Dawson Geophysical Company
Annual Report 2017

Plain-text annual report

Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549Form 10-K☒☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2017 ☐☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From to Commission File No. 001-32472DAWSON GEOPHYSICAL COMPANY(Exact name of registrant as specified in its charter)Texas 74-2095844(State or other jurisdiction of (I.R.S. Employerincorporation or organization) Identification 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 Registered Common Stock, $0.01 par value The NASDAQ Stock Market Securities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒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 ☐ No ☒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 of1934 during 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 ☒ No ☐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 ☒ No ☐ 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 to thisForm 10-K. ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the ExchangeAct. (Check one):Large accelerated filer ☐Accelerated filer ☒Non-accelerated filer ☐Smaller reporting company ☐Emerging growth company ☐(Do not check if a smaller reporting company) If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with anynew or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒As of June 30, 2017, 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 $78,703,000.On March 5, 2018, there were 21,792,506 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 REFERENCEPortions of the Registrant’s Proxy Statement for its 2018 Annual Meeting of Shareholders are incorporated by reference into Part III of this Annual Report on Form 10-K. Table of ContentsTABLE OF CONTENTS Page PART I Item 1. Business3Item 1A. Risk Factors6Item 1B. Unresolved Staff Comments15Item 2. Properties15Item 3. Legal Proceedings15Item 4. Mine Safety Disclosures15 PART II Item 5. Market for Our Common Equity and Related Stockholder Matters16Item 6. Selected Financial Data19Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations20Item 7A. Quantitative and Qualitative Disclosures about Market Risk29Item 8. Financial Statements and Supplementary Data29Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure29Item 9A. Controls and Procedures29Item 9B. Other Information30 PART III Item 10. Directors, Executive Officers and Corporate Governance31Item 11. Executive Compensation31Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters31Item 13. Certain Relationships and Related Transactions and Director Independence31Item 14. Principal Accounting Fees and Services31 PART IV Item 15. Exhibits and Financial Statement Schedules32Index to Exhibits 33Signatures 37Index to Financial Statements F‑1 1 Table of ContentsDAWSON GEOPHYSICAL COMPANYFORM 10‑KFor the Year Ended December 31, 2017DISCLOSURE REGARDING FORWARD‑LOOKING STATEMENTSStatements other than statements of historical fact included in this Form 10‑K that relate to forecasts, estimates orother expectations regarding future events, including without limitation, statements under “Management’s Discussion andAnalysis of Financial Condition and Results of Operations” and “Business” regarding technological advancements and ourfinancial position, business strategy, and plans and objectives of our management for future operations, may be deemed to beforward‑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, identifyforward‑looking statements. Such forward‑looking statements are based on the beliefs of our management, as well asassumptions made by and information currently available to management. Actual results could differ materially from thosecontemplated by the forward‑looking statements as a result of certain factors, including, but not limited to, dependence uponenergy industry spending; the volatility of oil and natural gas prices; changes in economic conditions; the potential forcontract delays; reductions or cancellations of service contracts; limited number of customers; credit risk related to ourcustomers; reduced utilization; high fixed costs of operations and high capital requirements; operational disruptions;industry competition; external factors affecting the Company’s crews such as weather interruptions and inability to obtainland access rights of way; whether the Company enters into turnkey or day rate contracts; crew productivity; the availabilityof capital resources; and disruptions in the global economy. See “Risk Factors” for more information on these and otherfactors. These forward‑looking statements reflect our current views with respect to future events and are subject to these andother risks, uncertainties and assumptions relating to our operations, results of operations, growth strategies and liquidity.The cautionary statements made in this Form 10‑K should be read as applying to all related forward‑looking statementswherever they appear in this Form 10‑K. All subsequent written and oral forward‑looking statements attributable to us orpersons acting on our behalf are expressly qualified in their entirety by this paragraph. We assume no obligation to updateany such forward‑looking statements.2 Table of Contents Part I Item 1. BUSINESSGeneralDawson Geophysical Company, a Texas corporation (the “Company”), is a leading provider of North Americanonshore seismic data acquisition services with operations throughout the continental United States (“U.S.”) and Canada. Weacquire and process 2‑D, 3‑D and multi‑component seismic data for our clients, ranging from major oil and gas companies toindependent oil and gas operators as well as providers of multi‑client data libraries. Our principal business office is located at508 West Wall, Suite 800, Midland, Texas 79701 (Telephone: 432‑684‑3000), and our internet address iswww.dawson3d.com. We make available free of charge on our website our annual reports on Form 10‑K, quarterly reports onForm 10‑Q, and current reports on Form 8‑K as soon as reasonably practicable after filing or furnishing such information withthe Securities and Exchange Commission (“SEC”).On February 11, 2015, the Company, which was formerly known as TGC Industries, Inc. (“Legacy TGC”),consummated a strategic business combination with Dawson Operating Company, which was formerly known as DawsonGeophysical Company (“Legacy Dawson”), pursuant to which a wholly‑owned subsidiary of Legacy TGC merged with andinto Legacy Dawson, with Legacy Dawson continuing after the merger as the surviving entity and a wholly‑owned subsidiaryof Legacy TGC (the “Merger”). In connection with the Merger, Legacy Dawson changed its name to “Dawson OperatingCompany” and Legacy 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 topost‑combination Dawson Geophysical Company and its consolidated subsidiaries, including Legacy Dawson.We provide our seismic data acquisition services primarily to onshore oil and natural gas exploration anddevelopment companies for use in the onshore drilling and production of oil and natural gas in the continental U.S. andCanada as well as providers of multi‑client data libraries. The main factors influencing demand for seismic data acquisitionservices in our industry are the level of drilling activity by oil and natural gas companies and the sizes of such companies’exploration and development budgets, which, in turn, depend largely on current and anticipated future crude oil and naturalgas prices and depletion rates of the companies’ oil and natural gas reserves.As of December 31, 2017, we operated nine seismic crews, consisting of six crews in the U.S. and three crews inCanada, and one seismic data processing center. We began the fourth quarter operating seven crews in the U.S. and two inCanada, and ended the quarter operating six crews in the U.S. and three crews in Canada. We are currently operating sevencrews in the U.S. and anticipate operating up to seven crews in the U.S. into the third quarter of 2018. We anticipateoperating four crews in Canada through the end of the winter season, which concludes at the end of the first quarter 2018.While demand for our services improved throughout 2017, we continue to experience a challenging market environment dueto fluctuations in domestic oil and natural gas exploration activities and commodity prices. Our seismic crews supply seismicdata primarily to companies engaged in the exploration and development of oil and natural gas on land and in land‑to‑watertransition areas. Seismic acquisition services of our wholly‑owned subsidiary, Eagle Canada Seismic Services, ULC (“EagleCanada”), are also used by the potash mining industry in Canada, and Eagle Canada has particular expertise through itsheliportable 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 betterdelineate existing oil and natural gas fields, and to augment reservoir management techniques. In addition, seismic data aresometimes utilized in unconventional reservoirs to identify geo-hazards (such as subsurface faults) for drilling purposes, aidin geo-steering of a horizontal well bore and rock property identification for high grading of well locations and hydraulicfracturing. The majority of our current activity is in areas of unconventional reservoirs.We acquire geophysical data using the latest in 3‑D seismic survey techniques. We introduce acoustic energy intothe ground by using vibration equipment or dynamite detonation, depending on the surface terrain, area of operation, andsubsurface requirements. The reflected energy, or echoes, are received through geophones, converted into a digital signal at amulti‑channel recording unit, and then transmitted to a central recording vehicle. Subsurface requirements dictate the numberof channels necessary to perform our services. We generally use tens of thousands of recording channels in our seismicsurveys. Additional recording channels enhance the resolution of the seismic survey through increased imaging analysis andprovide improved operational efficiencies for our clients. With our state‑of‑the‑art seismic equipment,3 Table of Contentsincluding computer technology and multiple channels, we acquire, on a cost effective basis, immense volumes of seismicdata that, when processed and interpreted, produce precise images of the earth’s subsurface. Our clients then use our seismicdata to generate 3‑D geologic models that help reduce drilling risks, finding and development costs, and improve recoveryrates from existing fields.In addition to conventional 2‑D and 3‑D seismic surveys, we provide what the industry refers to as multi‑componentseismic data surveys. Multi‑component surveys involve the recording of alternative seismic waves known as shear waves.Shear waves can be recorded as wave conversion of conventional energy sources (3‑C converted waves) or from horizontalvibrator energy source units (shear wave vibrators). Multi‑component data are utilized in further analysis of subsurface rocktype, fabric and reservoir characterization. We own equipment required for onshore multi‑component surveys. The majorityof the projects in Canada require multi‑component recording equipment. We have operated one to two multi‑componentequipped crews in the U.S. routinely over the past few years. The use of multi‑component seismic data could increase inNorth America over the next few years if industry conditions improve and potentially require capital expenditures foradditional equipment.In recent years, we have begun providing surface‑recorded microseismic services utilizing equipment we own.Microseismic monitoring is used by clients who use hydraulic fracturing to extract hydrocarbon deposits to monitor theirhydraulic fracturing operations.We market and supplement our services in the continental U.S. from our headquarters in Midland, Texas and fromadditional offices in three other cities in Texas (Denison, Houston and Plano) as well as two additional states, Oklahoma(Oklahoma City) and Colorado (Denver). In addition, we market and supplement our services in Canada from our facilities inCalgary, Alberta.The IndustryTechnological advances in seismic equipment and computing allow the seismic industry to acquire and process, ona cost‑effective basis, immense volumes of seismic data which produce precise images of the earth’s subsurface. The latestaccepted method of seismic data acquisition, processing, and the subsequent interpretation of the processed data is the 3‑Dseismic method. Geophysicists use computer workstations to interpret 3‑D data volumes, identify subsurface anomalies, andgenerate 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 gascompanies to better delineate existing fields and to augment their reservoir management techniques. Benefits ofincorporating high resolution 3‑D seismic surveys into exploration and development programs 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 anincreasing demand for improved data quality with greater subsurface resolution.Currently, the North American seismic data acquisition industry is made up of a number of companies divided intotwo groups. The first group is made up of publicly‑traded companies which includes us and SAExploration Holdings, Inc.(“SAE”). The second group is made up of Echo Seismic Ltd. (“ECHO”), Geokinetics, Inc. (“Geokinetics”), BreckenridgeGeophysical Inc. (“Breckenridge”), and Paragon Geophysical Services, Inc. (“Paragon”), along with smaller companies whichgenerally run one or two seismic crews and often specialize in specific regions or types of operations.Equipment and CrewsIn recent years, we have experienced continued increases in recording channel capacity on a per crew or projectbasis. This increase in channel count demand is driven by client needs and is necessary in order to produce higher resolutionimages, increase crew efficiencies and undertake larger scale projects. Due to the increase in demand for higher channelcounts, we have continued our investments in additional channels. In response to project‑based channel requirements, weroutinely deploy a variable number of channels on a variable number of crews in an effort to maximize asset utilization andmeet client needs. While the number of recording systems we own may exceed the number utilized in the field at any giventime, we maintain the excess equipment to provide additional operational flexibility and to allow us to quickly deployadditional recording channels and energy source units as needed to respond to client demand and desire for4 Table of Contentsimproved data quality with greater subsurface images. We believe we will realize the benefit of increased channel counts andflexibility of deployment through increased crew efficiencies, higher revenues and margins with improved conditions.In recent years, we have purchased or leased a significant number of cable‑less recording channels. We have utilizedthis equipment primarily as stand‑alone recording systems, but, on occasion, we have utilized it in conjunction with ourcable‑based systems. As a result of the introduction of cable‑less recording systems, we have realized increased crewefficiencies and increased revenue on projects using this equipment. We believe we will experience continued demand forcable‑less recording systems in the future. While we have replaced cable‑based recording equipment with cable‑lessequipment on certain crews, the cable‑based recording equipment continues to be deployed on existing crews.As of December 31, 2017, we owned equipment for 21 land‑based seismic data acquisition crews, 190 vibratorenergy source units, approximately 375,000 recording channels and 21 central recording systems. Of the 21 recordingsystems we owned at December 31, 2017, 12 were Geospace Technologies GSR and GSX cable‑less recording systems, sevenwere ARAM ARIES cable‑based recording systems, one was a Wireless Seismic RT System 2 system, and one was a cable‑lessINOVA Hawk system. Each crew consists of approximately 40 to 100 technicians with associated vehicles, geophones, aseismic recording system, energy sources, cables, and a variety of other equipment. Each ARAM crew has one centralrecording vehicle which captures seismic data. The GSR, GSX and INOVA Hawk crews utilize a recorder to manage the dataacquisition while the individual system captures and holds the data until they are placed in the Data Transfer Module. Thedata is then transferred to various data storage media, which are delivered to a data processing center selected by the client.Equipment Acquisition and Capital ExpendituresWe monitor and evaluate advances in geophysical technology and commit capital funds to purchase the equipmentwe deem most effective to maintain our competitive position. Purchasing and updating seismic equipment and technologyinvolves a commitment to capital spending. We also tie our capital expenditures closely to demand for our services.Beginning in 2014, we adopted a maintenance capital expenditures program due to the belief that our equipment base wassufficient to meet current demand. In response to an opportunity during the third quarter of 2017, we increased our 2017capital budget to $16 million to acquire 19,000 units of multi-component seismic data acquisition equipment including57,000 additional cable-less recording channels to serve our clients in the U.S. and Canada. We will continue to adopt amaintenance capital expenditure program for 2018.ClientsOur services are marketed by supervisory and executive personnel who contact clients to determine geophysicalneeds and respond to client inquiries regarding the availability of crews or processing schedules. These contacts are basedprincipally upon professional relationships developed over a number of years.Our clients range from major oil and gas companies to small independent oil and gas operators and also providers ofmulti‑client data libraries. The services we provide to our clients vary according to the size and needs of each client. Duringthe twelve months ended December 31, 2017, sales to two clients represented approximately 27% of our revenue. Theremaining balance of our revenue derived from varied clients and none represented 10% or more of our revenues. Weanticipate that sales to these clients will represent a smaller percentage of our overall revenues during 2018.We do not acquire seismic data for our own account or for future sale, maintain multi‑client seismic data libraries, orparticipate in oil and gas ventures. The results of seismic surveys conducted for a client belong to that client. It is also ourpolicy that none of our officers, directors or employees actively participate in oil and natural gas ventures. All of our clients’information is maintained in the strictest confidence.Domestic and Foreign OperationsWe derive our revenue from domestic and foreign sources. Total revenues for the twelve months ended December31, 2017 were approximately $157,148,000, of which $135,058,000 were earned in the U.S. and $22,090,000 were earned inCanada. Total revenue for the twelve months ended December 31, 2016 were approximately $133,330,000, of which$122,522,000 were earned in the U.S. and $10,808,000 were earned in Canada.5 Table of ContentsLong lived assets as of December 31, 2017 were approximately $307,844,000, with $282,420,000 owned in the U.S.and $25,424,000 owned in Canada. Long lived assets as of December 31, 2016 were approximately $324,950,000, with$308,418,000 owned in the U.S. and $16,532,000 owned in Canada.ContractsOur contracts are obtained either through competitive bidding or as a result of client negotiations. Our services areconducted under general service agreements for seismic data acquisition services which define certain obligations for us andfor our clients. A supplemental agreement setting forth the terms of a specific project, which may be canceled by either partyon short notice, is entered into for every project. We currently operate under supplemental agreements that are either“turnkey” agreements providing for a fixed fee to be paid to us for each unit of data acquired or “term” agreements providingfor a fixed 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 agreementsgenerally provide us more profit potential, but involve more risks because of the potential of crew downtime or operationaldelays. We attempt to negotiate on a project‑by‑project basis some level of weather downtime protection within the turnkeyagreements. Under the term agreements, we forego an increased profit potential in exchange for a more consistent revenuestream with improved protection from crew downtime or operational delays.CompetitionThe acquisition of seismic data for the oil and natural gas industry is a highly competitive business. Contracts forsuch services generally are awarded on the basis of price quotations, crew experience, and the availability of crews to performin a timely manner, although factors other than price, such as crew safety, performance history, and technological andoperational expertise, are often determinative. Our competition includes publicly traded competitors, such as SAE. Our othermajor competitors include Echo, Geokinetics, Breckenridge, and Paragon. In addition to these previously named companies,we also compete for projects from time to time with smaller seismic companies which operate in local markets with only oneor two crews. Further, the barriers to entry in the seismic industry are not prohibitive, and it would not be difficult for seismiccompanies outside of the U.S. to enter the domestic market and compete with us.EmployeesAs of December 31, 2017, we employed 851 full‑time employees, of which 92 consisted of management, sales, andadministrative personnel with the remainder being crew and crew support personnel. Our employees are not represented by alabor union. We believe we have good relations with our employees.See “Item 2. Properties” for a description of our material properties utilized in our business. Item 1A. RISK FACTORSAn investment in our common stock is subject to a number of risks, including those discussed below. You shouldcarefully consider these discussions of risk and the other information included in this Form 10‑K. These risk factors couldaffect our actual results and should be considered carefully when evaluating us. Although the risks described below are therisks that we believe are material, they are not the only risks relating to our business, our industry and our common stock.Additional risks and uncertainties, including those that are not yet identified or that we currently believe are immaterial,may also adversely affect our business, financial condition or results of operations. If any of the events described belowoccur, our business, financial condition or results of operations could be materially adversely affected.We derive substantially all of our revenues from companies in the oil and natural gas exploration and developmentindustry, as well as providers of multi‑client data libraries which serve common clients in the industry. The oil and naturalgas industry is a historically cyclical industry with levels of activity that are significantly affected by the levels andvolatility 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 field management activities, which depend primarily on oil and natural gas prices. Significantfluctuations in domestic oil and natural gas exploration activities and commodity prices have affected, and will continue toaffect, demand for our services and our results of operations. We could be adversely impacted if the level of such6 Table of Contentsexploration activities and the prices for oil and natural gas were to significantly decline in the future. In addition to themarket prices of oil and natural gas, the willingness of our clients to explore, develop and produce depends largely uponprevailing industry conditions that are influenced by numerous factors over which our management has no control, includinggeneral economic conditions and the availability of credit. Any prolonged reduction in the overall level of exploration anddevelopment activities, whether resulting from changes in oil and natural gas prices or otherwise, could adversely impact usin many ways by negatively 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 demandfor our services. Worldwide political, economic, and military events have contributed to oil and natural gas price volatility and arelikely to continue to do so in the future. Depending on the market prices of oil and natural gas, oil and natural gasexploration and development companies may cancel or curtail their capital expenditure and drilling programs, therebyreducing demand for our services, or may become unable to pay, or have to delay payment of, amounts owed to us for ourservices. Oil and natural gas prices have been highly volatile historically and, we believe, will continue to be so in the future.Many factors beyond our 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; ·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 U.S. and elsewhere; ·domestic and foreign tax policy; ·domestic and foreign energy policy including increased emphasis on alternative sources of energy; ·weather conditions in the U.S., Canada and elsewhere; ·the pace adopted by foreign governments for the exploration, development, and production of their nationalreserves; ·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 operationsand could lead to further significant fluctuations in the demand for and pricing of oil and gas. Reduced demand7 Table of Contentsand pricing pressures could adversely affect the financial condition and results of operations of our clients and their ability topurchase our services. We are not able to predict the timing, extent, and duration of the economic cycles in the markets inwhich we operate. The oil and natural gas industry is emerging from a severe downturn and prices for oil and natural gas haverecently stabilized after the decline that began in the fourth quarter of 2014. If the downturn that we appear to be emergingfrom continues for an extended period of time, or if it becomes more extreme, it may have material adverse effects on ourplanned 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 lossof one of these clients could adversely affect our results of operations.We derive a significant amount of our revenues from a relatively small number of oil and gas exploration anddevelopment companies and providers of multi‑client data libraries. During the twelve months ended December 31, 2017,our two largest clients accounted for approximately 27% of our revenues. If these clients, or any of our other significantclients, were to terminate their contracts or fail to contract for our services in the future because they are acquired, alter theirexploration or development strategy, experience financial difficulties or for any other reason, our results of operations couldbe adversely affected.Our clients could delay, reduce or cancel their service contracts with us on short notice, which may lead to lower thanexpected demand and revenues.Our order book reflects client commitments at levels we believe are sufficient to maintain operations on our existingcrews for the indicated periods. However, our clients can delay, reduce or cancel their service contracts with us on shortnotice. If the oil and natural gas industry incurs a downturn, it may result in an increase in delays, reductions or cancellationsby our clients. In addition, the timing of the origination and completion of projects and when projects are awarded andcontracted for is also uncertain. As a result, our order book as of any particular date may not be indicative of actual demandand revenues for any succeeding period.Our revenues, operating results and cash flows can be expected to fluctuate from period to period.Our revenues, operating results and cash flows may fluctuate from period to period. These fluctuations areattributable to the level of new business in a particular period, the timing of the initiation, progress or cancellation ofsignificant projects, higher revenues and expenses on our dynamite contracts, and costs we incur to train new crews we mayadd in the future to meet increased client demand. Fluctuations in our operating results may also be affected by other factorsthat are outside of our control such as permit delays, weather delays and crew productivity. Oil and natural gas prices, whileshowing improvement over the past year, have continued to be volatile and have resulted in significant demand fluctuationsfor our services. There can be no assurance of future oil and gas price levels or stability. Our operations in Canada are alsoseasonal as a result of the thawing season and we have historically experienced limited Canadian activity during the secondand 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 highfixed costs, the negative effect of one or more of these factors could trigger wide variations in our operating revenues, cashflows, EBITDA, margin, and profitability from quarter‑to‑quarter, rendering quarter‑to‑quarter comparisons unreliable as anindicator of performance. Due to the factors discussed above, you should not expect sequential growth in our quarterlyrevenues and profitability.We extend credit to our clients without requiring collateral, and a default by a client could have a material adverseeffect on our operating revenues.We perform ongoing credit evaluations of our clients’ financial conditions and, generally, require no collateral fromour clients. It is possible that one or more of our clients will become financially distressed, especially in light of the recentdownturn in the oil and natural gas industry and fluctuations in commodity prices, which could cause them to default ontheir obligations to us and could reduce the client’s future need for seismic services provided by us. Our concentration ofclients may also increase our overall exposure to these credit risks. A default in payment from one of our large clients couldhave a material adverse effect on our operating results for the period involved.8 Table of ContentsWe incur losses.We incurred net losses of $31,266,000 and $39,792,000 for the twelve months ended December 31, 2017 and 2016,respectively.Our ability to be profitable in the future will depend on many factors beyond our control, but primarily on the levelof demand for land‑based seismic data acquisition services by oil and natural gas exploration and development companies.Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis.We have indebtedness from time to time under credit facilities with a commercial bank, and certain of our core assetsand our accounts receivable are pledged as collateral for these obligations. Our ability to borrow may be limited if ouraccounts receivable decrease or the value of certain of our core assets is materially impaired.From time to time, we have indebtedness under credit facilities with a commercial bank, and certain of our coreassets as well as our accounts receivable are pledged as collateral for these borrowings. If we are unable to repay all securedborrowings when due, whether at maturity or if declared due and payable following a default, our lenders have the right toproceed against the assets pledged to secure the indebtedness and may sell these assets in order to repay those borrowings,which could materially harm our business, financial condition and results of operations. Our ability to borrow funds underour revolving line of credit is tied to the value of pledged assets as well as the amount of our eligible accounts receivable. Ifour pledged assets become materially impaired or our accounts receivable decrease materially for any reason, includingdelays, reductions or cancellations by clients or decreased demand for our services, our ability to borrow to fund operationsor other obligations 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 theMerger, we recorded intangibles associated with the combination of Legacy TGC and Legacy Dawson that are an asset on ourconsolidated balance sheet. Future events, including our financial performance, sustained decreases in oil and natural gasprices, reduced demand for our services, our market valuation or the market valuation of comparable companies, loss of asignificant client’s business, or strategic decisions, could cause us to conclude that impairment indicators exist andultimately that the asset values associated with our equipment or our intangibles were to be impaired. If we were to impair ourequipment or intangibles, these noncash asset impairments could negatively affect our financial results in a material mannerin the period in which they are recorded, and the larger the amount of any impairment that may be taken, the greater theimpact such impairment may have on our financial results.Our profitability is determined, in part, by the utilization level and productivity of our crews and is affected by numerousexternal factors that are beyond our control.Our revenue is determined, in part, by the contract price we receive for our services, the level of utilization of ourdata acquisition crews and the productivity of these crews. Crew utilization and productivity is partly a function of externalfactors, such as client cancellation or delay of projects, operating delays from inclement weather, obtaining land access rightsand other factors, over which we have no control. If our crews encounter operational difficulties or delays on any dataacquisition 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 fora defined scope of work or unit of data acquired. The revenue, cost and gross profit realized under our turnkey contracts canvary from our estimates because of changes in job conditions, variations in labor and equipment productivity or because ofthe performance of our subcontractors. Turnkey contracts may also cause us to bear substantially all of the risks of businessinterruption caused by external factors over which we may have no control, such as weather, obtaining land access rights,crew downtime or operational delays. These variations, delays and risks inherent in turnkey contracts may result in reducingour profitability.9 Table of ContentsWe 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 companies with financial resources that are greater than our own as well as companies of comparableand smaller size. Additionally, the seismic data acquisition business is extremely price competitive and has a history ofperiods in which seismic contractors bid jobs below cost and, therefore, adversely affected industry pricing. Many contractsare awarded on a bid basis, which may further increase competition based primarily on price. Further, the barriers to entry inthe seismic industry are not prohibitive, and it would not be difficult for seismic companies outside of the U.S. to enter thedomestic market and compete with us.Inclement weather may adversely affect our ability to complete projects and could, therefore, adversely affect our resultsof operations.Our seismic data acquisition operations could be adversely affected by inclement weather conditions. Delaysassociated with weather conditions could adversely affect our results of operations. For example, weather delays could affectour operations on a particular project or an entire region and could lengthen the time to complete data acquisition projects.In addition, even if we negotiate weather protection provisions in our contracts, we may not be fully compensated by ourclients for delays caused by inclement weather.Our operations are subject to delays related to obtaining land access rights of way from third parties which could affectour results of operations.Our seismic data acquisition operations could be adversely affected by our inability to obtain timely right of wayusage from both public and private land and/or mineral owners. We cannot begin surveys on property without obtainingpermits from governmental entities as well as the permission of the private landowners who own the land being surveyed. Inrecent years, it has become more difficult, costly and time‑consuming to obtain access rights of way as drilling activities haveexpanded into more populated areas. Additionally, while landowners generally are cooperative in granting access rights,some have become more resistant to seismic and drilling activities occurring on their property. In addition, governmentalentities do not always grant permits within the time periods expected. Delays associated with obtaining such rights of waycould 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 tomaintain our competitive advantage.Seismic data acquisition and data processing technologies historically have progressed steadily, and we expect thistrend to continue. In order to remain competitive, we must continue to invest additional capital to maintain, upgrade andexpand our seismic data acquisition capabilities. Our working capital requirements remain high, primarily due to theexpansion of our infrastructure in response to client demand for cable‑less recording systems and more recording channels,which has increased as the industry strives for improved data quality with greater subsurface resolution images. Our sourcesof working capital are limited. We have historically funded our working capital requirements primarily with cash generatedfrom operations, cash reserves and, from time to time, borrowings from commercial banks. In recent years, we have fundedsome of our capital expenditures through equipment term loans and capital leases. In the past, we have also funded ourcapital expenditures and other financing needs through public equity offerings. If we were to expand our operations at a rateexceeding operating cash flow, if current demand or pricing of geophysical services were to decrease substantially, or iftechnical advances or competitive pressures required us to acquire new equipment faster than our cash flow could sustain,additional financing could be required. If we were not able to obtain such financing or renew our existing revolving line ofcredit when needed, our failure could have a negative impact on our ability to pursue expansion and maintain ourcompetitive advantage.Technological change in our business creates risks of technological obsolescence and requirements for future capitalexpenditures. If we are unable to keep 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 thisprogression to continue. We are in a capital intensive industry, and in order to remain competitive, we must continue toinvest additional capital to maintain, upgrade and expand our seismic data acquisition capabilities. However, we may havelimitations on our ability to obtain the financing necessary to enable us to purchase state‑of‑the‑art equipment, and certain10 Table of Contentsof our competitors may be able to purchase newer equipment when we may not be able to do so, thus affecting our ability tocompete.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. Fromtime to time, increased demand for seismic data acquisition services has decreased the available supply of new seismicequipment, 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 andresults of operations. In addition, any adverse change in the terms of our suppliers’ arrangements could affect our results ofoperations.Some of our suppliers may also be our competitors. If competitive pressures were to become such that our supplierswould no longer sell to us, we would not be able to easily replace the technology with equipment that communicateseffectively with our existing technology, thereby impairing our ability to conduct our business.We are dependent on our management team and key employees, and inability to retain our current team or attract newemployees could harm our business.Our continued success depends upon attracting and retaining highly skilled professionals and other technicalpersonnel. A number of our employees are highly skilled scientists and highly trained technicians. The loss, whether bydeath, departure or illness, of our senior executives or other key employees or our failure to continue to attract and retainskilled and technically knowledgeable personnel could adversely affect our ability to compete in the seismic servicesindustry. We may experience significant competition for such personnel, particularly during periods of increased demand forseismic services. A limited number of our employees are under employment contracts, and we have no key man insurance.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 holdor issue foreign currency forward contracts, option contracts or other derivative financial instruments to mitigate the currencyexchange rate risk. Our results of operations and our cash flows could be impacted by changes in foreign currency exchangerates.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 naturalgas prices and other risks and uncertainties described in this “Risk Factors” section and in our other filings with the SEC,could cause the market price of our common stock to fall. Our high and low sales prices of our common stock for the twelvemonths ended December 31, 2017 were $8.55 and $3.70, respectively. Further, the high and low sales prices of our commonstock for the twelve months ended December 31, 2016 were $9.00 and $2.90, respectively. Our common stock is listed on The NASDAQ Stock Market LLC (“NASDAQ”) under the symbol “DWSN.” However,daily trading volumes for our common stock are, and may continue to be, relatively small compared to many other publiclytraded securities. For example, during 2017 our daily trading volume was as low as 11,200 shares. It may be difficult for youto sell your shares in the public market at any given time at prevailing prices, and the price of our common stock may,therefore, be volatile. Our common stock has traded below $5.00 per share in the past year, and when it trades below $5.00 per share it may beconsidered a low‑priced stock and may be subject to regulations that limit or restrict the potential market for the stock.Although currently our common stock is trading above $5.00 per share, our common stock may be considered a low-priced stock pursuant to rules promulgated under the Exchange Act, if it trades below a price of $5.00 per share. Under theserules, broker-dealers participating in transactions in low-priced securities must first deliver a risk disclosure document whichdescribes the risks associated with such stock, the broker-dealer’s duties, the client’s rights and remedies, and certain marketand other information, and make a suitability determination approving the client for low-priced stock11 Table of Contentstransactions based on the client’s financial situation, investment experience and objectives. Broker-dealers must alsodisclose these restrictions in writing and provide monthly account statements to the client, and obtain specific writtenconsent of the client. With these restrictions, the likely effect of designation as a low-price stock would be to decrease thewillingness of broker-dealers to make a market for our common stock, to decrease the liquidity of the stock, and to increasethe transaction costs of sales and purchases of such stocks compared to other securities. As of July 6, 2017, our common stockwas quoted at a closing sales price of $3.75 per share and we cannot guarantee that our common stock will trade at a pricegreater than $5.00 per share. We do not expect to pay cash dividends on our common stock for the foreseeable future, and, therefore, onlyappreciation of the price of our common stock may provide a return to shareholders.While there are currently no restrictions prohibiting us from paying dividends to our shareholders, our board ofdirectors, after consideration of economic and market conditions affecting the energy industry in general, and the oilfieldservices business in particular, determined that we would not pay a dividend in respect of our common stock for theforeseeable future. Payment of any dividends in the future will be at the discretion of our board and will depend on ourfinancial 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 acquireus in the future or may adversely impact your ability to obtain a premium in connection with a future change of controltransaction.Our amended and restated certificate of formation contains provisions that require the approval of holders of 80% ofour issued and outstanding shares before we may merge or consolidate with or into another corporation or entity or sell all, orsubstantially all, of our assets to another corporation or entity. Additionally, if we increase the size of our board from thecurrent eight directors to nine directors, we could, by resolution of the board of directors, stagger the directors’ terms, and ourdirectors could not be removed without approval of holders of 80% of our issued and outstanding shares. These provisionscould 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 deemsto be in our best interest. The terms of such preferred stock may adversely impact the dividend and liquidation rights of ourcommon shareholders without the approval of our common shareholders.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 activitiesare often conducted in remote areas under dangerous conditions, including the detonation of dynamite. These operations aresubject to risk of injury to personnel and damage to equipment. Our crews are mobile, and equipment and personnel aresubject to vehicular accidents. These risks could cause us to experience equipment losses, injuries to our personnel, andinterruptions in our business.In addition, we could be subject to personal injury or real property damage claims in the normal operation of ourbusiness. Such claims may not be covered under the indemnification provisions contained in our general service agreementsto the extent that the damage is due to our negligence or intentional misconduct.Our general service agreements require us to have specific amounts of insurance. However, we do not carry insuranceagainst certain risks that could cause losses, including business interruption resulting from equipment maintenance orweather delays. Further, there can be no assurance, however, that any insurance obtained by us will be adequate to cover alllosses or liabilities or that this insurance will continue to be available or available on terms which are acceptable to us.Liabilities for which we are not insured, or which exceed the policy limits of our applicable insurance, could have amaterially adverse effect on 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 ofsubcontractors to perform services and provide products. While we obtain contractual indemnification and insurancecovering the acts of these subcontractors and require the subcontractors to obtain insurance for our benefit, we could be12 Table of Contentsheld liable for the actions of these subcontractors. In addition, subcontractors may cause injury to our personnel or damage toour 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 (anon‑cash item) and maintenance expenses associated with seismic data acquisition and equipment and crew costs. Inaddition, ongoing maintenance capital expenditures, as well as new equipment investment, can be significant. As a result,any extended periods of significant downtime or low productivity caused by reduced demand, weather interruptions,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 mayinterrupt our business.Our business is subject to the general risks inherent in land‑based seismic data acquisition activities. Our activitiesare often conducted in remote areas under extreme weather and other dangerous conditions, including the use of dynamite asan energy source. These operations are subject to risk of injury to our personnel and third parties and damage to ourequipment and improvements in the areas in which we operate. In addition, our crews often operate in areas where the risk ofwildfires is present and may be increased by our activities. Since our crews are mobile, equipment and personnel are subjectto vehicular accidents. We use diesel fuel which is classified by the U.S. Department of Transportation as a hazardousmaterial. These risks could cause us to experience equipment losses, injuries to our personnel and interruptions in ourbusiness. Delays due to operational disruptions such as equipment losses, personnel injuries and business interruptions couldadversely 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 seismicinformation, electronic data processing and accounting data. If any of such programs or systems were to fail or createerroneous information in our hardware or software network infrastructure, or if we were subject to cyberspace breaches orattacks, possible consequences include our loss of communication links, loss of seismic data and inability to automaticallyprocess commercial transactions or engage in similar automated or computerized business activities. Any such consequencecould 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 sensitiveinformation or to render data or systems unusable, threats to the safety of our employees, threats to the security of ourfacilities and infrastructure, and threats from terrorist acts. Cyber‑security attacks in particular are evolving and include, butare not limited to, malicious software, attempts to gain unauthorized access to data and other electronic security breaches thatcould lead to disruptions in critical systems, unauthorized release of confidential or otherwise protected information andcorruption of data. Although we utilize various procedures and controls to monitor and protect against these threats and tomitigate our exposure to such threats, there can be no assurance that these procedures and controls will be sufficient inpreventing security threats from materializing. If any of these events were to materialize, they could lead to losses of sensitiveinformation, critical infrastructure, personnel or capabilities essential to our operations and could have a material adverseeffect 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, provincial and local laws and regulations, including laws andregulations relating to the protection of the environment and archeological sites and those that may result from climatechange legislation. Canadian operations have been historically cyclical due to governmental restrictions on seismicacquisition during certain periods. As a result, there is a risk that there will be a significant amount of unused equipmentduring those periods. We are required to expend financial and managerial resources to comply with such laws and relatedpermit requirements in our operations, and we anticipate that we will continue to be required to do so in the future. Althoughsuch expenditures historically have not been material to us, the fact that such laws or regulations change frequently makes itimpossible for us to predict the cost or impact of such laws and regulations on our future operations. The adoption of lawsand regulations that have the effect of reducing or curtailing exploration and development activities by energy companiescould also adversely affect our operations by reducing the demand for our services.13 Table of ContentsCurrent and future legislation or regulation relating to climate change or hydraulic fracturing could negatively affectthe exploration and production of oil 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 and methane), may be contributing to global climate change, legislative and regulatorymeasures to address the concerns are in various phases of discussion or implementation at the national and state levels. Atleast one‑half of the states, either individually or through multi‑state regional initiatives, have already taken legal measuresintended to reduce GHG emissions, primarily through the planned development of GHG emission inventories and/or GHGcap and trade programs. Although various climate change legislative measures have been under consideration by the U.S.Congress, it is not possible at this time to predict whether or when Congress may act on climate change legislation. The U.S.Environmental Protection Agency (the “EPA”) has promulgated a series of rulemakings and taken other actions that the EPAstates 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, includingextensive GHG monitoring and reporting requirements. While this rule does not control GHG emission levels from anyfacilities, it will cause covered facilities to incur monitoring and reporting costs. Moreover, lawsuits have been filed seekingto 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 alleged global warming may result in new environmental laws or regulationsthat may negatively affect us, our suppliers and our clients. This could cause us to incur additional direct costs in complyingwith any new environmental regulations, as well as increased indirect costs resulting from our clients, suppliers or bothincurring additional compliance costs that get passed on to us. Moreover, passage of climate change legislation or otherfederal or state legislative or regulatory initiatives that regulate or restrict emissions of GHG may curtail production anddemand for fossil fuels such as oil and gas in areas where our clients operate and, thus, adversely affect future demand for ourservices. Reductions in our revenues or increases in our expenses as a result of climate control initiatives could have adverseeffects on our business, financial position, results of operations and cash flows.Hydraulic fracturing is an important and commonly used process in the completion of oil and gas wells. Hydraulicfracturing involves the injection of water, sand and chemical additives under pressure into rock formations to stimulate gasproduction. Due to public concerns raised regarding potential impacts of hydraulic fracturing on groundwater quality,legislative and regulatory efforts at the federal level and in some states have been initiated to require or make more stringentthe permitting and compliance requirements for hydraulic fracturing operations. At the federal level, a bill was introduced inCongress in March 2011 entitled the “Fracturing Responsibility and Awareness of Chemicals Act,” or the “FRAC Act,” thatwould amend the federal Safe Drinking Water Act, or the “SDWA,” to repeal an exemption from regulation for hydraulicfracturing. The FRAC Act was re-introduced in Congress in June 2013, however, Congress has not taken any significantaction on such legislation. If the FRAC Act or similar legislation were enacted, the definition of “underground injection” inthe SDWA would be amended to encompass hydraulic fracturing activities. Such a provision could require hydraulicfracturing operations to meet permitting and financial assurance requirements, adhere to certain construction specifications,fulfill monitoring, reporting, and recordkeeping obligations, and meet plugging and abandonment requirements. The FRACAct also proposes to require the reporting and public disclosure of chemicals used in the fracturing process, which couldmake it easier for third parties opposing the hydraulic fracturing process to initiate legal proceedings based on allegationsthat specific chemicals used in the fracturing process could adversely affect groundwater. In early 2010, the EPA indicated ina 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’swebsite posting as improper rulemaking, the Agency’s position, if upheld, could require additional permitting. In addition, inMarch 2010, the EPA commenced a study of the potential adverse effects that hydraulic fracturing may have on water qualityand public health, and a committee of the U.S. House of Representatives has commenced its own investigation into hydraulicfracturing practices. The EPA issued a final report in December 2016, concluding that hydraulic fracturing activities have thepotential to impact drinking water resources, particularly when involving water withdrawals, spills, fracturing into wells withinadequate mechanical integrity, fracturing directly into such resources, underground migration of liquids and gases, andinadequate treatment, disposal, storage and discharge of wastewater. The final report also listed the data gaps anduncertainties that limited the EPA’s ability to fully assess the potential impacts of hydraulic fracturing on drinking waterresources.These legislative and regulatory initiatives imposing additional reporting obligations on, or otherwise limiting, thehydraulic fracturing process could make it more difficult or costly to complete natural gas wells. Shale gas cannot be14 Table of Contentseconomically produced without extensive fracturing. In the event such legislation is enacted, demand for our seismicacquisition services may be adversely affected.We are subject to the requirements of Section 404 of the Sarbanes‑Oxley Act. If we are unable to maintain compliancewith Section 404, or if the costs related to maintaining compliance are significant, our profitability, stock price, results ofoperations and financial condition could be materially adversely affected.If we are unable to maintain adequate internal controls in accordance with Section 404, as such standards areamended, supplemented, or modified from time to time, we may not be able to ensure that we have effective internal controlsover financial reporting on an ongoing basis in accordance with Section 404. Failure to achieve and maintain effectiveinternal controls could have a material adverse effect on our stock price. In addition, a material weakness in the effectivenessof 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 couldnegatively impact our business, profitability and financial condition. Item 1B. UNRESOLVED STAFF COMMENTSNone. Item 2. PROPERTIESOur headquarters are located in a 34,570 square foot leased property in Midland, Texas. We have two properties inMidland that we own, including a 61,402 square foot property we use as a field office, equipment and fabrication facility,and maintenance and repair shop, along with a 6,600 square foot property that we use as an inventory field office and storagefacility.We also have additional offices in three other cities in Texas: Denison, Houston and Plano. Our Denison warehousefacility consists of one 5,000 square foot building, two 10,000 square foot adjacent buildings and an outdoor storage area ofapproximately 60,500 square feet. Our Houston sales office is in a 10,041 square foot facility. Our office in Plano, Texasconsists of 7,797 square feet of office space.We lease a 3,443 square foot facility in Denver, Colorado as a sales office. We also lease a 7,480 square foot facilityin Oklahoma City, Oklahoma as a sales office.We lease 15,020 square feet of office, warehouse and shop space located in Calgary, Alberta.We believe that our existing facilities are being appropriately utilized in line with past experience and are wellmaintained, suitable for their intended use and adequate to meet our current and future operating requirements. Item 3. LEGAL PROCEEDINGSFrom time to time, we are a party to various legal proceedings arising in the ordinary course of business. Althoughwe cannot predict the outcomes of any such legal proceedings, our management believes that the resolution of pending legalactions will not have a material adverse effect on our financial condition, results of operations or liquidity.For a discussion of certain contingencies affecting the Company, please refer to Note 16, “Commitments andContingencies,” to the Consolidated Financial Statements incorporated by reference herein. Item 4. MINE SAFETY DISCLOSURESNot applicable.15 Table of Contents Part II Item 5. MARKET FOR OUR COMMON EQUITY AND RELATED STOCKHOLDER MATTERSOur common stock trades on the NASDAQ under the symbol “DWSN.” The table below represents the high and lowsales prices per share for the periods shown.Three Months Ended High Low March 31, 2016 $4.85 $2.90 June 30, 2016 $8.42 $4.00 September 30, 2016 $8.87 $6.28 December 31, 2016 $9.00 $6.27 March 31, 2017 $8.55 $5.29 June 30, 2017 $5.61 $3.77 September 30, 2017 $4.70 $3.70 December 31, 2017 $5.66 $4.29 As of March 5, 2018, the market price for our common stock was $6.25 per share, and we had 109 commonstockholders of record, as reported by our transfer agent.We did not pay any dividends to shareholders in 2017 or 2016. While there are currently no restrictions prohibitingus from paying dividends to our shareholders, our board of directors, after consideration of economic and market conditionsaffecting 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 thediscretion of our board and will depend on our financial condition, results of operations, capital and legal requirements, andother factors deemed relevant by the board.The following table summarizes certain information regarding securities authorized for issuance under our equitycompensation plans as of December 31, 2017. See information and definitions regarding material features of the plans inNote 8, “Stock‑Based Compensation,” to the Consolidated Financial Statements incorporated by reference herein.16 Table of ContentsEquity Compensation Plan Information Number of Securities to be Number of Securities Issued Upon Remaining Available Exercise or Weighted Average for Future Issuance Vesting of Exercise Price Under the Equity Outstanding of Outstanding Compensation Plan Options, Options, (Excluding Securities Warrants and Warrants and Reflected in Plan Category Rights Rights Column (a)) (a) Legacy Dawson Plan Equity compensation plan approved by security holders 305,460(1) $10.74(2) — Equity compensation plans not approved by securityholders — — — Legacy TGC Plan Equity compensation plan approved by security holders 177,163 $13.61 — Equity compensation plans not approved by securityholders — — — 2016 Plan Equity compensation plan approved by security holders 222,000 $ —(3)684,416 Equity compensation plans not approved by securityholders — — — Total 704,623 $12.37(2) 684,416 (1)Number of securities to be issued upon the exercise of outstanding options, warrants and rights include 133,760options that have vested but have not yet been exercised and 171,700 restricted stock unit awards that have not yetvested. (2)Excludes unvested restricted stock unit awards, for which there is no exercise price. (3)Restricted stock unit awards have no exercise price. PERFORMANCE GRAPHThe following graph matches Dawson Geophysical Company’s cumulative five year total shareholder return oncommon stock with the cumulative total returns of the S&P 500 index and the PHLX Oil Service Sector index. The graphtracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends)from December 31, 2012 to December 31, 2017.The stock prices used in the computation of the graph below reflect those of Legacy TGC from December 31, 2012to December 31, 2014 multiplied by three to account for the 1‑for‑3 reverse stock split undertaken by Legacy TGC inconnection with the Merger. The stock price at December 31, 2015, 2016, and 2017 reflects that of the combined Companyfollowing the Merger, as reported on NASDAQ under the symbol “DWSN”.17 Table of ContentsCOMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*Among Dawson Geophysical Company, the S&P 500 Indexand the PHLX Oil Service Sector Index*$100 invested on December 31, 2012 in stock or index, including reinvestment of dividends.Year ended December 31. 12/12 12/13 12/14 12/15 12/16 12/17 Dawson Geophysical Company 100.00 98.27 29.08 15.53 36.08 22.30 S&P 500 100.00 129.60 144.36 143.31 156.98 187.47 PHLX Oil Service Sector 100.00 127.64 95.78 71.64 83.48 67.93 The stock price performance included in this graph is not necessarily indicative of future stock price performance.18 Table of Contents Item 6. SELECTED FINANCIAL DATAThe following selected financial data should be read in conjunction with Item 7, “Management’s Discussion andAnalysis of Financial Condition and Results of Operations,” and the Company’s consolidated financial statements andrelated notes included in Item 8, “Financial Statements and Supplementary Data.” Three MonthsEnded Year Ended December 31, December 31, Year Ended September30, 2017 2016 2015 2014 2014 2013 (amounts in thousands, except per share amounts) Operating revenues$157,148 $133,330 $234,685 $50,802 $261,683 $305,299 Net (loss) income (1)$(31,266) $(39,792) $(26,279) $(4,991) $(12,620) $10,480 Basic (loss) income per shareattributable to common stock (2)$(1.44) $(1.84) $(1.27) $(0.36) $(0.90) $0.75 Cash dividends declared per shareof common stock (3) (4)$ — $ — $— $0.05 $0.14 $— Weighted average equivalentcommon shares outstanding (5) 21,695 21,612 20,688 14,020 14,009 13,868 Total assets$165,238 $187,666 $247,787 $244,022 $256,662 $289,027 Revolving line of credit$ — $ — $— $— $— $— Current maturities of notes payableand obligations under capitalleases$2,712 $2,357 $8,585 $6,018 $6,752 $9,258 Notes payable and obligationsunder capital leases, net of currentmaturities$5,153 $ — $2,106 $4,209 $4,933 $3,697 Stockholders’ equity$141,252 $170,884 $209,718 $194,218 $199,530 $213,060 (1)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)Earnings per share for the three months ended December 31, 2014 and for the years ended September 30, 2014, and2013 have been adjusted for the effect of the Merger by dividing the previously reported earnings per share by theMerger conversion factor of 1.76. (3)Calculated based on dividends declared in period regardless of period paid. (4)Dividends per share for the three months ended December 31, 2014 and for the year ended September 30, 2014 havebeen adjusted for the effect of the Merger by dividing the previously reported dividends per share by the Mergerconversion factor of 1.76. (5)Weighted average shares for the three months ended December 31, 2014 and for the years ended September 30,2014 and 2013 have been adjusted for the effect of the Merger by multiplying the previously reported weightedaverage shares by the Merger conversion factor of 1.76.19 Table of Contents Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONSThe following discussion and analysis should be read in conjunction with our financial statements and relatednotes thereto included elsewhere in this Form 10‑K. Portions of this document that are not statements of historical orcurrent fact are forward‑looking statements that involve risk and uncertainties, such as statements of our plans, businessstrategy, objectives, expectations and intentions. This discussion contains forward‑looking statements that involve risks anduncertainties. Please see “Business,” “Disclosure Regarding Forward‑Looking Statements” and “Risk Factors” elsewherein this Form 10‑K.On February 11, 2015, Legacy TGC completed the Merger with Legacy Dawson pursuant to which a wholly‑ownedsubsidiary of Legacy TGC merged with and into Legacy Dawson, with Legacy Dawson continuing after the Merger as thesurviving entity and a wholly‑owned subsidiary of Legacy TGC. The common stock of the merged company is listed onNASDAQ under the symbol “DWSN.” Under the Merger agreement, at the effective time of the Merger, each issued andoutstanding share of Legacy Dawson’s common stock, par value $0.33 1/3 per share, including shares underlying LegacyDawson’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 LegacyTGC Common Stock which occurred immediately prior to the Merger.The Merger is accounted for as a reverse acquisition under which Legacy Dawson is considered the accountingacquirer of Legacy TGC. As such, the financial statements of Legacy Dawson are treated as the historical financial statementsof the merged company. Except as otherwise specifically provided, this discussion and analysis relates to the business andoperations of Legacy Dawson and its consolidated subsidiaries for the periods prior to the closing of the Merger and on aconsolidated 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 elsewherein this Form 10‑K. Unless the context requires otherwise, all references in this Item 7 to the “Company,” “we,” “us” or “our”refer to (i) Legacy Dawson and its consolidated subsidiaries, for periods through February 10, 2015 and (ii) the mergedcompany for periods on or after February 11, 2015.OverviewWe are a leading provider of North American onshore seismic data acquisition services with operations throughoutthe continental U.S. and Canada. Substantially all of our revenues are derived from the seismic data acquisition services weprovide to our clients, mainly oil and natural gas companies of all sizes. Our clients consist of major oil and gas companies,independent oil and gas operators, and providers of multi-client data libraries. Demand for our services depends upon thelevel of spending by these companies for exploration, production, development and field management activities, whichdepends, in a large part, on oil and natural gas prices. Significant fluctuations in domestic oil and natural gas explorationactivities and commodity prices, as we have recently experienced, have affected, and will continue to affect, demand for ourservices and our results of operations, and such fluctuations continue to be the single most important factor affecting ourbusiness and results of operations. During the fourth quarter of 2017, as anticipated, we experienced a temporary decline in crew utilization primarilydue to project readiness issues. We began the fourth quarter operating seven crews in the U.S. and two in Canada, and endedthe quarter operating six crews in the U.S. and three in Canada. The fourth quarter in the U.S. historically has beenchallenging due to shorter work days and the holiday season. We are currently operating seven crews in the U.S. andanticipate operating up to seven crews into the third quarter of 2018. We anticipate completing two microseismic projects inthe U.S. during the first half of 2018, and operating four crews in Canada through the end of the winter season whichconcludes at the end of the first quarter of 2018. While we continue to experience lower than historical demand, we encountered a moderate increase in demand forour services for the year 2017 when compared to 2016. This resulted in improved productivity and crew utilization, primarilyduring the second half of the year. The recent rise in oil prices, combined with forecasted oil price increases through 2018,has resulted in increased demand for our services and has brought about a return to positive EBITDA. At the same time, theoil and gas industry’s renewed focus on profitability as well as production growth has further driven an increase in requestsfor proposals, as more exploration and production operators seek to lower drilling and completion20 Table of Contentscosts as well as maximize production through the integrated use of seismic data into their development plans. While still welloff the demand levels experienced in 2015, the recent increase in bid activity is encouraging. The majority of our crews are currently working in oil producing basins, however, we anticipate increased seismicdata acquisition activity in basins outside of the Permian and Delaware basins as commodity prices improve and those basinsbecome more economic. While our revenues are mainly affected by the level of client demand for our services, our revenuesare also affected by the pricing for our services that we negotiate with our clients and the productivity and utilization level ofour data acquisition crews. Factors impacting productivity and utilization levels include client demand, commodity prices,whether we enter into turnkey or dayrate contracts with our clients, the number and size of crews, the number of recordingchannels per crew, crew downtime related to inclement weather, delays in acquiring land access permits, agricultural orhunting activity, holiday schedules, short winter days, crew repositioning and equipment failure. To the extent weexperience these factors, our operating results may be affected from quarter to quarter. Consequently, our efforts to negotiatemore favorable contract terms in our supplemental service agreements, mitigate permit access delays and improve overallcrew productivity may contribute to growth in our revenues. In response to the lower than historical demand for our services, we have continued our cost reduction measures. Ourefforts include the sale of our dynamite energy source drilling operation during March 2017. This operation, acquired as partof our February 2015 Merger with TGC Industries, was sold to a long-term service provider and resulted in a gain ofapproximately $1.45 million. We also decreased costs through operational restructuring and a reduction in the levels of ourin-house supplemental services. We continue an evaluation of all in-house service levels in order to reduce our costs. Due tothe additional crews in the field during the fourth quarter, our employee count increased to 851 as of December 31, 2017. Most of our client contracts are turnkey contracts. The percentage of revenues derived from turnkey contractsrepresented approximately three-quarters of our revenues in 2017 and 2016. While turnkey contracts allow us to capitalizeon improved crew productivity, we also bear more risks related to weather and crew downtime. We expect the percentage ofturnkey contracts to remain high as we continue our operations in the mid-continent, western and southwestern regions of theU.S. in which turnkey contracts are more common. Over time, we have experienced continued increases in recording channel capacity on a per-crew or project basisand high utilization of cable-less and multicomponent equipment. This increase in channel count demand is driven by clientneeds and is necessary in order to produce higher resolution images, increase crew efficiencies and undertake larger scaleprojects. In response to project-based channel requirements, we routinely deploy a variable number of channels on a variablenumber of crews in an effort to maximize asset utilization and meet client needs. Reimbursable third-party charges related to our use of helicopter support services, permit support services,specialized survey technologies and dynamite energy sources in areas with limited access are other important factorsaffecting our results. Revenues associated with third-party charges as a percentage of revenues were generally below ourhistorical range during 2017. We expect that as we continue our operations in the more open terrain of the mid-continent,western and southwestern regions of the U.S., the level of these third-party charges will continue to be generally below ourhistorical range of 25% to 35% of 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 to future levels of domestic exploration or commodity prices, we believe opportunitiesexist for us to enhance our market position by responding to our clients’ continuing desire for higher resolution subsurfaceimages. If economic conditions continue to weaken such that our clients continue to reduce their capital expenditures or ifthe sustained drop in oil and natural gas prices worsens, it could continue to result in diminished demand for our seismicservices, could cause downward pressure on the prices we charge and would affect our results of operations. Items Affecting Comparability of Our Financial ResultsAs discussed above, the Merger was accounted for as a reverse acquisition under which Legacy Dawson wasconsidered the accounting acquirer of Legacy TGC. As such, the historical financial statements of Legacy Dawson are treatedas the historical financial statements of the combined company. Due to the foregoing, our financial results for the threemonths ended December 31, 2014 and the years ended September 30, 2014 and 2013 are not directly comparable to ourfinancial results for the years ended December 31, 2017, 2016 and 2015. This is a result of the combination of the21 Table of Contentsassets and liabilities and results of operations of two previously separate companies. The financial results for the year endedDecember 31, 2015 presented in this Form 10-K reflect the operations of Legacy Dawson for the period January 1 throughFebruary 10, 2015 and the operations of the combined company for the period February 11 through December 31, 2015.Results of OperationsYear Ended December 31, 2017 versus Year Ended December 31, 2016Operating Revenues. Operating revenues for the year ended December 31, 2017 were $157,148,000 as compared to$133,330,000 for the same period of 2016. The increase was primarily due to an increase in utilization rates in 2017 asdemand for our services showed moderate improvement over 2016. We also had an increase in reimbursable revenue due tothe increased number of acquisition projects. We experienced revenue increases in both the U.S. and Canadian markets in2017. Although we saw increases in our revenue, we did experience a number of project readiness issues and client-directeddelays throughout 2017. Severe weather conditions in several areas of operations during the first and second quarters of 2017led to short term project delays with our crew count dropping to as low as two in April of 2017.Operating Expenses. Operating expenses for the year ended December 31, 2017 increased to $139,164,000 ascompared to $121,661,000 for the same period of 2016. The increase in operating expenses and reimbursed third–partycharges was primarily a result of an increase in utilization rates as discussed in operating revenues above and higherreimbursable expenses corresponding to the increased number of acquisition projects.General and administrative expenses. General and administrative expenses were 10.3% of revenues in the yearended December 31, 2017 compared to 12.6% of revenues in the same period of 2016. General and administrative expensesdecreased to $16,189,000 during the year ended December 31, 2017 from $16,822,000 during the same period of 2016. Theprimary factor for the decrease in general and administrative expenses was on-going cost reduction efforts to reduceadministrative costs to support our operations.Depreciation expense. Depreciation for the year ended December 31, 2017 totaled $39,235,000 compared to$44,283,000 for the same period of 2016. The decrease in depreciation expense is a result of limiting capital expenditures tonecessary maintenance capital requirements in recent years. Our depreciation expense is expected to remain flat during 2018primarily due to limited capital expenditures to maintain our existing asset base.Our total operating costs for the year ended December 31, 2017 were $194,588,000, representing a 6.5% increasefrom the corresponding period of 2016. This change was primarily due to the factors described above.Income Taxes. Income tax benefit was $5,314,000 for the year ended December 31, 2017 as compared to $6,449,000for the same period of 2016. The effective tax benefit rates for the years ended December 31, 2017 and 2016 wereapproximately 14.5% and 13.9%, respectively. Our effective tax rates increased as compared to the corresponding periodfrom the prior year primarily due to the filing and processing of federal and state tax returns and the associated refundsreceived. Our effective tax rates differ from the statutory federal rate of 35% for certain items such as state and local taxes,valuation allowances, non‑deductible expenses and discrete items.Year Ended December 31, 2016 versus Year Ended December 31, 2015Operating Revenues. Operating revenues for the year ended December 31, 2016 were $133,330,000 as compared to$234,685,000 for the same period of 2015. The decrease was primarily due to the significant reduction in utilization rates in2016 as demand for our services decreased as a result of decreased and uncertain commodity prices and reduced clientexpenditures. Severe weather conditions in several areas of operations during the first and second quarters also led to shortterm project delays. Client directed delays affected utilization of two to three crews during the third and fourth quarters.Reimbursed third‑party charges decreased consistently with the overall drop in revenues during the year ended December 31,2016.Operating Expenses. Operating expenses for the year ended December 31, 2016 decreased to $121,661,000 ascompared to $205,566,000 for the same period of 2015. The decrease in operating expenses and reimbursed third–partycharges was primarily a result of the significant reduction in utilization rates discussed in operating revenues above.22 Table of ContentsGeneral and administrative expenses. General and administrative expenses were 12.6% of revenues in the yearended December 31, 2016 compared to 9.7% of revenues in the same period of 2015. General and administrative expensesdecreased to $16,822,000 during the year ended December 31, 2016 from $22,729,000 during the same period of 2015. Theprimary factors for the decrease in general and administrative expense were transaction costs of approximately $3,314,000related to the Merger in 2015 and reduced administrative costs to support our operations.Depreciation expense. Depreciation for the year ended December 31, 2016 totaled $44,283,000 compared to$47,072,000 for the same period of 2015. The decrease in depreciation expense is a result of limiting capital expenditures tonecessary maintenance capital requirements in recent years.Our total operating costs for the year ended December 31, 2016 were $182,766,000, representing a 33.6% decreasefrom the corresponding period of 2015. This change was primarily due to the factors described above.Income Taxes. Income tax benefit was $6,449,000 for the year ended December 31, 2016 as compared to$13,755,000 for the same period of 2015. The effective tax benefit rates for the years ended December 31, 2016 and 2015were approximately 13.9% and 34.4%, respectively. Our effective tax rates decreased as compared to the correspondingperiod from the prior year primarily due to the recording of a valuation allowance during the year against our federal netoperating loss deferred tax asset and an increase in our valuation allowance against our state net operating loss deferred taxassets. Our effective tax rates differ from the statutory federal rate of 35% for certain items such as state and local taxes,valuation allowances, non‑deductible expenses and discrete items. Use of EBITDA (Non‑GAAP measure)We define EBITDA as net income (loss) plus interest expense, interest income, income taxes, and depreciation andamortization expense. Our management uses EBITDA as a supplemental financial measure to assess: ·the financial performance of our assets without regard to financing methods, capital structures, taxes orhistorical cost basis; ·our liquidity and operating performance over time in relation to other companies that own similar assets andthat we believe calculate EBITDA in 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 notdefined under generally accepted accounting 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 orliquidity, investors and others should not consider this data in isolation or as a substitute for net income (loss), cash flowfrom operating activities or other cash flow data calculated in accordance with GAAP. In addition, our EBITDA may not becomparable to EBITDA or similarly titled measures utilized by other companies since such other companies may notcalculate EBITDA in the same manner as us. Further, the results presented by EBITDA cannot be achieved without incurringthe costs that the measure excludes: interest, taxes, and depreciation and amortization.The reconciliation of our EBITDA to our net loss and net cash (used in) provided by operating activities, which arethe most directly comparable GAAP financial measures, are provided in the following tables (in thousands): Year Ended December 31, 2017 2016 2015 Net loss $(31,266) $(39,792) $(26,279) Depreciation and amortization 39,235 44,283 47,072 Interest (income) expense, net (148) (87) 450 Income tax benefit (5,314) (6,449) (13,755) EBITDA $2,507 $(2,045) $7,488 23 Table of Contents Year Ended December 31, 2017 2016 2015 Net cash (used in) provided by operating activities $(6,703) $8,742 $20,612 Changes in working capital and other items 10,186 (9,908) (11,968) Noncash adjustments to net loss (976) (879) (1,156) EBITDA $2,507 $(2,045) $7,488 Liquidity and Capital ResourcesIntroduction. Our principal sources of cash are amounts earned from the seismic data acquisition services weprovide to our clients. Our principal uses of cash are the amounts used to provide these services, including expenses relatedto our operations and acquiring new equipment. Accordingly, our cash position depends (as do our revenues) on the level ofdemand for our services. Historically, cash generated from our operations along with cash reserves and borrowings fromcommercial banks have been sufficient to fund our working capital requirements and, to some extent, our capitalexpenditures.Cash Flows. The following table shows our sources and uses of cash (in thousands) for the years ended December31, 2017, 2016 and 2015: Year Ended December 31, 2017 2016 2015 Net cash (used in) provided by: Operating activities $(6,703) $8,742 $20,612 Investing activities 16,788 (22,729) 15,787 Financing activities (3,420) (8,483) (13,606) Effect of exchange rate changes to cash and cash equivalents 724 85 (428) Net change in cash and cash equivalents $7,389 $(22,385) $22,365 Year Ended December 31, 2017 versus Year Ended December 31, 2016Net cash used in operating activities was $6,703,000 for the year ended December 31, 2017 compared to cashprovided by operating activities of $8,742,000 for the same period in 2016. Cash reductions were primarily due to anincrease in our operating level of accounts receivable as of December 31, 2017.Net cash provided by investing activities was $16,788,000 for the year ended December 31, 2017 and includes$23,667,000 of cash reserves that were not reinvested offset by cash capital expenditures of $8,675,000. The increase in cashprovided by investing activities were aided by $1,325,000 of proceeds from disposal of assets and $375,000 of proceeds onflood insurance claims. Net cash used in investing activities was $22,729,000 for the year ended December 31, 2016 andincluded $19,250,000 of cash reserves that were invested and cash capital expenditures of $8,251,000. These increases incash used in investing activities were offset by $1,922,000 of proceeds from disposal of assets and $2,850,000 of proceeds onflood insurance claims. Net cash used in financing activities was $3,420,000 for the year ended December 31, 2017 and includes principalpayments of $2,186,000 on our notes, payments of $1,076,000 under our capital leases, and outflows of $158,000 associatedwith taxes related to stock vesting. Net cash used in financing activities was $8,483,000 for the year ended December 31,2016 and included principal payments of $7,554,000 on our notes, payments of $780,000 under our capital leases, andoutflows of $149,000 associated with taxes related to stock vesting.Year Ended December 31, 2016 versus Year Ended December 31, 2015Net cash provided by operating activities was $8,742,000 and $20,612,000 for the years ended December 31, 2016and 2015, respectively. This decrease primarily reflects our decline in revenues during the year ended December 31, 2016.Cash received from reductions in our overall operating level of accounts receivable to $16,031,000 as of December 31, 2016from $35,700,000 as of December 31, 2015 provided $19,669,000 of operating cash flows for the year ended December 31,2016.24 Table of ContentsNet cash used in investing activities was $22,729,000 for the year ended December 31, 2016 and included$19,250,000 of cash reserves that were invested and cash capital expenditures of $8,251,000. These increases in cash used ininvesting activities were offset by $1,922,000 of proceeds from disposal of assets and $2,850,000 of proceeds on floodinsurance claims. Net cash provided by investing activities was $15,787,000 for the year ended December 31, 2015 andincluded cash of $12,382,000 acquired in the Merger, $7,750,000 of short term investment maturities that were notreinvested, $1,501,000 of proceeds from disposal of assets and $1,000,000 of proceeds on flood insurance claims. Theseincreases in cash provided by investing activities were offset by cash capital expenditures of $6,846,000.Net cash used in financing activities was $8,483,000 for the year ended December 31, 2016 and included principalpayments of $7,554,000 on our notes, payments of $780,000 under our capital leases, and outflows of $149,000 associatedwith taxes related to stock vesting. 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 our notes, payments of $1,535,000 under our capital leases, andoutflows of $867,000 associated with taxes related to stock vesting offset by proceeds of $5,144,000 from our CreditAgreement (as defined below).Capital Expenditures. During 2017, we made capital expenditures of $16,310,000. Our Board of Directorsapproved an increase to our 2017 capital budget during the third quarter, raising it from $10,000,000 to $16,000,000. Thiswas due to an opportunity to acquire seismic data acquisition equipment during that quarter. The Board of Directorsapproved an initial 2018 budget of $10,000,000 for capital expenditures, which is limited primarily to necessarymaintenance capital requirements and incremental recording channel replacement or increase. In recent years, we havefunded some of our capital expenditures through capital leases, cash reserves, and equipment term loans. In the past, we havealso funded our capital expenditures and other financing needs through public equity offerings.We continually strive to supply our clients with technologically advanced 3-D data acquisition recording servicesand data processing capabilities. We maintain equipment in and out of service in anticipation of increased future demand forour services.Capital Resources. Historically, we have primarily relied on cash generated from operations, cash reserves andborrowings from commercial banks to fund our working capital requirements and, to some extent, our capital expenditures.Recently, we have funded some of our capital expenditures through capital leases and equipment term loans. From time totime in the past, we have also funded our capital expenditures and other financing needs through public equity offerings.Indebtedness. On June 30, 2015, we entered into an amendment to our Credit Agreement with our lender SovereignBank, (as amended from time to time, the “Credit Agreement”) for the purpose of renewing, extending and increasing our lineof credit under such agreement. The Credit Agreement was renewed on June 30, 2017. In a merger effective September 11,2017, Sovereign Bank merged with and into Veritex Bank.Credit Agreement. Our Credit Agreement with Veritex Bank (formerly Sovereign Bank) includes term loan andrevolving loan features, and also allows for the issuance of letters of credit and other promissory notes. We can borrow up to amaximum of $20.0 million pursuant to the Credit Agreement, subject to the terms and limitations discussed below.The Credit Agreement provides for a revolving loan feature (the “Line of Credit”) that permits us to borrow, repayand re-borrow, from time to time until June 30, 2018, up to the lesser of (i) $20.0 million or (ii) a sum equal to (a) 80% of oureligible accounts receivable (less the outstanding principal balance of term loans and letters of credit under the CreditAgreement) and (b) the lesser of (i) 50% of the value of certain of our core equipment or (ii) $12,500,000. We have notutilized the Line of Credit since its inception. Because our ability to borrow funds under the Line of Credit is tied to theamount of our eligible accounts receivable and value of certain of our core equipment, if our accounts receivable decreasematerially for any reason, including delays, reductions or cancellations by clients, or decreased demand for our services, orthe value of our pledged core equipment decreases materially, our borrowing ability to fund operations or other obligationsmay be reduced. The Credit Agreement also provides for a term loan feature. We have no outstanding notes payable under the termloan feature of the Credit Agreement, and any notes outstanding under this feature would count toward the maximumamounts we may borrow under the Credit Agreement. We paid off our remaining equipment note payable during the third quarter of 2017. We do not currently have anynotes payable under our Credit Agreement.25 Table of Contents Our obligations under the Line of Credit are secured by a security interest in our accounts receivable and certain ofour core equipment, and the term loans are also secured by certain of our core equipment. Interest on amounts outstandingunder the Credit Agreement accrues at the lesser of 4.5% or the prime rate (as quoted in the Wall Street Journal), subject toan interest rate floor of 2.5%. The Credit Agreement contains customary covenants for credit facilities of this type, includinglimitations on disposition of assets, mergers and other fundamental changes. We are also obligated to meet certain financialcovenants, including (i) a ratio of (x) total liabilities minus subordinated debt to (y) tangible net worth plus subordinateddebt not to exceed 1.00:1.00, (ii) a ratio of current assets to current liabilities of at least 1.50:1.00 and (iii) required tangiblenet worth of not less than $125,000,000. We were in compliance with all covenants under the Credit Agreement, includingspecified ratios, as of December 31, 2017. Veritex Bank has issued three letters of credit as of December 31, 2017. The first letter of credit is in the amount of$1,767,000 to support payment of our insurance obligations. The principal amount of this letter of credit is collateralized bycertain of our core equipment. The second letter of credit is in the amount of $583,000 to support our workers’ compensationinsurance and is secured by a certificate of deposit. The third letter of credit is unsecured and in the amount of $75,000, tosupport certain of our performance obligations. None of the letters of credit count as funds borrowed under our Line of Credit.Other Indebtedness. We paid in full, during November 2017, one note payable to a finance company for variousinsurance premiums. In addition, we lease certain seismic recording equipment and vehicles under leases classified as capital leases. OurConsolidated Balance Sheets as of December 31, 2017 include capital lease obligations of $7,865,000. Contractual Obligations. We believe that our capital resources, including our short‑term investments, cash flowfrom operations, and funds available under our Line of Credit, will be adequate to meet our current operational needs. Webelieve that we will be able to finance our 2018 capital expenditures through cash flow from operations, borrowings fromcommercial lenders, and the funds available under our Line of Credit. However, our ability to satisfy working capitalrequirements, meet debt repayment obligations, and fund future capital requirements will depend principally upon our futureoperating performance, which is subject to the risks inherent in our business, and will also depend on the extent to which thecurrent economic climate adversely affects the ability of our customers, and/or potential customers, to promptly pay amountsowing to us under their service contracts with us.The following table summarizes payments due in specific periods related to our contractual obligations with initialterms exceeding one year as of December 31, 2017 (in thousands): Payments Due by Period Within After Contractual Obligations Total 1 Year 2-3 Years 4-5 Years 5 Years Operating lease obligations (office space) $10,386 $1,588 $2,704 $2,176 $3,918 Capital lease obligations 7,865 2,713 5,132 20 — Total $18,251 $4,301 $7,836 $2,196 $3,918 Off‑Balance Sheet ArrangementsAs of December 31, 2017, we had no off‑balance sheet arrangements under current GAAP. However, we do haveoperating leases discussed above in the “Liquidity and Capital Resources: Contractual Obligations” section and below in the“Recently Issued Accounting Pronouncements” section.Critical Accounting PoliciesThe preparation of our financial statements in conformity with GAAP requires that certain assumptions andestimates be made that affect the reported amounts of assets and liabilities at the date of our financial statements and thereported amounts of revenues and expenses during the reporting periods. Because of the use of assumptions and estimatesinherent in the reporting process, actual results could differ from those estimates.Allowance for Doubtful Accounts. We prepare our allowance for doubtful accounts receivable based on our reviewof past‑due accounts, our past experience of historical write‑offs and our current client base. While the collectability26 Table of Contentsof outstanding client invoices is continually assessed, the inherent volatility of the energy industry’s business cycle cancause 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 occursuggesting deterioration in the assets’ recoverability or fair value. Recognition of an impairment charge is required if futureexpected undiscounted net cash flows are insufficient to recover the carrying value of the assets, and the fair value of theassets is below the carrying value of the assets. Our forecast of future cash flows used to perform impairment analysis includesestimates 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 theestimated expected undiscounted future cash flows, we measure the amount of possible impairment by comparing thecarrying amount of the asset to its fair value. No impairment charges were recognized for the years ended December 31, 2017,2016 and 2015.Leases. We lease certain vehicles and seismic recording equipment under lease agreements. We evaluate each leaseto determine its appropriate classification as an operating or capital lease for financial reporting purposes. Any lease thatdoes not meet the criteria for a capital lease is accounted for as an operating lease. The assets and liabilities under capitalleases are recorded at the lower of the present value of the minimum lease payments or the fair market value of the relatedassets. Assets under capital leases are amortized using the straight‑line method over the initial lease term. Amortization ofassets under capital leases is included in depreciation expense.Revenue Recognition. Our services are provided under cancelable service contracts. These contracts are either“turnkey” or “term” agreements. Under both types of agreements, we recognize revenues when revenue is realizable andservices 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 isrecognized on a per-unit-of-data-acquired rate, as services are performed. Under term agreements, revenue is recognized on aper-unit-of-time-worked rate, as services are performed. In the case of a cancelled service contract, we recognize revenue andbill 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. Werecord amounts billed to clients in revenue at the gross amount including out‑of‑pocket expenses that are reimbursed by theclient.In some instances, we bill clients in advance of the services performed. In those cases, we recognize the liability asdeferred revenue. As services 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 intothe per-unit-of-data-acquired rate. In these circumstances, these set‑up costs that occur prior to initiating revenue recognitionare 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 forthe current year and by using an asset and liability approach in recognizing the amount of deferred tax liabilities and assetsfor the future tax consequences of events that have been recognized in our financial statements or tax returns. We determinedeferred taxes by identifying the types and amounts of existing temporary differences, measuring the total deferred tax assetor 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 theyear of an enacted rate change. The deferred tax asset is reduced by a valuation allowance if, based on available evidence, itis more likely than not that some portion or all of the deferred tax assets will not be realized. Our methodology for recordingincome taxes requires judgment regarding assumptions and the use of estimates, including determining our annual effectivetax 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. Due to our recent operating losses and valuationallowances, we may recognize reduced or no tax benefits on future losses on the Consolidated Statements of Operations andComprehensive Loss. Our effective tax rates differ from the statutory federal rate of 35% for certain items such as state andlocal taxes, valuation allowances, non‑deductible expenses and discrete items.27 Table of ContentsRecently Issued Accounting PronouncementsIn February 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update(“ASU”) No. 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain TaxEffects from Accumulated Other Comprehensive Income, which allows a reclassification from accumulated othercomprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act passed by theU.S. federal government in December 2017. This ASU is effective for the annual period beginning after December 15, 2018,and for annual and interim periods thereafter. We do not believe this ASU will have a material impact on our condensedconsolidated financial statements. In May 2017, the FASB issued ASU No. 2017-09, Compensation – Stock Compensation (Topic 718): Scope ofModification Accounting, which provides guidance about which changes to the terms or conditions of a share-basedpayment award require an entity to apply modification accounting. This ASU is effective for the annual period beginningafter December 15, 2017, and for annual and interim periods thereafter. We do not believe this ASU will have a materialimpact on our condensed consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation (Topic 718):Improvements to Employee Share-Based Payment Accounting, which is intended to simplify accounting for share-basedpayments awarded to employees, including income tax consequences, classification of awards as either equity or liabilities,and classification on the statement of cash flows. This ASU was effective for the annual period beginning after December 15,2016, and for annual and interim periods thereafter. We adopted ASU 2016-09 in the first quarter of 2017 and elected toaccount for forfeitures as they occur, rather than estimate expected forfeitures. As a result of adopting this standard, weapplied the modified retrospective approach and recorded a cumulative-effect adjustment within the ConsolidatedStatements of Stockholders’ Equity that had no material impact on our condensed consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which will require organizations thatlease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases.In January 2017, the FASB issued ASU No. 2017-03, Accounting Changes and Error Corrections (Topic 250) andInvestments – Equity Method and Joint Ventures (Topic 323), which stated additional qualitative disclosures should beconsidered to assess the significance of the impact upon adoption. This ASU is effective for the annual period beginning afterDecember 15, 2018, and for annual and interim periods thereafter. Early adoption is permitted. In January 2018, the FASBissued ASU No. 2018-01, Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842, whichprovides an optional transition practical expedient to not evaluate under Topic 842 existing or expired land easements thatwere not previously accounted for as leases under the current lease guidance in Topic 840. We are currently evaluating thenew guidance and practical expedient to determine the impact they will have on our condensed consolidated financialstatements and believe that the most significant change will be to our Condensed Consolidated Balance Sheets as our assetand liability balances will increase for operating leases that are currently off-balance sheet. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which introduces a newfive-step revenue recognition model in which an entity should recognize revenue to depict the transfer of promised goods orservices to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange forthose goods or services. This ASU also requires disclosures sufficient to enable users to understand the nature, amount,timing, and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative andquantitative disclosures about contracts with customers, significant judgments and changes in judgments, and assetsrecognized from the costs to obtain or fulfill a contract. Entities have the option of using either a full retrospective ormodified approach to adopt ASU No. 2014-09. Subsequent amendments to the initial guidance have been issued in March2016, April 2016, May 2016, December 2016, January 2017, and September 2017 within ASU No. 2016-08, ASU No. 2016-10, ASU No. 2016-12, ASU No. 2016-20, ASU No. 2017-03, and ASU No. 2017-13 regarding principal-versus-agent,performance obligations and licensing, assessing collectability, presentation of sales taxes, noncash consideration, andcompleted contracts and contract modifications at transition. These updates do not change the core principle of the guidanceunder ASU No. 2014-09, but rather provide implementation guidance. This new standard must be adopted by us in ourcalendar year beginning January 1, 2018. We have completed our assessment of the new standard and are adopting thestandard using the full retrospective method. For further information regarding the impact of this ASU on our consolidated financial statements see Note 17,“Recently Issued Accounting Pronouncements” to the Consolidated Financial Statements. 28 Table of Contents Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKWe are exposed to certain market risks arising from the use of financial instruments in the ordinary course ofbusiness. These risks arise primarily as a result of potential changes to operating concentration of credit risk and changes ininterest rates. We have not entered into any hedge arrangements, commodity swap agreements, commodity futures, options orother derivative financial instruments. We also conduct business in Canada, which subjects our results of operations and cashflows to foreign currency exchange rate risk.Concentration of Credit Risk. Our principal market risks include fluctuations in commodity prices, which affectdemand for and pricing of our services, and the risk related to the concentration of our clients in the oil and natural gasindustry. Since all of our clients are involved in the oil and natural gas industry, there may be a positive or negative effect onour exposure to credit risk because our clients may be similarly affected by changes in economic and industry conditions. Asan example, changes to existing regulations or the adoption of new regulations may unfavorably impact us, our suppliers orour clients. In the normal course of business, we provide credit terms to our clients. Accordingly, we perform ongoing creditevaluations of our clients and maintain allowances for possible losses. Our historical experience supports our allowance fordoubtful accounts of $250,000 at December 31, 2017. This does not necessarily indicate that it would be adequate to cover apayment default by one large or several smaller clients.We generally provide services to certain key clients that account for a significant percentage of our accountsreceivable at any given time. Our key clients vary over time. We extend credit to various companies in the oil and natural gasindustry, including our key clients, for the acquisition of seismic data, which results in a concentration of credit risk. Thisconcentration of credit risk may be affected by changes in the economic or other conditions of our key clients and mayaccordingly impact our overall credit risk. If any of these significant clients were to terminate their contracts or fail tocontract for our services in the future because they are acquired, alter their exploration or development strategy, or for anyother reason, our results of operations could be affected. Because of the nature of our contracts and clients’ projects, ourlargest clients can change from year to year, and the largest clients in any year may not be indicative of the largest clients inany subsequent year. During the twelve months ended December 31, 2017, our two largest clients accounted forapproximately 27% of revenue. The remaining balance of our revenue derived from varied clients and none represented morethan 10% of revenue.Interest Rate Risk. From time to time, we are exposed to the impact of interest rate changes on the outstandingindebtedness under our Credit Agreement.We generally have cash in the bank which exceeds federally insured limits. Historically, we have not experiencedany losses in such accounts; however, volatility in financial markets may impact our credit risk on cash and short‑terminvestments. At December 31, 2017, cash and cash equivalents totaled $22,013,000.For further information, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results ofOperations,” and “Item 1A. Risk Factors.” Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAThe information required by this item appears on pages F‑1 through F‑24 hereof and are incorporated herein byreference. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIALDISCLOSURENone. Item 9A. CONTROLS AND PROCEDURESManagement’s Evaluation of Disclosure Controls and ProceduresWe carried out an evaluation, under the supervision and with the participation of our management, including ourprincipal executive, financial and accounting officers, of the effectiveness of our disclosure controls and procedures pursuantto Rule 13a‑15(e) and 15d‑15(e) under the Exchange Act as of the end of the period covered by this report. Based29 Table of Contentsupon that evaluation, our President and Chief Executive Officer, and our Executive Vice President, Chief Financial Officer,Secretary, and Treasurer concluded that, as of December 31, 2017, our disclosure controls and procedures were effective, inall material respects, with regard to the recording, processing, summarizing and reporting, within the time periods specified inthe 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 informationrequired to be disclosed in reports filed or submitted under the Exchange Act is accumulated and communicated to ourmanagement, including our President and Chief Executive Officer, and our Executive Vice President, Chief Financial Officer,Secretary, and Treasurer, as appropriate, to allow timely decisions regarding required disclosure.Management’s Report on Internal Control over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting.Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordance with GAAP. Because of its inherentlimitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changesin 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, and Executive Vice President,Chief Financial Officer, Secretary, and Treasurer, we evaluated the effectiveness of our internal controls over financialreporting as of December 31, 2017 using the criteria set forth in Internal Control — Integrated Framework issued by theCommittee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on this evaluation, we haveconcluded that, as of December 31, 2017, our internal control over financial reporting was effective. Our internal control overfinancial reporting as of December 31, 2017 has been audited by RSM US LLP, the independent registered public accountingfirm who also audited our financial statements. Their attestation report appears on page F‑2.Changes in Internal Control over Financial ReportingIn the fourth quarter of 2017, we added and/or modified certain internal controls and processes in preparation ofadopting the new revenue recognition standard in January 2018 under the full retrospective approach. There have not beenany additional changes in our internal control over financial reporting (as defined in Rule 13a‑15(f) and 15d‑15(f) of theExchange Act) during the quarter ended December 31, 2017 that have materially affected or are reasonably likely tomaterially affect our internal control over financial reporting. Item 9B. OTHER INFORMATIONNone.30 Table of Contents Part III Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEThe information required by Item 10 of Form 10‑K is hereby incorporated by reference from the earlier filed of: (i) anamendment to this annual report on Form 10‑K or (ii) the Company’s definitive proxy statement which will be filed pursuantto Regulation 14A within 120 days after the Company’s year-end for the year covered by this report. Item 11. EXECUTIVE COMPENSATIONThe information required by Item 11 of Form 10‑K is hereby incorporated by reference from the earlier filed of: (i) anamendment to this annual report on Form 10‑K or (ii) the Company’s definitive proxy statement which will be filed pursuantto Regulation 14A within 120 days after the Company’s year-end for the year covered by this report. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATEDSTOCKHOLDER MATTERSThe 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 of Form 10‑K is hereby incorporated by reference from the earlier filed of: (i) anamendment to this annual report on Form 10‑K or (ii) the Company’s definitive proxy statement which will be filed pursuantto 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 INDEPENDENCEThe information required by Item 13 of Form 10‑K is hereby incorporated by reference from the earlier filed of: (i) anamendment to this annual report on Form 10‑K or (ii) the Company’s definitive proxy statement which will be filed pursuantto Regulation 14A within 120 days after the Company’s year-end for the year covered by this report. Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICESThe information required by Item 14 of Form 10‑K is hereby incorporated by reference from the earlier filed of: (i) anamendment to this annual report on Form 10‑K or (ii) the Company’s definitive proxy statement, which will be filed pursuantto Regulation 14A within 120 days after the Company’s year-end for the year covered by this report.31 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‑24 and areincorporated by reference into Part II, Item 8:Reports of Independent Registered Public Accounting Firms Consolidated Balance Sheets Consolidated Statements of Operations and Comprehensive Loss Consolidated Statements of Stockholders’ EquityConsolidated Statements of Cash FlowsNotes to the Consolidated Financial Statements (2)Financial Statement Schedules.All schedules are omitted because they are either not applicable or the required information is shown in the financialstatements 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 Reporton Form 10‑K and is hereby incorporated by reference.32 Table of ContentsINDEX TO EXHIBITSEXHIBIT NO. DESCRIPTION2.1 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, datedSeptember 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 to theRegistrant’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, filedas Exhibit 10.1 to the Registrant’s Current Report on Form 8‑K, filed on September 22, 2011, and incorporatedherein by reference. 10.5 Fourth Amendment to Amended and Restated Loan and Security Agreement by and between the Registrant andSovereign 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 Registrant andSovereign 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 Registrant andSovereign 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 Amended andRestated 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, andincorporated herein by reference. 10.9 Eighth 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, 2014, filedas Exhibit 10.1 to the Registrant’s Current Report on Form 8‑K, filed on September 19, 2014, and incorporatedherein by reference. 33 Table of ContentsEXHIBIT NO. DESCRIPTION10.10 Ninth Amendment to Amended and Restated Loan and Security Agreement, filed on July 2, 2015 asExhibit 10.1 to the Registrant’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, filed on March 16, 2016 as Exhibit10.11 to the Registrant’s Annual Report on Form 10-K, and incorporated herein by reference. 10.12 Eleventh Amendment to Amended and Restated Loan and Security Agreement, by and between the Registrantand Sovereign Bank, dated September 30, 2016, filed on October 6, 2016 as Exhibit 10.1 to the Registrant’sCurrent Report on Form 8-K, and incorporated herein by reference. 10.13 Twelfth Amendment to Amended and Restated Loan and Security Agreement, by and between the Registrantand Sovereign Bank, dated November 23, 2016, filed on June 30, 2017 as Exhibit 10.2 to the registrant’sCurrent Report on Form 8-K and incorporated herein by reference. 10.14 Thirteenth Amendment to Amended and Restated Loan and Security Agreement, by and between the Registrantand Sovereign Bank, dated June 30, 2017, filed on June 30, 2017 as Exhibit 10.1 to the Registrant’s CurrentReport on Form 8-K and incorporated herein by reference. +10.15 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. +10.16 The Executive Nonqualified Excess Plan Document, filed as Exhibit 10.2 to the Registrant’s Current Report onForm 8‑K filed on January 8, 2013, and incorporated herein by reference. +10.17 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. +10.18 Employment Agreement, dated October 8, 2014, by and between the Registrant and Stephen C. Jumper, filed asExhibit 10.5 to the Registrant’s Current Report on Form 8‑K, filed on October 9, 2014, and incorporated hereinby reference. +10.19 Employment Agreement, dated October 8, 2014, by and between the Registrant and Wayne A. Whitener, filedas Exhibit 10.2 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 C. Ray Tobias, filed asExhibit 10.6 to the Registrant’s Current Report on Form 8‑K, filed on October 9, 2014, and incorporated hereinby reference. +10.21 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 incorporated hereinby reference. +10.22 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 incorporated hereinby reference. +10.23 Employment Agreement, dated October 8, 2014, by and between the Registrant and James W. Thomas, filed asExhibit 10.8 to the Registrant’s Current Report on Form 8‑K, filed on October 9, 2014, and incorporated hereinby reference. +10.24 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. 34 Table of ContentsEXHIBIT NO. DESCRIPTION+10.25 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. +10.26 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. +10.27 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. +10.28 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. +10.29 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. +10.30 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. +10.31 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/aDawson 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. 10.37 Form of Supplemental Agreement to Master Geophysical Data Acquisition Agreement, filed as Exhibit 10.11 toDawson Operating Company’s (f/k/a Dawson Geophysical Company) Annual Report on Form 10‑K, filed onDecember 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. +10.39 Dawson Geophysical Company 2016 Stock and Performance Incentive Plan, filed on May 5, 2016 as Exhibit10.2 to the Registrant’s Current Report on Form 8-K, and incorporated herein by reference.35 Table of ContentsEXHIBIT NO. DESCRIPTION *21.1 Subsidiaries of the Registrant. *23.1 Consent of RSM US LLP, independent registered public accountants to incorporation of report by reference. *23.2 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 to Section 302of the Sarbanes‑Oxley Act of 2002. *31.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302of the Sarbanes‑Oxley Act of 2002. *32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906of the Sarbanes‑Oxley Act of 2002. *32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906of 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. 36 Table of Contents SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report tobe signed on its behalf by the undersigned, thereunto duly authorized, in the City of Midland, and the State of Texas, on the9 day of March, 2018. DAWSON GEOPHYSICAL COMPANY By:/s/ Stephen C. Jumper Stephen C. Jumper Chairman of the Board of Directors President and Chief Executive Officer Pursuant to the requirements of the Exchange Act, this report has been signed below by the following persons onbehalf of the registrant and in the capacities and on the dates indicated.Signature Title Date /s/ Stephen C. JumperStephen C. Jumper President, Chief Executive Officer andChairman of the Board of Directors(principal executive officer) 03-09-18 /s/ Wayne A. WhitenerWayne A. Whitener Vice Chairman of the Board of Directors 03-09-18 /s/ William J. BarrettWilliam J. Barrett Director 03-09-18 /s/ Craig W. CooperCraig W. Cooper Director 03-09-18 /s/ Gary M. HooverGary M. Hoover Director 03-09-18 /s/ Allen T. McInnesAllen T. McInnes Director 03-09-18 /s/ Ted R. NorthTed R. North Director 03-09-18 /s/ Mark A. Vander PloegMark A. Vander Ploeg Director 03-09-18 /s/ James K. BrataJames K. Brata Executive Vice President, Chief FinancialOfficer, Secretary, and Treasurer(principal financial and accounting officer) 03-09-18 37 thTable of ContentsINDEX TO CONSOLIDATED FINANCIAL STATEMENTSConsolidated Financial Statements of Dawson Geophysical Company PageReports of Independent Registered Public Accounting Firms F‑2Consolidated Balance Sheets as of December 31, 2017 and 2016 F‑5Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2017,2016 and 2015 F‑6Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2017, 2016 and 2015 F‑7Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016 and 2015 F‑8Notes to Consolidated Financial Statements F‑9 F-1 Table of ContentsReport of Independent Registered Public Accounting Firm To the Board of Directors and StockholdersDawson Geophysical Company Opinion on the Internal Control Over Financial Reporting We have audited Dawson Geophysical Company's (the Company) internal control over financial reporting as ofDecember 31, 2017, based on criteria established in Internal Control — Integrated Framework issued by the Committee ofSponsoring Organizations of the Treadway Commission in 2013. In our opinion, the Company maintained, in all materialrespects, effective internal control over financial reporting as of December 31, 2017, based on criteria established in InternalControl — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in2013. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board(United States) (PCAOB), the consolidated balance sheets as of December 31, 2017 and 2016, the related consolidatedstatements of operations and comprehensive loss, stockholders' equity and cash flows for each of the years then ended of theCompany and our report dated March 9, 2017 expressed an unqualified opinion. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting andfor its assessment of the effectiveness of internal control over financial reporting in the accompanying Management’s Reporton Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal controlover financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required tobe independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules andregulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether effective internal control over financial reporting wasmaintained in all material respects. Our audit included obtaining an understanding of internal control over financialreporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as weconsidered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company's internal control over financial reporting is a process designed to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company's internal control over financial reporting includes those policiesand procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and thatreceipts and expenditures of the company are being made only in accordance with authorizations of management anddirectors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use or disposition of the company's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detectmisstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls maybecome inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures maydeteriorate. /s/ RSM US LLP Houston, TexasMarch 9, 2018F-2 Table of ContentsReport of Independent Registered Public Accounting FirmTo the Board of Directors and StockholdersDawson Geophysical Company Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Dawson Geophysical Company and itssubsidiaries (the Company) as of December 31, 2017 and 2016, the related consolidated statements of operations andcomprehensive loss, stockholders' equity and cash flows for each of the years then ended, and the related notes to theconsolidated financial statements.In our opinion, the financial statements present fairly, in all material respects, the financial position of the Companyas of December 31, 2017 and 2016, and the results of its operations and its cash flows for the years then ended, in conformitywith accounting principles generally accepted in the United States of America.We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board(United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2017, based on criteriaestablished in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of theTreadway Commission in 2013, and our report dated March 9, 2018 expressed an unqualified opinion on the effectiveness ofthe Company's internal control over financial reporting.Basis for OpinionThese financial statements are the responsibility of the Company’s management. Our responsibility is to express anopinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with thePCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws andthe applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan andperform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement,whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of thefinancial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such proceduresincluded examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our auditsalso included evaluating the accounting principles used and significant estimates made by management, as well asevaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for ouropinion./s/ RSM US LLPWe have served as the Company's auditor since 2016.Houston, TexasMarch 9, 2018F-3 Table of ContentsReport of Independent Registered Public Accounting FirmThe Board of Directors and Stockholders ofDawson Geophysical Company We have audited the accompanying consolidated statements of operations and comprehensive loss, stockholders'equity and cash flows for the year ended December 31, 2015. These financial statements are the responsibility of theCompany's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statement presentation. We believethat our audit provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidatedresults of operations and cash flows of Dawson Geophysical Company for the year ended December 31, 2015, in conformitywith U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Dallas, TexasMarch 15, 2016 F-4 Table of Contents DAWSON GEOPHYSICAL COMPANYCONSOLIDATED BALANCE SHEETS(amounts in thousands, except share data) December 31, 2017 2016 ASSETS Current assets: Cash and cash equivalents $22,013 $14,624 Short-term investments 16,583 40,250 Accounts receivable, net of allowance for doubtful accounts of $250 at December 31, 2017 and 2016 33,138 16,031 Current maturities of notes receivable 695 — Prepaid expenses and other current assets 4,677 4,822 Total current assets 77,106 75,727 Property and equipment 307,844 324,950 Less accumulated depreciation (221,271) (214,033) Property and equipment, net 86,573 110,917 Notes receivable, net of current maturities 841 — Intangibles, net 494 487 Long-term deferred tax assets, net 224 535 Total assets $165,238 $187,666 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $5,933 $5,617 Accrued liabilities: Payroll costs and other taxes 1,151 885 Other 4,314 2,983 Deferred revenue 3,699 3,155 Current maturities of notes payable and obligations under capital leases 2,712 2,357 Total current liabilities 17,809 14,997 Long-term liabilities: Notes payable and obligations under capital leases, net of current maturities 5,153 — Deferred tax liabilities, net 874 146 Other accrued liabilities 150 1,639 Total long-term liabilities 6,177 1,785 Commitments and contingencies — — Stockholders’ equity: Preferred stock-par value $1.00 per share; 4,000,000 shares authorized, none outstanding — — Common stock-par value $0.01 per share; 35,000,000 shares authorized, 21,836,617 and 21,704,851 shares issued, and 21,788,172 and 21,656,406 shares outstanding at December 31, 2017 and 2016, respectively 218 217 Additional paid-in capital 143,835 142,998 Retained (deficit) earnings (2,021) 29,265 Treasury stock, at cost; 48,445 shares at December 31, 2017 and December 31, 2016 — — Accumulated other comprehensive loss, net (780) (1,596) Total stockholders’ equity 141,252 170,884 Total liabilities and stockholders’ equity $165,238 $187,666 See accompanying notes to the consolidated financial statements.F-5 Table of Contents DAWSON GEOPHYSICAL COMPANYCONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS(amounts in thousands, except share and per share data) Year Ended December 31, 2017 2016 2015 Operating revenues $157,148 $133,330 $234,685 Operating costs: Operating expenses 139,164 121,661 205,566 General and administrative 16,189 16,822 22,729 Depreciation and amortization 39,235 44,283 47,072 194,588 182,766 275,367 Loss from operations (37,440) (49,436) (40,682) Other income (expense): Interest income 306 347 159 Interest expense (158) (260) (609) Other income 712 3,108 1,098 Loss before income tax (36,580) (46,241) (40,034) Income tax benefit (expense): Current 6,077 396 (291) Deferred (763) 6,053 14,046 5,314 6,449 13,755 Net loss (31,266) (39,792) (26,279) Other comprehensive income (loss): Net unrealized income (loss) on foreign exchange rate translation, net 816 228 (1,480) Comprehensive loss $(30,450) $(39,564) $(27,759) Basic loss per share attributable to common stock $(1.44) $(1.84) $(1.27) Diluted loss per share attributable to common stock $(1.44) $(1.84) $(1.27) Weighted average equivalent common shares outstanding 21,694,645 21,611,562 20,688,185 Weighted average equivalent common shares outstanding - assuming dilution 21,694,645 21,611,562 20,688,185 See accompanying notes to the consolidated financial statements. F-6 Table of ContentsDAWSON GEOPHYSICAL COMPANYCONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY(amounts in thousands, except share data) Accumulated Common Stock Additional Retained Other Number Paid-in Earnings Comprehensive Of Shares Amount Capital (Deficit) (Loss) Income Total Balance December 31, 2014 14,216,540 $142 $99,084 $95,336 $(344) $194,218 Net loss (26,279) (26,279) Unrealized loss on foreign exchange rate translation (2,106) Income tax benefit 626 Other comprehensive loss (1,480) (1,480) Stock consideration issued in merger 7,381,476 74 42,828 42,902 Issuance of common stock under stock compensation plans 14,212 — — — Tax deficit recorded to hypothetical apic pool (551) (551) Stock-based compensation expense 890 890 Issuance of common stock as compensation 58,937 — 266 266 Shares exchanged for taxes on stock-based compensation (41,855) — (248) (248) Balance December 31, 2015 21,629,310 216 142,269 69,057 (1,824) 209,718 Net loss (39,792) (39,792) Unrealized gain on foreign exchange rate translation 496 Income tax expense (268) Other comprehensive gain 228 228 Issuance of common stock under stock compensation plans 20,221 — — Tax deficit recorded to hypothetical apic pool (77) (77) Stock-based compensation expense 462 462 Issuance of common stock as compensation 66,200 1 416 417 Shares exchanged for taxes on stock-based compensation (10,880) — (72) (72) Balance December 31, 2016 21,704,851 217 142,998 29,265 (1,596) 170,884 Impact of adopting ASU 2016-09 20 (20) — Net loss (31,266) (31,266) Unrealized gain on foreign exchange rate translation 1,091 Income tax expense (275) Other comprehensive gain 816 816 Issuance of common stock under stock compensation plans 92,448 1 (1) — Stock-based compensation expense 656 656 Issuance of common stock as compensation 67,498 320 320 Shares exchanged for taxes on stock-based compensation (28,180) (158) (158) Balance December 31, 2017 21,836,617 $218 $143,835 $(2,021) $(780) $141,252 See accompanying notes to the consolidated financial statements. F-7 Table of Contents DAWSON GEOPHYSICAL COMPANYCONSOLIDATED STATEMENTS OF CASH FLOWS(amounts in thousands) Year Ended December 31, 2017 2016 2015 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(31,266) $(39,792) $(26,279) Adjustments to reconcile net loss to net cash (used in) provided by operatingactivities: Depreciation and amortization 39,235 44,283 47,072 Noncash compensation 976 879 1,156 Deferred income tax expense (benefit) 763 (6,053) (14,046) Gain on proceeds from insurance settlements — (2,269) (407) Change in other accrued long-term liabilities (1,489) (195) 1,834 (Gain) loss on disposal of assets (1,714) (167) 815 Other (91) 186 (81) Change in current assets and liabilities: (Increase) decrease in accounts receivable (16,696) 19,669 15,883 Decrease in prepaid expenses and other current assets 401 1,328 1,752 Increase (decrease) in accounts payable 1,176 (4,326) (3,128) Increase (decrease) in accrued liabilities 1,458 (1,810) (4,579) Increase (decrease) in deferred revenue 544 (2,991) 620 Net cash (used in) provided by operating activities (6,703) 8,742 20,612 CASH FLOWS FROM INVESTING ACTIVITIES: Cash acquired from merger — — 12,382 Capital expenditures, net of noncash capital expenditures summarized below (8,675) (8,251) (6,846) Proceeds from maturity of short-term investments 61,250 91,750 34,500 Acquisition of short-term investments (37,583) (111,000) (26,750) Proceeds from disposal of assets 1,325 1,922 1,501 Proceeds from flood insurance claims 375 2,850 1,000 Proceeds from notes receivable 96 — — Net cash provided by (used in) investing activities 16,788 (22,729) 15,787 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from promissory note — — 5,144 Principal payments on notes payable (2,186) (7,554) (16,348) Principal payments on capital lease obligations (1,076) (780) (1,535) Excess tax benefit from share-based payment arrangement — (77) (551) Tax withholdings related to stock-based compensation awards (158) (72) (316) Net cash used in financing activities (3,420) (8,483) (13,606) Effect of exchange rate changes on cash and cash equivalents 724 85 (428) Net increase (decrease) in cash and cash equivalents 7,389 (22,385) 22,365 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 14,624 37,009 14,644 CASH AND CASH EQUIVALENTS AT END OF PERIOD $22,013 $14,624 $37,009 SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest $143 $260 $620 Cash paid for income taxes $— $33 $692 Cash received for income taxes $4,791 $348 $752 NONCASH INVESTING AND FINANCING ACTIVITIES: (Decrease) increase in accrued purchases of property and equipment $(907) $1,542 $(52) Capital lease obligations incurred $8,542 $— $126 Stock consideration to consummate the merger $— $— $42,902 Financed insurance premiums $248 $— $1,046 Equipment sales financed for buyer $(1,500) $— $— Sales tax on equipment sales financed for buyer $(132) $— $— See accompanying notes to the consolidated financial statements. F-8 Table of ContentsDAWSON GEOPHYSICAL COMPANYNOTES TO CONSOLIDATED FINANCIAL STATEMENTSOn 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 formerlyknown as Dawson Geophysical Company (“Legacy Dawson”). Unless the context requires otherwise, all references in theNotes to Consolidated Financial Statements of this Form 10-K to the “Company,” “we,” “us” or “our” refer to (i) LegacyDawson and its consolidated subsidiaries, for periods through February 10, 2015 and (ii) the merged company for periodson or after February 11, 2015.1. Summary of Significant Accounting Policies Organization and Nature of OperationsThe Company is a leading provider of onshore seismic data acquisition and processing services. Founded in 1952,the Company acquires and processes 2-D, 3-D and multi-component seismic data for its clients, ranging from major oil andgas companies to independent oil and gas operators as well as providers of multi-client data libraries. The Company operatesin the lower 48 states of the U.S. and in Canada.Principles of ConsolidationThe consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries,Dawson Operating LLC, Eagle Canada, Inc., Dawson Seismic Services Holdings, Inc., Eagle Canada Seismic Services ULCand Exploration Surveys, Inc. All significant intercompany balances and transactions have been eliminated in consolidation.Cash EquivalentsFor purposes of the financial statements, the Company considers demand deposits, certificates of deposit, overnightinvestments, money market funds and all highly liquid debt instruments purchased with an initial maturity of three months orless to be cash equivalents.Allowance for Doubtful AccountsManagement determines the need for any allowance for doubtful accounts receivable based on its review of past-dueaccounts, its past experience of historical write-offs and its current client base. While the collectability of outstanding clientinvoices is continually assessed, the inherent volatility of the energy industry’s business cycle can cause swift andunpredictable changes in the financial stability of the Company’s clients.Property and EquipmentProperty and equipment is capitalized at historical cost or the fair value of assets acquired in a business combinationand is depreciated over the useful life of the asset. Management’s estimation of this useful life is based on circumstances thatexist 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 costand related accumulated depreciation are removed from the balance sheet, and any resulting gain or loss is reflected in theresults of operations for the period.Impairment of Long-Lived AssetsLong-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 flowsare insufficient to recover the carrying value of the assets, and the fair value of the assets is below the carrying value of theassets. Management’s forecast of future cash flows used to perform impairment analysis includes estimatesF-9 Table of Contentsof future revenues and expenses based on the Company’s anticipated future results, while considering anticipated future oiland natural gas prices which is fundamental in assessing demand for the Company’s services. If the carrying amounts of theassets exceed the estimated expected undiscounted future cash flows, the Company measures the amount of possibleimpairment by comparing the carrying amount of the assets to the fair value. No impairment charges were recognized for theyears ended December 31, 2017, 2016 and 2015.LeasesThe Company leases certain seismic recording equipment and vehicles under lease agreements. The Companyevaluates each lease to determine its appropriate classification as an operating or capital lease for financial reportingpurposes. Any lease that does not meet the criteria for a capital lease is accounted for as an operating lease. The assets andliabilities under capital leases are recorded at the lower of the present value of the minimum lease payments or the fair marketvalue of the related assets. Assets under capital leases are amortized using the straight-line method over the initial lease term.Amortization of assets under capital leases is included in depreciation expense.IntangiblesThe Company has intangible assets consisting primarily of trademarks/tradenames (which are not amortized)resulting from a business combination. The Company tests for impairment on an annual basis during the fourth quarter, andbetween 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 years ended December 31, 2017,2016 and 2015.Revenue RecognitionServices are provided under cancelable service contracts. These contracts are either “turnkey” or “term” agreements.Under both types of agreements, the Company recognizes revenues when revenue is realizable and services have beenperformed. Services are defined as the commencement of data acquisition or processing operations. Revenues are consideredrealizable when earned according to the terms of the service contracts. Under turnkey agreements, revenue is recognized on aper-unit-of-data-acquired 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 case of a cancelled service contract, revenue is recognized and the client isbilled for services performed up to the date of cancellation.The Company receives reimbursements for certain out-of-pocket expenses under the terms of the service contracts.Amounts billed to clients are recorded in revenue at the gross amount, including out-of-pocket expenses that are reimbursedby the client.In some instances, clients are billed in advance of services performed. In those cases, the Company recognizes theliability as deferred revenue. As services 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 intothe per-unit-of-data-acquired rate. In these circumstances, these set-up costs that occur prior to initiating revenue recognitionare capitalized and amortized as data is acquired.Stock-Based CompensationThe Company measures all stock-based compensation awards, which include stock options, restricted stock,restricted stock units and common stock awards, using the fair value method and recognizes compensation expense, net ofactual forfeitures, as operating or general and administrative expense, as appropriate, in the Consolidated Statements ofOperations and Comprehensive Loss on a straight-line basis over the vesting period of the related awards.Foreign Currency TranslationThe U.S. Dollar is the reporting currency for all periods presented. The functional currency of the Company’s foreignsubsidiaries is generally the local currency. Any transactions denominated in a currency other than the functional currencyare remeasured with the resulting unrealized gain or loss recognized in the Consolidated Statements of Operations andComprehensive Loss as other income (expense). All assets and liabilities in the functional currency are then translatedF-10 Table of Contentsinto U.S. Dollars at the exchange rate on the balance sheet date. Income and expenses are translated using the exchange rateapplicable to each transaction. Equity transactions are translated using historical exchange rates. Adjustments resulting fromtranslation are recorded as a separate component of accumulated other comprehensive income (loss) in the ConsolidatedBalance Sheets. Realized foreign currency transaction gains (losses) are included in the Consolidated Statements ofOperations and Comprehensive Loss as other income (expense).Income TaxesThe Company accounts for income taxes by recognizing amounts of taxes payable or refundable for the current year,and by using an asset and liability approach in recognizing the amount of deferred tax assets and liabilities for the future taxconsequences of events that have been recognized in the Company’s financial statements or tax returns. Managementdetermines deferred taxes by identifying the types and amounts of existing temporary differences, measuring the totaldeferred 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 inincome in the year of an enacted rate change. The deferred tax asset is reduced by a valuation allowance if, based onavailable evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized.Management’s methodology for recording income taxes requires judgment regarding assumptions and the use of estimates,including determining the annual effective tax rate and the valuation of deferred tax assets, which can create variancesbetween actual results and estimates and could have a material impact on the Company’s provision or benefit for incometaxes. Due to recent operating losses and valuation allowances, the Company may recognize reduced or no tax benefits onfuture losses on the Consolidated Statements of Operations and Comprehensive Loss. The Company’s effective tax ratesdiffer from the statutory federal rate of 35% for certain items such as state and local taxes, valuation allowances, non-deductible expenses and discrete items.Use of Estimates in the Preparation of Financial StatementsPreparation of the accompanying financial statements in conformity with GAAP requires management to makeestimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets andliabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reportingperiod. Because of the use of assumptions and estimates inherent in the reporting process, actual results could differ fromthose estimates.ReclassificationsCertain reclassifications have been made to the years ended December 31, 2016 and 2015 consolidated financialstatements to conform to the 2017 presentation. This includes reclassifications on the Consolidated Statements of CashFlows for the adoption in 2016 of ASU No 2016-05.2.Short-Term Investments The Company had short-term investments at December 31, 2017 and 2016 consisting of certificates of deposit withoriginal maturities greater than three months but less than a year. Certificates of deposits with any given banking institutiondid not exceed the FDIC insurance limit at December 31, 2017 or 2016. 3. Fair Value of Financial InstrumentsAt December 31, 2017 and 2016, the Company’s financial instruments included cash and cash equivalents, short-term investments in certificates of deposit, accounts receivable, other current assets, accounts payable, other currentliabilities and notes payable. At December 31, 2017, the Company’s financial instruments also included notes receivable.Due to the short-term maturities of cash and cash equivalents, accounts receivable, other current assets, accounts payable andother current liabilities, the carrying amounts approximate fair value at the respective balance sheet dates. The carrying valueof the notes receivable and notes payable approximate their fair value based on a comparison with the prevailing marketinterest rates. Due to the short-term maturities of the Company’s investments in certificates of deposit, the carrying amountsapproximate fair value at the respective balance sheet dates. The fair values of the Company’s notes receivable, notespayable and investments in certificates of deposit are level 2 measurements in the fair value hierarchy. F-11 Table of Contents4. MergerOn February 11, 2015, the Company completed the Merger. Immediately prior to the effective time of the Merger,Legacy TGC effected a reverse stock split 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 of Legacy TGC Common Stock outstanding. After givingeffect to the Reverse Stock Split, at the effective time of the Merger, without any action on the part of any shareholder, eachissued and outstanding share of Legacy Dawson’s common stock, par value $0.33-1/3 per share (the “Legacy DawsonCommon Stock”), including shares underlying Legacy Dawson’s outstanding equity awards (but excluding any shares ofLegacy Dawson Common Stock owned by Legacy TGC, Merger Sub or Legacy Dawson or any wholly-owned subsidiary ofLegacy Dawson), were converted into the right to receive 1.760 shares of Legacy TGC Common Stock (the “ExchangeRatio”).The Merger was accounted for as a reverse acquisition under the acquisition method of accounting in accordancewith ASC No. 805, “Business Combinations.” The Company accounted for the transaction by using Legacy Dawson’shistorical information and accounting policies and adding the assets and liabilities of Legacy TGC at their respective fairvalues. Consequently, Legacy Dawson’s assets and liabilities retained their carrying values and Legacy TGC’s assetsacquired and liabilities assumed by Legacy Dawson as the accounting acquirer in the Merger were recorded at their fairvalues measured as of February 11, 2015, the effective date of the Merger.5. Property and EquipmentProperty and equipment (in thousands), together with the related estimated useful lives at December 31, 2017 and2016, were as follows: December 31, 2017 2016 Useful Lives Land, building and other $16,610 $15,777 3 to 40 years Recording equipment 183,841 199,068 5 to 10 years Line clearing equipment 11 1,071 5 years Vibrator energy sources 79,694 79,162 5 to 15 years Vehicles 27,688 29,872 1.5 to 10 years 307,844 324,950 Less accumulated depreciation (221,271) (214,033) Property and equipment, net $86,573 $110,917 6. Supplemental Consolidated Balance Sheet InformationOther current liabilities (in thousands) consist of the following at December 31, 2017 and 2016: December 31, 2017 2016 Accrued self-insurance reserves $2,799 $1,422 Other accrued expenses and current liabilities 1,515 1,561 Other current liabilities $4,314 $2,983 7. DebtOn June 30, 2015, the Company entered into an amendment to its Credit Agreement with its lender, Sovereign Bankfor the purpose of renewing, extending and increasing the Company’s line of credit under such agreement. The CreditAgreement was renewed on June 30, 2017. In a merger effective September 11, 2017, Sovereign Bank merged with and intoVeritex Bank.Credit AgreementThe Credit Agreement provides for a revolving loan feature, or Line of Credit, that permits the Company to borrow,repay and re-borrow, from time to time until June 30, 2018, up to the lesser of (i) $20.0 million or (ii) a sum equalF-12 Table of Contentsto (a) 80% of the Company’s eligible accounts receivable (less the outstanding principal balance of term loans and letters ofcredit under the Credit Agreement) and (b) the lesser of (i) 50% of the value of certain of the Company’s core equipment or(ii) $12,500,000. The Company has not utilized the Line of Credit since its inception. Because the Company’s ability toborrow funds under the Line of Credit is tied to the amount of the Company’s eligible accounts receivable and value ofcertain of its core equipment, if the Company’s accounts receivable decrease materially for any reason, including delays,reductions or cancellations by clients, or decreased demand for the Company’s services, or the value of the Company’spledged core equipment decreases materially, the Company’s borrowing ability to fund operations or other obligations maybe reduced. The Credit Agreement also provides for a term loan feature. The Company has no outstanding notes payable underthe term loan feature of the Credit Agreement, and any notes outstanding under this feature would count toward themaximum amounts the Company may borrow under the Credit Agreement. The Company paid off the remaining equipment note payable during the third quarter of 2017. The Company doesnot currently have any notes payable under the Credit Agreement. The Company’s obligations under the Line of Credit are secured by a security interest in the Company’s accountsreceivable and certain of the Company’s core equipment, and the term loans are also secured by certain of the Company’score equipment. Interest on amounts outstanding under the Credit Agreement accrues at the lesser of 4.5% or the prime rate(as quoted in the Wall Street Journal), subject to an interest rate floor of 2.5%. The Credit Agreement contains customarycovenants for credit facilities of this type, including limitations on disposition of assets, mergers and other fundamentalchanges. The Company is also obligated to meet certain financial covenants, including (i) a ratio of (x) total liabilities minussubordinated debt to (y) tangible net worth plus subordinated debt not to exceed 1.00:1.00, (ii) a ratio of current assets tocurrent liabilities of at least 1.50:1.00 and (iii) required tangible net worth of not less than $125,000,000. The Company wasin compliance with all covenants under the Credit Agreement, including specified ratios, as of December 31, 2017. Veritex Bank has issued three letters of credit as of December 31, 2017. The first letter of credit is in the amount of$1,767,000 to support payment of certain insurance obligations of the Company. The principal amount of this letter of creditis collateralized by certain of the Company’s core equipment. The second letter of credit is in the amount of $583,000 tosupport the company’s workers’ compensation insurance and is secured by a certificate of deposit. The third letter of credit isunsecured and in the amount of $75,000 to support certain performance obligations of the Company. None of the letters ofcredit count as funds borrowed under the Company’s Line of Credit. Other IndebtednessThe Company paid in full, during November 2017, one note payable to a finance company for various insurancepremiums. In addition, the Company leases certain seismic recording equipment and vehicles under leases classified as capitalleases. The Company’s Consolidated Balance Sheets as of December 31, 2017 and 2016 include capital lease obligations of$7,865,000 and $419,000, respectively.Maturities of DebtThe Company’s aggregate principal amount (in thousands) of outstanding notes payable and the interest rates andmonthly payments as of December 31, 2017 and 2016 are as follows: December 31, 2017 December 31, 2016 Notes payable to commercial banks Aggregate principal amount outstanding $ — $1,938 Interest rates — 3.50% - 4.50% F-13 Table of ContentsThe Company’s aggregate maturities of obligations under capital leases (in thousands) at December 31, 2017 are asfollows: January 2018 - December 2018 $2,713January 2019 - December 2019 2,841January 2020 - December 2020 2,291January 2021 - December 2021 20Obligations under capital leases $7,865Interest rates on these leases ranged from 3.16% to 6.72%.8. Stock-Based CompensationSince the date of its effectiveness on May 5, 2016, the Company issues new grants of stock-based awards pursuant tothe Dawson Geophysical Company 2016 Stock and Performance Incentive Plan (the “2016 Plan”). Upon its effectiveness, the2016 Plan replaced: (i) the Amended and Restated Dawson Geophysical Company 2006 Stock and Performance IncentivePlan (the “Legacy Dawson Plan”), which originated from Legacy Dawson and (ii) the Amended and Restated 2006 StockAwards Plan of Dawson Geophysical Company (formerly known as the TGC Industries, Inc. 2006 Stock Awards Plan) (the“Legacy TGC Plan”), which originated from Legacy TGC (the Legacy Dawson Plan and the Legacy TGC Plan are referred tocollectively as, (the “Prior Plans”). The Company administered both of the Prior Plans as a result of the Merger, and per the2016 Plan, no new grants of awards have been permitted under the Prior Plans after the effectiveness of the 2016 Plan.Further, the Legacy Dawson Plan and the Legacy TGC Plan expired pursuant to their terms on November 28, 2016 and March29, 2016, respectively. Any outstanding awards previously granted under the Prior Plans continue to remain outstanding inaccordance with their terms. The awards outstanding and available under the 2016 Plan and the awards outstanding undereach of the Prior Plans and their associated accounting treatment are discussed below.In 2016, the Company adopted the 2016 Plan. The 2016 Plan, which provides for the issuance of up to 1,000,000shares of authorized Company common stock. As of December 31, 2017, there were approximately 684,416 shares availablefor future issuance. The 2016 Plan provides for the issuance of stock-based compensation awards, including stock options,common stock, restricted stock, restricted stock units and other forms. Stock option grant prices awarded under the 2016 Planmay not be less than the fair market value of the common stock subject to such option on the grant date, and the term of stockoptions shall extend no more than ten years after the grant date. The 2016 Plan terminates May 5, 2026.In 2006, Legacy Dawson adopted the Legacy Dawson Plan, which was amended and restated in connection with theMerger. The Legacy Dawson Plan provided for the issuance of stock-based compensation awards, including stock options,common stock, restricted stock, restricted stock units and other forms. Stock option grant prices awarded under the LegacyDawson Plan were required to be no less than the fair market value of the common stock subject to such option on the grantdate, and the term of stock options was limited to no more than ten years after the grant date. The Legacy Dawson Planterminated on November 28, 2016 and, upon the effectiveness of the 2016 Plan on May 5, 2016, has had no shares availablefor future issuance.In 2006, the Company adopted the Legacy TGC Plan, which was amended and restated in connection with theMerger. The Legacy TGC Plan provided for the issuance of stock-based compensation awards, including stock options,common stock, and restricted stock. Stock option grant prices awarded under the Legacy TGC Plan were required to be noless than the fair market value of the common stock subject to such option on the grant date, and the term of stock optionswas limited to no more than ten years after the grant date. The Legacy TGC Plan terminated on March 29, 2016 and, sincesuch time, has had no shares available for future issuance.Historically, the Company’s employees and officers that held unvested restricted stock were entitled to dividendswhen the Company paid dividends (“participating”). The Company’s employees and officers that hold unvested restrictedstock awarded during 2016 or thereafter are not entitled to dividends when the Company pays dividends (“non-participating”).F-14 Table of ContentsImpact of Stock-Based Compensation:The following table summarizes stock-based compensation expense (in thousands), which is included in operatingor general and administrative expense, as appropriate, in the Consolidated Statements of Operations and ComprehensiveLoss, for the years ended December 31, 2017, 2016 and 2015: Year Ended December 31, 2017 2016 2015 Stock options $— $42 $— Restricted stock awards 495 347 363 Restricted stock unit awards 161 73 526 Common stock awards 320 417 267 Total compensation expense $976 $879 $1,156 Stock Options:Legacy Dawson estimated the fair value of each stock option on the date of grant using the Black-Scholes optionpricing model. Legacy TGC estimated the fair value of each stock option on the date of grant using the Binomial LatticeModel. Actual value realized with stock options, if any, is dependent on the future performance of the Company’s commonstock and overall stock market conditions.A summary of the outstanding stock options as of December 31, 2017 as well as activity during the year then endedis as follows: Number of StockOptions WeightedAverage ExercisePrice WeightedAverageRemainingContractualTerm in Years Balance as of December 31, 2016 369,464 $12.70 Forfeited (25,731) $11.42 Expired (32,810) $16.79 Balance as of December 31, 2017 310,923 $12.37 1.23 Exercisable as of December 31, 2017 310,923 $12.37 1.23 Stock options issued under both the Legacy TGC plan and Legacy Dawson plans are a combination of incentivestock options and non-qualified stock options. For incentive stock options, no tax deduction is recorded when options areawarded. If an excise and sale of vested options results in a disqualifying disposition, a tax deduction for the Companyoccurs.Outstanding options at December 31, 2017 expire during the period from December 2018 to July 2019. The intrinsicvalue of the outstanding options at December 31, 2017 was zero. There were no unrecognized compensation costs related tostock options as of December 31, 2017.There were no options granted or vested, and there were no excess tax benefits from disqualifying dispositionsduring the years ended December 31, 2017, 2016 and 2015. No options were exercised during the years ended December 31,2017, 2016 and 2015.No cash was received from option exercises during the years ended December 31, 2017, 2016 and 2015.Restricted Stock Awards:There were no restricted stock grants in the year ended December 31, 2017. The Company granted 87,000 non-participating restricted stock awards during the year ended December 31, 2016 with a weighted average grant date fair valueof $2.96. There were no restricted stock grants in the year ended December 31, 2015. The fair value of non-participatingrestricted stock awards equals the market price of the Company’s stock on the grant date and generally vest in three years orin annual increments over three years.F-15 Table of ContentsA summary of the status of the Company’s nonvested non-participating restricted stock awards as of December 31,2017 and activity during the year then ended is as follows: Number of RestrictedStock Awards Weighted AverageGrant Date FairValue Nonvested as of December 31, 2016 87,000 $2.96 Vested (10,833) $7.00 Forfeited (5,000) $2.96 Nonvested as of December 31, 2017 71,167 $4.19 As of December 31, 2017, there were approximately $137,000 of unrecognized compensation costs related tononvested non-participating restricted stock awards. These costs are expected to be recognized over a weighted averageperiod of 1.12 years. The aggregate vesting date fair value of restricted stock for the year ended December 31, 2017 was $84,000. Therewere no vestings of restricted stock for the years ended December 31, 2016 and 2015. Restricted Stock Unit Awards: The Company granted 227,000, 196,400, and 10,000 restricted stock unit awards during the years ended December31, 2017, 2016 and 2015, respectively, with a weighted average grant date fair value of $3.96, $2.96 and $5.76, respectively.The fair value of restricted stock unit awards equals the market price of the Company’s stock on the grant date and generallyvest in one to three years or in annual increments over three years.A summary of the Company’s nonvested restricted stock unit awards as of December 31, 2017 and activity duringthe year then ended is as follows: Number of RestrictedStock Unit Awards Weighted AverageGrant Date FairValue Nonvested as of December 31, 2016 253,315 $4.24 Granted 227,000 $3.96 Vested (81,615) $6.58 Forfeited (5,000) $3.97 Nonvested as of December 31, 2017 393,700 $3.60 As of December 31, 2017, there were approximately $921,000 of unrecognized compensation costs related tononvested restricted stock unit awards. These costs are expected to be recognized over a weighted average period of 1.81years.The aggregate vesting date fair value of restricted stock units for the years ended December 31, 2017, 2016 and2015 was $422,000, $156,000 and $85,000, respectively.Common Stock Awards:The Company granted common stock awards with immediate vesting to outside directors and employees during theyears ended December 31, 2017, 2016 and 2015 as follows: Number of CommonStock Awards Weighted AverageGrant Date FairValue Year ended December 31, 2017 67,498 $4.74 Year ended December 31, 2016 66,200 $6.31 Year ended December 31, 2015 58,937 $4.53 F-16 Table of Contents9. DividendsThe Company has not paid dividends during calendar years 2017, 2016 and 2015. While there are currently norestrictions prohibiting the Company from paying dividends, the board of directors, after consideration of economic andmarket conditions affecting the energy industry in general, and the oilfield services business in particular, determined thatthe Company would not pay a dividend in respect of the Company’s common stock for the foreseeable future. Payment ofany dividends in the future will be at the discretion of the Company’s board and will depend on our financial condition,results of operations, capital and legal requirements, and other factors deemed relevant by the board.10. Employee Benefit PlansThe Company provides a 401(k) plan as part of its employee benefits package in order to retain quality personnel.Legacy Dawson elected to match 100% of the employee contributions up to a maximum of 6% of the participant’s applicablecompensation under the Legacy Dawson 401(k) plan for the years ended December 31, 2017, 2016 and 2015. LegacyDawson's 401(k) plan was retained in connection with the Merger. Legacy TGC’s 401(k) plan, which was terminated inconnection with the Merger, is consistent with Legacy Dawson’s 401(k) plan except Legacy TGC matched 50% of theemployee’s contribution up to a maximum of 6% of the participant’s applicable compensation. The Company’s matchingcontributions under Legacy Dawson’s 401(k) plan for the years ended December 31, 2017, 2016 and 2015 wereapproximately $1,480,000, $1,658,000, and $1,849,000, respectively. Legacy TGC’s employees rolled into the LegacyDawson 401(k) plan during 2015. In addition, the Company’s matching contributions to the Legacy TGC 401(k) plan (priorto such plan’s termination) during 2015 were $98,000.11. Advertising CostsAdvertising costs are charged to expense as incurred. Advertising costs for the years ended December 31, 2017,2016 and 2015 totaled $371,000, $372,000, and $466,000, respectively. 12. Income Taxes The Company’s components of loss before income taxes (in thousands) are as follows: Year Ended December 31, 2017 2016 2015 Domestic $(31,714) $(41,162) $(36,230) Foreign (4,866) (5,079) (3,804) Loss before income taxes $(36,580) $(46,241) $(40,034) The Company’s components of income tax benefit (in thousands) are as follows: Year Ended December 31, 2017 2016 2015 Current federal benefit $40 $215 $280 Current state benefit (expense) 3,545 181 (571) Current foreign benefit 2,492 — — Deferred federal (expense) benefit (51) 5,795 12,499 Deferred state benefit (expense) 697 (847) 860 Deferred foreign (expense) benefit (1,409) 1,105 687 Income tax benefit $5,314 $6,449 $13,755 The 2017 Tax Cuts and Jobs Act was enacted on December 22, 2017 resulting in significant changes to the InternalRevenue Code. This reform changed the U.S. Statutory tax rate from 35% to 21% for tax years beginning after December 31,2017. The Company is required to recognize the effect of the tax law changes in the period of enactment, such as remeasuringthe domestic deferred tax assets and liabilities as well as reassessing the net realizability of deferred tax assets and liabilities.Due to the Company’s current loss position and domestic valuation allowances, this tax reform will not have a materialimpact on the consolidated financials.F-17 Table of ContentsIn December 2017, the Securities and Exchange Commission staff issued Accounting Bulleting No. 118, IncomeTax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”), which allows companies to record provisionalamounts during a measurement period not to extend beyond one year from the enactment date. Due to the Tax Cuts and Jobsact being enacted in late fourth quarter of 2017 and subsequent guidance expected throughout the next 12 months, theaccounting of deferred tax re-measurement is considered incomplete due to forthcoming guidance and the ongoing analysisof final year-end data and tax positions. Analysis is expected to be completed within the measurement period in accordancewith SAB 118. Subsequent adjustments are not expected to have a material impact on the consolidated financials due to thedomestic loss position and the associated valuation allowances on the domestic deferred tax assets. The income tax provision differs from the amount computed by applying the statutory federal income tax rate tolosses before income taxes as follows (in thousands): Year Ended December 31, 2017 2016 2015 Tax benefit computed at statutory rate of 35% $12,803 $16,184 $14,012 Change in valuation allowance (4,564) (10,200) (502) State income tax benefit (expense), net of federal tax 2,757 (433) 423 Foreign losses 1,593 985 954 Transaction costs — — (445) Tax reform impact to deferred tax balances (1) (7,590) — — Other 315 (87) (687) Income tax benefit $5,314 $6,449 $13,755 (1)Due to the Tax Cuts and Jobs Act enacted on December 22, 2017, the Company’s domestic deferred tax assets andliabilities were remeasured from 35% to 21% as of December 31, 2017. The change in tax rate resulted in a decreaseto the gross domestic deferred tax asset which is offset by a corresponding decrease to the valuation allowance.F-18 Table of ContentsThe principal components of the Company’s net deferred tax (liabilities) assets are as follows (in thousands): December 31, 2017 2016 Deferred tax assets: Federal tax net operating loss ("NOL") carryforward $21,014 $32,746 Foreign tax NOL carryforward 4,410 4,486 Deferred revenue 626 462 Restricted stock and restricted stock unit awards 192 318 Workers’ compensation 64 74 State tax NOL carryforward 1,529 1,223 Self-insurance 128 219 Canadian start-up costs 156 275 Alternative Minimum Tax ("AMT") credit carryforward 315 315 Foreign tax credit — 1,874 Foreign deferred taxes 874 (535) Other comprehensive income 242 786 Uncertain tax positions — 512 Other 80 271 Gross deferred tax assets 29,630 43,026 Less valuation allowances (17,366) (13,602) Net deferred tax assets 12,264 29,424 Deferred tax liabilities: Property and equipment (12,914) (29,035) Net deferred tax (liabilities) assets $(650) $389 Foreign deferred tax (liabilities) assets $(874) $535 Domestic deferred tax assets (liabilities) 224 (146) Net deferred tax (liabilities) assets $(650) $389 At December 31, 2017, the Company had a NOL for U.S. federal income tax purposes of approximately$100,065,000. This NOL will begin to expire in 2027. The Company will carry forward the tax benefits related to federalNOL of approximately $21,014,000. The Company also had state NOL’s that will affect state taxes of approximately$1,935,000 at December 31, 2017. State NOL’s began to expire in 2015. The Company also had a Canadian NOL of$16,963,000 that will begin to expire in 2037.In evaluating the possible sources of taxable income during 2017, the Company determined it is more likely thannot that the remaining deferred tax assets will not be realizable. As a result, the Company recorded full valuation allowancesagainst its federal and state deferred tax assets with the exception of its trademark intangible and the AMT credit which willbe refundable within the next five years. A partial valuation allowance was recorded against foreign deferred tax assetsexcluding losses which are expected to be absorbed by future temporary differences.A summary of the Company’s gross uncertain tax positions at December 31, 2017 and 2016 as well as activity forthe years then ended are as follows (in thousands): December 31, 2017 2016 Balance at beginning of year $1,489 $1,684 Decrease in prior year tax positions — (14) Increase in current year tax positions — 157 Liability statute expiration (1,489) (338) Balance at end of year $— $1,489 The Company’s policy is to recognize interest and penalties related to uncertain tax positions in income taxexpense.F-19 Table of ContentsDue to the resolution of amended federal, state and foreign tax returns and the expiration of various statutes oflimitations, the full uncertain tax positions balance at December 31, 2016 reversed in the twelve months ended December 31,2017.13. Net (Loss) Income per Share Attributable to Common Stock Net loss per share attributable to common stock is calculated using the two-class method. The two-class method isan allocation method of calculating loss per share when a company’s capital structure includes participating securities thathave rights to undistributed earnings. Historically, the Company’s employees and officers that held unvested restricted stockwere entitled to dividends when the Company paid dividends (“participating”). The Company’s employees and officers thathold unvested restricted stock awarded during 2016 or thereafter are not entitled to dividends when the Company paysdividends (“non-participating”). The Company’s basic net loss per share attributable to common stock is computed byreducing the Company’s net loss by the income allocable to unvested restricted stockholders that have a right to participatein earnings. The Company’s employees and officers that hold unvested restricted stock do not participate in losses becausethey are not contractually obligated to do so. The undistributed earnings are allocated based on the relative percentage of theweighted average unvested participating restricted stock awards. The basic net loss per share attributable to common stock iscomputed by dividing the net loss attributable to common stock by the weighted average shares outstanding. The weightedaverage shares outstanding for the year ended December 31, 2015 was calculated by totaling (i) the product of (x) theweighted shares of Legacy Dawson Common Stock outstanding at the beginning of the year multiplied by (y) the ExchangeRatio, plus (ii) the number of shares associated with awards of Legacy Dawson participating restricted stock and restrictedstock units that vested in conjunction with the Merger, weighted as of February 11, 2015, plus (iii) the number of shares ofLegacy TGC Common Stock outstanding immediately prior to the Merger, weighted to reflect that such shares wereoutstanding from February 11, 2015 until December 31, 2015. The Company’s diluted loss per share attributable to commonstock is computed by adjusting basic loss per share attributable to common stock by income allocable to unvestedparticipating restricted stock, if any, divided by weighted average diluted shares outstanding. A reconciliation of the loss per share attributable to common stock is as follows (in thousands, except share and pershare data): Year Ended December 31, 2017 2016 2015 Net loss$(31,266) $(39,792) $(26,279) Income allocable to unvested participating restrictedstock — — — Basic loss attributable to common stock$(31,266) $(39,792) $(26,279) Reallocation of participating earnings — — — Diluted loss attributable to common stock$(31,266) $(39,792) $(26,279) Weighted average common shares outstanding: Basic 21,694,645 21,611,562 20,688,185 Dilutive common stock options, restricted stock unitawards and non-participating restricted stock awards — — — Diluted 21,694,645 21,611,562 20,688,185 Basic loss attributable to a share of common stock$(1.44) $(1.84) $(1.27) Diluted loss attributable to a share of common stock$(1.44) $(1.84) $(1.27) The Company had a net loss in the years ended December 31, 2017, 2016 and 2015. As a result, all stock options,restricted stock unit awards, and non-participating restricted stock awards were anti-dilutive and excluded from weightedaverage shares used in determining the diluted loss attributable to a share of common stock for the respective periods. Thefollowing weighted average numbers of stock options, restricted stock unit awards, and non-participating restricted stockawards have been excluded from the calculation of diluted loss per share attributable to common stock, as their effect wouldbe anti-dilutive for the years ended December 31, 2017, 2016 and 2015:F-20 Table of Contents Year Ended December 31, 2017 2016 2015 Stock options 338,355 411,763 425,981 Restricted stock unit awards 332,221 268,461 126,596 Non-participating restricted stock awards 73,296 76,303 — Total 743,872 756,527 552,577 The Company has not awarded participating restricted stock for the years ended December 31, 2017, 2016 and2015. 14. Major ClientsThe Company operates in only one business segment, contract seismic data acquisition and processingservices. Sales to these clients, as a percentage of operating revenues that exceeded 10%, were as follows: Year Ended December 31, 2017 2016 2015 A 17% 13% 21% B 10% — 15% The Company does not believe that the loss of any client listed above would have a material adverse effect on theCompany.15. Areas of OperationThe U.S. and Canada are the only countries of operation for the Company.Revenues for the year ended December 31, 2017 were $157,148,000 with $135,058,000 earned in the U.S. and$22,090,000 earned in Canada. Revenues for the year ended December 31, 2016 were $133,330,000 with $122,522,000earned in the U.S. and $10,808,000 earned in Canada. Revenues for the year ended December 31, 2015 were $234,685,000with $222,154,000 earned in the U.S. and $12,531,000 earned in Canada.Net long-lived assets as of December 31, 2017 were approximately $86,573,000, with $76,751,000 located in theU.S. and $9,822,000 located in Canada. Net long-lived assets as of December 31, 2016 were approximately $110,917,000,with $105,059,000 located in the U.S. and $5,858,000 located in Canada.16. Commitments and ContingenciesFrom time to time, the Company is a party to various legal proceedings arising in the ordinary course of business.Although the Company cannot predict the outcomes of any such legal proceedings, management believes that the resolutionof pending legal actions will not have a material adverse effect on the Company’s financial condition, results of operations orliquidity, 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 invoicesor other matters. While the Company seeks to minimize these disputes and maintain good relations with its clients, theCompany has experienced in the past, and may experience in the future, disputes that could affect its revenues and results ofoperations in any period.The Company has non-cancelable operating leases for office and shop space in Midland, Plano, Denison, Houston,Denver, Oklahoma City and Calgary, Alberta. F-21 Table of ContentsThe following table summarizes payments due in specific periods related to the Company’s contractual obligationswith initial terms exceeding one year as of December 31, 2017 (in thousands): Payments Due by Period Within After Total 1 Year 2-3 Years 4-5 Years 5 Years Operating lease obligations (office space) $10,386 $1,588 $2,704 $2,176 $3,918 Some of the Company’s operating leases contain predetermined fixed increases of the minimum rental rate duringthe initial lease term. For these leases, the Company recognizes the related expense on a straight-line basis and recordsdeferred rent as the difference between the amount charged to expense and the rent paid. Rental expense under theCompany’s operating leases with initial terms exceeding one year was $1,785,000 for the year ended December 31, 2017,$1,907,000 for the year ended December 31, 2016, and $1,691,000 for the year ended December 31, 2015.As of December 31, 2017, the Company had three letters of credit issued by Veritex Bank. The first letter of credit isin the amount of $1,767,000 to support payment of our insurance obligations. The principal amount of this letter of credit iscollateralized by certain of our core equipment. The second letter of credit is in the amount of $583,000 to support theCompany’s workers’ compensation insurance and is secured by a certificate of deposit. The third letter of credit is unsecuredand in the amount of $75,000 to support certain of our performance obligations of the Company. None of the letters of creditcount as funds borrowed under our Line of Credit. 17. Recently Issued Accounting PronouncementsIn February 2018, the FASB issued ASU No. 2018-02, Income Statement – Reporting Comprehensive Income (Topic220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allows areclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from theTax Cuts and Jobs Act passed by the U.S. federal government in December 2017. This ASU is effective for the annual periodbeginning after December 15, 2018, and for annual and interim periods thereafter. The Company does not believe this ASUwill have a material impact on its condensed consolidated financial statements. In May 2017, the FASB issued ASU No. 2017-09, Compensation – Stock Compensation (Topic 718): Scope ofModification Accounting, which provides guidance about which changes to the terms or conditions of a share-basedpayment award require an entity to apply modification accounting. This ASU is effective for the annual period beginningafter December 15, 2017, and for annual and interim periods thereafter. The Company does not believe this ASU will have amaterial impact on its condensed consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation (Topic 718):Improvements to Employee Share-Based Payment Accounting, which is intended to simplify accounting for share-basedpayments awarded to employees, including income tax consequences, classification of awards as either equity or liabilities,and classification on the statement of cash flows. This ASU was effective for the annual period beginning after December 15,2016, and for annual and interim periods thereafter. The Company adopted ASU 2016-09 in the first quarter of 2017 andelected to account for forfeitures as they occur, rather than estimate expected forfeitures. As a result of adopting this standard,the Company applied the modified retrospective approach and recorded a cumulative-effect adjustment within theConsolidated Statements of Stockholders’ Equity that had no material impact on the Company’s condensed consolidatedfinancial statements. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which will require organizations thatlease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases.In January 2017, the FASB issued ASU No. 2017-03, Accounting Changes and Error Corrections (Topic 250) andInvestments – Equity Method and Joint Ventures (Topic 323), which stated additional qualitative disclosures should beconsidered to assess the significance of the impact upon adoption. This ASU is effective for the annual period beginning afterDecember 15, 2018, and for annual and interim periods thereafter. Early adoption is permitted. In January 2018, the FASBissued ASU No. 2018-01, Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842, whichprovides an optional transition practical expedient to not evaluate under Topic 842 existing or expired land easements thatwere not previously accounted for as leases under the current lease guidance in Topic 840. The Company is currentlyevaluating the new guidance and practical expedient to determine the impact they will have on its condensedF-22 Table of Contentsconsolidated financial statements and believes that the most significant change will be to its Condensed ConsolidatedBalance Sheets as its asset and liability balances will increase for operating leases that are currently off-balance sheet. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which introduces a newfive-step revenue recognition model in which an entity should recognize revenue to depict the transfer of promised goods orservices to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange forthose goods or services. This ASU also requires disclosures sufficient to enable users to understand the nature, amount,timing, and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative andquantitative disclosures about contracts with customers, significant judgments and changes in judgments, and assetsrecognized from the costs to obtain or fulfill a contract. Entities have the option of using either a full retrospective ormodified approach to adopt ASU No. 2014-09. Subsequent amendments to the initial guidance have been issued in March2016, April 2016, May 2016, December 2016, January 2017, and September 2017 within ASU No. 2016-08, ASU No. 2016-10, ASU No. 2016-12, ASU No. 2016-20, ASU No. 2017-03, and ASU No. 2017-13 regarding principal-versus-agent,performance obligations and licensing, assessing collectability, presentation of sales taxes, noncash consideration, andcompleted contracts and contract modifications at transition. These updates do not change the core principle of the guidanceunder ASU No. 2014-09, but rather provide implementation guidance. This new standard must be adopted by the Companyin our calendar year beginning January 1, 2018. The Company has completed its assessment of the new standard and areadopting the standard using the full retrospective method. The expected impact of adopting the new standard on the Company’s 2017 and 2016 consolidated financialstatements will not have a material impact on the overall operating results of the Company and is reflected below. Theprimary impact of adopting the new standard will be delayed recognition of certain miscellaneous revenues and certainfulfillment costs that are being recognized as incurred under our current revenue recognition policy. These revenues andexpenses will be estimated and allocated over the life of the contract rather than recognized as services are provided. Select line items from the Company’s Consolidated Statements of Operations and Comprehensive Loss which reflectthe expected adoption of the new standard will be as follows (in thousands except per share data): Year Ended December 31, 2017 2016Operating revenues $156,532 $137,640Operating expenses $139,072 $124,024Loss from operations $(37,964) $(47,489)Net loss $(31,790) $(37,845)Diluted loss per share attributed to common stock $(1.47) $(1.75) There will be no effect on income taxes for the years ended December 31, 2017 and 2016 as the Company is in a fullvaluation allowance domestically. Select line items from the Company’s Consolidated Balance Sheets which reflect the expected adoption of the newstandard are as follows (in thousands): December 31, 2017Accounts receivable, net $33,157Prepaid expenses and other current assets $7,339Deferred revenue $6,314 18. Concentrations of Credit RiskFinancial instruments that potentially expose the Company to concentrations of credit risk at any given time mayconsist of cash and cash equivalents, money market funds and overnight investment accounts, short-term investments incertificates of deposit, trade and other receivables and other current assets. At December 31, 2017 and 2016, the Companyhad deposits with domestic and international banks in excess of federally insured limits. Management believes the credit riskassociated with these deposits is minimal. Money market funds seek to preserve the value of the investment, but it is possibleto lose money investing in these funds.F-23 Table of ContentsThe Company’s sales are to clients whose activities relate to oil and natural gas exploration and production. TheCompany generally extends unsecured credit to these clients; therefore, collection of receivables may be affected by theeconomy surrounding the oil and natural gas industry or other economic conditions. The Company closely monitorsextensions of credit and may negotiate payment terms that mitigate risk.19. Quarterly Consolidated Financial Data (unaudited and in thousands, except per share data) Quarter Ended March 31, June 30, September 30, December 31, Year ended December 31, 2017: Operating revenues $41,927 $30,469 $45,627 $39,125 Loss from operations $(12,141) $(15,385) $(4,136) $(5,778) Net loss $(9,154) $(14,809) $(2,759) $(4,544) Basic loss per share attributable to common stock $(0.42) $(0.68) $(0.13) $(0.21) Diluted loss per share attributable to common stock $(0.42) $(0.68) $(0.13) $(0.21) Year ended December 31, 2016: Operating revenues $47,055 $28,086 $28,122 $30,067 Loss from operations $(10,631) $(13,266) $(14,257) $(11,282) Net loss $(8,600) $(11,589) $(12,416) $(7,187) Basic loss per share attributable to common stock $(0.40) $(0.54) $(0.57) $(0.33) Diluted loss per share attributable to common stock $(0.40) $(0.54) $(0.57) $(0.33) Basic and diluted loss per share attributable to common stock are computed independently for each of the quarterspresented. Therefore, the sum of quarterly basic and diluted information may not equal the annual basic and diluted loss pershare attributable to common stock. F-24Exhibit 21.1SUBSIDIARIES OF THE REGISTRANTDawson 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 corporationExploration Surveys, Inc., a Texas corporationExhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe 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 theRegistration Statement on Form S-4 related to the Amended and Restated Dawson Geophysical Company2006 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 StockAwards Plan (the "Legacy TGC Plan"),(3)Registration Statement (Form S-8 No. 333-201923) pertaining to the Legacy TGC Plan, (4)Registration Statement (Form S-8 No. 333-204643) pertaining to the Legacy Dawson Plan, and(5)Registration Statement (Form S-8 No. 333-212577) pertaining to the Dawson Geophysical Company 2016Stock and Performance Incentive Planof our reports dated March 9, 2018, relating to the consolidated financial statements of Dawson Geophysical Company(which express an unqualified opinion on the financial statements and effectiveness of internal control over financialreporting of Dawson Geophysical Company), incorporated by reference in Annual Report on Form 10-K of DawsonGeophysical Company for the year ended December 31, 2017./s/RSM US, LLP/s/ RSM US, LLP Houston, TexasMarch 9, 2018 Exhibit 23.2 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 theRegistration Statement on Form S-4 related to the Amended and Restated Dawson Geophysical Company 2006Stock and Performance Incentive Plan (the "Legacy Dawson Plan"); (2) Registration Statement (Form S-8 No. 333-142221) pertaining to the TGC Industries, Inc. 2006 StockAwards Plan (the "Legacy TGC Plan"); (3) Registration Statement (Form S-8 No. 333-201923) pertaining to the Legacy TGC Plan; (4) Registration Statement (Form S-8 No. 333-204643) pertaining to the Legacy Dawson Plan; and (5) Registration Statement (Form S-8 No. 333-212577) pertaining to the Dawson Geophysical Company 2016Stock and Performance Incentive Planof our report dated March 15, 2016, with respect to the consolidated financial statements of Dawson GeophysicalCompany for the year ended December 31, 2015 included in this Annual Report (Form 10-K) for the year endedDecember 31, 2017. /s/ Ernst and Young LLP Dallas, TexasMarch 7, 2018 Exhibit 31.1CERTIFICATIONSI, 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 amaterial fact necessary to make the statements made, in light of the circumstances under which such statements weremade, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairlypresent in all material respects the financial condition, results of operations and cash flows of the registrant as of,and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controlsand procedures (as defined in Exchange Act Rules 13a‑15(e) and 15d‑15(e)) and internal control over financialreporting (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 bedesigned under our supervision, to ensure that material information relating to the registrant, including itsconsolidated subsidiaries, is made known to us by others within those entities, particularly during theperiod in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financialreporting to be designed under our supervision, to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles;(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in thisreport our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of theperiod 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 occurredduring the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of anannual report) that has materially affected, or is reasonably likely to materially affect, the registrant’sinternal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal controlover financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (orpersons performing the equivalent functions):(a)All significant deficiencies and material weaknesses in the design or operation of internal control overfinancial reporting which are reasonably 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 significantrole in the registrant’s internal control over financial reporting.Dated: March 09, 2018 /s/ Stephen C. Jumper Stephen C. Jumper Chairman of the Board of Directors, President and ChiefExecutive Officer (Principal Executive Officer) Exhibit 31.2CERTIFICATIONSI, 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 amaterial fact necessary to make the statements made, in light of the circumstances under which such statements weremade, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairlypresent in all material respects the financial condition, results of operations and cash flows of the registrant as of,and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controlsand procedures (as defined in Exchange Act Rules 13a‑15(e) and 15d‑15(e)) and internal control over financialreporting (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 bedesigned under our supervision, to ensure that material information relating to the registrant, including itsconsolidated subsidiaries, is made known to us by others within those entities, particularly during theperiod in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financialreporting to be designed under our supervision, to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles;(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in thisreport our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of theperiod 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 occurredduring the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of anannual report) that has materially affected, or is reasonably likely to materially affect, the registrant’sinternal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal controlover financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (orpersons performing the equivalent functions):(a)All significant deficiencies and material weaknesses in the design or operation of internal control overfinancial reporting which are reasonably 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 significantrole in the registrant’s internal control over financial reporting.Dated: March 09, 2018 /s/ James K. Brata James K. Brata Executive Vice President, Chief Financial Officer, Secretary,and Treasurer (Principal Financial and Accounting Officer)Exhibit 32.1CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES‑OXLEY ACT OF 2002In connection with the annual report of Dawson Geophysical Company (the “Company”) on Form 10‑K for the fiscalyear ended December 31, 2017, as filed 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 toSection 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 of1934 (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 andresults of operations of the Company.Dated: March 09, 2018 /s/ Stephen C. Jumper Stephen C. Jumper Chairman of the Board of Directors, President and ChiefExecutive Officer (Principal Executive Officer) Exhibit 32.2CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES‑OXLEY ACT OF 2002In connection with the annual report of Dawson Geophysical Company (the “Company”) on Form 10‑K for the fiscalyear ended December 31, 2017, as filed with the Securities and Exchange Commission (the “Report”), I, James K. Brata,Executive Vice President, Chief Financial Officer, Secretary, and Treasurer 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 of1934 (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 andresults of operations of the Company.Dated: March 09, 2018 /s/ James K. Brata James K. Brata Executive Vice President, Chief Financial Officer, Secretary,and Treasurer (Principal Financial and Accounting Officer) 

Continue reading text version or see original annual report in PDF format above