2014 2014 2013 Stock Options $— $— $— $62,000 Restricted Stock Awards 363,000 213,000 821,000 1,307,000 Restricted Stock Units 526,000 74,000 233,000 25,000 Common Stock Awards 267,000 165,000 171,000 403,000 Total Compensation Expense $1,156,000 $452,000 $1,225,000 $1,797,000 Table of ContentsDAWSON GEOPHYSICAL COMPANYNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) A summary of the Company's employee stock options as of December 31, 2015 as well as activity during the three months ended December 31, 2014, theyear ended September 30, 2014 and the year ended December 31, 2015 is presented below. Stock options issued under the Legacy TGC and Legacy Dawson plans are incentive stock options. No tax deduction is recorded when options areawarded. If an exercise and sale of vested options results in a disqualifying disposition, a tax deduction for the Company occurs. Outstanding options at December 31, 2015 expire from November 2016 to July 2019. There was no unrecognized compensation costs related to stockoption awards as of December 31, 2015. There were no options granted or vested and there were no excess tax benefits from disqualifying dispositions during the year ended December 31, 2015,the three months ended December 31, 2014 and the years ended September 30, 2014 and 2013. No options were exercised during the year endedDecember 31, 2015 or the three months ended December 31, 2014 or the year ended September 30, 2013. The total intrinsic value of options exercised duringthe year ended September 30, 2014 was $13,000, respectively. No cash was received from option exercises under all share-based payment arrangements during the year ended December 31, 2015 and the three monthsended December 31, 2014. Cash received from option exercises under all share-based payment arrangements during the years ended September 30, 2014 and2013 was $32,000 and $608,000, respectively.Restricted Stock Awards: There were no restricted stock grants in year ended December 31, 2015, three months ended December 31, 2014, or years ended September 30, 2014 and2013. At September 30, 2014 and December 31, 2014, 182,160 restricted share awards with a weighted average grant date fair value (based on the market priceof the Company's stock on the date of grant) of $13.38 per share were outstanding. As of December 31, 2015, all restricted stock has vested and no awardswere outstanding.Restricted Stock Units: The Company granted 10,000, 94,898, 38,555 and 3,520 restricted stock units in the year ended December 31, 2015, the three months endedDecember 31, 2014 and the years ended September 30, 2014F-18 Number ofOptionedShares(1) WeightedAverageExercisePrice(1) WeightedAverageRemainingContractualTerm in Years Balance as of September 30, 2014 and December 31, 2014 160,434 $10.74 Forfeited (1,760)$10.74 Oustanding and vested Legacy TGC options 279,756 $14.25 Options cancelled (10,000)$11.79 Balance as of December 31, 2015 428,430 $13.01 2.93 Exercisable as of December 31, 2015 428,430 $13.01 2.93 (1)Balance of optioned shares and weighted average exercise price converted for the Merger that occurred February 11, 2015.Table of ContentsDAWSON GEOPHYSICAL COMPANYNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)and 2013, respectively, with a weighted average grant date fair value of $5.76, $6.79, $18.02 and $15.42, respectively. The fair value of restricted stock unitsequals the market price of the Company's stock on the grant date. A summary of the Company's nonvested restricted stock unit awards as of December 31, 2015 as well as activity during the three months endedDecember 31, 2014 and the year ended December 31, 2015 is presented below. As of December 31, 2015, there was approximately $587,000 of unrecognized compensation cost related to nonvested restricted stock units. This cost isexpected to be recognized over a weighted average period of 1.78 years.Common Stock Awards: The Company granted common shares with immediate vesting to outside directors and employees in year ended December 31, 2015, the three monthsended December 31, 2014 and the years ended September 30, 2014 and 2013 as follows:9. Dividends The Company has not paid dividends during calendar year 2015. During calendar year 2014, four quarterly dividends of $0.05 per share were paid toshareholders of record representing an aggregate dividend of approximately $645,000 on each payment date on the number of issued and outstandingCommon Stock as of the applicable declaration date, or approximately $2,580,000. While there are currently no restrictions prohibiting the Company from paying dividends, the Board of Directors, after consideration of general economicand market conditions affecting the energy industry in general, and the oilfield services business in particular, determined that the Company would not pay adividend in respect of the foreseeable future. Payment of any dividends in the future will be at the discretion of our board and will depend on our financialcondition, results of operations, capital and legal requirements, and other factors deemed relevant by the board.F-19 Number ofRestrictedShareUnits(1) WeightedAverageGrant DateFair Value(1) Balance as of September 30, 2014 38,555 $18.02 Grants 94,898 6.79 Balance as of December 31, 2014 133,453 $10.03 Grants 10,000 5.76 Vested (14,206) 17.78 Balance as of December 31, 2015 129,247 $8.85 (1)Balance of restricted share units and weighted average grant date fair value price converted for merger that occurredFebruary 11, 2015. Number ofSharesGranted WeightedAverageGrant DateFair Value Year Ended December 31, 2015 58,937 $4.53 Three Months Ended December 31, 2014 21,730 $7.59 Year Ended September 30, 2014 9,706 $17.61 Year Ended September 30, 2013 25,491 $15.81 Table of ContentsDAWSON GEOPHYSICAL COMPANYNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)10. Employee Benefit Plans The Company provides a 401(k) plan as part of its employee benefits package in order to retain quality personnel. Legacy Dawson elected to match100% of the employee contributions up to a maximum of 6% of the participant's gross salary under the Legacy Dawson 401(k) plan for the year endedDecember 31, 2015, the three months ended December 31, 2014, and the years ended September 30, 2014 and 2013. Legacy Dawson's 401(k) plan wasretained in connection with the merger. Legacy TGC's 401(k) plan, which was terminated in connection with the Merger, is consistent with Legacy Dawson's401(k) plan except Legacy TGC matched 50% of the employee's contribution up to a maximum of 6% of the participant's gross salary. The Company'smatching contributions under Legacy Dawson's 401(k) plan for calendar year 2015, three months ended December 31, 2014, and fiscal 2014 and 2013 wereapproximately $1,849,000, $462,000, $1,895,000 and $1,747,000, respectively. Legacy TGC's employees rolled on to the Legacy Dawson 401(k) planduring 2015. In addition, the Company's matching contributions to the Legacy TGC 401(k) plan (prior to such plan's termination) during 2015 were $98,000.11. Advertising Costs Advertising costs are charged to expense as incurred. Advertising costs totaled $466,000 during the year ended December 31, 2015, $62,000 during thethree months ended December 31, 2014, $223,000 and $319,000 during the years ended September 30, 2014 and 2013, respectively.12. Income Taxes The Company's components of (loss) income before income taxes are as follows: The Company recorded income tax benefit of $13,755,000 and $1,912,000 for the year ended December 31, 2015 and the three months endedDecember 31, 2014, respectively. In year ended September 30, 2014, the Company recorded income tax benefit of $5,280,000 as compared to expense of$9,090,000 in year ended September 30, 2013. Income tax benefit (expense) is comprised of the following:F-20 Year EndedDecember 31, Three Months EndedDecember 31, Year Ended September 30, 2015 2014 2014 2013 (Loss) income before income taxes Domestic $(36,230,000)$(6,249,000)$(11,671,000)$23,019,000 Foreign (3,804,000) (654,000) (6,229,000) (3,449,000)Total $(40,034,000)$(6,903,000)$(17,900,000)$19,570,000 Year EndedDecember 31, Three Months EndedDecember 31, Year Ended September 30, 2015 2014 2014 2013 Current federal benefit (expense) $280,000 — $74,000 $(124,000)Current state expense (571,000)$(39,000) (633,000) (693,000)Current foreign expense — — (228,000) — Deferred foreign benefit (expense) 687,000 — — — Deferred federal benefit (expense) 12,499,000 1,783,000 5,489,000 (6,251,000)Deferred state benefit (expense) 860,000 168,000 578,000 (2,022,000)Total $13,755,000 $1,912,000 $5,280,000 $(9,090,000)Table of ContentsDAWSON GEOPHYSICAL COMPANYNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The income tax provision differs from the amount computed by applying the statutory federal income tax rate to (losses) income before income taxes asfollows: The principal components of the Company's net deferred tax liability are as follows: At December 31, 2015, the Company had a gross NOL for U.S. federal income tax purposes of approximately $65,719,000. This NOL will begin to expirein 2029. The Company will carry forward the net federal NOL of approximately $23,002,000. The Company also had net state NOLs that will affect statetaxes of approximately $850,000 at December 31, 2015. State NOLs began to expire in 2015. Carryback provisions are not allowed by all states, accordinglythe state NOLs give rise to a deferred tax asset. Several of these carry forwards are primarily available in states where the Company believes the assets cannotbeF-21 Year EndedDecember 31, Three Months EndedDecember 31, Year Ended September 30, 2015 2014 2014 2013 Tax benefit (expense) computed at statutory rate of35% $14,012,000 $2,416,000 $6,265,000 $(6,850,000)Change in valuation allowance (502,000) (170,000) (1,506,000) (1,265,000)State income tax benefit (expense), net of federal tax 423,000 83,000 (32,000) (1,486,000)Foreign losses 954,000 170,000 1,506,000 987,000 Transaction costs (445,000) (522,000) (332,000) — Other (687,000) (65,000) (621,000) (476,000)Income tax benefit (expense) $13,755,000 $1,912,000 $5,280,000 $(9,090,000) December 31,2015 September 30,2014 Deferred tax assets: Federal tax net operating loss (NOL) carryforward $23,002,000 $11,205,000 Foreign tax NOL carryforward 3,694,000 2,441,000 Deferred revenue 1,193,000 297,000 Restricted stock 214,000 756,000 Workers' compensation 144,000 148,000 State tax NOL carryforward 850,000 792,000 Self-insurance 260,000 286,000 Canadian start-up costs 296,000 337,000 AMT credit carry forward 315,000 312,000 Foreign tax credit 1,874,000 228,000 Other comprehensive income 1,055,000 128,000 Unrecognized tax benefits 562,000 — Other (91,000) 209,000 Total gross deferred tax assets 33,368,000 17,139,000 Less valuation allowance (3,707,000) (2,771,000)Total net deferred tax assets 29,661,000 14,368,000 Deferred tax liabilities: Property and equipment (34,980,000) (42,199,000)Total net deferred tax liability $(5,319,000)$(27,831,000)Table of ContentsDAWSON GEOPHYSICAL COMPANYNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)deemed to be more likely than not realizable. Based on management's belief that the net operating loss carry forwards are not realizable, a $526,000 valuationallowance, net of federal benefit was maintained to offset these deferred tax assets as of December 31, 2015. The Company also has Canadian deferred taxassets that will begin to expire in 2032. The Company has recorded a partial valuation allowance of $3,181,000 against the Canadian deferred tax assetsbecause management believes it is currently not more likely than not to be realizable. In conjunction with the Merger at February 11, 2015, the Company established an accrual for unrecognized tax benefits of $715,000. At December 31,2015, the Company increased this accrual for unrecognized tax benefits to $1,684,000. There were no unrecognized tax benefits at the three months endedDecember 31, 2014 or the years ended September 30, 2014 and 2013. The tax years generally subject to future examination by tax authorities are for yearsended December 31, 2012 and after. While it is expected that the amount of unrecognized tax benefits will change in the next twelve months, the Companydoes not expect any change to have a significant impact on its results of operations. The Company's policy is to recognize interest and penalties related tounrecognized tax benefits in income tax expense. There was no interest and penalties recognized in the year ended December 31, 2015, three months endedDecember 31, 2014 or in the years ended September 30, 2014 or 2013.13. Net (Loss) Income per Share Attributable to Common Stock Net (loss) income per share attributable to common stock is calculated using the two-class method. The two-class method is an allocation method ofcalculating (loss) earnings per share when a company's capital structure includes participating securities that have rights to undistributed earnings. TheCompany's employees and officers that hold unvested restricted stock are entitled to dividends when the Company pays dividends. The Company's basic net(loss) income per share attributable to common stock is computed by reducing the Company's net (loss) income by the net income allocable to unvestedrestricted stockholders that have a right to participate in earnings. The Company's employees and officers that hold unvested restricted stock do notparticipate in losses because they are not contractually obligated to do so. The undistributed earnings are allocated based on the relative percentage of theweighted average unvested restricted stock awards. The basic net (loss) income per share attributable to common stock is computed by dividing the net (loss)income attributable to common stock by the weighted average shares outstanding. The weighted average shares outstanding for the year ended December 31,2015 was calculated by totaling (i) the product of (x) the weighted shares of Legacy Dawson Common Stock outstanding at the beginning of the yearmultiplied by (y) the Exchange Ratio, plus (ii) the number of shares associated with awards of Legacy Dawson restricted stock and restricted stock units thatvested in conjunction with the Merger, weighted as of February 11, 2015, plus (iii) the number of shares of Legacy TGC Common Stock outstandingimmediately prior to the Merger, weighted to reflect that such shares were outstanding from February 11, 2015 until December 31, 2015. The weightedaverage number of shares outstanding for the three months ended December 31, 2014 and for the years ended September 30, 2014 and 2013 were calculatedas if the Merger had occurred at the beginning of the respective period, and the components of the weighted average shares calculation were multiplied bythe Exchange Ratio. The Company's dilutive net (loss) income per share attributable to common stock is computed by adjusting basic net (loss) income pershare attributable to common stock by diluted income allocable to unvestedF-22Table of ContentsDAWSON GEOPHYSICAL COMPANYNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)restricted stock, if any, divided by weighted average diluted shares outstanding. A reconciliation of the basic and diluted (loss) income per share attributableto common stock is as follows: The Company had a net loss in the year ended December 31, 2015, the three months ended December 31, 2014, and the year ended September 30, 2014.As a result, all stock options and restricted stock units were anti-dilutive and excluded from weighted average shares used in determining the diluted lossattributable to a share of common stock for the respective periods. The following weighted average numbers of stock options and restricted stock units havebeen excluded from the calculation of diluted loss per share attributable to common stock, as their effect would be anti-dilutive for the year endedDecember 31, 2015, the three months ended December 31, 2014, and the year ended September 30, 2014: There were no weighted average number of stock options or restricted stock units that were anti-dilutive for the year ended September 30, 2013.F-23 Year EndedDecember 31, Three Months EndedDecember 31, Year Ended September 30, 2015 2014 2014 2013 (in thousands, except share and per share data) Net (loss) income $(26,279)$(4,991)$(12,620)$10,480 Income allocable to unvested restricted stock — (9) (26) (136)Basic (loss) income attributable to common stock $(26,279)$(5,000)$(12,646)$10,344 Reallocation of participating earnings — — — 1 Diluted (loss) income attributable to common stock $(26,279)$(5,000)$(12,646)$10,345 Weighted average common shares outstanding: Basic 20,688,185 14,019,813 14,008,635 13,868,120 Dilutive common stock options and restricted stockunits — — — 71,721 Diluted 20,688,185 14,019,813 14,008,635 13,939,841 Basic (loss) income attributable to a share of commonstock $(1.27)$(0.36)$(0.90)$0.75 Diluted (loss) income attributable to a share ofcommon stock $(1.27)$(0.36)$(0.90)$0.74 Year EndedDecember 31, Three Months endedDecember 31, Year EndedSeptember 30, 2015 2014 2014 Stock options 159,561 160,434 162,107 Restricted stock units 126,596 66,405 33,373 Total 286,157 226,839 195,480 Table of ContentsDAWSON GEOPHYSICAL COMPANYNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following weighted average shares of unvested restricted stock were included in common stock outstanding as such shares have a nonforfeitableright to participate in any dividends that might be declared and have the right to vote:14. Major Clients The Company operates in only one business segment, contract seismic data acquisition and processing services. Sales to these clients, as a percentage ofoperating revenues that exceeded 10%, were as follows: The Company does not believe that the loss of any client listed above would have a material adverse effect on the Company.15. Areas of Operation The U.S. and Canada are the only countries of operation for the Company. Revenues for the year ended December 31, 2015 were $234,685,000 with $222,154,000 earned in the United States and $12,531,000 earned in Canada.Revenues for the three months ended December 31, 2014 were $50,802,000, all earned in the United States. Revenues for the fiscal year ended September 30,2014 were $261,683,000 with $256,110,000 earned in the United States and $5,573,000 earned in Canada. Revenues for the fiscal year ended September 30,2013 were $305,299,000 with $303,869,000 earned in the United States and $1,430,000 earned in Canada. Net long-lived assets as of December 31, 2015 were approximately $147,567,000, with $136,758,000 located in the United States and $10,809,000located in Canada. Net long-lived assets as of September 30, 2014 were approximately $164,494,000, with $163,880,000 located in the United States and$614,000 located in Canada.16. Commitments and Contingencies From time to time, the Company is a party to various legal proceedings arising in the ordinary course of business. Although the Company cannot predictthe outcomes of any such legal proceedings, management believes that the resolution of pending legal actions will not have a material adverse effect on theCompany's financial condition, results of operations or liquidity as the Company believes it is adequately indemnified and insured. The Company experiences contractual disputes with its clients from time to time regarding the payment of invoices or other matters. While the Companyseeks to minimize these disputes and maintain good relations with its clients, the Company has in the past, and may in the future, experience disputes thatcould affect its revenues and results of operations in any period.F-24 Year EndedDecember 31, Three Months EndedDecember 31, Year EndedSeptember 30, 2015 2014 2014 2013 Restricted Stock 46,695 182,160 182,160 182,160 Year EndedDecember 31, 2015 Three Months EndedDecember 31, 2014 Year EndedSeptember 30, 2014 Year EndedSeptember 30, 2013 A 21% 14% 16% 19%B 15% 10% 13% 17%C — — 12% — Table of ContentsDAWSON GEOPHYSICAL COMPANYNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The Company has non-cancelable operating leases for office and shop space in Midland, Plano, Denison, Houston, Denver, Oklahoma City and Calgary,Alberta. The following table summarizes payments due in specific periods related to the Company's contractual obligations with initial terms exceeding one yearas of December 31, 2015. Some of the Company's operating leases contain predetermined fixed increases of the minimum rental rate during the initial lease term. For these leases,the Company recognizes the related expense on a straight-line basis and records deferred rent as the difference between the amount charged to expense andthe rent paid. Rental expense under the Company's operating leases with initial terms exceeding one year was $1,691,000 for the year ended December 31,2015, $242,000 for the three months ended December 31, 2014, and $965,000 and $900,000 for the years ended September 30, 2014 and 2013, respectively. As of December 31, 2015, the Company had unused letters of credit of approximately $1,767,000. The Company's letters of credit of $1,767,000 areassociated with the Company's existing insurance coverage. Also as of December 31, 2015, the Company had unused letters of credit of approximately $233,000. The Company's letters of credit are associated withthe Company's self-insured retention on workers' compensation claims. Effective in fiscal 2012, the Company was no longer self-insured for workers'compensation claims after October 1, 2011. The unused letters of credit of $233,000 are associated with workers' compensation claims outstanding prior toOctober 1, 2011.17. Rights Agreement Legacy Dawson executed a Rights Agreement, dated as of July 23, 2009, between Legacy Dawson and Mellon Investors Services, LLC, as rights agent(the "Rights Agreement"). The Rights Agreement set forth and governed the rights that were dividended to the holders of record of the common stock ofLegacy Dawson at the close of business on July 23, 2009 (the "Rights"). The Rights, if triggered, would have entitled the registered holder to purchase fromLegacy Dawson certain fractional shares of Series A Junior Participating Preferred Stock, par value $1.00 per share, of Legacy Dawson. On October 8, 2014, Legacy Dawson entered into an amendment to the rights agreement (the "Rights Amendment") with the rights agent in order toinclude provisions such that (a) the Merger would not trigger any action under the Rights Agreement and no distribution of rights would occur by virtue ofthe Merger or the consummation of the other transactions contemplated thereby and (b) the rights would expire at the effective time of the Merger. Pursuantto the Rights Amendment, the Rights Agreement expired pursuant to its terms upon the closing of the Merger on February 11, 2015.18. Recently Issued Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) which will require organizations that lease assets to recognize on the balancesheet the assets and liabilities for the rights and obligations created by those leases. This ASU is effective for the annual period ending after December 15,2016, and for annual and interim periods thereafter. Early adoption is permitted. The Company is currently evaluating the new guidance to determine theimpact it will have on its consolidated financial statements.F-25 Payments Due by Period (in 000's) Total Within1 Year 2 - 3Years 4 - 5Years After5 Years Operating lease obligations (office space) $11,271 $1,704 $2,660 $1,899 $5,008 Table of ContentsDAWSON GEOPHYSICAL COMPANYNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) In November 2015, the FASB issued ASU No. 2015-17 to simplify income tax accounting. The update requires that all deferred tax assets and liabilitiesbe classified as noncurrent on the balance sheet instead of separating deferred taxes into current and noncurrent amounts. This update is effective for fiscalyears beginning after December 15, 2016, and interim periods within those fiscal years, and may be adopted earlier on a voluntary basis. The Companyelected to early adopt this guidance during the fourth quarter of 2015 and have applied a full retrospective approach to all periods presented. Current deferredincome tax assets of $5,977,000 as of September 30, 2014 have been reclassified and presented as a reduction to deferred income tax liabilities, net, in theConsolidated Balance Sheet. In September 2015, the FASB issued ASU No. 2015-16, "Business Combinations — Simplifying the Accounting for Measurement-Period Adjustments".ASU 2015-16 eliminates the requirement that an acquirer in a business combination account for measurement-period adjustments retrospectively. Instead, anacquirer will recognize a measurement-period adjustment during the period in which it determines the amount of the adjustment, including the effect onearnings of any amounts it would have recorded in previous periods if the accounting had been completed at the acquisition date. The guidance is effectivefor public entities for fiscal years beginning after December 15, 2015 and interim periods within those fiscal years. Early adoption is permitted. The Companyadopted ASU 2015-16 during the quarter ended September 30, 2015. The adoption of ASU 2015-16 did not materially affect the Company's consolidatedresults of operations, cash flows, financial position or financial statement disclosures. In August 2014, the FASB issued ASU No. 2014-15, "Presentation of Financial Statements — Going Concern" (Subtopic 205-40). This ASU providesguidance on management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and in certaincircumstances to provide related footnote disclosures. This ASU is effective for the annual period ending after December 15, 2016, and for annual and interimperiods thereafter. Early adoption is permitted. The Company does not expect the adoption of this guidance will have any material impact on its consolidatedfinancial statements. In May 2014, the FASB issued ASU No. 2014-09 that introduces a new five-step revenue recognition model in which an entity should recognize revenueto depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled inexchange for those goods or services. This ASU also requires disclosures sufficient to enable users to understand the nature, amount, timing, and uncertaintyof revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures about contracts with customers,significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. This standard is effective for fiscal yearsbeginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted, but only for fiscal years beginningafter December 15, 2016. Entities have the option of using either a full retrospective or modified approach to adopt ASU 2014-09. The Company is currentlyevaluating the new guidance to determine the impact it will have on its consolidated financial statements and the method of adoption.19. Concentrations of Credit Risk Financial instruments that potentially expose the Company to concentrations of credit risk at any given time may consist of cash and cash equivalents,money market funds and overnight investment accounts, short-term investments in certificates of deposit, trade and other receivables and other current assets.At December 31, 2015 and September 30, 2014, the Company had deposits with domestic and international banks in excess of federally insured limits.Management believes the credit risk associated with these deposits is minimal. Money market funds seek to preserve the value of the investment, but it ispossible to lose money investing in these funds.F-26Table of ContentsDAWSON GEOPHYSICAL COMPANYNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The Company's sales are to clients whose activities relate to oil and natural gas exploration and production. The Company generally extends unsecuredcredit to these clients; therefore, collection of receivables may be affected by the economy surrounding the oil and natural gas industry or other economicconditions. The Company closely monitors extensions of credit and may negotiate payment terms that mitigate risk.20. Quarterly Consolidated Financial Data (Unaudited) Basic and diluted (loss) income per share attributable to common stock are computed independently for each of the quarters presented. Therefore, thesum of quarterly basic and diluted information may not equal the annual basic and diluted (loss) income per share attributable to common stock. In addition,all income (loss) per share calculations have been adjusted to reflect the 1.76 merger conversion factor.F-27 Quarter Ended December 31 March 31 June 30 September 30 December 31 Year Ended December 31, 2015: Operating revenues $73,722,000 $43,335,000 $62,498,000 $55,130,000 Loss from operations $(9,814,000)$(18,065,000)$(4,662,000)$(8,141,000)Net loss $(6,592,000)$(11,877,000)$(2,870,000)$(4,940,000)Basic and diluted loss per share attributableto common stock $(0.37)$(0.55)$(0.13)$(0.23)Diluted loss per share attributable tocommon stock $(0.37)$(0.55)$(0.13)$(0.23)Three Months Ended December 31, 2014: Operating revenues $50,802,000 Loss from operations $(6,984,000)Net loss $(4,991,000)Basic and diluted loss per share attributableto common stock $(0.36)Diluted loss per share attributable tocommon stock $(0.36)Year Ended September 30, 2014: Operating revenues $68,181,000 $76,766,000 $54,166,000 $62,570,000 (Loss) income from operations $(4,967,000)$2,822,000 $(9,228,000)$(6,531,000) Net (loss) income $(2,897,000)$1,652,000 $(7,493,000)$(3,882,000) Basic (loss) income per share attributable tocommon stock $(0.20)$0.12 $(0.54)$(0.28) Diluted (loss) income per share attributableto common stock $(0.20)$0.12 $(0.54)$(0.28) Table of Contents INDEX TO EXHIBITS EXHIBIT NO. DESCRIPTION 2.1 Agreement and Plan of Merger, dated October 8, 2014, by and among Dawson Operating Company (f/k/aDawson Geophysical Company), the Registrant and Riptide Acquisition Corp., filed as Exhibit 2.1 to theRegistrant's Current Report on Form 8-K, filed on October 9, 2014, and incorporated herein by reference. 3.1 Amended and Restated Certificate of Formation, as amended February 11, 2015, filed as Exhibit 3.1 to theRegistrant's Annual Report on Form 10-K, filed on March 16, 2015, and incorporated herein by reference. 3.2 Bylaws, as amended February 11, 2015 filed as Exhibit 3.2 to the Registrant's Annual Report on Form 10-K,filed on March 16, 2015, and incorporated herein by reference. 4.1 Form of Specimen Stock Certificate, filed as Exhibit 4.1 to the Registrant's Current Report on Form 8-K, filedon February 11, 2015, and incorporated herein by reference. 10.1 Amended and Restated Loan and Security Agreement by and between the Registrant and Sovereign Bank,dated September 16, 2009, filed as Exhibit 10.1 to the Registrant's Current Report on Form 8-K, filed onSeptember 22, 2009 (File No. 001-32472), and incorporated herein by reference. 10.2 Amended and Restated Promissory Note, by and between the Registrant and Sovereign Bank, datedSeptember 16, 2009, filed as Exhibit 10.2 to the Registrant's Current Report on Form 8-K, filed onSeptember 22, 2009 (File No. 001-32472), and incorporated herein by reference. 10.3 Amendment to Amended and Restated Loan and Security Agreement and Amended and Restated PromissoryNote by and between the Registrant and Sovereign Bank, dated September 16, 2010, filed as Exhibit 10.1 tothe Registrant's Form 10-Q for the quarterly period ended September 30, 2010, and incorporated herein byreference. 10.4 Third Amendment to Amended and Restated Loan and Security Agreement and Amendment to Amended andRestated Promissory Note, by and between the Registrant and Sovereign Bank, dated September 16, 2011,filed as Exhibit 10.1 to the Registrant's Current Report on Form 8-K, filed on September 22, 2011, andincorporated herein by reference. 10.5 Fourth Amendment to Amended and Restated Loan and Security Agreement by and between the Registrantand Sovereign Bank, dated January 26, 2012, filed as Exhibit 10.1 to the Registrant's Quarterly Report onForm 10-Q for the quarterly period ended September 30, 2012, and incorporated herein by reference. 10.6 Fifth Amendment to Amended and Restated Loan and Security Agreement by and between the Registrantand Sovereign Bank, dated September 16, 2012, filed as Exhibit 10.2 to the Registrant's Quarterly Report onForm 10-Q for the quarterly period ended September 30, 2012, and incorporated herein by reference. 10.7 Sixth Amendment to Amended and Restated Loan and Security Agreement, by and between the Registrantand Sovereign Bank, dated as of October 11, 2012, filed as Exhibit 10.1 to the Registrant's Form 10-Q for thequarterly period ended September 30, 2013, and incorporated herein by reference 10.8 Seventh Amendment to Amended and Restated Loan and Security Agreement and Amendment to Amendedand Restated Promissory Note, by and between the Registrant and Sovereign Bank, dated as of September 16,2013, filed as Exhibit 10.2 to the Registrant's Form 10-Q for the quarterly period ended September 30, 2013,and incorporated herein by reference. Table of ContentsEXHIBIT NO. DESCRIPTION 10.9 Eighth Amendment to Amended and Restated Loan and Security Agreement and Amendment to Amendedand Restated Promissory Note, by and between the Registrant and Sovereign Bank, dated September 16,2014, filed as Exhibit 10.1 to the Registrant's Current Report on Form 8-K, filed on September 19, 2014, andincorporated herein by reference. 10.10 Ninth Amendment to Amended and Restated Loan and Security Agreement (filed on July 2, 2015 asExhibit 10.1 to the Company's Current Report on Form 8-K (File No. 001-32472) and incorporated herein byreference). *10.11 Tenth Amendment to Amended and Restated Loan and Security Agreement. +10.12 The Executive Nonqualified "Excess" Plan Adoption Agreement, filed as Exhibit 10.1 to the Registrant'sCurrent Report on Form 8-K, filed on January 8, 2013, and incorporated herein by reference. +10.13 The Executive Nonqualified Excess Plan Document, filed as Exhibit 10.2 to the Registrant's Current Reporton Form 8-K filed on January 8, 2013, and incorporated herein by reference. +10.14 Form of Indemnification Agreement entered with directors and executive officers, filed as Exhibit 10.1 to theRegistrant's Current Report on Form 8-K, filed on October 9, 2014, and incorporated herein by reference. +10.15 Employment Agreement, dated October 8, 2014, by and between the Registrant and Stephen C. Jumper, filedas Exhibit 10.5 to the Registrant's Current Report on Form 8-K, filed on October 9, 2014, and incorporatedherein by reference. +10.16 Employment Agreement, dated October 8, 2014, by and between the Registrant and Wayne A. Whitener,filed as Exhibit 10.2 to the Registrant's Current Report on Form 8-K, filed on October 9, 2014, andincorporated herein by reference. +10.17 Employment Agreement, dated October 8, 2014, by and between the Registrant and C. Ray Tobias, filed asExhibit 10.6 to the Registrant's Current Report on Form 8-K, filed on October 9, 2014, and incorporatedherein by reference. +10.18 Employment Agreement, dated October 8, 2014, by and between the Registrant and Daniel G. Winn, filed asExhibit 10.4 to the Registrant's Current Report on Form 8-K, filed on October 9, 2014, and incorporatedherein by reference. +10.19 Employment Agreement, dated October 8, 2014, by and between the Registrant and James K. Brata, filed asExhibit 10.3 to the Registrant's Current Report on Form 8-K, filed on October 9, 2014, and incorporatedherein by reference. +10.20 Employment Agreement, dated October 8, 2014, by and between the Registrant and Christina W. Hagan,filed as Exhibit 10.7 to the Registrant's Current Report on Form 8-K, filed on October 9, 2014, andincorporated herein by reference. +10.21 Employment Agreement, dated October 8, 2014, by and between the Registrant and James W. Thomas, filedas Exhibit 10.8 to the Registrant's Current Report on Form 8-K, filed on October 9, 2014, and incorporatedherein by reference. +10.22 Letter Agreement, dated February 15, 2016, by and between James K. Brata and the Company, filed asExhibit 10.1 to the Company's Current Report on Form 8-K, filed on February 19, 2016, and incorporatedherein by reference. +10.23 Letter Agreement, dated February 15, 2016, by and between Christina W. Hagan and the Company, filed asExhibit 10.2 to the Company's Current Report on Form 8-K, filed on February 19, 2016, and incorporatedherein by reference. Table of ContentsEXHIBIT NO. DESCRIPTION +10.24 Letter Agreement, dated February 15, 2016, by and between Stephen C. Jumper and the Company, filed onFebruary 19, 2016 as Exhibit 10.3 to the Company's Current Report on Form 8-K (File No. 001-32472) andincorporated herein by reference. +10.25 Letter Agreement, dated February 15, 2016, by and between James W. Thomas and the Company, filed asExhibit 10.4 to the Company's Current Report on Form 8-K, filed on February 19, 2016, and incorporatedherein by reference. +10.26 Letter Agreement, dated February 15, 2016, by and between C. Ray Tobias and the Company, filed asExhibit 10.5 to the Company's Current Report on Form 8-K, filed on February 19, 2016, and incorporatedherein by reference. +10.27 Letter Agreement, dated February 15, 2016, by and between Wayne A. Whitener and the Company, filed asExhibit 10.6 to the Company's Current Report on Form 8-K, filed on February 19, 2016, and incorporatedherein by reference. +10.28 Letter Agreement, dated February 15, 2016, by and between Daniel G. Winn and the Company, filed asExhibit 10.7 to the Company's Current Report on Form 8-K, filed on February 19, 2016, and incorporatedherein by reference. +10.29 Amended and Restated Dawson Geophysical Company 2006 Stock and Performance Incentive Plan, filed asExhibit 10.1 to the Registrant's Current Report on Form 8-K, filed on February 11, 2015, and incorporatedherein by reference. +10.30 Form of Restricted Stock Agreement for the Legacy Dawson Plan, filed as Exhibit 10.3 to Dawson OperatingCompany's (f/k/a Dawson Geophysical Company) Quarterly Report on Form 10-Q, filed on February 11,2008 (File No. 001-34404), and incorporated herein by reference. +10.31 Form of Restricted Stock Agreement for the Legacy Dawson Plan, filed as Exhibit 10.5 to Dawson OperatingCompany's (f/k/a Dawson Geophysical Company) Annual Report on Form 10-K, filed on December 11, 2013(File No. 001-34404), and incorporated herein by reference. +10.32 Form of Restricted Stock Unit Agreement for the Legacy Dawson Plan, filed as Exhibit 10.5 to DawsonOperating Company's (f/k/a Dawson Geophysical Company) Annual Report on Form 10-K, filed onDecember 11, 2013 (File No. 001-34404) , and incorporated herein by reference. +10.33 Form of Stock Option Agreement for the Legacy Dawson Plan, filed as Exhibit 10.4 to Dawson OperatingCompany's (f/k/a Dawson Geophysical Company) Quarterly Report on Form 10-Q, filed on February 11,2008 (File No. 001-34404), and incorporated herein by reference. +10.34 Form of Stock Option Agreement for the Legacy Dawson Plan, filed as Exhibit 10.9 to Dawson OperatingCompany's (f/k/a Dawson Geophysical Company) Annual Report on Form 10-K, filed on December 11, 2013(File No. 001-34404), and incorporated herein by reference. +10.35 Dawson Geophysical 2014 Annual Incentive Plan, filed as Exhibit 10.1 to Dawson Operating Company's(f/k/a Dawson Geophysical Company) Current Report on Form 8-K, filed on November 25, 2013 (FileNo. 001-34404), and incorporated herein by reference. 10.36 Form of Master Geophysical Data Acquisition Agreement, filed as Exhibit 10.10 to Dawson OperatingCompany's (f/k/a Dawson Geophysical Company) Annual Report on Form 10-K, filed on December 5, 2012(File No. 001-34404), and incorporated herein by reference. Table of ContentsEXHIBIT NO. DESCRIPTION 10.37 Form of Supplemental Agreement to Master Geophysical Data Acquisition Agreement, filed as Exhibit 10.11to Dawson Operating Company's (f/k/a Dawson Geophysical Company) Annual Report on Form 10-K, filedon December 5, 2012 (File No. 001-34404), and incorporated herein by reference. 10.38 Amended and Restated 2006 Stock Awards Plan of the Company (formerly known as the TGC Industries, Inc.2006 Stock Awards Plan, i.e., the Legacy TGC Plan) (filed on June 5, 2015 as Exhibit 10.1 to the Company'sCurrent Report on Form 8-K (File No. 001-32472) and incorporated herein by reference). *21.1 Subsidiaries of the Registrant. *23.1 Consent of Ernst & Young LLP, independent registered public accountants to incorporation of report byreference. *31.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 302 of the Sarbanes-Oxley Act of 2002. *31.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 302 of the Sarbanes-Oxley Act of 2002. *31.3 Certification of Chief Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 302 of the Sarbanes-Oxley Act of 2002. *32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes-Oxley Act of 2002. *32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes-Oxley Act of 2002. *32.3 Certification of Chief Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes-Oxley Act of 2002. 101.INS*XBRL Instance Document. 101.SCH*XBRL Taxonomy Extension Schema Document. 101.CAL*XBRL Taxonomy Extension Calculation Linkbase Document. 101.DEF*XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB*XBRL Taxonomy Extension Labels Linkbase Document. 101.PRE*XBRL Taxonomy Extension Presentation Linkbase Document.*Filed herewith. +Management contract or compensatory plan or arrangement.Exhibit 10.11 SOVEREIGN BANK – LOAN NO. 17003864 (REVOLVING CREDIT FACILITY) TENTH AMENDMENT TOAMENDED AND RESTATED LOAN AND SECURITY AGREEMENT THIS TENTH AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this “Amendment”) dated as of JUNE30, 2015 (the “Effective Date”), is by and between SOVEREIGN BANK, a Texas state bank (together with its successors and assigns, “Lender”), andDAWSON GEOPHYSICAL COMPANY, a Texas corporation (“Debtor”), formerly known as TGC INDUSTRIES, INC. RECITALS WHEREAS, Debtor and Lender entered into that certain AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT dated as ofSEPTEMBER 16, 2009 (as amended, modified, and restated from time to time, the “Agreement”), pursuant to which Lender agreed to make certain creditfacilities available to Debtor on the terms and conditions set forth therein. WHEREAS, the parties desire to amend the Agreement pursuant to the terms and conditions set forth herein. NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agreeas follows: 1. Defined Terms. Capitalized terms used in this Amendment, to the extent not otherwise defined herein, shall have the same meanings as inthe Agreement, as amended hereby. Section 1 of the Agreement is further amended as follows: (a) The defined term “Letter of Credit” is hereby added to the Agreement in the correct alphabetical order as follows (with otherdefined terms being re-lettered, as applicable): “Letter of Credit” means that certain letter of credit with an issue date of November 23, 2015, issued by Lender, at the request of Debtor, asapplicant, for the benefit of AIG ASSURANCE COMPANY and the other beneficiaries named therein, for drawings up to ONE MILLION SEVENHUNDRED SIXTY-SEVEN THOUSAND ONE HUNDRED FIFTEEN AND NO/100 DOLLARS (1,767,115.00). (b) The following sentence is hereby added at the end of the definition of “Indebtedness”: “The Indebtedness includes all obligations of Debtor to Lender under the Letter of Credit.” 2. Addition of Section 2(f). A new Section 2(f) is hereby added to the Agreement as follows: (f) Letter of Credit. (i) Debtor hereby requests Lender to issue the Letter of Credit. Subject to the terms and conditions set forth in thisAgreement and the other Loan Documents, Lender hereby agrees to issue the Letter of Credit on November 23, 2015. Each advance by Lenderpursuant to a drawing under the Letter of Credit is due and payable on the date that is THIRTY (30) days after such drawing date, and will becharged by Lender as (and will be deemed to be) a Loan under the Revolving Credit Facility by Lender as of the day and time such payment is madeby Lender and in the amount of such payment. Effective on the date of issuance of the Letter of Credit, a reserve against the Borrowing Base shall beestablished in an amount equal to the Letter of Credit and all other commitments and obligations made or incurred by Lender with respect thereto.Debtor shall pay Lender an Issuance Fee of $17,671.15 upon issuance of the Letter of Credit. 1 (ii) Debtor authorizes Lender to accept, honor, or pay (as applicable) against any draft or other document which on its faceappears otherwise in order and is signed, issued, or presented by any party or under the name of any party (a) purporting to act with authority (actualor apparent) on behalf of the beneficiary in whose name the Letter of Credit requires that any draft or document must be drawn, issued, or presented;(b) purporting to claim through such beneficiary; or (c) posing as such beneficiary. Debtor agrees to reimburse Lender any and all amounts whichLender pays under the Letter of Credit notwithstanding any legal or factual insufficiency or infirmity in such party’s conduct or in any of thedocuments referenced in items (a), (b) or (c) above. Debtor shall indemnify and hold Lender harmless from and against any and all losses, claims,damages, liabilities, costs and expenses which Lender may suffer or incur in connection with the Letter of Credit and any documents, drafts oracceptances relating thereto, including any losses, claims, damages, liabilities, costs and expenses due to (A) any action taken by any issuer orcorrespondent with respect to the Letter of Credit, or (B) if applicable, any fluctuation in the exchange rates for foreign currency: provided, however,that such indemnity shall not, as to the Lender, be available to the extent that such losses, claims, damages, liabilities, costs or expenses resultedfrom the Lender’s gross negligence or willful misconduct, IT BEING EXPRESSLY UNDERSTOOD AND AGREED THAT SUCH INDEMNITYSHALL EXTEND TO AND COVER LENDER’S NEGLIGENCE. Debtor assumes all risks with respect to the acts or omissions of the drawer underor beneficiary of the Letter of Credit and for such purposes the drawer or beneficiary shall be deemed Debtor’s agent. Debtor assumes all risks for,and agrees to pay, all foreign, Federal, State and local taxes, duties and levies relating to any goods subject to the Letter of Credit or any documents,drafts or acceptances thereunder. Debtor hereby releases and holds Lender harmless from and against any acts, waivers, errors, delays or omissions,whether caused by Debtor, by any issuer or correspondent or otherwise with respect to or relating to the Letter of Credit. The provisions of thisSection shall survive the payment of obligations of Debtor hereunder and the termination of this Agreement. (iii) Nothing contained herein shall be deemed or construed to grant Debtor any right or authority to pledge the credit ofLender in any manner. Lender shall have no liability of any kind with respect to the Letter of Credit provided by an issuer other than Lender unlessLender has duly executed and delivered to such issuer the application or a guarantee or indemnification in writing with respect to the Letter ofCredit. Debtor shall be bound by any interpretation made by Lender, or any other issuer or correspondent under or in connection with the Letter ofCredit or any documents, drafts or acceptances thereunder, notwithstanding that such interpretation may be inconsistent with any instructions ofDebtor. Lender shall have the sole and exclusive right and authority to, and Debtor shall not: (A) at any time an Event of Default has occurred and iscontinuing, (l) approve or resolve any questions on non-compliance of documents or (2) give any instructions as to acceptance or rejection of anydocuments or goods, and (B) at all times, grant any extensions of the maturity of, time of payment for, or time of presentation of, any drafts,acceptances, or documents, drafts or acceptances thereunder or any letters of credit included in the Collateral. Lender may take any such actionseither in its own name or in Debtor’s name. (iv) If as a result of any regulatory change there shall be imposed, modified, or deemed applicable any tax, reserve, specialdeposit, or similar requirement against or with respect to or measured by reference the Letter of Credit and the result shall be to increase the cost tothe Lender of issuing or maintaining the Letter of Credit or reduce any amount receivable by the Lender hereunder in respect of the Letter of Credit(which increase in cost, or reduction in amount receivable, shall be the result of the Lender’s reasonable allocation of the aggregate of such increasesor reductions resulting from such event), then, upon demand by the Lender, Debtor agrees to pay the Lender, from time to time as specified by theLender, such additional amounts as shall be sufficient to compensate the Lender for such increased costs or reductions in amount. A statement as tosuch increased costs or reductions in amount incurred by the Lender, submitted by the Lender to the Debtor, shall be conclusive as to the amountthereof, provided that the determination thereof is made on a reasonable basis. (v) Neither Lender nor any of Lender’s correspondents shall be responsible for, and Debtor’s obligation to reimburse Lendershall not be affected by any change of circumstances or conditions or action of any person related to the Letter of Credit or this Agreement includingwithout limitation: (a) the validity, accuracy, sufficiency or genuineness of drafts, documents, certificates, statements or endorsements thereon, evenif such drafts, documents, certificates, statements or endorsements thereon 2 prove, in fact, to be in any respect invalid, insufficient, fraudulent or forged; (b) any breach of any agreement between Debtor and the Beneficiary ofthe Letter of Credit or any other party, even if Lender has received notice of same; (c) any failure of any draft to bear any reference or adequatereference to the Letter of Credit; (d) any act or omission by Lender in connection with the Letter of Credit or related drafts and documents if done ingood faith; (e) any omissions, interruptions, errors, mis-deliveries or delays in the transmission or delivery of any documents, message orcommunication by mall, cable, telegram or other media in connection with the Letter of Credit; (f) any act, error, default, omission or failure inbusiness of the Beneficiary, any correspondent or any other party, or any other act or omission beyond Lender’s control; (g) any acceptance orpayment of overdrafts or irregular drafts or extensions of time limits or other changes or variations in, the Letter of Credit if assented to, orally or inwriting, by Debtor; Debtor shall be conclusively deemed to have waived any right to object to such variation unless within three days of receipt ofsuch irregular drafts or documents or notice of such variation, Debtor files written notice with Lender; (h) any delay by any party in giving, orfailing to give notice of any default under any agreement involving Lender; (i) failure by Lender to perfect any interest in or exercise any right withrespect to the collateral securing this Agreement or any other security, endorsement, or guarantee it may have for payment of Debtor’s obligations;and, (j) any amendments to which Debtor has assented. (vi) Lender shall not be responsible to Debtor for, and Lender’s right to reimbursement, indemnification, and other paymentshereunder shall not be impaired by any act or omission for which an issuer of a letter of credit is relieved of responsibility under the 2007 Revisionof the Uniform Customs and Practice for Documentary Credits of the international Chamber of Commerce, ICC Publication No. 600 or otherapplicable law. In addition, Debtor acknowledges that it has reviewed and agreed to the proposed language of the Letter of Credit and that Lendershall not be responsible for the inclusion or absence of any terms or conditions in that document. Lender shall not be liable for any special, indirect,or consequential damages, unless there is clear and convincing evidence that such damages resulted from Lender’s bad faith. (vii) The governing law provisions of this Agreement shall apply to this Section, except to the extent such laws areinconsistent with the 2007 Revision of the Uniform Customs and Practice for Documentary Credits of the International Chamber of Commerce, ICCPublication No. 600. (viii) If any Event of Default shall occur and be continuing or the Revolving Credit Maturity Date shall have occurred, Debtorshall, if requested by the Lender, immediately deposit with and pledge to the Lender cash or cash equivalent investments in an amount equal to theoutstanding face amount of the Letter of Credit as security for the obligations thereunder. 3. Conditions Precedent. The obligations of Lender under this Amendment shall be subject to the condition precedent that Debtor shall haveexecuted and delivered to Lender this Amendment and such other documents and instruments incidental and appropriate to the transaction provided forherein as Lender or its counsel may reasonably request. 4. Payment Expenses. Debtor agrees to pay all reasonable attorneys’ fees of Lender in connection with the drafting and execution of thisAmendment. 5. Ratifications. Except as expressly modified and superseded by this Amendment, the Agreement and the other Loan Documents are ratifiedand confirmed and continue in full force and effect. The Loan Documents, as modified by this Amendment, continue to be legal, valid, binding andenforceable in accordance with their respective terms. Without limiting the generality of the foregoing, Debtor hereby ratifies and confirms that all liensheretofore granted to Lender were intended to, do and continue to secure the full payment and performance of the indebtedness arising under the LoanDocuments. Debtor agrees to perform such acts and duly authorize, execute, acknowledge, deliver, file and record such additional assignments, securityagreements, modifications or agreements to any of the foregoing, and such other agreements, documents and instruments as Lender may reasonably request inorder to perfect and protect those liens and preserve and protect the rights of Lender in respect of all present and future collateral. The terms, conditions andprovisions of the Loan Documents (as the same may have been amended, modified or restated from time to time) are incorporated herein by reference, thesame as if stated verbatim herein. 3 6. Representations, Warranties and Confirmations. Debtor hereby represents and warrants to Lender that (a) this Amendment and any otherLoan Documents to be delivered under this Amendment (if any) have been duly executed and delivered by Debtor, are valid and binding upon Debtor andare enforceable against Debtor in accordance with their terms, except as limited by any applicable bankruptcy, insolvency or similar laws of generalapplication relating to the enforcement of creditors’ rights and except to the extent specific remedies may generally be limited by equitable principles, (b) noaction of, or filing with, any governmental authority is required to authorize, or is otherwise required in connection with, the execution, delivery andperformance by Debtor of this Amendment or any other Loan Document to be delivered under this Amendment, and (c) the execution, delivery andperformance by Debtor of this Amendment and any other Loan Documents to be delivered under this Amendment do not require the consent of any otherperson and do not constitute a violation of any laws, agreements or understandings to which Debtor is a party or by which Debtor is bound. 7. Release. Debtor hereby acknowledges and agrees that it knows of no defenses, counterclaims, offsets, cross-complaints, claims or demandsof any kind or nature whatsoever to or against Lender or the terms and provisions of or the obligations of Debtor under the Loan Documents and the otheragreements, instruments and documents evidencing, securing, governing, guaranteeing or pertaining thereto, and that Debtor has no right to seek affirmativerelief or damages of any kind or nature from Lender with respect thereto. To the extent Debtor knows of any such defenses, counterclaims, offsets, cross-complaints, claims, demands or rights, Debtor hereby waives, and hereby knowingly and voluntarily releases and forever discharges Lender and itspredecessors, officers, directors, agents, attorneys, employees, successors and assigns, from all possible claims, demands, actions, causes of action, defenses,counterclaims, offsets, cross-complaints, damages, costs, expenses and liabilities whatsoever with respect thereto, such waiver and release being with fullknowledge and understanding of the circumstances and effects of such waiver and release and after having consulted legal counsel with respect thereto. 8. Multiple Counterparts. This Amendment may be executed in a number of identical separate counterparts, each of which for all purposes isto be deemed an original, but all of which shall constitute, collectively, one agreement. Signature pages to this Amendment may be detached from multipleseparate counterparts and attached to the same document and a telecopy or other facsimile of any such executed signature page shall be valid as an original. 9. Reference to Loan Documents. Each of the Loan Documents, including the Agreement and any and all other agreements, documents, orinstruments now or hereafter executed and delivered pursuant to the terms hereof containing a reference to any Loan Document shall mean and refer to suchLoan Document as amended hereby. 10. Severability. Any provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair orinvalidate the remainder of this Amendment and the effect thereof shall be confined to the provision so held to be invalid or unenforceable. 11. Headings. The headings, captions, and arrangements used in this Amendment are for convenience only and shall not affect theinterpretation of this Amendment. NOTICE OF FINAL AGREEMENT THE AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS THE SAME MAY BE AMENDED BY THIS AMENDMENT, REPRESENTTHE FINAL AGREEMENT BETWEEN AND AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTSBETWEEN AND AMONG THE PARTIES. 4 REMAINDER OF PAGE LEFT INTENTIONALLY BLANK 5 IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed as of the date first written above. LENDER:ADDRESS: SOVEREIGN BANK6060 Sherry LaneDallas, TX 75225By:/s/ Stephanie Baird VelasquezName:Stephanie Baird VelasquezTitle:Area President With copies of notices to:GARDERE WYNNE SEWELL LLP1601 Elm Street, Suite 3000Dallas, TX 75201-4761Attention: Steven S. Camp DEBTOR:ADDRESS: DAWSON GEOPHYSICAL COMPANY101 E. Park Blvd., Suite 955Plano, TX 75074By:/s/ Wayne WhitenerName:Wayne WhitenerTitle:Executive Vice Chairman 6QuickLinks -- Click here to rapidly navigate through this document Exhibit 21.1 SUBSIDIARIES OF THE REGISTRANT Dawson Operating LLC, a Texas limited liability companyEagle Canada, Inc., a Delaware corporationDawson Seismic Services Holdings, Inc., a Delaware corporationEagle Canada Seismic Services ULC, a Canadian corporationTidelands Geophysical Co., Inc., a Texas corporationExploration Surveys, Inc., a Texas corporationQuickLinksExhibit 21.1SUBSIDIARIES OF THE REGISTRANTQuickLinks -- Click here to rapidly navigate through this document Exhibit 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in the following Registration Statements:(1)Registration Statement (Form S-8 No. 333-199922) pertaining to the Post-Effective Amendment to the Registration Statement on Form S-4related to the Amended and Restated Dawson Geophysical Company 2006 Stock and Performance Incentive Plan (the "Legacy Dawson Plan"),(2)Registration Statement (Form S-8 No. 333-142221) pertaining to the TGC Industries, Inc. 2006 Stock Awards Plan (the "Legacy TGC Plan"), (3)Registration Statement (Form S-8 No. 333-201923) pertaining to the Legacy TGC Plan, and (4)Registration Statement (Form S-8 No. 333-204643) pertaining to the Legacy Dawson Planof our reports dated March 15, 2016, with respect to the consolidated financial statements of Dawson Geophysical Company and the effectiveness of internalcontrol over financial reporting of Dawson Geophysical Company incorporated by reference in this Annual Report (Form 10-K) of Dawson GeophysicalCompany for the year ended December 31, 2015.Dallas, TexasMarch 15, 2016 /s/ Ernst & Young LLPQuickLinksExhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMQuickLinks -- Click here to rapidly navigate through this document Exhibit 31.1 CERTIFICATIONS I, Stephen C. Jumper, certify that:1.I have reviewed this annual report on Form 10-K of Dawson Geophysical Company; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recentfiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant's internal control over financial reporting; and 5.The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internalcontrol over financial reporting.Dated: March 15, 2016 /s/ STEPHEN C. JUMPERStephen C. JumperChairman of the Board of Directors, President andChief Executive Officer(Principal Executive Officer)QuickLinksExhibit 31.1CERTIFICATIONSQuickLinks -- Click here to rapidly navigate through this document Exhibit 31.2 CERTIFICATIONS I, James K. Brata, certify that:1.I have reviewed this annual report on Form 10-K of Dawson Geophysical Company; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recentfiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant's internal control over financial reporting; and 5.The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internalcontrol over financial reporting.Dated: March 15, 2016 /s/ JAMES K. BRATAJames K. BrataExecutive Vice President, Treasurer and Chief FinancialOfficer(Principal Financial Officer)QuickLinksExhibit 31.2CERTIFICATIONSQuickLinks -- Click here to rapidly navigate through this document Exhibit 31.3 CERTIFICATIONS I, Christina W. Hagan, certify that:1.I have reviewed this annual report on Form 10-K of Dawson Geophysical Company; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recentfiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant's internal control over financial reporting; and 5.The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internalcontrol over financial reporting.Dated: March 15, 2016 /s/ CHRISTINA W. HAGANChristina W. HaganExecutive Vice President, Secretary and Chief AccountingOfficer(Principal Accounting Officer)QuickLinksExhibit 31.3CERTIFICATIONSQuickLinks -- Click here to rapidly navigate through this document Exhibit 32.1 CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the annual report of Dawson Geophysical Company (the "Company") on Form 10-K for the fiscal year ended December 31, 2015, asfiled with the Securities and Exchange Commission (the "Report"), I, Stephen C. Jumper, President and Chief Executive Officer of the Company, certify,pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d));and (2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany.Dated: March 15, 2016 /s/ STEPHEN C. JUMPERStephen C. JumperChairman of the Board of Directors, President andChief Executive Officer(Principal Executive Officer)QuickLinksExhibit 32.1CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002QuickLinks -- Click here to rapidly navigate through this document Exhibit 32.2 CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the annual report of Dawson Geophysical Company (the "Company") on Form 10-K for the fiscal year ended December 31, 2015, asfiled with the Securities and Exchange Commission (the "Report"), I, James K. Brata, Executive Vice President, Treasurer and Chief Financial Officer of theCompany, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d));and (2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany.Dated: March 15, 2016 /s/ JAMES K. BRATAJames K. BrataExecutive Vice President, Treasurer and Chief FinancialOfficer(Principal Financial Officer)QuickLinksExhibit 32.2CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002QuickLinks -- Click here to rapidly navigate through this document Exhibit 32.3 CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the annual report of Dawson Geophysical Company (the "Company") on Form 10-K for the fiscal year ended December 31, 2015, asfiled with the Securities and Exchange Commission (the "Report"), I, Christina W. Hagan, Executive Vice President, Secretary and Chief Accounting Officerof the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d));and (2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany.Dated: March 15, 2016 /s/ CHRISTINA W. HAGANChristina W. HaganExecutive Vice President, Secretary and Chief AccountingOfficer(Principal Accounting Officer)QuickLinksExhibit 32.3CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

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