Dawson Geophysical Company
Annual Report 2018

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, 2018 ☐☐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 every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation S-T (§ 232 405 of the chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit suchfiles). 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, a smaller reporting company, oran emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company”in Rule 12b-2 of the Exchange Act.Large accelerated filer ☐Accelerated filer ☒Non-accelerated filer ☐Smaller reporting company ☒Emerging growth 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, 2018, 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 $165,982,000.On March 4, 2019, there were 23,141,739 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 2019 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 Data30Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure30Item 9A. Controls and Procedures30Item 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 38Index to Financial Statements F‑1 1 Table of ContentsDAWSON GEOPHYSICAL COMPANYFORM 10‑KFor the Year Ended December 31, 2018DISCLOSURE 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.During the fourth quarter of 2018, we operated a peak of four crews in the U.S. and a peak of three crews in Canadawith varying utilization of the active crews during the quarter in both areas of operation. The fourth quarter in the U.S.historically has been challenging due to shorter work days and the holiday season. Based on currently available information,we anticipate operating up to a peak of five crews in the U.S. and up to a peak of four crews in Canada in the first quarter of2019, with varying utilization of the active crews during the quarter in both areas of operation. The winter season in Canadaconcludes at the end of the first quarter of 2019 with no further seismic activities anticipated thereafter and until the nextwinter season. In addition, we anticipate that we will conduct one microseismic project in the U.S. during the first quarter of2019. Based on currently available information, we anticipate operating up to a peak of four crews in the U.S. with varyingutilization during the second quarter of 2019.Our seismic crews supply seismic data primarily to companies engaged in the exploration and development of oiland natural gas on land and in land‑to‑water transition areas. Seismic acquisition services of our wholly‑owned subsidiary,Eagle Canada Seismic Services, ULC (“Eagle Canada”), are also used by the potash mining industry in Canada, and EagleCanada has particular expertise through its heliportable capabilities. Our clients rely on seismic data to identify areas wheresubsurface conditions are favorable for the accumulation of existing hydrocarbons, to optimize the development andproduction of hydrocarbon reservoirs, to better delineate existing oil and natural gas fields, and to augment reservoirmanagement techniques. In addition, seismic data are sometimes utilized in unconventional reservoirs to identify geo-hazards (such as subsurface faults) for drilling purposes, aid in geo-steering of a horizontal well bore and rock propertyidentification for high grading of well locations and hydraulic fracturing. The majority of our current activity is in areas ofunconventional 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 signal3 Table of Contentsat a multi‑channel recording unit, and then transmitted to a central recording vehicle. Subsurface requirements dictate thenumber of channels necessary to perform our services. We generally use tens of thousands of recording channels in ourseismic surveys. Additional recording channels enhance the resolution of the seismic survey through increased imaginganalysis and provide improved operational efficiencies for our clients. With our state‑of‑the‑art seismic equipment, includingcomputer technology and multiple channels, we acquire, on a cost effective basis, immense volumes of seismic data that,when processed and interpreted, produce precise images of the earth’s subsurface. Our clients then use our seismic data togenerate 3‑D geologic models that help reduce drilling risks, finding and development costs, and improve recovery ratesfrom 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”), Breckenridge Geophysical Inc. (“Breckenridge”), andParagon Geophysical Services, Inc. (“Paragon”), along with smaller companies which generally run one or two small channelcount 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 utilization4 Table of Contentsand meet client needs. While the number of recording systems we own may exceed the number utilized in the field at anygiven time, 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 for improved dataquality with greater subsurface images. We believe we will realize the benefit of increased channel counts and flexibility ofdeployment 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 utilize thisequipment primarily as stand‑alone recording systems. As a result of the introduction of cable‑less recording systems, wehave realized increased crew efficiencies and increased channels on projects using this equipment. We believe we willexperience continued demand for cable‑less recording systems and increased channel count in the future.As of December 31, 2018, we owned 18 central recording systems, 184 vibrator energy source units, andapproximately 334,000 recording channels. Of the 18 recording systems we owned at December 31, 2018, 13 were GeospaceTechnologies GSR and GSX cable‑less recording systems, three were ARAM ARIES cable‑based recording systems, one wasa Wireless Seismic RT System 2 system, and one was a cable‑less INOVA Hawk system. Each crew consists of approximately40 to 100 technicians with associated vehicles, geophones, a seismic recording system, energy sources, cables, and a varietyof other equipment. Each ARAM crew has one central recording vehicle which captures seismic data. The GSR, GSX andINOVA Hawk crews utilize a recorder to manage the data acquisition while the individual system captures and holds the datauntil they are placed in the Data Transfer Module. The data is then transferred to various data storage media, which aredelivered 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 a strategic opportunity to acquire certain seismic recording equipmentduring the third quarter of 2018, we increased our 2018 capital budget to $17,000,000. We have adopted a maintenancecapital expenditure program of $10,000,000 for 2019.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, 2018, sales to two clients represented approximately 32% of our revenues. Weanticipate that sales to these clients will represent a smaller percentage of our overall revenues during 2019. The remainingbalance of our revenues were derived from varied clients and none represented 10% or more of our revenues.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, 2018 were approximately $154,156,000, of which $137,101,000 were earned in the U.S. and $17,055,000 were earned inCanada. Total revenues for the twelve months ended December 31, 2017 were approximately $156,532,000, of which$134,442,000 were earned in the U.S. and $22,090,000 were earned in Canada.5 Table of ContentsLong lived assets as of December 31, 2018 were approximately $293,948,000, with $267,418,000 owned in the U.S.and $26,530,000 owned in Canada. Long 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.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, Breckenridge, and Paragon. In addition to these previously named companies, we alsocompete for projects from time to time with smaller seismic companies which operate in local markets with only one or twosmall channel count crews. Further, the barriers to entry in the seismic industry are not prohibitive, and it would not bedifficult for seismic companies outside of the U.S. to enter the domestic market and compete with us.EmployeesAs of December 31, 2018 we employed 582 full‑time employees, of which 88 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 the 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.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, 2018,our two largest clients accounted for approximately 32% 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.We incur losses.We incurred net losses of $24,407,000 for the twelve months ended December 31, 2018 and $31,790,000 for thetwelve months ended December 31, 2017.8 Table of ContentsOur 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. Future events,including our financial performance, sustained decreases in oil and natural gas prices, reduced demand for our services, ourmarket valuation or the market valuation of comparable companies, loss of a significant client’s business, or strategicdecisions, could cause us to conclude that impairment indicators exist and ultimately that the asset values associated withour equipment or our intangibles were to be impaired. If we were to impair our equipment or intangibles, these noncash assetimpairments could negatively affect our financial results in a material manner in the period in which they are recorded, andthe larger the amount of any impairment that may be taken, the greater the impact such impairment may have on our financialresults.Our profitability is determined, in part, by the utilization level and productivity of our crews and is affected by numerousexternal factors that are beyond our control.Our revenues are 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.We face intense competition in our business that could result in downward pricing pressure and the loss of market share.The seismic data acquisition services industry is a highly competitive business in the continental U.S. and Canada.Our competitors include 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.9 Table of ContentsInclement 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 certain ofour 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.10 Table of ContentsSome 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, 2018 were $8.40 and $3.04, respectively. Further, the high and low sales prices of our commonstock for the twelve months ended December 31, 2017 were $8.55 and $3.70, 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 2018 our daily trading volume was as low as 11,000 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.Our common stock may be considered a low-priced stock pursuant to rules promulgated under the Exchange Act, ifit trades below a price of $5.00 per share. Under these rules, broker-dealers participating in transactions in low-pricedsecurities must first deliver a risk disclosure document which describes the risks associated with such stock, the broker-dealer’s duties, the client’s rights and remedies, and certain market and other information, and make a suitabilitydetermination approving the client for low-priced stock transactions based on the client’s financial situation, investmentexperience and objectives. Broker-dealers must also disclose these restrictions in writing and provide monthly accountstatements to the client, and obtain specific written consent of the client. With these restrictions, the likely effect ofdesignation as a low-price stock would be to decrease the willingness of broker-dealers to make a market for our commonstock, to decrease the liquidity of the stock, and to increase the transaction costs of sales and purchases of such stockscompared to other securities. As of December 26, 2018, our common stock was quoted at a closing sales price of $3.10 pershare and we cannot guarantee that our common stock will trade at a price greater 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 cash dividends to our shareholders, our board ofdirectors, after consideration of economic and market conditions affecting the energy industry in general, and the oilfield11 Table of Contentsservices business in particular, determined that we would not pay a cash dividend in respect of our common stock for theforeseeable future. Payment of any cash 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 be heldliable for the actions of these subcontractors. In addition, subcontractors may cause injury to our personnel or damage to ourproperty that is not fully covered by insurance.The high fixed costs of our operations could result in continuing or increasing 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 continuing or increasing operating losses.12 Table of ContentsWe 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.Current 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. The13 Table of ContentsU.S. Environmental Protection Agency (the “EPA”) has promulgated a series of rulemakings and taken other actions that theEPA states will result in the regulation of GHG as “air pollutants” under the existing federal Clean Air Act. Furthermore, in2010, EPA regulations became effective that require monitoring and reporting of GHG emissions on an annual basis,including extensive GHG monitoring and reporting requirements. While this rule does not control GHG emission levels fromany facilities, it will cause covered facilities to incur monitoring and reporting costs. Moreover, lawsuits have been filedseeking to require individual companies to reduce GHG emissions from their operations. These and other lawsuits relating toGHG emissions 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 beeconomically 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 maintain14 Table of Contentseffective internal controls could have a material adverse effect on our stock price. In addition, a material weakness in theeffectiveness of our internal control over financial reporting could result in an increased chance of fraud and the loss ofclients, reduce our ability to obtain financing, and/or require additional expenditures to comply with these requirements,each of which could negatively impact our business, profitability and financial condition. Item 1B. UNRESOLVED STAFF 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 an 8,161 square foot facility. Our office in Plano, Texasconsists of 7,797 square feet of office space.We lease an 1,801 square foot facility in Denver, Colorado as a sales office. We also lease a 7,480 square footfacility in 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, 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 March 31, 2018 $6.78 $4.64 June 30, 2018 $8.40 $5.38 September 30, 2018 $8.28 $5.50 December 31, 2018 $6.57 $3.04 As of March 4, 2019, the market price for our common stock was $3.30 per share, and we had 115 commonstockholders of record, as reported by our transfer agent.The Board of Directors approved a 5% stock dividend (or 0.05 share for each share outstanding) on the outstandingshares of our common stock on May 1, 2018. The stock dividend was paid on May 29, 2018 to shareholders of record onMay 14, 2018. All comparative financial statement presentations have been retroactively adjusted to reflect the dividend. Wedid not pay any dividends to shareholders in 2017. While there are currently no restrictions prohibiting us from payingdividends to our shareholders, our board of directors, after consideration of economic and market conditions affecting theenergy industry in general, and the oilfield services business in particular, determined that we would not pay a dividend inrespect of our common stock for the foreseeable future. Payment of any dividends in the future will be at the discretion of ourboard and will depend on our financial condition, results of operations, capital and legal requirements, and other factorsdeemed relevant by the board.16 Table of ContentsThe following table summarizes certain information regarding securities authorized for issuance under our equitycompensation plans as of December 31, 2018. See information and definitions regarding material features of the plans inNote 8, “Stock‑Based Compensation,” to the Consolidated Financial Statements incorporated by reference herein.Equity 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 163,485(1) $ — — Equity compensation plans not approved by securityholders — — — Legacy TGC Plan Equity compensation plan approved by security holders 87,497 $11.23 — Equity compensation plans not approved by securityholders — — — 2016 Plan Equity compensation plan approved by security holders 463,600 $ — 418,517 Equity compensation plans not approved by securityholders — — — Total 714,582 $11.23 418,517 (1)Number of securities to be issued upon the exercise of outstanding options, warrants and rights represents 163,485restricted stock unit awards that have not yet vested.17 Table of ContentsPERFORMANCE 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, 2013 to December 31, 2018.The stock prices used in the computation of the graph below reflect those of Legacy TGC from December 31, 2013to 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, 2017, and 2018 reflects that of the combinedCompany following the Merger, as reported on NASDAQ under the symbol “DWSN”.COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*Among Dawson Geophysical Company, the S&P 500 Indexand the PHLX Oil Service Sector Index*$100 invested on December 31, 2013 in stock or index, including reinvestment of dividends.Year ended December 31. 12/13 12/14 12/15 12/16 12/17 12/18 Dawson Geophysical Company 100.00 29.59 15.80 36.71 22.69 16.21 S&P 500 100.00 111.39 110.58 121.13 144.65 135.63 PHLX Oil Service Sector 100.00 75.04 56.13 65.40 53.22 28.68 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.” Amounts below are in thousands, exceptper share amounts. Three MonthsEnded Year Ended Year Ended December 31, December 31, September30, 2018 2017 2016 2015 2014 2014 (as adjusted) (as adjusted) (as adjusted) (as adjusted) (as adjusted)Operating revenues (1)$154,156 $156,532 $137,640 $234,685 $50,802 $261,683Net loss (2) (3)$(24,407) $(31,790) $(38,333) $(26,279) $(4,991) $(12,620)Basic loss per share of commonstock (4) (5) (6)$(1.07) $(1.40) $(1.69) $(1.21) $(0.34) $(0.86)Cash dividends declared per share ofcommon stock (7) (8) (9)$ — $ — $ — $ — $0.05 $0.13Weighted average equivalentcommon shares outstanding (10) (11) 22,912 22,779 22,692 21,732 14,730 14,718Total assets$150,685 $167,919 $190,455 $247,787 $244,022 $256,662Revolving line of credit$ — $ — $ — $ — $ — $ —Current maturities of notes payableand obligations under capital leases$6,683 $2,712 $2,357 $8,585 $6,018 $6,752Notes payable and obligations undercapital leases, net of current maturities$6,097 $5,153 $ — $2,106 $4,209 $4,933Stockholders’ equity$117,016 $141,318 $171,474 $209,718 $194,218 $199,530(1)Operating revenues for the years ended December 31, 2017 and 2016 include adjustments for the adoption of Accounting StandardsUpdate (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“Topic 606”) as discussed below in Critical AccountingPolicies.(2)Net loss for the years ended December 31, 2017 and 2016 include adjustments for the adoption of Topic 606.(3)Net loss for the year ended December 31, 2015, the three months ended December 31, 2014 and the year ended September 30, 2014include transaction costs associated with the Merger of $3,314,000, $1,492,000 and $950,000, respectively.(4)Loss per share of common stock for the years ended December 31, 2017 and 2016 include adjustments for the adoption of Topic 606and adjustments for the May 2018 5% stock dividend discussed in Item 5 above.(5)Loss per share of common stock for the year ended December 31, 2015, the three months ended December 31, 2014 and the yearended September 30, 2014 include adjustments for the May 2018 5% stock dividend.(6)Loss per share for the three months ended December 31, 2014 and the year ended September 30, 2014 have been adjusted for theeffect of the Merger by dividing the previously reported loss per share by the Merger conversion factor of 1.76.(7)Cash dividends per share for the three months ended December 31, 2014 and the year ended September 30, 2014 includeadjustments for the May 2018 5% stock dividend.(8)Calculated based on cash dividends declared in period regardless of period paid.(9)Cash dividends per share for the three months ended December 31, 2014 and the year ended September 30, 2014 have been adjustedfor the effect of the Merger by dividing the previously reported dividends per share by the Merger conversion factor of 1.76.(10)Weighted average shares for the years ended December 31, 2017, 2016 and 2015, the three months ended December 31, 2014 andthe year ended September 30, 2014 include adjustments for the May 2018 5% stock dividend.(11)Weighted average shares for the three months ended December 31, 2014 and the year ended September 30, 2014 have been adjustedfor the effect of the Merger by multiplying the previously reported weighted average 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.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 Dawson Geophysical Company and its consolidated subsidiaries.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 2018, we operated a peak of four crews in the U.S. and a peak of three crews in Canadawith varying utilization of the active crews during the quarter in both areas of operation. The fourth quarter in the U.S.historically has been challenging due to shorter work days and the holiday season. Based on currently available information,we anticipate operating up to a peak of five crews in the U.S. and up to a peak of four crews in Canada in the first quarter of2019, with varying utilization of the active crews during the quarter in both areas of operation. The winter season in Canadaconcludes at the end of the first quarter of 2019 with no further seismic activities anticipated thereafter and until the nextwinter season. In addition, we anticipate that we will conduct one microseismic project in the U.S. during the first quarter of2019. Based on currently available information, we anticipate operating up to a peak of four crews in the U.S. with varyingutilization during the second quarter of 2019.Despite the challenging fourth quarter market conditions, for the twelve month period ending December 31, 2018,while revenues remained consistent with 2017 levels, we delivered a 140% increase in EBITDA and a significant reductionin net loss compared to the twelve month period ended December 31, 2017. Our ongoing emphasis on cost reduction andenhanced efficiencies contributed to these improvements. While our twelve month results improved compared to the twelvemonth period ended December 31, 2017, market conditions continue to remain challenging in both the U.S. and Canada. Theincrease in demand we anticipated for the second half of 2018 did not materialize as oil prices softened, and the Canadianmarket was unfavorably impacted by the large differential between Canadian oil prices and West Texas Intermediate (“WTI”)prices. In the Permian and Delaware Basins, takeaway capacity constraints resulted in a pricing differential to WTIthroughout the year, further reducing effective oil prices. Many industry professionals believe the Permian and Delawarepricing differential will further ease as additional takeaway capacity is added in 2019 and 2020. That said, we are encouragedby an emerging trend related to areas of activity by exploration and production companies and multi-client data companies.For much of 2018, seismic projects in the U.S. have been concentrated in the Permian and Delaware basins with little activityoccurring outside of those basins. In recent months, we have seen a slight increase in interest in projects located outside ofthe Permian and Delaware basins. We have recently bid projects in the Niobrara and Powder River, SCOOP/STACK, EagleFord, and Austin Chalk basins. While our revenues are mainly affected by the level of client demand for our services, our revenues are also affectedby the pricing for our services that we negotiate with our clients and the productivity and utilization level of our dataacquisition crews. Factors impacting productivity and utilization levels include client demand, commodity prices, whetherwe enter into turnkey or dayrate contracts with our clients, the number and size of crews, the number of recording channelsper crew, crew downtime related to inclement weather, delays in acquiring land access permits, agricultural or20 Table of Contentshunting 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. The majority of our revenues were derived from turnkey contracts for the years ending December 31, 2018 and 2017.While turnkey contracts allow us to capitalize on improved crew productivity, we also bear more risks related to weather andcrew downtime. We expect the majority of our contracts to be turnkey as we continue our operations in the mid-continent,western and southwestern regions of the U.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 2018. 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 ResultsEffective January 1, 2018, the Company adopted the requirements of ASU No. 2014-09, Revenue from Contractswith Customers (Topic 606) as discussed below. All amounts and disclosures set forth in this Annual report on Form 10-Khave been updated to comply with the new standard, as indicated by “as adjusted”. The Board of Directors approved a 5% stock dividend (or 0.05 share for each share outstanding) on the outstandingshares of common stock of the Company on May 1, 2018. The stock dividend was paid on May 29, 2018 to shareholders ofrecord on May 14, 2018. All comparative financial statement presentations have been retroactively adjusted to reflect thedividend and is also indicated by “as adjusted”.Results of OperationsYear Ended December 31, 2018 versus Year Ended December 31, 2017 (as adjusted)Operating Revenues. Operating revenues for the year ended December 31, 2018 were $154,156,000 compared to$156,532,000 for the same period of 2017. The comparable revenue totals for the years ended December 31, 2018 and 2017was a result of similar crew utilization rates over those periods.Operating Expenses. Operating expenses for the year ended December 31, 2018 decreased to $132,937,000compared to $139,072,000 for the same period of 2017. The decrease in operating expenses was mainly due to decreasedreimbursable charges for the year ended December 31, 2018 compared to the same period in 2017.General and administrative expenses. General and administrative expenses were 10.6% of revenues in the yearended December 31, 2018 compared to 10.3% of revenues in the same period of 2017. General and administrative expensesincreased to $16,287,000 during the year ended December 31, 2018 from $16,189,000 during the same period of 2017.21 Table of ContentsThe primary factor for general and administrative expenses remaining flat year to year is the result of multiple years ofinitiatives to control administrative costs required to support our operations.Depreciation expense. Depreciation for the year ended December 31, 2018 totaled $29,959,000 compared to$39,235,000 for the same period of 2017. 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 2019primarily due to limited capital expenditures to maintain our existing asset base.Our total operating costs for the year ended December 31, 2018 were $179,183,000, representing a 7.9% decreasefrom the corresponding period of 2017. This change was primarily due to the factors described above.Income Taxes. Income tax benefit was $798,000 for the year ended December 31, 2018 compared to $5,314,000 forthe same period of 2017. The effective tax benefit rates for the years ended December 31, 2018 and 2017 were approximately3.1% and 14.3%, respectively. Our effective tax rates decreased compared to the corresponding period from the prior yearprimarily due to the filing and acceptance of federal and state tax returns and the associated refunds received in 2017. Oureffective tax rates differ from the statutory federal rate of 21% for certain items such as state and local taxes, valuationallowances, non‑deductible expenses and discrete items. Year Ended December 31, 2017 (as adjusted) versus Year Ended December 31, 2016 (as adjusted)Operating Revenues. Operating revenues for the year ended December 31, 2017 were $156,532,000 compared to$137,640,000 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 revenues, 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 $139,072,000compared to $124,023,000 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 12.2% 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 control 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 total operating costs for the year ended December 31, 2017 were $194,496,000, representing a 5.1% 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 compared to $5,960,000for the same period of 2016. The effective tax benefit rates for the years ended December 31, 2017 and 2016 wereapproximately 14.3% and 13.5%, respectively. Our effective tax rates increased compared to the corresponding period fromthe prior year primarily due to the filing and acceptance of federal and state tax returns and the associated refunds received.Our effective tax rates differ from the statutory federal rate of 35% for certain items such as state and local taxes, valuationallowances, non‑deductible expenses and discrete items.22 Table of ContentsUse 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 provided by (used in) operating activities, which arethe most directly comparable GAAP financial measures, are provided in the following tables (in thousands): Year Ended December 31, 2018 2017 2016 (as adjusted) (as adjusted) Net loss $(24,407) $(31,790) $(38,333) Depreciation and amortization 29,959 39,235 44,283 Interest expense (income), net 8 (148) (87) Income tax benefit (798) (5,314) (5,960) EBITDA $4,762 $1,983 $(97) Year Ended December 31, 2018 2017 2016 (as adjusted) (as adjusted) Net cash provided by (used in) operating activities $12,871 $(6,703) $8,742 Changes in working capital and other items (6,741) 9,662 (7,960) Noncash adjustments to net loss (1,368) (976) (879) EBITDA $4,762 $1,983 $(97) 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.23 Table of ContentsCash Flows. The following table shows our sources and uses of cash (in thousands) for the years ended December31, 2018, 2017 and 2016: Year Ended December 31, 2018 2017 2016 (as adjusted) (as adjusted) Net cash provided by (used in): Operating activities $12,871 $(6,703) $8,742 Investing activities (8,596) 16,788 (22,729) Financing activities 2,517 (3,420) (8,483) Effect of exchange rate changes on cash and cash equivalents (76) 724 85 Net change in cash and cash equivalents $6,716 $7,389 $(22,385) Year Ended December 31, 2018 versus Year Ended December 31, 2017 (as adjusted)Net cash provided by operating activities was $12,871,000 for the year ended December 31, 2018 compared to cashused in operating activities of $6,703,000 for the same period in 2017. Cash reductions were primarily due to a decrease inour net loss and a decrease in our operating level of accounts receivable as of December 31, 2018.Net cash used in investing activities was $8,596,000 for the year ended December 31, 2018 and includes $6,000,000of proceeds from maturities of short-term investments that were not reinvested offset by cash capital expenditures of$15,745,000. Net cash provided by investing activities was $16,788,000 for the year ended December 31, 2017 and included$23,667,000 of proceeds from maturities of short-term investments that were not reinvested offset by cash capitalexpenditures of $8,675,000. Cash provided by investing activities for the year ended December 31, 2017 was aided by$1,325,000 of proceeds from disposal of assets. Net cash provided by financing activities was $2,517,000 for the year ended December 31, 2018 and includesproceeds from notes payable used to purchase seismic data acquisition equipment of $6,518,000 offset by principalpayments of $1,180,000 on our notes, payments of $2,699,000 under our capital leases, and outflows of $121,000 associatedwith taxes related to stock vesting. Net cash used in financing activities was $3,420,000 for the year ended December 31,2017 and included principal payments of $2,186,000 on our notes, payments of $1,076,000 under our capital leases, andoutflows of $158,000 associated with taxes related to stock vesting.Year Ended December 31, 2017 (as adjusted) versus Year Ended December 31, 2016 (as adjusted)Net 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 proceeds from maturities of short-term investments that were not reinvested offset by cash capitalexpenditures of $8,675,000. The increase in cash provided by investing activities was aided by $1,325,000 of proceeds fromdisposal of assets. Net 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 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.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.24 Table of ContentsCapital 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 VeritexBank (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, 2018.Credit Agreement. Our Credit Agreement with Veritex Bank includes term loan and revolving loan features, andalso allows for the issuance of letters of credit and other promissory notes. We can borrow up to a maximum of $20.0 millionpursuant 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, 2019, 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. Any notes outstanding under this feature would counttoward the maximum amounts we may borrow under the Credit Agreement.We do not currently have any notes payable under the term loan feature of the Credit Agreement.We have one outstanding note payable under the Credit Agreement that is not under the term loan feature (andtherefore does not count towards the maximum amounts that we may borrow) which was incurred on September 13, 2018 topurchase (and is secured by) equipment and has a remaining aggregate principal amount of $5,975,000 as of December 31,2018. The note payable will mature upon the earlier of (i) the acceleration of the indebtedness pursuant to the terms of theCompany’s existing credit facility with Veritex Bank or (ii) September 13, 2021.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 to aninterest 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 $100,000,000. We were in compliance with all covenants under the Credit Agreement, includingspecified ratios, as of December 31, 2018. Veritex Bank has also issued three letters of credit as of December 31, 2018. The first letter of credit is in the amountof $1,767,000 to support payment of our insurance obligations. The principal amount of this letter of credit is collateralizedby certain of our core equipment. The second letter of credit is in the amount of $583,000 to support our workerscompensation insurance and is secured by a certificate of deposit. The third letter of credit is unsecured and in the amount of$75,000 to support certain of our performance obligations. None of the letters of credit counts as funds borrowed under ourLine of Credit.Other Indebtedness. As of December 31, 2018, we have two notes payable to a finance company for variousinsurance premiums totaling $1,680,000. In addition, we lease certain seismic recording equipment and vehicles under leases classified as capital leases. OurConsolidated Balance Sheets as of December 31, 2018 include capital lease obligations of $5,125,000. 25 Table of ContentsContractual 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 2019 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, 2018 (in thousands): Payments Due by Period (in thousands) Within After Contractual Obligations Total 1 Year 2-3 Years 4-5 Years 5 Years Operating lease obligations (office space) $9,761 $1,521 $2,870 $2,321 $3,049 Capital lease obligations 5,125 2,830 2,295 — — Debt obligations 7,655 3,852 3,803 — — Total $22,541 $8,203 $8,968 $2,321 $3,049 Off‑Balance Sheet ArrangementsAs of December 31, 2018, 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 collectability ofoutstanding client invoices is continually assessed, the inherent volatility of the energy industry’s business cycle can causeswift and unpredictable changes in the financial stability of our clients. Our allowance for doubtful accounts was $250,000 atDecember 31, 2018, 2017 and 2016.Notes Receivable. Our notes receivable consist of one note receivable from the purchaser of certain dynamite energysource drilling equipment. This note receivable is stated at the unpaid principal balance. An allowance for note losses wasnot deemed necessary at December 31, 2018. Interest is recognized over the term of the note and is calculated using thesimple-interest method. Amounts payable to us under the note receivable are fully collateralized by the specific dynamiteenergy source drilling equipment sold to the note payor.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, 2018,2017 and 2016.26 Table of ContentsLeases. 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 which usually have an originalexpected duration of one year or less. These contracts are either “turnkey” or “term” agreements. Under both types ofagreements, we recognize revenue as the services are performed. Revenue is recognized based on square miles of datarecorded compared to total square miles anticipated to be recorded on the survey using the total estimated revenue for theservice contract. In the case of a cancelled service contract, the client is billed and revenue is recognized for any third partycharges and square miles of data recorded up to the date of cancellation. We also receive reimbursements for certain out-of-pocket expenses under the terms of the service contracts. Theamounts billed to clients are included at their gross amount in the total estimated revenue for the service contract. Clients are billed as permitted by the service contract. Contract assets and contract liabilities are the result of timingdifferences between revenue recognition, billings and cash collections. If billing occurs prior to the revenue recognition orbilling exceeds the revenue recognized, the amount is considered deferred revenue and a contract liability. Conversely, if therevenue recognition exceeds the billing, the excess is considered an unbilled receivable and a contract asset. As services areperformed, those contract liabilities and contract assets are recognized as revenue and expense, respectively. In some instances, third-party permitting, surveying, drilling, helicopter, equipment rental and mobilization coststhat directly relate to the contract are utilized to fulfill the contract obligations. These fulfillment costs are capitalized inother current assets and amortized based on the total square miles of data recorded compared to total square miles anticipatedto be recorded on the survey using the total estimated fulfillment costs for the service contract.Estimates for total revenue and total fulfillment cost on any service contract are based on significant qualitative andquantitative judgments. Management considers a variety of factors such as whether various components of the performanceobligation will be performed internally or externally, cost of third party services, and facts and circumstances unique to theperformance obligation in making these estimates.In May 2014, the Financial Accounting Standards Board (“FASB”) issued Topic 606 related to revenue recognitionin which an entity should recognize revenue when promised goods or services are transferred to customers in an amount thatreflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Topic 606 alsorequires disclosures sufficient to enable users to understand the nature, amount, timing, and uncertainty of revenue and cashflows arising from contracts with customers.We adopted Topic 606 effective January 1, 2018, using the full retrospective method, which required us to adjustour consolidated financial statements from amounts previously reported for each prior reporting period presented. Werecognized the cumulative effect of adopting the guidance as an adjustment to our opening balance of retained earnings as ofJanuary 1, 2016. We elected several ongoing and transitional practical expedients including (i) to ignore the financingcomponent when estimating the transaction price for service contracts completed within one year, (ii) to exclude sales taxcollected from the customer when determining the transaction price, (iii) to expense incremental costs to obtain a customercontract if the amortization period for those costs would otherwise be one year or less, (iv) to not restate contracts that beginand end within the same annual reporting period, (v) to use the transaction price at the completion of the contract toretrospectively apply the new guidance, and (vi) to not disclose the remaining performance obligations for the reportingperiods presented before the date of initial application. The most significant impact to us of the adoption of Topic 606 relatesto the deferred recognition of revenues and expenses to fulfill contracts with customers until data recording has begun.Adjustments to Consolidated Financial Statements related to Topic 606 are shown in the Consolidated Statementsof Stockholders’ Equity and in Note 6 - Supplemental Consolidated Financial Statement Information.27 Table of ContentsIncome 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 21% for certain items such as state andlocal taxes, valuation allowances, non‑deductible expenses and discrete items.Recently Issued Accounting PronouncementsIn June 2018, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2018-07, Compensation – StockCompensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which expands the scope ofTopic 718 to include share-based payment transactions for acquiring goods and services from nonemployees except forcertain circumstances. Any transition impact will be a cumulative-effect adjustment to retained earnings as of the beginningof the year of adoption. This ASU is effective for the annual period beginning after December 15, 2018, including interimperiods within that annual period and early adoption is permitted. We will adopt this guidance in the first quarter of 2019and do not expect a material impact on our consolidated financial statements. In 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 (loss) to retained earnings for stranded tax effects resultingfrom the Tax Cuts and Jobs Act passed by the U.S. federal government in December 2017. We adopted ASU 2018-02 in thefirst quarter of 2018 and recorded an adjustment to Stockholders’ Equity within the Consolidated Balance Sheets that did nothave a material impact on our 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. We adopted this guidance in the first quarter of 2018, andit did not have a material impact on our 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.Qualitative and quantitative disclosures are required and optional practical expedients may be elected. This ASU is effectivefor the annual period beginning after December 15, 2018, including interim periods within that annual period. Subsequentamendments to the initial guidance have been issued in January 2017, January 2018, and July 2018 within ASU No. 2017-03, ASU No. 2018-01, ASU No. 2018-10, and ASU No. 2018-11 regarding qualitative disclosures, optional practicalexpedients, codification improvements and an optional transition method to adopt with a cumulative-effect adjustmentversus a modified retrospective approach. These updates do not change the core principle of the guidance under ASU No.2016-02, but rather provide implementation guidance. We will adopt the accounting standard using the cumulative-effecttransition method, which applies the guidance at the beginning of the period of adoption. We will elect the package ofpractical expedients permitted, which, among other things, allows us to carry forward the historical lease classification. Wewill make the accounting policy elections to not recognize lease assets and lease liabilities with an initial term of 12 monthsor less and to not separate lease and non-lease components. Our accounting for finance leases remains substantiallyunchanged. Operating lease right-of-use (“ROU”) assets and liabilities will be recognized at the commencement date basedon the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, anincremental borrowing rate based on the information available at the commencement date will be used in determining thepresent value. We will use the implicit rate when readily determinable. The operating lease ROU asset will also include anyprepaid lease payments and will be reduced by any accrued lease payments. Our lease terms may include options to extend orterminate the lease when it is reasonably certain that those options will be exercised. Operating28 Table of Contentslease cost for lease payments will be recognized on a straight-line basis over the lease term. The expected impact of adoptionon our consolidated balance sheet will be the recognition of a ROU asset of $7.8 million, an operating lease liability of $8.3million, and a reduction of accrued liabilities of $0.5 million, primarily for office and shop space leases that are currently off-balance sheet. We do not anticipate any material impact on our results of operations nor any material impact on our cashflows. Our disclosures will be adjusted according to the disclosure requirements of the standard. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework –Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements on fairvalue measurement by removing, modifying, and adding certain disclosures. This ASU is effective for the annual periodbeginning after December 15, 2019, including interim periods within that annual period. We are currently evaluating the newguidance to determine the impact it will have on our consolidated financial statements. In August 2018, the SEC adopted amendments to simplify certain disclosure requirements, as set forth in SecuritiesAct Release No. 33-10532, Disclosure Update and Simplification, which includes a requirement for entities to present thechanges in shareholders’ equity in the interim financial statements in quarterly reports on Form 10-Q. This amendment iseffective for all filings made on or after November 5, 2018. In light of the timing of effectiveness of the amendment andproximity to the filing date for most filers’ quarterly reports, the SEC has allowed for a filer’s first presentation of the changesin shareholders’ equity to be included in its Form 10-Q for the quarter that begins after the effective date. We have elected toadopt the SEC’s delayed implementation option and will present the changes in shareholders’ equity on an interim basis inthe first quarter of 2019. 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, 2018. 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, 2018, our two largest clients accounted forapproximately 32% 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, 2018, cash and cash equivalents totaled $28,729,000.29 Table of ContentsFor 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‑25 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. Based upon thatevaluation, our President and Chief Executive Officer, and our Executive Vice President, Chief Financial Officer, Secretary,and Treasurer concluded that, as of December 31, 2018, our disclosure controls and procedures were effective, in all materialrespects, with regard to the recording, processing, summarizing and reporting, within the time periods specified in the SEC’srules and forms, for information required to be disclosed by us in the reports that we file or submit under the Exchange Act.Our disclosure controls and procedures include controls and procedures designed to ensure that information required to bedisclosed in reports filed or submitted under the Exchange Act is accumulated and communicated to our management,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, 2018 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, 2018, our internal control over financial reporting was effective. Our internal control overfinancial reporting as of December 31, 2018 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 ReportingThere have not been any additional changes in our internal control over financial reporting (as defined inRule 13a‑15(f) and 15d‑15(f) of the Exchange Act) during the quarter ended December 31, 2018 that have materially affectedor are reasonably likely to materially 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‑25 and areincorporated by reference into Part II, Item 8:Reports of Independent Registered Public Accounting Firm 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. DESCRIPTION 2.1 Agreement and Plan of Merger, dated October 8, 2014, by and among Dawson Operating Company (f/k/aDawson Geophysical Company), the Registrant and Riptide Acquisition Corp., filed as Exhibit 2.1 to theRegistrant’s Current Report on Form 8‑K, filed on October 9, 2014, and incorporated herein by reference. 3.1 Amended and Restated Certificate of Formation, as amended February 11, 2015, filed as Exhibit 3.1 to theRegistrant’s Annual Report on Form 10‑K, filed on March 16, 2015, and incorporated herein by reference. 3.2 Bylaws, as amended February 11, 2015 filed as Exhibit 3.2 to the Registrant’s Annual Report on Form 10‑K,filed on March 16, 2015, and incorporated herein by reference. 4.1 Form of Specimen Stock Certificate, filed as Exhibit 4.1 to the Registrant’s Current Report on Form 8‑K, filedon February 11, 2015, and incorporated herein by reference. 10.1 Amended and Restated Loan and Security Agreement by and between the Registrant and Sovereign Bank,dated September 16, 2009, filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8‑K, filed onSeptember 22, 2009 (File No. 001‑32472), and incorporated herein by reference. 10.2 Amended and Restated Promissory Note, by and between the Registrant and Sovereign Bank, datedSeptember 16, 2009, filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8‑K, filed onSeptember 22, 2009 (File No. 001‑32472), and incorporated herein by reference. 10.3 Amendment to Amended and Restated Loan and Security Agreement and Amended and Restated PromissoryNote by and between the Registrant and Sovereign Bank, dated September 16, 2010, filed as Exhibit 10.1 tothe Registrant’s Form 10‑Q for the quarterly period ended September 30, 2010, and incorporated herein byreference. 10.4 Third Amendment to Amended and Restated Loan and Security Agreement and Amendment to Amended andRestated Promissory Note, by and between the Registrant and Sovereign Bank, dated September 16, 2011,filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8‑K, filed on September 22, 2011, andincorporated herein by reference. 10.5 Fourth Amendment to Amended and Restated Loan and Security Agreement by and between the Registrantand Sovereign Bank, dated January 26, 2012, filed as Exhibit 10.1 to the Registrant’s Quarterly Report onForm 10‑Q for the quarterly period ended September 30, 2012, and incorporated herein by reference. 10.6 Fifth Amendment to Amended and Restated Loan and Security Agreement by and between the 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 Registrantand Sovereign Bank, dated as of October 11, 2012, filed as Exhibit 10.1 to the Registrant’s Form 10‑Q for thequarterly period ended September 30, 2013, and incorporated herein by reference. 33 Table of ContentsEXHIBIT NO. DESCRIPTION 10.8 Seventh Amendment to Amended and Restated Loan and Security Agreement and Amendment to Amendedand Restated Promissory Note, by and between the Registrant and Sovereign Bank, dated as of September 16,2013, filed as Exhibit 10.2 to the Registrant’s Form 10‑Q for the quarterly period ended September 30, 2013,and incorporated herein by reference. 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,filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8‑K, filed on September 19, 2014, andincorporated herein by reference. 10.10 Ninth Amendment to Amended and Restated Loan and Security Agreement, filed on July 2, 2015 asExhibit 10.1 to the 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 asExhibit 10.11 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 theRegistrant and Sovereign Bank, dated June 30, 2017, filed on June 30, 2017 as Exhibit 10.1 to theRegistrant’s Current Report on Form 8-K and incorporated herein by reference. 10.15 Fourteenth Amendment to Amended and Restated Loan and Security Agreement, by and between theRegistrant and Veritex Community Bank, dated November 23, 2017, filed on July 2, 2018 as Exhibit 10.2 tothe Registrant’s Current Report on Form 8-K and incorporated herein by reference. 10.16 Fifteenth Amendment to Amended and Restated Loan and Security Agreement, by and between the Registrantand Veritex Community Bank, dated June 30, 2018, filed on July 2, 2018 as Exhibit 10.1 to the Registrant’sCurrent Report on Form 8-K and incorporated herein by reference. 10.17 Sixteenth Amendment to Amended and Restated Loan and Security Agreement, by and between theRegistrant and Veritex Community Bank, dated September 13, 2018, filed on September 18, 2018 as Exhibit10.1 to the Registrant’s Current Report on Form 8-K and incorporated herein by reference. 10.18 Seventeenth Amendment to Amended and Restated Loan and Security Agreement, by and between theRegistrant and Veritex Community Bank, dated November 23, 2018, filed on February 21, 2019 as Exhibit10.1 to the Registrant’s Current Report on Form 8-K and incorporated herein by reference. +10.19 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. 34 Table of ContentsEXHIBIT NO. DESCRIPTION +10.20 The Executive Nonqualified Excess Plan Document, filed as Exhibit 10.2 to the Registrant’s Current Reporton Form 8‑K filed on January 8, 2013, and incorporated herein by reference. +10.21 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. +10.22 Employment Agreement, dated October 8, 2014, by and between the Registrant and Stephen C. Jumper, filedas Exhibit 10.5 to the Registrant’s Current Report on Form 8‑K, filed on October 9, 2014, and incorporatedherein by reference. +10.23 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. +10.24 Employment Agreement, dated October 8, 2014, by and between the Registrant and C. Ray Tobias, filed asExhibit 10.6 to the Registrant’s Current Report on Form 8‑K, filed on October 9, 2014, and incorporatedherein by reference. +10.25 Employment Agreement, dated October 8, 2014, by and between the Registrant and Daniel G. Winn, filed asExhibit 10.4 to the Registrant’s Current Report on Form 8‑K, filed on October 9, 2014, and incorporatedherein by reference. +10.26 Employment Agreement, dated October 8, 2014, by and between the Registrant and James K. Brata, filed asExhibit 10.3 to the Registrant’s Current Report on Form 8‑K, filed on October 9, 2014, and incorporatedherein by reference. +10.27 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 incorporatedherein by reference. +10.28 Letter Agreement, dated February 15, 2016, by and between James K. Brata and the Company, filed asExhibit 10.1 to the Company’s Current Report on Form 8‑K, filed on February 19, 2016, and incorporatedherein by reference. +10.29 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. +10.30 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. +10.31 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. +10.32 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. 35 Table of ContentsEXHIBIT NO. DESCRIPTION +10.33 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. 10.34 Letter Agreement, dated May 4, 2018, by and between James K. Brata and the Company, filed as Exhibit 10.1to the Company’s Current Report on Form 8-K, filed on May 4, 2018, and incorporated herein by reference. 10.35 Letter Agreement, dated May 4, 2018, by and between Stephen C. Jumper and the Company, filed as Exhibit10.2 to the Company’s Current Report on Form 8-K, filed on May 4, 2018, and incorporated herein byreference. 10.36 Letter Agreement, dated May 4, 2018, by and between James W. Thomas and the Company, filed as Exhibit10.3 to the Company’s Current Report on Form 8-K, filed on May 4, 2018, and incorporated herein byreference. 10.37 Letter Agreement, dated May 4, 2018, by and between C. Ray Tobias and the Company, filed as Exhibit 10.4to the Company’s Current Report on Form 8-K, filed on May 4, 2018, and incorporated herein by reference. +10.38 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. +10.39 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. +10.40 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. +10.41 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. +10.42 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. +10.43 Dawson Geophysical 2014 Annual Incentive Plan, filed as Exhibit 10.1 to Dawson Operating Company’s(f/k/a Dawson Geophysical Company) Current Report on Form 8‑K, filed on November 25, 2013 (FileNo. 001‑34404), and incorporated herein by reference. 10.44 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. 10.45 Form of Supplemental Agreement to Master Geophysical Data Acquisition Agreement, filed as Exhibit 10.11to Dawson Operating Company’s (f/k/a Dawson Geophysical Company) Annual Report on Form 10‑K, filedon December 5, 2012 (File No. 001‑34404), and incorporated herein by reference.36 Table of ContentsEXHIBIT NO. DESCRIPTION +10.46 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. +10.47 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. *21.1 Subsidiaries of the Registrant. *23.1 Consent of RSM US LLP, independent registered public accountants to incorporation of report by reference. *31.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 302 of the Sarbanes‑Oxley Act of 2002. *31.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 302 of the Sarbanes‑Oxley Act of 2002. *32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes‑Oxley Act of 2002. *32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes‑Oxley Act of 2002. 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. 37 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 the6 day of March, 2019. 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) 03-06-19 /s/ Wayne A. WhitenerWayne A. Whitener Vice Chairman of the Board of Directors 03-06-19 /s/ William J. BarrettWilliam J. Barrett Director 03-06-19 /s/ Craig W. CooperCraig W. Cooper Director 03-06-19 /s/ Gary M. HooverGary M. Hoover Director 03-06-19 /s/ Michael L. KlofasMichael L. Klofas Director 03-06-19 /s/ Ted R. NorthTed R. North Director 03-06-19 /s/ Mark A. Vander PloegMark A. Vander Ploeg Director 03-06-19 /s/ James K. BrataJames K. Brata Executive Vice President, Chief FinancialOfficer, Secretary, and Treasurer(principal financial and accounting officer) 03-06-19 38 thTable of ContentsINDEX TO CONSOLIDATED FINANCIAL STATEMENTSConsolidated Financial Statements of Dawson Geophysical Company PageReports of Independent Registered Public Accounting Firm F‑2Consolidated Balance Sheets as of December 31, 2018 and 2017 F‑4Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2018,2017 and 2016 F‑5Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2018, 2017 and 2016 F‑6Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017 and 2016 F‑7Notes to Consolidated Financial Statements F‑8 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, 2018, 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, 2018, 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, 2018 and 2017, 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 6, 2019 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 6, 2019F-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, 2018 and 2017, 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, 2018 and 2017, 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, 2018, 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 6, 2019 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 6, 2019F-3 Table of ContentsDAWSON GEOPHYSICAL COMPANYCONSOLIDATED BALANCE SHEETS(amounts in thousands, except share data) December 31, December 31, 2018 2017 (as adjusted) Assets Current assets: Cash and cash equivalents $28,729 $22,013 Short-term investments 10,583 16,583 Accounts receivable, net of allowance for doubtful accounts of $250 at December 31, 2018 and2017 25,338 33,156 Current maturities of notes receivable 64 695 Prepaid expenses and other current assets 12,311 7,340 Total current assets 77,025 79,787 Property and equipment 293,948 307,844 Less accumulated depreciation (222,407) (221,271) Property and equipment, net 71,541 86,573 Notes receivable, net of current maturities 1,447 841 Intangibles, net 379 494 Long-term deferred tax assets, net 293 224 Total assets $150,685 $167,919 Liabilities and stockholders' equity Current liabilities: Accounts payable $5,427 $5,933 Accrued liabilities: Payroll costs and other taxes 1,034 1,151 Other 3,643 4,314 Deferred revenue 10,501 6,314 Current maturities of notes payable and obligations under capital leases 6,683 2,712 Total current liabilities 27,288 20,424 Long-term liabilities: Notes payable and obligations under capital leases, net of current maturities 6,097 5,153 Deferred tax liabilities, net 134 874 Other accrued liabilities 150 150 Total long-term liabilities 6,381 6,177 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, 23,018,441 and 22,926,805 shares issued, and 22,969,996 and 22,878,360 shares outstanding at December 31, 2018 and 2017, respectively 230 229 Additional paid-in capital 153,268 152,022 Retained deficit (34,518) (10,153) Treasury stock, at cost; 48,445 shares — — Accumulated other comprehensive loss, net (1,964) (780) Total stockholders’ equity 117,016 141,318 Total liabilities and stockholders’ equity $150,685 $167,919 See accompanying notes to the consolidated financial statements.F-4 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, 2018 2017 2016 (as adjusted) (as adjusted) Operating revenues $154,156 $156,532 $137,640 Operating costs: Operating expenses 132,937 139,072 124,023 General and administrative 16,287 16,189 16,822 Depreciation and amortization 29,959 39,235 44,283 179,183 194,496 185,128 Loss from operations (25,027) (37,964) (47,488) Other income (expense): Interest income 400 306 347 Interest expense (408) (158) (260) Other (expense) income (170) 712 3,108 Loss before income tax (25,205) (37,104) (44,293) Income tax benefit (expense): Current 41 6,077 396 Deferred 757 (763) 5,564 798 5,314 5,960 Net loss (24,407) (31,790) (38,333) Other comprehensive (loss) income: Net unrealized (loss) income on foreign exchange rate translation, net (1,141) 816 228 Comprehensive loss $(25,548) $(30,974) $(38,105) Basic loss per share of common stock $(1.07) $(1.40) $(1.69) Diluted loss per share of common stock $(1.07) $(1.40) $(1.69) Cash dividend declared per share of common stock $— $— $— Weighted average equivalent common shares outstanding 22,912,217 22,779,377 22,692,139 Weighted average equivalent common shares outstanding - assuming dilution 22,912,217 22,779,377 22,692,139 See accompanying notes to the consolidated financial statements. F-5 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 (as adjusted) (as adjusted) (as adjusted) (as adjusted) Balance December 31, 2015 22,719,498 $227 $150,456 $60,859 $(1,824) $209,718Impact of adopting ASU 2014-09 (869) (869)Net loss (as adjusted) (38,333) (38,333)Unrealized gain on foreign exchange rate translation 496 Income tax expense (268) Other comprehensive gain 228 228Issuance of common stock under stock compensationplans 20,221 — — —Tax deficit recorded to hypothetical APIC pool (77) (77)Stock-based compensation expense 462 462Issuance of common stock as compensation 66,200 1 416 417Shares exchanged for taxes on stock-based compensation (10,880) — (72) (72)Balance December 31, 2016 22,795,039 228 151,185 21,657 (1,596) 171,474Impact of adopting ASU 2016-09 20 (20) —Net loss (as adjusted) (31,790) (31,790)Unrealized gain on foreign exchange rate translation 1,091 Income tax expense (275) Other comprehensive gain 816 816Issuance of common stock under stock compensationplans 92,448 1 (1) —Stock-based compensation expense 656 656Issuance of common stock as compensation 67,498 — 320 320Shares exchanged for taxes on stock-based compensation (28,180) — (158) (158)Balance December 31, 2017 22,926,805 229 152,022 (10,153) (780) 141,318Impact of adopting ASU 2018-02 43 (43) —Cash in lieu of fractional shares for stock dividend (101) (1) (1)Net loss (24,407) (24,407)Unrealized loss on foreign exchange rate translation (1,141) Income tax benefit — Other comprehensive loss (1,141) (1,141)Issuance of common stock under stock compensationplans 51,384 1 (1) —Stock-based compensation expense 1,037 1,037Issuance of common stock as compensation 59,284 — 331 331Shares exchanged for taxes on stock-based compensation (18,931) — (121) (121)Balance December 31, 2018 23,018,441 $230 $153,268 $(34,518) $(1,964) $117,016See accompanying notes to the consolidated financial statements.F-6 Table of Contents DAWSON GEOPHYSICAL COMPANYCONSOLIDATED STATEMENTS OF CASH FLOWS(amounts in thousands) Year Ended December 31, 2018 2017 2016 (as adjusted) (as adjusted) Cash flows from operating activities: Net loss$(24,407) $(31,790) $(38,333) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 29,959 39,235 44,283 Noncash compensation 1,368 976 879 Deferred income tax (benefit) expense (757) 763 (5,564) Gain on proceeds from insurance settlements — — (2,269) Change in other accrued long-term liabilities — (1,489) (195) Loss (gain) on disposal of assets 16 (1,714) (167) Other — (91) 186 Change in current assets and liabilities: Decrease (increase) in accounts receivable 6,744 (16,465) 19,891 (Increase) decrease in prepaid expenses and other current assets (2,664) 278 4,242 (Decrease) increase in accounts payable (798) 1,207 (4,878) (Decrease) increase in accrued liabilities (777) 1,458 (1,810) Increase (decrease) in deferred revenue 4,187 929 (7,523) Net cash provided by (used in) operating activities 12,871 (6,703) 8,742 Cash flows from investing activities: Capital expenditures, net of noncash capital expenditures summarized below (15,745) (8,675) (8,251) Proceeds from maturity of short-term investments 55,000 61,250 91,750 Acquisition of short-term investments (49,000) (37,583) (111,000) Proceeds from disposal of assets 437 1,325 1,922 Proceeds from flood insurance claims 687 375 2,850 Proceeds from notes receivable 25 96 — Net cash (used in) provided by investing activities (8,596) 16,788 (22,729) Cash flows from financing activities: Proceeds from notes payable 6,518 — — Principal payments on notes payable (1,180) (2,186) (7,554) Principal payments on obligations under capital leases (2,699) (1,076) (780) Excess tax benefit from share-based payment arrangement — — (77) Tax withholdings related to stock-based compensation awards (121) (158) (72) Cash in lieu of stock dividend paid (1) — — Net cash provided by (used in) financing activities 2,517 (3,420) (8,483) Effect of exchange rate changes on cash and cash equivalents (76) 724 85 Net increase (decrease) in cash and cash equivalents 6,716 7,389 (22,385) Cash and cash equivalents at beginning of year 22,013 14,624 37,009 Cash and cash equivalents at end of year$28,729 $22,013 $14,624 Supplemental cash flow information: Cash paid for interest$408 $143 $260 Cash paid for income taxes$14 $— $33 Cash received for income taxes$— $4,791 $348 Noncash investing and financing activities: Increase (decrease) in accrued purchases of property and equipment$353 $(907) $1,542 Capital lease obligations incurred$— $8,542 $— Financed insurance premiums$2,317 $248 $— Equipment sales financed for buyer$— $(1,500) $— Sales tax on equipment sales financed for buyer$— $(132) $— See accompanying notes to the consolidated financial statements. F-7 Table of ContentsDAWSON GEOPHYSICAL COMPANYNOTES TO CONSOLIDATED FINANCIAL STATEMENTS1. 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 estimates of future revenuesand expenses based on the Company’s anticipated future results, while considering anticipated future oil and natural gasprices which is fundamental in assessing demand for the Company’s services. If the carrying amounts of the assets exceed theestimated expected undiscounted future cash flows, the Company measures the amount of possible impairment by comparingthe carrying amount of the assets to the fair value. No impairment charges were recognized for the years ended December 31,2018, 2017 and 2016.F-8 Table of ContentsLeasesThe 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, 2018,2017 and 2016.Revenue RecognitionServices are provided under cancelable service contracts which usually have an original expected duration of oneyear or less. These contracts are either “turnkey” or “term” agreements. Under both types of agreements, the Companyrecognizes revenues as the services are performed. Revenue is recognized based on square miles of data recorded compared tototal square miles anticipated to be recorded on the survey using the total estimated revenue for the service contract. In thecase of a cancelled service contract, the client is billed and revenue is recognized for any third party charges and square milesof data recorded up to the date of cancellation. The Company receives reimbursements for certain out-of-pocket expenses under the terms of the service contracts.The amounts billed to clients are included at their gross amount in the total estimated revenue for the service contract. Clients are billed as permitted by the service contract. Contract assets and contract liabilities are the result of timingdifferences between revenue recognition, billings and cash collections. If billing occurs prior to the revenue recognition orbilling exceeds the revenue recognized, the amount is considered deferred revenue and a contract liability. Conversely, if therevenue recognition exceeds the billing, the excess is considered an unbilled receivable and a contract asset. As services areperformed, those deferred revenue amounts are recognized as revenue. In some instances, third-party permitting, surveying, drilling, helicopter, equipment rental and mobilization coststhat directly relate to the contract are utilized to fulfill the contract obligations. These fulfillment costs are capitalized inother current assets and amortized based on the total square miles of data recorded compared to total square miles anticipatedto be recorded on the survey using the total estimated fulfillment costs for the service contract.Estimates for total revenue and total fulfillment cost on any service contract are based on significant qualitative andquantitative judgments. Management considers a variety of factors such as whether various components of the performanceobligation will be performed internally or externally, cost of third party services, and facts and circumstances unique to theperformance obligation in making these estimates.In May 2014, the Financial Accounting Standards Board (“FASB”) issued Topic 606 (ASU 2014-09) related torevenue recognition in which an entity should recognize revenue when promised goods or services are transferred tocustomers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goodsor services. Topic 606 also requires disclosures sufficient to enable users to understand the nature, amount, timing, anduncertainty of revenue and cash flows arising from contracts with customers.The Company adopted Topic 606 effective January 1, 2018, using the full retrospective method, which required usto adjust our consolidated financial statements from amounts previously reported for each prior reporting period presented.The Company recognized the cumulative effect of adopting the guidance as an adjustment to our opening balance ofretained earnings as of January 1, 2016. The Company elected several ongoing and transitional practical expedientsincluding (i) to ignore the financing component when estimating the transaction price for service contractsF-9 Table of Contentscompleted within one year, (ii) to exclude sales tax collected from the customer when determining the transaction price, (iii)to expense incremental costs to obtain a customer contract if the amortization period for those costs would otherwise be oneyear or less, (iv) to not restate contracts that begin and end within the same annual reporting period, (v) to use the transactionprice at the completion of the contract to retrospectively apply the new guidance, and (vi) to not disclose the remainingperformance obligations for the reporting periods presented before the date of initial application. The most significant impactto the Company of the adoption of Topic 606 relates to the deferred recognition of revenues and expenses to fulfill contractswith customers until data recording has begun.Adjustments to Consolidated Financial Statements related to Topic 606 are shown in the Consolidated Statementsof Stockholders’ Equity and in Note 6 - Supplemental Consolidated Financial Statement Information.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 translated intoU.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 21% 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.F-10 Table of ContentsReclassificationsCertain reclassifications have been made to the years ended December 31, 2017 and 2016 consolidated financialstatements to conform to the 2018 presentation.2.Short-Term Investments The Company had short-term investments at December 31, 2018 and 2017 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, 2018 or 2017. 3. Fair Value of Financial InstrumentsAt December 31, 2018 and 2017, the Company’s financial instruments included cash and cash equivalents, short-term investments in certificates of deposit, accounts receivable, notes receivable, other current assets, accounts payable, othercurrent liabilities and notes payable. Due to the short-term maturities of cash and cash equivalents, accounts receivable, othercurrent assets, accounts payable and other current liabilities, the carrying amounts approximate fair value at the respectivebalance sheet dates. The carrying value of the notes receivable and notes payable approximate their fair value based on acomparison with the prevailing market interest rates. Due to the short-term maturities of the Company’s investments incertificates of deposit, the carrying amounts approximate fair value at the respective balance sheet dates. The fair values ofthe Company’s notes receivable, notes payable and investments in certificates of deposit are level 2 measurements in the fairvalue hierarchy. 4. 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, 2018 and2017, were as follows: December 31, 2018 2017 Useful LivesLand, building and other $15,164 $16,610 3 to 40 yearsRecording equipment 171,514 183,841 5 to 10 yearsLine clearing equipment — 11 5 yearsVibrator energy sources 79,168 79,694 5 to 15 yearsVehicles 28,101 27,688 1.5 to 10 years 293,948 307,844 Less accumulated depreciation (222,407) (221,271) Property and equipment, net $71,541 $86,573 F-11 Table of Contents6. Supplemental Consolidated Financial Statement InformationDisaggregated Revenues The Company has one line of business, acquiring and processing seismic data in North America. Our chiefoperating decision maker (President, CEO, and Chairman of the Board) makes operating decisions and assesses performancebased on the Company as a whole. Accordingly, the Company is considered to be in a single reportable segment. Thefollowing table presents the Company’s operating revenues (unaudited and in thousands) disaggregated by geographicregion: Year Ended December 31, 2018 2017 2016 (as adjusted) (as adjusted)Operating Revenues United States $137,101 $134,442 $126,832 Canada 17,055 22,090 10,808 Total $154,156 $156,532 $137,640Deferred Costs (in thousands)The opening balance of deferred cost was $2,991 and $3,668 at January 1, 2018 and 2017, respectively. TheCompany’s prepaid expenses and other current assets at December 31, 2018 included deferred costs incurred to fulfillcontracts with customers of $6,994. Deferred costs at December 31, 2018 compared to January 1, 2018 increased primarily as a result of new projects forclients with significant deferred fulfillment costs at December 31, 2018. Deferred cost at December 31, 2017 compared toJanuary 1, 2017 remained fairly consistent. The amount of total deferred costs amortized for the years ended December 31, 2018 and 2017 was $36,615 and$39,980, respectively. There were no material impairment losses incurred during these periods.Deferred Revenue (in thousands)The opening balance of deferred revenue was $6,314 and $5,385 at January 1, 2018 and 2017, respectively. TheCompany’s deferred revenue at December 31, 2018 was $10,501.Deferred revenue at December 31, 2018 compared to January 1, 2018 increased primarily as a result of new projectsfor clients with large third party reimbursables where data has not yet been recorded. Deferred revenue at December 31, 2017compared to January 1, 2017 remained fairly consistent.Revenue recognized for the year ended December 31, 2018 that was included in the contract liability balance at thebeginning of 2018 was $5,945. Revenue recognized for the year ended December 31, 2017 that was included in the contractliability balance at the beginning of 2017 was $5,381. Deferred revenue not recognized during either year relates to projectsthat have not yet started or were cancelled.F-12 Table of ContentsAdjustments to Consolidated Financial StatementsThe following tables reflect the adjustments applied to our consolidated financial statements related to both theadoption of Topic 606 and the 5% stock dividend discussed in Note 1 – Summary of Significant Accounting Policies’ Basisof Presentation and Note 9 – Dividends, respectively.Select line items from the Company’s Consolidated Balance Sheets which reflect the adoption of the new standardand 5% stock dividend are as follows (in thousands): December 31, 2017 As PreviouslyReported Topic 606Adjustments Stock DividendAdjustments As AdjustedCurrent assets: Accounts receivable, net$33,138 $18 $33,156Prepaid expenses and other current assets$4,677 $2,663 $7,340Current liabilities: Deferred revenue$3,699 $2,615 $6,314Stockholders' equity: Common Stock$218 $11 $229Additional paid-in capital$143,835 $8,187 $152,022Retained deficit$(2,021) $66 $(8,198) $(10,153) December 31, 2016 As PreviouslyReported Topic 606Adjustments Stock DividendAdjustments As AdjustedCurrent assets: Accounts receivable, net$16,031 $249 $16,280Prepaid expenses and other current assets$4,822 $2,540 $7,362Current liabilities: Accounts payable$5,617 $(31) $5,586Deferred revenue$3,155 $2,230 $5,385Stockholders' equity: Common Stock$217 $11 $228Additional paid-in capital$142,998 $8,187 $151,185Retained earnings$29,265 $590 $(8,198) $21,657 Select line items from the Company’s Consolidated Statements of Operations and Comprehensive Loss which reflectthe adoption of the new standard and the 5% stock dividend are as follows (in thousands except share and per share data): Twelve Months Ended December 31, 2017 As PreviouslyReported Topic 606Adjustments Stock DividendAdjustments As AdjustedOperating revenues$157,148 $(616) $156,532Operating costs: Operating expenses$139,164 $(92) $139,072Loss from operations$(37,440) $(524) $(37,964)Net loss$(31,266) $(524) $(31,790)Basic and diluted loss per share of common stock$(1.44) $(0.03) $0.07 $(1.40)Weighted average equivalent common shares outstanding and outstanding - assuming dilution 21,694,645 1,084,732 22,779,377 F-13 Table of Contents Twelve Months Ended December 31, 2016 As PreviouslyReported Topic 606Adjustments Stock DividendAdjustments As AdjustedOperating revenues$133,330 $4,310 $137,640Operating costs: Operating expenses$121,661 $2,362 $124,023Loss from operations$(49,436) $1,948 $(47,488)Income tax benefit$6,449 $(489) $5,960Net loss$(39,792) $1,459 $(38,333)Basic and diluted loss per share of common stock$(1.84) $0.07 $0.08 $(1.69)Weighted average equivalent common shares outstanding and outstanding - assuming dilution 21,611,562 1,080,577 22,692,139 Select line items from the Company’s Consolidated Statements of Cash Flows which reflect the adoption of the newstandard are as follows (in thousands): Twelve Months Ended December 31, 2017 As PreviouslyReported Topic 606Adjustments As AdjustedCash flows from operating activities: Net loss$(31,266) $(524) $(31,790)Change in current assets and liabilities: Increase in accounts receivable$(16,696) $231 $(16,465)Decrease in prepaid expenses and other current assets$401 $(123) $278Increase in accounts payable$1,176 $31 $1,207Increase in deferred revenue$544 $385 $929Net cash used in operating activities$(6,703) $— $(6,703) Twelve Months Ended December 31, 2016 As PreviouslyReported Topic 606Adjustments As AdjustedCash flows from operating activities: Net loss$(39,792) $1,459 $(38,333)Deferred income tax benefit$(6,053) $489 $(5,564)Change in current assets and liabilities: Decrease in accounts receivable$19,669 $222 $19,891Decrease in prepaid expenses and other current assets$1,328 $2,914 $4,242Decrease in accounts payable$(4,326) $(552) $(4,878)Decrease in deferred revenue$(2,991) $(4,532) $(7,523)Net cash used in operating activities$8,742 $— $8,742 Other current liabilities (in thousands) consist of the following at December 31, 2018 and 2017: December 31, 2018 2017 Accrued self-insurance reserves $2,423 $2,799 Other accrued expenses and current liabilities 1,220 1,515 Other current liabilities $3,643 $4,314 7. DebtOn June 30, 2015, the Company entered into an amendment to its Credit Agreement with its lender, Veritex Bankfor the purpose of renewing, extending and increasing the Company’s line of credit under such agreement. The CreditAgreement was renewed on June 30, 2018.F-14 Table of ContentsCredit 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, 2019, up to the lesser of (i) $20.0 million or (ii) a sum equal to (a) 80%of the Company’s eligible accounts receivable (less the outstanding principal balance of term loans and letters of creditunder 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 to borrowfunds under the Line of Credit is tied to the amount of the Company’s eligible accounts receivable and value of certain of itscore equipment, if the Company’s accounts receivable decrease materially for any reason, including delays, reductions orcancellations by clients, or decreased demand for the Company’s services, or the value of the Company’s pledged coreequipment decreases materially, the Company’s borrowing ability to fund operations or other obligations may be reduced. The Credit Agreement also provides for a term loan feature. Any notes outstanding under this feature would counttoward the maximum amounts the Company may borrow under the Credit Agreement. The Company does not currently have any notes payable under the term loan feature of the Credit Agreement.The Company has one outstanding note payable under the Credit Agreement that is not under the term loan feature(and therefore does not count towards the maximum amounts that the Company may borrow) which was incurred onSeptember 13, 2018 to purchase (and is secured by) equipment and has a remaining aggregate principal amount of$5,975,000 as of December 31, 2018. The note payable will mature upon the earlier of (i) the acceleration of the indebtednesspursuant to the terms of the Company’s existing credit facility with Veritex Bank or (ii) September 13, 2021.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 $100,000,000. The Company wasin compliance with all covenants under the Credit Agreement, including specified ratios, as of December 31, 2018. Veritex Bank has also issued three letters of credit as of December 31, 2018. The first letter of credit is in the amountof $1,767,000 to support payment of certain insurance obligations of the Company. The principal amount of this letter ofcredit is collateralized by certain of the Company’s core equipment. The second letter of credit is in the amount of $583,000to support the company’s workers compensation insurance and is secured by a certificate of deposit. The third letter of creditis unsecured and in the amount of $75,000 to support certain performance obligations of the Company. None of the letters ofcredit counts as funds borrowed under the Company’s Line of Credit.Other IndebtednessAs of December 31, 2018, the Company has two notes payable to a finance company for various insurance premiumstotaling $1,680,000. 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, 2018 and 2017 include capital lease obligations of$5,125,000 and $7,865,000, respectively.F-15 Table of ContentsMaturities of DebtThe Company’s aggregate principal amount (in thousands) of outstanding notes payable and the interest rates andmonthly payments as of December 31, 2018 and 2017 are as follows: Year Ended December 31, 2018 2017Notes payable to commercial banks Aggregate principal amount outstanding $5,975 $ —Interest rate 5.0% — Year Ended December 31, 2018 2017Notes payable to finance company for insurance Aggregate principal amount outstanding $1,680 $ —Interest rate 3.8 % —The Company’s aggregate maturities of obligations under capital leases (in thousands) at December 31, 2018 are asfollows: January 2019 - December 2019 $2,830January 2020 - December 2020 2,276January 2021 - December 2021 19Obligations under capital leases $5,125Interest rates on these leases ranged from 4.65% to 4.93%.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, which provides for the issuance of up to 1,000,000 shares ofauthorized Company common stock. As of December 31, 2018, there were approximately 418,517 shares available for futureissuance. The 2016 Plan provides for the issuance of stock-based compensation awards, including stock options, commonstock, restricted stock, restricted stock units and other forms. Stock option grant prices awarded under the 2016 Plan may notbe less than the fair market value of the common stock subject to such option on the grant date, and the term of stock optionsshall 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 LegacyF-16 Table of ContentsDawson Plan terminated on November 28, 2016 and, upon the effectiveness of the 2016 Plan on May 5, 2016, has had noshares available for 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. The Company’s employees and officers that hold unvested restricted stock awardedduring 2016 or thereafter are not entitled to dividends when the Company pays dividends.Impact 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, 2018, 2017 and 2016: Year Ended December 31, 2018 2017 2016 Stock options $— $— $42 Restricted stock awards 915 495 347 Restricted stock unit awards 122 161 73 Common stock awards 331 320 417 Total compensation expense $1,368 $976 $879 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, 2018 as well as activity during the year then endedis as follows: Number of StockOptions Weighted AverageExercise Price Weighted AverageRemainingContractual Termin Years (as adjusted) (as adjusted) Balance as of December 31, 2017 326,460 $11.79 Forfeited (42,516) $12.48 Expired (196,447) $11.88 Balance as of December 31, 2018 87,497 $11.23 0.58 Exercisable as of December 31, 2018 87,497 $11.23 0.58 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 exercise and sale of vested options results in a disqualifying disposition, a tax deduction for the Companyoccurs.Outstanding options at December 31, 2018 expire in July 2019. The intrinsic value of the outstanding options atDecember 31, 2018 was zero. There were no unrecognized compensation costs related to stock options as of December 31,2018.F-17 Table of ContentsThere were no options granted or vested, and there were no excess tax benefits from disqualifying dispositionsduring the years ended December 31, 2018, 2017 and 2016. No options were exercised during the years ended December 31,2018, 2017 and 2016.No cash was received from option exercises during the years ended December 31, 2018, 2017 and 2016.Restricted Stock Awards:There were no restricted stock grants in the years ended December 31, 2018 and 2017. The Company granted 91,348restricted stock awards during the year ended December 31, 2016 with a weighted average grant date fair value of $2.96. Thefair value of restricted stock awards equals the market price of the Company’s stock on the grant date and the awardsgenerally vest in one to three years or in annual increments over three years.A summary of the status of the Company’s nonvested restricted stock awards as of December 31, 2018 and activityduring the year then ended is as follows: Number of RestrictedStock Awards Weighted AverageGrant Date Fair Value (as adjusted) Nonvested as of December 31, 2017 74,724 $4.19 Vested (8,750) $8.21 Nonvested as of December 31, 2018 65,974 $3.65 As of December 31, 2018, there were approximately $15,000 of unrecognized compensation costs related tononvested restricted stock awards. These costs are expected to be recognized over a weighted average period of 0.13 years. The aggregate vesting date fair value of restricted stock for the years ended December 31, 2018 and 2017 was$48,000 and $84,000, respectively. There was no vesting of restricted stock for the year ended December 31, 2016. Restricted Stock Unit Awards: The Company granted 268,000, 238,350, and 206,220 restricted stock unit awards during the years ended December31, 2018, 2017 and 2016, respectively, with a weighted average grant date fair value of $7.14, $3.96, and $2.96, respectively.The fair value of restricted stock unit awards equals the market price of the Company’s stock on the grant date and the awardsgenerally vest 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, 2018 and activity duringthe year then ended is as follows: Number of RestrictedStock Unit Awards Weighted AverageGrant Date Fair Value (as adjusted) Nonvested as of December 31, 2017 413,385 $3.60 Granted 268,000 $7.14 Vested (43,050) $4.40 Forfeited (11,250) $5.63 Nonvested as of December 31, 2018 627,085 $5.03 As of December 31, 2018, there were approximately $1,868,000 of unrecognized compensation costs related tononvested restricted stock unit awards. These costs are expected to be recognized over a weighted average period of 1.58years.The aggregate vesting date fair value of restricted stock units for the years ended December 31, 2018, 2017, and2016 was $273,000, $422,000, and $156,000, respectively.F-18 Table of ContentsCommon Stock Awards:The Company granted common stock awards with immediate vesting to outside directors and employees during theyears ended December 31, 2018, 2017 and 2016 as follows: Number of CommonStock Awards Weighted AverageGrant Date Fair Value Year ended December 31, 2018 59,284 $5.59 Year ended December 31, 2017 67,498 $4.74 Year ended December 31, 2016 66,200 $6.31 9. DividendsThe Board of Directors approved a 5% stock dividend (or 0.05 share for each share outstanding) on the outstandingshares of our common stock on May 1, 2018. The stock dividend was paid on May 29, 2018 to shareholders of record onMay 14, 2018. The Company did not issue any stock dividends during calendar years 2017 or 2016.The Company has not paid cash dividends during calendar years 2018, 2017 and 2016. While there are currently norestrictions prohibiting the Company from paying cash 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 cash dividend in respect of the Company’s common stock for the foreseeable future. Paymentof any type of dividends in the future will be at the discretion of the Company’s board and will depend on our financialcondition, 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, 2018, 2017 and 2016. 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, 2018, 2017 and 2016 wereapproximately $1,505,000, $1,480,000, and $1,658,000, respectively.11. Advertising CostsAdvertising costs are charged to expense as incurred. Advertising costs for the years ended December 31, 2018,2017 and 2016 totaled $498,000, $371,000, and $372,000, respectively. 12. Income Taxes The Company’s components of loss before income taxes (in thousands) are as follows: Year Ended December 31, 2018 2017 2016 (as adjusted) (as adjusted) Domestic $(20,577) $(32,238) $(39,214) Foreign (4,628) (4,866) (5,079) Loss before income taxes $(25,205) $(37,104) $(44,293) F-19 Table of ContentsThe Company’s components of income tax benefit (in thousands) are as follows: Year Ended December 31, 2018 2017 2016 (as adjusted) (as adjusted) Current federal benefit $55 $40 $215 Current state (expense) benefit (14) 3,545 181 Current foreign benefit — 2,492 — Deferred federal (expense) benefit (274) (51) 5,326 Deferred state benefit (expense) 344 697 (867) Deferred foreign benefit (expense) 687 (1,409) 1,105 Income tax benefit $798 $5,314 $5,960 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 was required to recognize the effect of the tax law changes in the period of enactment, such asremeasuring the domestic deferred tax assets and liabilities as well as reassessing the net realizability of deferred tax assetsand liabilities. Due to the Company’s current loss position and domestic valuation allowances, the tax reform did not have amaterial impact on the consolidated financials.In December 2017, the SEC staff issued Accounting Bulletin No. 118, Income Tax Accounting Implications of theTax Cuts and Jobs Act (“SAB 118”), which allows companies to record provisional amounts during a measurement periodnot to extend beyond one year from the enactment date. The Tax Cuts and Jobs act was enacted in late fourth quarter of 2017and provisional amounts were recorded. Subsequent guidance was received throughout the year and the accounting ofdeferred tax re-measurement was completed in accordance with SAB 118. Adjustments did not have a material impact on theconsolidated financials due to the domestic loss position and the associated valuation allowances on the domestic deferredtax 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, 2018 2017 2016 (as adjusted) (as adjusted) Tax benefit computed at statutory rate of 21% and 35% (1) $5,293 $12,986 $15,503 Change in valuation allowance (5,811) (4,747) (9,995) State income tax benefit (expense), net of federal tax 260 2,757 (446) Foreign losses 1,319 1,593 985 Tax reform impact to deferred tax balances (2) — (7,590) — Other (263) 315 (87) Income tax benefit $798 $5,314 $5,960 (1)Statutory rate of 21% for year ended December 31, 2018 and 35% for years ended December 31, 2017 and 2016.(2)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-20 Table of ContentsThe principal components of the Company’s net deferred tax assets (liabilities) are as follows (in thousands): December 31, 2018 2017 Deferred tax assets: Federal tax net operating loss ("NOL") carryforward $24,848 $21,014 Foreign tax NOL carryforward 5,298 4,410 Deferred revenue 697 626 Restricted stock and restricted stock unit awards 320 192 Workers’ compensation 60 64 State tax NOL carryforward 2,134 1,529 Self-insurance 111 128 Canadian start-up costs 137 156 Alternative Minimum Tax ("AMT") credit carryforward 315 315 Foreign deferred taxes 466 874 Other comprehensive income 490 242 Other 92 80 Gross deferred tax assets 34,968 29,630 Less valuation allowances (22,806) (17,366) Net deferred tax assets 12,162 12,264 Deferred tax liabilities: Property and equipment (12,003) (12,914) Net deferred tax assets (liabilities) $159 $(650) Foreign deferred tax liabilities $(134) $(874) Domestic deferred tax assets 293 224 Net deferred tax assets (liabilities) $159 $(650) At December 31, 2018, the Company had a NOL for U.S. federal income tax purposes of approximately$118,326,000. This NOL will begin to expire in 2027. Losses incurred after the year ended December 31, 2017 have noexpiration. The Company will carry forward the tax benefits related to federal NOL of approximately $24,848,000. TheCompany also had state NOL’s that will affect state taxes of approximately $2,702,000 at December 31, 2018. State NOL’sbegan to expire in 2015. The Company also had a Canadian NOL of $20,379,000 that will begin to expire in 2037.In evaluating the possible sources of taxable income during 2018, 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 four 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, 2018 and 2017 as well as activity forthe years then ended are as follows (in thousands): December 31, 2018 2017 Balance at beginning of year $— $1,489 Decrease in prior year tax positions — — Increase in current year tax positions — — Liability statute expiration — (1,489) Balance at end of year $— $— The Company’s policy is to recognize interest and penalties related to uncertain tax positions in income taxexpense.Due 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.F-21 Table of Contents13. Net Loss per Share Basic net loss per share is computed by dividing the net loss by the weighted average shares outstanding. Dilutedloss per share is computed by dividing the net loss by the weighted average diluted shares outstanding. The computation of basic and diluted loss per share is as follows (in thousands, except share and per share data): Year Ended December 31, 2018 2017 2016 (as adjusted) (as adjusted) Net loss $(24,407) $(31,790) $(38,333) Weighted average common shares outstanding: Basic 22,912,217 22,779,377 22,692,139 Dilutive common stock options, restricted stock unit awardsand restricted stock awards — — — Diluted 22,912,217 22,779,377 22,692,139 Basic loss per share of common stock $(1.07) $(1.40) $(1.69) Diluted loss per share of common stock $(1.07) $(1.40) $(1.69) The Company had a net loss in the years ended December 31, 2018, 2017 and 2016. As a result, all stock options,restricted stock unit awards, and restricted stock awards were anti-dilutive and excluded from weighted average shares usedin determining the diluted loss per share of common stock for the respective periods.The following weighted average numbers of stock options, restricted stock unit awards, and restricted stock awards,in each case as adjusted for the 5% stock dividend paid to shareholders on May 29, 2018, have been excluded from thecalculation of diluted loss per share of common stock, as their effect would be anti-dilutive for the years ended December 31,2018, 2017 and 2016: Year Ended December 31, 2018 2017 2016 (as adjusted) (as adjusted) Stock options 240,700 355,264 432,337 Restricted stock units 552,458 348,826 281,875 Restricted stock awards 67,052 76,960 80,116 Total 860,210 781,050 794,328 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, 2018 2017 2016 A 22% 17% 13% B 10% 10% — 15. Areas of OperationThe U.S. and Canada are the only countries of operation for the Company.Revenues for the year ended December 31, 2018 were $154,156,000 with $137,101,000 earned in the U.S. and$17,055,000 earned in Canada. Revenues for the year ended December 31, 2017 were $156,532,000 with $134,442,000earned in the U.S. and $22,090,000 earned in Canada. Revenues for the year ended December 31, 2016 were $137,640,000with $126,832,000 earned in the U.S. and $10,808,000 earned in Canada.F-22 Table of ContentsNet long-lived assets as of December 31, 2018 were approximately $71,541,000, with $62,033,000 located in theU.S. and $9,508,000 located in Canada. Net long-lived assets as of December 31, 2017 were approximately $86,573,000,with $76,751,000 located in the U.S. and $9,822,000 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. The following table summarizes payments due in specific periods related to the Company’s contractual obligationswith initial terms exceeding one year as of December 31, 2018 (in thousands): Payments Due by Period (in thousands) Within After Total 1 Year 2-3 Years 4-5 Years 5 Years Operating lease obligations (office space) $9,761 $1,521 $2,870 $2,321 $3,049 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 $1,604,000 for the year ended December 31, 2018,$1,785,000 for the year ended December 31, 2017, and $1,907,000 for the year ended December 31, 2016.As of December 31, 2018, 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 June 2018, the FASB issued ASU No. 2018-07, Compensation – Stock Compensation (“Topic 718”):Improvements to Nonemployee Share-Based Payment Accounting, which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees except for certain circumstances. Anytransition impact will be a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption. ThisASU is effective for the annual period beginning after December 15, 2018, including interim periods within that annualperiod and early adoption is permitted. The Company will adopt this guidance in the first quarter of 2019 and does notexpect a material impact on its consolidated financial statements. In February 2018, the FASB issued ASU No. 2018-02, Income Statement – Reporting Comprehensive Income(Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allows areclassification from accumulated other comprehensive income (loss) to retained earnings for stranded tax effects resultingfrom the Tax Cuts and Jobs Act passed by the U.S. federal government in December 2017. The Company adopted ASU 2018-02 in the first quarter of 2018 and recorded an adjustment to Stockholders’ Equity within the Consolidated Balance Sheetsthat did not have a material impact on the Company’s consolidated financial statements.F-23 Table of Contents 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. The Company adopted this guidance in the first quarterof 2018, and it did not have a material impact on the Company’s 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.Qualitative and quantitative disclosures are required and optional practical expedients may be elected. This ASU is effectivefor the annual period beginning after December 15, 2018, including interim periods within that annual period. Subsequentamendments to the initial guidance have been issued in January 2017, January 2018, and July 2018 within ASU No. 2017-03, ASU No. 2018-01, ASU No. 2018-10, and ASU No. 2018-11 regarding qualitative disclosures, optional practicalexpedients, codification improvements and an optional transition method to adopt with a cumulative-effect adjustmentversus a modified retrospective approach. These updates do not change the core principle of the guidance under ASU No.2016-02, but rather provide implementation guidance. The Company will adopt the accounting standard using thecumulative-effect transition method, which applies the guidance at the beginning of the period of adoption. The Companywill elect the package of practical expedients permitted, which, among other things, allows the Company to carry forward thehistorical lease classification. The Company will make the accounting policy elections to not recognize lease assets andlease liabilities with an initial term of 12 months or less and to not separate lease and non-lease components. The Company’saccounting for finance leases remains substantially unchanged. Operating lease ROU assets and liabilities will be recognizedat the commencement date based on the present value of lease payments over the lease term. As most of the Company’s leasesdo not provide an implicit rate, an incremental borrowing rate based on the information available at the commencement datewill be used in determining the present value. The Company will use the implicit rate when readily determinable. Theoperating lease ROU asset will also include any prepaid lease payments and will be reduced by any accrued lease payments.The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that thoseoptions will be exercised. Operating lease cost for lease payments will be recognized on a straight-line basis over the leaseterm. The expected impact of adoption on the Company’s consolidated balance sheet will be the recognition of a ROU assetof $7.8 million, an operating lease liability of $8.3 million, and a reduction of accrued liabilities of $0.5 million, primarilyfor office and shop space leases that are currently off-balance sheet. The Company does not anticipate any material impact onits results of operations nor any material impact on its cash flows. The Company’s disclosures will be adjusted according tothe disclosure requirements of the standard.In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework –Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements on fairvalue measurement by removing, modifying, and adding certain disclosures. This ASU is effective for the annual periodbeginning after December 15, 2019, including interim periods within that annual period. The Company is currentlyevaluating the new guidance to determine the impact it will have on the Company’s consolidated financial statements.In August 2018, the SEC adopted amendments to simplify certain disclosure requirements, as set forth in SecuritiesAct Release No. 33-10532, Disclosure Update and Simplification, which includes a requirement for entities to present thechanges in shareholders’ equity in the interim financial statements in quarterly reports on Form 10-Q. This amendment iseffective for all filings made on or after November 5, 2018. In light of the timing of effectiveness of the amendment andproximity to the filing date for most filers’ quarterly reports, the SEC has allowed for a filer’s first presentation of the changesin shareholders’ equity to be included in its Form 10-Q for the quarter that begins after the effective date. The Company haselected to adopt the SEC’s delayed implementation option and will present the changes in shareholders’ equity on an interimbasis in the first quarter of 2019.18. 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, 2018 and 2017, 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-24 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, 2018: Operating revenues $49,880 $36,158 $40,448 $27,670 Loss from operations $(1,640) $(6,291) $(5,234) $(11,862) Net loss $(1,709) $(5,711) $(5,171) $(11,816) Basic loss per share of common stock $(0.07) $(0.25) $(0.23) $(0.51) Diluted loss per share of common stock $(0.07) $(0.25) $(0.23) $(0.51) (as adjusted) (as adjusted) (as adjusted) (as adjusted) Year ended December 31, 2017: Operating revenues $42,366 $31,640 $45,108 $37,418 Loss from operations $(12,139) $(15,504) $(4,299) $(6,022) Net loss $(9,152) $(14,928) $(2,922) $(4,788) Basic loss per share of common stock $(0.40) $(0.66) $(0.13) $(0.21) Diluted loss per share of common stock $(0.40) $(0.66) $(0.13) $(0.21) Basic and diluted loss per share of common stock are computed independently for each of the quarters presented.Therefore, the sum of quarterly basic and diluted information may not equal the annual basic and diluted loss per share ofcommon stock. F-25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 6, 2019, 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, 2018./s/RSM US, LLP/s/ RSM US, LLP Houston, TexasMarch 6, 2019 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 06, 2019 /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 06, 2019 /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, 2018, 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 06, 2019 /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, 2018, 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 06, 2019 /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