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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 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, 2022
☐ 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. 001-32472
DAWSON GEOPHYSICAL COMPANY
(Exact name of registrant as specified in its charter)
Texas
(State or other jurisdiction of
incorporation or organization)
74-2095844
(I.R.S. Employer
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
Common Stock, $0.01 par value
Trading Symbol(s)
DWSN
Name of Exchange on Which Registered
The NASDAQ Stock Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ 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 of 1934 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 filing requirements 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 of
Regulation S-T (§ 232 405 of the chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes
⌧ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
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 any new or
revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over
financial reporting under section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Yes ☐ No ⌧
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, 2022, 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 $8,135,000.
On March 9, 2023, there were 23,812,329 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 indicates
otherwise.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s Proxy Statement for its 2023 Annual Meeting of Shareholders are incorporated by reference into Part III of this Annual Report on Form 10-K.
Table of Contents
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
TABLE OF CONTENTS
PART I
PART II
Market for Our Common Equity and Related Stockholder Matters
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
PART III
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions and Director Independence
Principal Accounting Fees and Services
PART IV
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Exhibits and Financial Statement Schedules
Item 15.
Index to Exhibits
Signatures
Index to Financial Statements
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DAWSON GEOPHYSICAL COMPANY
FORM 10-K
For the Year Ended December 31, 2022
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
Statements other than statements of historical fact included in this Form 10-K that relate to forecasts, estimates or
other expectations regarding future events, including without limitation, statements under “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” and “Business” regarding technological advancements and our
financial position, business strategy, and plans and objectives of our management for future operations, may be deemed to
be forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). When used in this Form 10-K, words such as “anticipate,”
“believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or our management, identify forward-
looking statements. Such forward-looking statements are based on the beliefs of our management, as well as assumptions
made by and information currently available to management. Actual results could differ materially from those
contemplated by the forward-looking statements as a result of certain factors. These risks include, but are not limited to, the
Company’s status as a controlled public company, which exempts the Company from certain corporate governance
requirements; the limited market for the Company’s shares, which could result in the delisting of the Company’s shares
from Nasdaq and the Company no longer being required to make filings with the SEC; the impact of general economic,
industry, market or political conditions; dependence upon energy industry spending; changes in exploration and production
spending by our customers and changes in the level of oil and natural gas exploration and development; the results of
operations and financial condition of our customers, particularly during extended periods of low prices for crude oil and
natural gas; the volatility of oil and natural gas prices; changes in economic conditions; the severity and duration of the
COVID-19 pandemic, related economic repercussions and the resulting impact on demand for oil and gas; surplus in the
supply of oil and the ability of the Organization of the Petroleum Exporting Countries and its allies, collectively known as
OPEC+, to agree on and comply with supply limitations; the duration and magnitude of the unprecedented disruption in the
oil and gas industry currently resulting from the impact of the foregoing factors, which is negatively impacting our
business; the potential for contract delays; reductions or cancellations of service contracts; limited number of customers;
credit risk related to our customers; reduced utilization; high fixed costs of operations and high capital requirements;
operational challenges relating to the COVID-19 pandemic and efforts to mitigate the spread of the virus, including
logistical challenges, protecting the health and well-being of our employees and remote work arrangements; industry
competition; external factors affecting the Company’s crews such as weather interruptions and inability to obtain land
access rights of way; whether the Company enters into turnkey or day rate contracts; crew productivity; the availability of
capital resources; disruptions in the global economy, including export controls and financial and economic sanctions
imposed on certain industry sectors and parties as a result of the developments in Ukraine and related activities, and
whether or not a future transaction or other action occurs that causes the Company to be delisted from Nasdaq and no
longer be required to make filings with the SEC. The cautionary statements made in this Form 10-K should be read as
applying to all related forward-looking statements wherever they appear in this Form 10-K. All subsequent written and oral
forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this
paragraph. The Company disclaims any intention or obligation to revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
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Item 1. BUSINESS
General
Part I
Dawson Geophysical Company, a Texas corporation (the “Company”), is a leading provider of North American
onshore seismic data acquisition services with operations throughout the continental United States (“U.S.”) and Canada.
We acquire and process 2-D, 3-D and multi-component seismic data for our clients, ranging from major oil and gas
companies to independent oil and gas operators as well as providers of multi-client data libraries. Our principal business
office is located at 508 West Wall, Suite 800, Midland, Texas 79701 (Telephone: 432-684-3000), and our internet address is
www.dawson3d.com. We make available free of charge on our website our annual reports on Form 10-K, quarterly reports
on Form 10-Q, and current reports on Form 8-K as soon as reasonably practicable after filing or furnishing such
information with the Securities and Exchange Commission (“SEC”).
Except as otherwise specifically noted herein, references herein to the “Company,” “we,” “us” or “our” refer to
Dawson Geophysical Company and its consolidated subsidiaries.
We provide our seismic data acquisition services primarily to providers of multi-client data libraries for use in the
onshore drilling and production of oil and natural gas in the continental U.S. and Canada, as well as directly to onshore oil
and natural gas exploration and development companies. The main factors influencing demand for seismic data acquisition
services in our industry are the level of drilling and completion activity by oil and natural gas companies and the size of
such companies’ exploration and development budgets, which, in turn, depend largely on current and anticipated future
crude oil and natural gas prices and production levels and depletion rates of the companies’ oil and natural gas reserves.
Our seismic data acquisition crews supply seismic data primarily to companies engaged in the exploration and
development of oil and natural gas on land and in land-to-water transition areas. In recent years, we have provided seismic
acquisition services for carbon capture and sequestration projects. 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 Eagle Canada has particular expertise through its heliportable capabilities. Our clients rely on seismic data to identify
areas where subsurface conditions are favorable for the accumulation of existing hydrocarbons, to optimize the
development and production of hydrocarbon reservoirs, to better delineate existing oil and natural gas fields, and to
augment reservoir management 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
property identification for high grading of well locations and hydraulic fracturing. The majority of our current activity is in
areas of unconventional reservoirs.
We acquire geophysical data using the latest in 3-D seismic survey techniques. We introduce acoustic energy into
the ground by using vibration equipment or dynamite detonation, depending on the surface terrain, area of operation, and
subsurface requirements. The reflected energy, or echoes, are received through geophones, converted into a digital signal at
a single or multi-channel recording unit, and then transmitted to a central recording vehicle. Subsurface requirements
dictate the number of channels necessary to perform our services. We generally use tens of thousands of recording channels
in our 3-D seismic surveys with the largest project consisting in excess of 60,000 recording channels and dozens of energy
source units. We are capable of deploying multiple crews equipped with this technology on multiple projects
simultaneously. Additional recording channels enhance the resolution of the seismic survey through increased imaging
analysis and provide improved operational efficiencies for our clients. With our state-of-the-art seismic equipment,
including computer technology and multiple channels, we acquire, on an efficient 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 to generate 3-D geologic models that help reduce drilling risks, finding and development costs, and improve recovery
rates from existing fields.
In addition to conventional 2-D and 3-D seismic surveys, we provide what the industry refers to as multi-
component seismic data surveys. Multi-component surveys involve the recording of alternative seismic waves known as
shear waves. Shear waves can be recorded as wave conversion of conventional energy sources (3-C converted waves) or
from horizontal vibrator energy source units (shear wave vibrators). Multi-component data are utilized in further analysis
of subsurface rock type, fabric and reservoir characterization. We own equipment required for onshore
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multi-component surveys. The majority of the projects in Canada require multi-component recording equipment. We have
operated one to two multi-component equipped crews in the U.S. periodically over the past few years. The use of multi-
component seismic data could increase in North America over the next few years if industry conditions improve and
potentially require capital expenditures for additional equipment.
In recent years, we have provided surface recorded microseismic services utilizing equipment we own.
Microseismic monitoring is used by clients who use hydraulic fracturing to extract hydrocarbon deposits to monitor their
hydraulic fracturing operations.
We market and supplement our services in the continental U.S. from our headquarters in Midland, Texas and from
additional offices in two other cities in Texas (Houston and Plano) as well as one additional state, Oklahoma (Oklahoma
City). In addition, we market and supplement our services in Canada from our facilities in Calgary, Alberta.
The Industry
Technological advances in seismic equipment and computing allow the seismic industry to acquire and process,
on an efficient basis, immense volumes of seismic data which produce precise images of the earth’s subsurface. The latest
accepted method of seismic data acquisition, processing, and the subsequent interpretation of the processed data is the 3-D
seismic method. Geophysicists use computer workstations to interpret 3-D data volumes, identify subsurface anomalies,
and generate a geologic model of subsurface features. In contrast with the 3-D method, the 2-D method involves the
collection of seismic data in a linear fashion, thus generating a single plane of subsurface seismic data. Over recent years,
the size of our surveys and density of recording channels and vibrator energy source units has increased, resulting in an
increase in required recording channels and energy source units to perform such surveys. The trend for our industry has
been a shift to fewer, larger channel count crews operating with an increase in the number of energy source units. We do
operate smaller crews from time to time depending on the requirements of the specific project.
3-D seismic data are used in the exploration and development of new reserves and enable oil and natural gas
companies to better delineate existing fields and to augment their reservoir management techniques. Benefits of
incorporating 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, and
management. In order to meet the requirements necessary to fully realize the benefits of 3-D seismic data, there is an
increasing demand for improved data quality with greater subsurface resolution with increased density of recording
channels and vibrator energy source units.
Currently, the North American seismic data acquisition industry includes a number of primary competitors which
includes us, SAExploration Holdings, Inc. (“SAE”), Echo Seismic Ltd. (“ECHO”), Breckenridge Geophysical, LLC.
(“Breckenridge”), and Paragon Geophysical Services, Inc. (“Paragon”), along with other smaller companies which
generally run one or two small channel count seismic crews and often specialize in specific regions or types of operations.
Equipment and Crews
In recent years, we have experienced continued increases in recording channel capacity and vibrator energy source
units on a per crew or project basis. This increase in channel count and energy source unit demand is driven by client needs
and is necessary in order to produce higher resolution images, increase crew efficiencies and undertake larger scale
projects. Due to the increase in demand for higher channel counts, we continued in recent years to make investments in
additional channels. In response to project-based channel requirements, we routinely deploy a variable number of channels
on a variable number of crews in an effort to maximize asset utilization and meet client needs. While the number of
recording systems we own may exceed the number utilized in the field at any given time, we maintain the excess
equipment to provide additional operational flexibility and to allow us to quickly deploy additional recording channels and
energy source units as needed to respond to client demand and desire for improved data quality with greater subsurface
images. We believe we will realize the benefit of increased channel counts and flexibility of deployment through increased
crew efficiencies, higher revenues and margins with improved conditions.
In recent years, we have purchased or leased a significant number of cableless recording channels. We utilize this
equipment primarily as stand-alone recording systems. As a result of the introduction of cableless recording systems, we
have realized increased crew efficiencies and increased channels on projects using this equipment. We believe we will
experience continued demand for cableless recording systems and increased channel count in the future.
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As of December 31, 2022, we operate 112 vibrator energy source units and approximately 285,000 recording
channels. The recording channels consist of 111,000 single-channel GSR/GSX boxes, 150,000 channels of GSR Multi-
channel boxes and a 24,000 channel INOVA Hawk System. Each crew consists of approximately 40 to 100 technicians
with associated vehicles, geophones, a seismic recording system, energy sources, cables, and a variety of other equipment.
The GSR/GSX and INOVA Hawk crews utilize a recorder to manage the data acquisition while the individual system
captures and holds the data until they are placed in the Data Transfer Module. The data is then transferred to various data
storage media, which are delivered to a data processing center selected by the client.
Equipment Acquisition and Capital Expenditures
We monitor and evaluate advances in geophysical technology and commit capital funds to purchase the equipment
we deem most effective to maintain our competitive position. Purchasing and updating seismic equipment and technology
involves 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 was
sufficient to meet current demand; however, our Board of Directors may increase the capital budget in response to strategic
opportunities to acquire seismic recording equipment. Our Board of Directors approved a maintenance capital expenditure
budget of $5,000,000 for 2022 of which we utilized $1,778,000 during the 12 months ended December 31, 2022. Our
Board of Directors has approved an initial maintenance capital expenditure budget of $5,000,000 for 2023.
Clients
Our services are marketed by supervisory and executive personnel who contact clients to determine geophysical
needs and respond to client inquiries regarding the availability of crews or processing schedules. These contacts are based
principally 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
of multi-client data libraries. The services we provide to our clients vary according to the size and needs of each client.
During the twelve months ended December 31, 2022, sales to three clients represented approximately 35% of our revenues.
We anticipate that sales to these clients will represent a similar percentage of our overall revenues during 2023. The
remaining balance of our revenues were derived from varied clients and none represented 10% or more of our revenues.
We historically have not acquired seismic data for our own account or for future sale, maintained multi-client
seismic data libraries, or participated in oil and gas ventures; however Wilks Brothers, LLC, our controlling shareholder,
has participated in those activities in the past, and may choose to do so with us in the future. The results of seismic surveys
conducted for a client belong to that client. It is also our policy that none of our officers, directors or employees actively
participate in oil and natural gas ventures. All of our clients’ information is maintained in the strictest confidence.
Domestic and Foreign Operations
We derive our revenue from domestic and foreign sources.
Refer to “Note 15, Areas of Operation” to the Consolidated Financial Statements incorporated by reference herein
for additional details.
Contracts
Our contracts are obtained either through competitive bidding or as a result of client negotiations. Our services are
conducted under general service agreements for seismic data acquisition services which define certain obligations for us
and for our clients. A supplemental agreement setting forth the terms of a specific project, which may be canceled by either
party on 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
providing for 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 agreements
generally provide us more profit potential, but involve more risks because of the potential of crew downtime or operational
delays. We attempt to negotiate on a project-by-project basis some level of weather downtime protection within the turnkey
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agreements. Under the term agreements, we forego an increased profit potential in exchange for a more consistent revenue
stream with improved protection from crew downtime or operational delays.
Competition
The acquisition of seismic data for the oil and natural gas industry is a competitive business. Contracts for such
services generally are awarded on the basis of price quotations, crew experience, and the availability of crews to perform in
a timely manner, although factors other than price, such as crew safety, performance history, and technological and
operational expertise, are often determinative. Our primary competition includes SAE, ECHO, Breckenridge, and Paragon.
In addition to these previously named companies, we also compete for projects from time to time with smaller seismic
companies which operate in local markets with only one or two small channel count crews. Further, the barriers to entry in
the seismic industry are substantial but not prohibitive. The recent increase in channel count and number of energy source
units required for larger projects makes it more costly and timely for new seismic companies or those outside of the U.S. to
enter the domestic market and compete with us.
Employees
As of December 31, 2022, we employed 226 full-time employees, of which 47 consisted of management, sales,
and administrative personnel with the remainder being crew and crew support personnel. Our employees are not
represented by a collective bargaining agreement. 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 FACTORS
An investment in our common stock is subject to a number of risks, including those discussed below. You should
carefully consider these discussions of risk and the other information included in this Form 10-K. These risk factors could
affect our actual results and should be considered carefully when evaluating us. Although the risks described below are the
risks that we believe are material, they are not the only risks relating to our business, our 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 below
occur, our business, financial condition or results of operations could be materially adversely affected.
Current macroeconomic conditions, including inflationary pressures in the broader U.S. economy, military conflicts
between Russia and Ukraine and the COVID-19 pandemic, have had, and are expected to continue to have, an impact
on oil and gas commodity prices and, therefore, demand for our services and, depending on the duration and severity,
could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Oil demand has deteriorated as a result of multiple global events, including inflationary pressures in the broader
U.S. economy relating to the continued economic recovery from the COVID-19 pandemic and corresponding preventative
measures taken around the world to contain its spread and mitigate its public health effects, and the ongoing military
conflict between Russia and Ukraine. Factors which are likely to affect commodity prices in future periods include, but are
not limited to, the effect of U.S. energy, monetary and trade policies; U.S. and global economic and political conditions and
developments; energy and environmental policies; operating curtailment of the U.S. oil and gas industry; and the severity
and duration of the COVID-19 outbreaks, which together have created future uncertainty for the demand and pricing for
services, equipment, and raw materials in the petroleum industry.
We are monitoring the military conflict between Russia and Ukraine as well as the related export controls and
financial and economic sanctions imposed on certain industry sectors and parties in Russia by the U.S., the U.K., the
European Union and others. The broader consequences of the Russian-Ukrainian conflict, which may include further
sanctions, embargoes, supply chain disruptions, regional instability and geopolitical shifts, may have adverse effects on
global macroeconomic conditions, increase volatility in the price and demand for oil and natural gas, increase exposure to
cyberattacks, cause disruptions in global supply chains, increase foreign currency fluctuations, cause constraints or
disruption in the capital markets and limit sources of liquidity. We cannot predict the extent of the conflict’s effect on our
business and results of operations as well as on the global economy and energy markets.
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We face various risks related to the COVID-19 pandemic and any future health epidemics, pandemics and similar
outbreaks, which may have material adverse effects on our business, financial condition, results of operations and cash
flows.
Our business and financial results may be negatively impacted by health epidemics, pandemics and similar
outbreaks. The COVID-19 pandemic and the measures and mandates to try to contain its spread and mitigate its public
health effects, such as travel bans and restrictions, quarantines, shelter in place orders, and shutdowns, have impacted our
workforce and operations, the operations of our customers, and those of our vendors and suppliers. The COVID-19
pandemic continues to evolve, and the extent to which the pandemic may impact our business, financial condition, results
of operations and cash flows will depend highly on future developments, which are very uncertain and cannot be
predicted.. And any future health epidemics, pandemics or similar outbreaks could also have a material adverse effect on
our business, financial condition, results of operations or cash flows.
We derive substantially all of our revenues from providers of multi-client data libraries and companies in the oil and
natural gas exploration and development industry. The oil and natural gas industry is a historically cyclical industry
with levels of activity that are significantly affected by the levels and volatility of oil and natural gas prices.
Demand for our services depends upon the level of expenditures by oil and natural gas companies for exploration,
production, development and field management activities, which depend primarily on oil and natural gas prices, as well as
capital allocation by our clients. Significant fluctuations in domestic oil and natural gas exploration activities and
commodity prices have affected, and will continue to affect, demand for our services and our results of operations. We
could be adversely impacted if the level of such exploration activities and the prices for oil and natural gas were to
significantly decline in the future. In addition to the market prices of oil and natural gas, the willingness of our clients to
explore, develop and produce depends largely upon prevailing industry conditions that are influenced by numerous factors
over which our management has no control, including general economic conditions and the availability of credit. Any
prolonged reduction in the overall level of exploration and development activities, whether resulting from changes in oil
and natural gas prices or otherwise, could adversely impact us in 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
demand for our services.
Worldwide political, economic, and military events have contributed to oil and natural gas price volatility and are
likely to continue to do so in the future. Depending on the market prices of oil and natural gas, oil and natural gas
exploration and development companies may cancel or curtail their capital expenditure and drilling programs, thereby
reducing demand for our services, or may become unable to pay, or have to delay payment of, amounts owed to us for our
services. Oil and natural gas prices have been highly volatile historically and, we believe, will continue to be so in the
future. Many factors 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+;
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● 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;
● increased attention to environmental, social and governance matters, including climate change;
● weather conditions in the U.S., Canada and elsewhere;
● the pace adopted by foreign governments for the exploration, development, and production of their national
reserves;
● the price of foreign imports of oil and natural gas; and
● the overall supply and demand for oil and natural gas.
We are a "controlled company", controlled by Wilks, and as a result, are exempt from certain corporate governance
requirements that are designed to provide protection to stockholders of companies that are not controlled companies.
As of March 9,2023, Wilks Brothers, LLC (“Wilks”) and its affiliates control approximately 74.46% of our
combined voting power and is able to elect all of the Company’s board of directors. As a result, we are considered a
“controlled company” for the purposes of the Nasdaq listing requirements. As a “controlled company,” we are permitted to,
and we may, opt out of the Nasdaq listing requirements that would require (i) a majority of the members of our board of
directors to be independent, (ii) that we establish a compensation committee and a nominating and governance committee,
each comprised entirely of independent directors, or (iii) an annual performance evaluation of the nominating and
governance and compensation committees. The Nasdaq listing requirements are intended to ensure that directors who meet
the independence standards are free of any conflicting interest that could influence their actions as directors. Our
stockholders may not have the same protections afforded to stockholders of companies that are subject to all of the
applicable Nasdaq listing requirements. It is also possible that the interests of Wilks may in some circumstances conflict
with our interests and the interests of the holders of our common stock.
A limited number of clients operating in a single industry account for a significant portion of our revenues, and the
loss of one of these clients 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 and
development companies and providers of multi-client data libraries. During the twelve months ended December 31, 2022,
our three largest clients accounted for approximately 35% of our revenues. If these clients, or any of our other significant
clients, were to terminate their contracts or fail to contract for our services in the future because they are acquired, alter
their exploration or development strategy, experience financial difficulties or for any other reason, our results of operations
could be adversely affected.
Our clients could delay, reduce or cancel their service contracts with us on short notice, which may lead to lower than
expected demand and revenues.
Our order book reflects client commitments at levels we believe are sufficient to maintain operations on our
existing crews for the indicated periods. However, our clients can delay, reduce or cancel their service contracts with us on
short notice. If the oil and natural gas industry incurs a downturn, it may result in an increase in delays, reductions or
cancellations by our clients. In addition, the timing of the origination and completion of projects and when projects are
awarded and contracted for is also uncertain. As a result, our order book as of any particular date may not be indicative of
actual demand and revenues for any succeeding period.
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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 are
attributable to the level of new business in a particular period, the timing of the initiation, progress or cancellation of
significant projects, higher revenues and expenses on our dynamite contracts, and costs we incur to train new crews we
may add in the future to meet increased client demand. Fluctuations in our operating results may also be affected by other
factors that are outside of our control such as permit delays, weather delays and crew productivity. Oil and natural gas
prices have continued to be volatile and have resulted in significant demand fluctuations for our services. There can be no
assurance of future oil and gas price levels or stability. Our operations in Canada are also seasonal as a result of the thawing
season, and we have historically experienced limited Canadian activity during the second and third quarters of each year.
The demand for our services would be adversely affected by a significant reduction in oil and natural gas prices and by
climate change legislation or material changes to U.S. energy policy. Because our business has high fixed costs, the
negative effect of one or more of these factors could trigger wide variations in our operating revenues, cash flows,
EBITDA, margin, and profitability from quarter-to-quarter, rendering quarter-to-quarter comparisons unreliable as an
indicator of performance. Due to the factors discussed above, you should not expect sequential growth in our quarterly
revenues and profitability.
We extend credit to our clients without requiring collateral, and a default by a client could have a material adverse
effect on our operating revenues.
We perform ongoing credit evaluations of our clients’ financial conditions and, generally, require no collateral
from our clients. It is possible that one or more of our clients will become financially distressed, which could cause them to
default on their obligations to us and could reduce the client’s future need for seismic services provided by us. Our
concentration of clients may also increase our overall exposure to these credit risks. A default in payment from one of our
large clients could have a material adverse effect on our operating results for the period involved.
We incur losses.
We incurred net losses of $20,451,000 for the twelve months ended December 31, 2022 and $29,091,000 for the
twelve months ended December 31, 2021.
Our ability to be profitable in the future will depend on many factors beyond our control, but primarily on the
level of demand for land-based 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.
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 (a
non-cash item) and maintenance expenses associated with seismic data acquisition and equipment and crew costs. In
addition, 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.
We have indebtedness from time to time under credit facilities with a commercial bank, and certain of our accounts
receivable and a restricted IntraFi Network Deposit account are pledged as collateral for these obligations. Our ability
to borrow may be limited if our accounts receivable decreases.
From time to time, we may have indebtedness under credit facilities with a commercial bank. We maintain a
restricted IntraFi Network Deposit account with our commercial bank which can be used as collateral against future
borrowings. If we are unable to repay all secured borrowings when due, whether at maturity or if declared due and payable
following a default, our lenders have the right to proceed against the deposit pledged to secure the indebtedness and may
liquidate the IntraFi Network Deposit account in order to repay those borrowings, which could materially harm our
business, financial condition and results of operations. Our ability to borrow funds under our revolving line of credit is tied
to the value of our collateral account with our commercial bank as well as the amount of our eligible accounts receivable. If
our accounts receivable decrease materially for any reason, including delays, reductions or cancellations by clients or
decreased demand for our services, our ability to borrow to fund operations or other obligations may be limited.
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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, our
market valuation or the market valuation of comparable companies, loss of a significant client’s business, or strategic
decisions, could cause us to conclude that impairment indicators exist and ultimately that the asset values associated with
our equipment or our intangibles were to be impaired. If we were to impair our equipment or intangibles, these non-cash
asset impairments could negatively affect our financial results in a material manner in the period in which they are
recorded, and the larger the amount of any impairment that may be taken, the greater the impact such impairment may have
on our financial results.
Our profitability is determined, in part, by the utilization level and productivity of our crews and is affected by
numerous external 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
our data acquisition crews and the productivity of these crews. Crew utilization and productivity is partly a function of
external factors, such as client cancellation or delay of projects, operating delays from inclement weather, obtaining land
access rights and other factors, over which we have no control. If our crews encounter operational difficulties or delays on
any data acquisition survey, our results of operations may vary, and in some cases, may be adversely affected.
In recent years, most of our projects have been performed on a turnkey basis for which we were paid a fixed price
for a defined scope of work or unit of data acquired. The revenue, cost and gross profit realized under our turnkey contracts
can vary from our estimates because of changes in job conditions, variations in labor and equipment productivity or
because of the performance of our subcontractors. Turnkey contracts may also cause us to bear substantially all of the risks
of business interruption 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 reducing our profitability.
We face competition in our business, which could result in downward pricing pressure and the loss of market share.
The seismic data acquisition services industry is a competitive business in the continental U.S. and Canada.
Additionally, the seismic data acquisition business is extremely price competitive and has a history of periods in which
seismic contractors bid jobs below cost and, therefore, adversely affected industry pricing. Many contracts are awarded on
a bid basis, which may further increase competition based primarily on price. Further, the barriers to entry in the seismic
industry are substantial but not prohibitive. The recent increase in channel count and number of energy source units
required for larger projects makes it more costly and timely for new seismic companies or those outside of the U.S. to enter
the domestic market and compete with us.
Inclement weather may adversely affect our ability to complete projects and could, therefore, adversely affect our
results of operations.
Our seismic data acquisition operations could be adversely affected by inclement weather conditions. Delays
associated with weather conditions could adversely affect our results of operations. For example, weather delays could
affect our 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 our clients 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
affect our results of operations.
Our seismic data acquisition operations could be adversely affected by our inability to obtain timely right of way
usage from both public and private land and/or mineral owners. We cannot begin surveys on property without obtaining
permits from governmental entities as well as the permission of the private landowners who own the land being surveyed.
In recent years, it has become more difficult, costly and time-consuming to obtain access rights of way as drilling activities
have expanded 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,
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governmental entities do not always grant permits within the time periods expected. Delays associated with obtaining such
rights of way could negatively affect our results of operations.
Capital requirements for our operations are large. If we are unable to finance these requirements, we may not be able
to maintain our competitive advantage.
Seismic data acquisition and data processing technologies historically have progressed steadily, and we expect this
trend to continue. In order to remain competitive, we must continue to invest additional capital to maintain, upgrade and
expand our seismic data acquisition capabilities. Our working capital requirements remain high, primarily due to the
expansion of our infrastructure in response to client demand for cableless recording systems and more recording channels,
which has increased as the industry strives for improved data quality with greater subsurface resolution images. Our
sources of working capital are limited. We have historically funded our working capital requirements primarily with cash
generated from operations, cash reserves and, from time to time, borrowings from commercial banks. In recent years, we
have funded some of our capital expenditures through equipment term loans and finance leases. In the past, we have also
funded our capital expenditures and other financing needs through public equity offerings. If we were to expand our
operations at a rate exceeding operating cash flow, if current demand or pricing of geophysical services were to decrease
substantially, or if technical 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 of credit when needed, it could have a negative impact on our ability to pursue expansion and
maintain our competitive advantage.
Technological change in our business creates risks of technological obsolescence and requirements for future capital
expenditures. If we are unable 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 this
progression to continue. We are in a capital-intensive industry and, in order to remain competitive, we must continue to
invest additional capital to maintain, upgrade and expand our seismic data acquisition capabilities. However, we may have
limitations on our ability to obtain the financing necessary to enable us to purchase state-of-the-art equipment, and certain
of our competitors may be able to purchase newer equipment when we may not be able to do so, thus affecting our ability
to compete.
We rely on a limited number of key suppliers for specific seismic services and equipment.
We depend on a limited number of third parties to supply us with specific seismic services and equipment. From
time to time, increased demand for seismic data acquisition services has decreased the available supply of new seismic
equipment, resulting in extended delivery dates on orders of new equipment. Any delay in obtaining equipment could delay
our deployment of additional crews and restrict the productivity of existing crews, adversely affecting our business and
results of operations. In addition, any adverse change in the terms of our suppliers’ arrangements could affect our results of
operations.
Some of our suppliers may also be our competitors. If competitive pressures were to become such that our
suppliers would no longer sell to us, we would not be able to easily replace the technology with equipment that
communicates effectively 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
new employees could harm our business.
Our continued success depends upon attracting and retaining highly skilled professionals and other technical
personnel. A number of our employees are highly skilled scientists and highly trained technicians. The loss, whether by
death, departure or illness, of our senior executives or other key employees or our failure to continue to attract and retain
skilled and technically knowledgeable personnel could adversely affect our ability to compete in the seismic services
industry. We may experience significant competition for such personnel, particularly during periods of increased demand
for seismic services. A limited number of our employees are under employment contracts, and we have no key man
insurance.
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We are subject to Canadian foreign currency exchange rate risk.
We conduct business in Canada which subjects us to foreign currency exchange rate risk. Currently, we do not
hold or issue foreign currency forward contracts, option contracts or other derivative financial instruments to mitigate the
currency exchange rate risk. Our results of operations and our cash flows could be impacted by changes in foreign currency
exchange rates.
Our common stock has experienced, and may continue to experience, price volatility and low trading volume.
Our stock price is subject to volatility. Overall market conditions, including a decline in oil and natural gas 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 twelve months
ended December 31, 2022 were $2.69 and $1.08, respectively. Further, the high and low sales prices of our common stock
for the twelve months ended December 31, 2021 were $4.47 and $1.83, 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 publicly traded securities. In addition, as of March 9, 2023, Wilks and its affiliates own approximately 74.46% of
our common stock so the public market for our common stock is more limited, which can lead to increased volatility and
low trading volumes. For example, during 2022 our daily trading volume was as low as 0 shares. It may be difficult for you
to 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 traded below $5.00 per share for the past year, and when it trades below $5.00 per share it may be
considered 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,
if it continues to trade below a price of $5.00 per share. Under these rules, broker-dealers participating in transactions in
low-priced securities 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 suitability
determination approving the client for low-priced stock transactions based on the client’s financial situation, investment
experience and objectives. Broker-dealers must also disclose these restrictions in writing and provide monthly account
statements to the client, and obtain specific written consent of the client. With these restrictions, the likely effect of
designation as a low-price stock would be to decrease the willingness of broker-dealers to make a market for our common
stock, to decrease the liquidity of the stock, and to increase the transaction costs of sales and purchases of such stocks
compared to other securities. Our common stock traded below a price of $5.00 per share for the duration of 2022 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, only
appreciation 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
of Directors, after consideration of economic and market conditions affecting the energy industry in general, and the
oilfield services business in particular, determined that we would not pay a cash dividend in respect of our common stock
for the foreseeable future. Payment of any cash dividends in the future will be at the discretion of our board and will
depend on our financial condition, results of operations, capital and legal requirements, and other factors deemed relevant
by the board.
Certain provisions of our amended and restated certificate of formation, or other governing documents and
agreements that currently exist or could exist in the future, may make it difficult for a third party to acquire us in the
future or may adversely impact your ability to obtain a premium in connection with a future change of control
transaction.
Our amended and restated certificate of formation contains provisions that require the approval of holders of 80%
of our issued and outstanding shares before we may merge or consolidate with or into another corporation or entity or sell
all, or substantially all, of our assets to another corporation or entity. Additionally, if we increase the size of our board to
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nine directors, we could, by resolution of the Board of Directors, stagger the directors’ terms, and our directors could not
be removed without approval of holders of 80% of our issued and outstanding shares. These provisions could discourage or
impede a tender offer, proxy contest or other similar transaction involving control of us.
In addition, our Board of Directors has the right to issue preferred stock upon such terms and conditions as it
deems to be in our best interest. The terms of such preferred stock may adversely impact the dividend and liquidation rights
of our common 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 activities
are often conducted in remote areas under dangerous conditions, including the detonation of dynamite. These operations
are subject to risk of injury to personnel and damage to equipment. Our crews are mobile, and equipment and personnel are
subject to vehicular accidents. These risks could cause us to experience equipment losses, injuries to our personnel, and
interruptions in our business.
In addition, we could be subject to personal injury or real property damage claims in the normal operation of our
business. Such claims may not be covered under the indemnification provisions contained in our general service
agreements to 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
insurance against certain risks that could cause losses, including business interruption resulting from equipment
maintenance or weather delays. Further, there can be no assurance, however, that any insurance obtained by us will be
adequate to cover all losses or liabilities or that this insurance will continue to be available or available on terms which are
acceptable to us. Liabilities for which we are not insured, or which exceed the policy limits of our applicable insurance,
could have a materially 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
of subcontractors to perform services and provide products. While we obtain contractual indemnification and insurance
covering the acts of these subcontractors and require the subcontractors to obtain insurance for our benefit, we could be
held liable for the actions of these subcontractors. In addition, subcontractors may cause injury to our personnel or damage
to our property that is not fully covered by insurance.
We operate under hazardous conditions that subject us to risk of damage to property or personnel injuries and may
interrupt our business.
Our business is subject to the general risks inherent in land-based seismic data acquisition activities. Our activities
are often conducted in remote areas under extreme weather and other dangerous conditions, including the use of dynamite
as an energy source. These operations are subject to risk of injury to our personnel and third parties and damage to our
equipment and improvements in the areas in which we operate. In addition, our crews often operate in areas where the risk
of wildfires is present and may be increased by our activities. Since our crews are mobile, equipment and personnel are
subject to vehicular accidents. We use diesel fuel which is classified by the U.S. Department of Transportation as a
hazardous material. These risks could cause us to experience equipment losses, injuries to our personnel and interruptions
in our business. Delays due to operational disruptions such as equipment losses, personnel injuries and business
interruptions could adversely affect our profitability and results of operations.
Loss of our information and computer systems could adversely affect our business.
We are heavily dependent on our information systems and computer-based programs, including our seismic
information, electronic data processing and accounting data. If any of such programs or systems were to fail or create
erroneous information in our hardware or software network infrastructure, or if we were subject to cyberspace breaches or
attacks, possible consequences include our loss of communication links, loss of seismic data and inability to automatically
process commercial transactions or engage in similar automated or computerized business activities. Any such
consequence could have a material adverse effect on our business.
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Our business could be negatively impacted by security threats, including cyber-security threats and other disruptions.
We face various security threats, including cyber-security threats to gain unauthorized access to sensitive
information or to render data or systems unusable, threats to the safety of our employees, threats to the security of our
facilities and infrastructure, and threats from terrorist acts. Cyber-security attacks in particular are evolving and include, but
are not limited to, malicious software, attempts to gain unauthorized access to data and other electronic security breaches
that could lead to disruptions in critical systems, unauthorized release of confidential or otherwise protected information
and corruption of data. Although we utilize various procedures and controls to monitor and protect against these threats and
to mitigate our exposure to such threats, there can be no assurance that these procedures and controls will be sufficient in
preventing security threats from materializing. If any of these events were to materialize, they could lead to losses of
sensitive information, critical infrastructure, personnel or capabilities essential to our operations and could have a material
adverse effect on our reputation, financial position, results of operations or cash flows.
Our business is subject to government regulation, which may adversely affect our future operations.
Our operations are subject to a variety of federal, state, provincial and local laws and regulations, including laws
and regulations relating to the protection of the environment and archeological sites and those that may result from climate
change legislation or executive orders that could negatively impact the exploration and production of oil and gas. Canadian
operations have been historically cyclical due to governmental restrictions on seismic acquisition during certain periods. As
a result, there is a risk that there will be a significant amount of unused equipment during those periods. We are required to
expend financial and managerial resources to comply with such laws and related permit requirements in our operations, and
we anticipate that we will continue to be required to do so in the future. Although such expenditures historically have not
been material to us, the fact that such laws or regulations change frequently makes it impossible for us to predict the cost or
impact of such laws and regulations on our future operations. The adoption of laws and regulations that have the effect of
reducing or curtailing exploration and development activities by energy companies could also adversely affect our
operations by reducing the demand for our services.
Current and future legislation or regulation relating to climate change could negatively affect the 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 regulatory
measures to address the concerns are in various phases of discussion or implementation at the national and state levels.
Many states, either individually or through multi-state regional initiatives, have already taken legal measures intended to
reduce GHG emissions, primarily through the planned development of GHG emission inventories and/or GHG cap and
trade programs. Although various climate change legislative measures have periodically been introduced in the U.S.
Congress, and there has been a wide-ranging policy debate both in the U.S. and internationally regarding the impact of
these gases and possible means for their regulation, it is not possible at this time to predict whether or when Congress may
act on climate change legislation. However, future actions that require substantial reductions in carbon emissions could be
costly and difficult to implement.
The U.S. Environmental Protection Agency (the “EPA”) has promulgated a series of regulations that require
monitoring and reporting of GHG emissions on an annual basis from certain sources, including some in the oil and gas
industry. While these rules do not control GHG emission levels from any facilities, they can cause covered facilities to
incur monitoring and reporting costs. Moreover, lawsuits have been filed seeking to require individual companies to reduce
GHG emissions from their operations. These and other lawsuits relating to GHG emissions may result in decisions by state
and federal courts and agencies that could impact our operations.
In addition, the U.S. was actively involved in the United Nations Conference on Climate Change in Paris, which
led to the creation of the Paris Agreement. In April 2016, the U.S. signed the Paris Agreement, which requires countries to
review and “represent a progression” in their nationally determined contributions, which set emissions reduction goals,
every five years. In November 2020, the U.S. officially withdrew from the Paris Agreement. However, on January 20,
2021, President Biden signed an “Acceptance on Behalf of the United States of America” that will allow the U.S. to rejoin
the Paris Agreement. The acceptance, deposited with the United Nations on January 20, reverses the prior withdrawal. The
U.S. officially rejoined the Paris Agreement on February 19, 2021. The Paris Agreement requires countries to review and
“represent a progression” in their nationally determined contributions, which set emissions reduction goals, every five
years beginning in 2020. As part of rejoining the Paris Agreement, President Biden announced that the U.S. would commit
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to a 50 to 52 percent reduction from 2005 levels of GHG emissions by 2030 and set the goal of reaching net-zero GHG
emissions by 2050. In addition, shortly after taking office in January 2021, President Biden issued a series of executive
orders designed to address climate change. For example, the Executive Order on “Protecting Public Health and the
Environment and Restoring Science to Tackle the Climate Crisis” sought to adopt new regulations and policies to address
climate change and suspend, revise, or rescind, prior agency actions that were identified as conflicting with the Biden
Administration’s climate policies. The United States Environmental Protection Agency has proposed strict new methane
emission regulations for certain oil and gas facilities and the Inflation Reduction Act of 2022 establishes a charge on
methane emissions above certain limits from the same facilities. Additional legislation or regulation by states and regions,
the EPA, and/or any international agreements to which the U.S. may become a party that control or limit GHG emissions or
otherwise seek to address climate change could adversely affect our operations.
The increasing governmental focus on GHG emissions may result in new environmental laws or regulations that
may negatively affect us, our suppliers and our clients. This could cause us to incur additional direct costs in complying
with any new environmental regulations, as well as increased indirect costs resulting from our clients, suppliers or both
incurring additional compliance costs that get passed on to us. Moreover, passage of climate change legislation, other
federal or state legislative or regulatory initiatives, or international agreements that regulate or restrict emissions of GHG
may curtail production and demand for fossil fuels such as oil and gas in areas where our clients operate and, thus,
adversely affect future demand for our services. Reductions in our revenues or increases in our expenses as a result of
climate control initiatives could have adverse effects on our business, financial position, results of operations and cash
flows.
In addition, activists concerned about the potential effects of climate change have directed their attention at
sources of funding for fossil-fuel energy companies, which has resulted in certain financial institutions, funds and other
sources of capital restricting or eliminating their investment in oil and natural gas activities. Ultimately, this could make it
more difficult to secure funding for exploration and production activities, which may have an adverse impact on the
demand for our services.
New regulation or legislation that limits or prohibits hydraulic fracturing could negatively affect the exploration and
production of oil and gas and adversely affect demand for our services.
Hydraulic fracturing is an important and commonly used process in the completion of oil and gas wells. Hydraulic
fracturing involves the injection of water, sand and chemical additives under pressure into rock formations to stimulate gas
production. Several political and regulatory authorities and governmental bodies have studied hydraulic fracturing and
considered potential regulations, and certain environmental and other groups have devoted resources to campaigns aimed at
restricting or eradicating hydraulic fracturing.
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
stringent the permitting and compliance requirements for hydraulic fracturing operations. Several states have adopted more
stringent permitting, public disclosure or well construction legislation and/or regulations. Three states (New York,
Maryland and Vermont) have banned the use of high-volume hydraulic fracturing. In addition to state laws, some local
municipalities have adopted or are considering adopting land use restrictions, such as city ordinances, that may restrict or
prohibit the performance of well drilling in general or hydraulic fracturing in particular. There have also been certain
governmental reviews that focus on deep shale and other formation completion and production practices, including
hydraulic fracturing. Governments may continue to study hydraulic fracturing. We cannot predict the outcome of future
studies, but based on the results of these studies to date, federal and state legislatures and agencies may seek to further
regulate or even ban hydraulic fracturing activities. These regulatory initiatives could each spur further action toward
federal and/or state legislation and regulation of hydraulic fracturing activities. Additional regulation could materially
reduce our business opportunities and revenues if our customers decrease their levels of activity in response to such
regulation.
Some parties also believe that there is a correlation between hydraulic fracturing and other oilfield related
activities and the increased occurrence of seismic activity. When caused by human activity, such seismic activity is called
induced seismicity. The extent of this correlation, if any, is the subject of studies of both state and federal agencies. In
addition, a number of lawsuits have been filed against other industry participants alleging damages and regulatory
violations in connection with such activity. These and other ongoing or proposed studies could spur initiatives to further
regulate hydraulic fracturing and other aspects of the oil and gas industry. In light of concerns about induced seismicity,
some state regulatory agencies have already modified their regulations or issued orders to address induced seismicity.
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The adoption of any future federal, state, foreign, regional or local laws that impact permitting requirements for,
result in reporting obligations on, or otherwise limit or ban, the hydraulic fracturing process could make it more difficult to
perform hydraulic fracturing. This could reduce demand for our services. Regulation that significantly restricts or prohibits
hydraulic fracturing, or that requires hydraulic fracturing 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, could have a material adverse impact on our business. Additionally,
legislation that requires the reporting and public disclosure of chemicals used in the fracturing process could make it easier
for third parties opposing the hydraulic fracturing process to initiate legal proceedings based on allegations that specific
chemicals used in the fracturing process could adversely affect groundwater.
These legislative and regulatory initiatives imposing additional reporting obligations on, or otherwise limiting, the
hydraulic fracturing process could make it more difficult or costly to complete natural gas wells. Shale gas cannot be
economically produced without extensive fracturing. In the event such legislation is enacted, demand for our seismic
acquisition services may be adversely affected.
Item 1B. UNRESOLVED STAFF COMMENTS
None.
Item 2. PROPERTIES
Our headquarters are located in a 34,570 square foot leased property in Midland, Texas. We have two properties in
Midland 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
storage facility.
We also have additional offices in two other cities in Texas: Houston and Plano. Our Houston sales office is in an
8,161 square foot facility. Our office in Plano, Texas consists of 5,181 square feet of office space.
We lease a 2,630 square foot facility in Oklahoma City, Oklahoma as a sales office.
We lease a 15,020 square foot facility in Calgary, Alberta consisting of office, warehouse and shop space.
We believe that our existing facilities are being appropriately utilized in line with past experience and are well
maintained, suitable for their intended use, and adequate to meet our current and future operating requirements.
Item 3. LEGAL PROCEEDINGS
For a discussion of certain contingencies and legal proceedings affecting the Company, please refer to “Note 16,
Commitments and Contingencies” to the Consolidated Financial Statements incorporated by reference herein.
Item 4. MINE SAFETY DISCLOSURES
Not applicable.
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Part II
Item 5. MARKET FOR OUR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock trades on the NASDAQ under the symbol “DWSN.” The table below represents the high and
low sales prices per share for the periods shown.
Three Months Ended
March 31, 2021
June 30, 2021
September 30, 2021
December 31, 2021
March 31, 2022
June 30, 2022
September 30, 2022
December 31, 2022
High Low
$ 4.47
$ 2.80
$ 3.00
$ 2.50
$ 2.61
$ 2.69
$ 2.18
$ 2.28
$ 2.07
$ 2.19
$ 1.83
$ 1.97
$ 2.25
$ 1.29
$ 1.08
$ 1.54
As of March 9, 2023, the market price for our common stock was $1.51 per share, and we had 68 common
stockholders of record, as reported by our transfer agent.
No dividends were paid in 2022 or 2021. While there are currently no restrictions prohibiting us from paying
dividends to our shareholders, our Board of Directors, after consideration of economic and market conditions affecting the
energy industry in general, and the oilfield services business in particular, determined that we would not pay a dividend in
respect of our common stock for the foreseeable future. Payment of any dividends in the future will be at the discretion of
our board and will depend on our financial condition, results of operations, capital and legal requirements, and other factors
deemed relevant by the board.
The following table summarizes certain information regarding securities authorized for issuance under our equity
compensation plans as of December 31, 2022. See information and definitions regarding material features of the plans in
“Note 8, Stock-Based Compensation” to the Consolidated Financial Statements incorporated by reference herein.
Equity Compensation Plan Information
Number of
Securities to be
Issued Upon
Exercise or
Vesting of
Outstanding
Options,
Warrants and
Rights
(a)
Weighted Average
Exercise Price
of Outstanding
Options,
Warrants and
Rights
Number of Securities
Remaining Available
for Future Issuance
Under the Equity
Compensation Plan
(Excluding Securities
Reflected in
Column (a))
— $
—
— $
—
—
—
1,264,487
—
1,264,487
Plan Category
2016 Plan
Equity compensation plan approved by security holders
Equity compensation plans not approved by security
holders
Total
Item 6. SELECTED FINANCIAL DATA
Not applicable.
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis should be read in conjunction with our financial statements and related
notes thereto included elsewhere in this Form 10-K. Portions of this document that are not statements of historical or
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current fact are forward-looking statements that involve risk and uncertainties, such as statements of our plans, business
strategy, objectives, expectations and intentions. This discussion contains forward-looking statements that involve risks and
uncertainties. Please see “Business,” “Disclosure Regarding Forward-Looking Statements” and “Risk Factors” elsewhere
in this Form 10-K.
You should read this discussion in conjunction with the financial statements and notes thereto included elsewhere
in 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.
Overview
We are a leading provider of North American onshore seismic data acquisition services with operations
throughout the continental U.S. and Canada. Substantially all of our revenues are derived from the seismic data acquisition
services we provide to our clients. 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 the level of spending by these
companies for exploration, production, development and field management activities, which depends, in large part, on oil
and natural gas prices. Significant fluctuations in domestic oil and natural gas exploration and development activities
related to commodity prices, as we have recently experienced, have affected, and will continue to affect, demand for our
services and our results of operations, and such fluctuations continue to be the single most important factor affecting our
business and results of operations.
We began the fourth quarter with three small to mid-sized channel count crews operating in the lower 48 in
October and dropped to one mid-size crew intermittently in November and a large channel count crew in late December.
Project timing was, and continues to be, impacted by delays in securing necessary land access agreements on behalf of our
clients. Activity in Canada began earlier than in recent seasons with up to three small channel count crews operating in the
back half of the fourth quarter and continuing to operate today.
For the full year, we experienced low utilization rates, particularly during the second and third quarters of 2022 as
demand for seismic services remained at historically low levels in North America. Bid activity and client discussions
improved in the third and fourth quarter and activity levels improved in the fourth quarter. Visibility continues to improve
into 2023 as does project timing related to land access agreements and project readiness.
First quarter 2023 activity in the lower 48 began with a large channel count crew operating on a project that began
late in the fourth quarter of 2022. After completion of that project in January, the operation of a mid-size channel count
crew began in February. We are currently operating two mid-sized crews, one of which began operations in early March.
Based on currently available information and discussion with our clients, we believe we will continue operation of two
mid-sized crews into the third quarter of 2023. Client discussions continued to increase early in 2023 and we believe
demand for our services is sufficient to maintain one to two mid-sized crews well into the second half of 2023. In Canada,
we are currently operating four crews of increased capacity from the fourth quarter of 2022 and anticipate operating all
four crews through the remainder of the Canadian season which typically ends in late March or early April.
While our revenues are mainly affected by the level of client demand for our services, our revenues are also
affected by the pricing for our services that we negotiate with our clients and the productivity and utilization level of our
data acquisition crews. Factors impacting productivity and utilization levels include client demand, commodity prices,
whether we enter into turnkey or dayrate contracts with our clients, the number and size of crews, the number of recording
channels per crew, crew downtime related to inclement weather, delays in acquiring land access permits, agricultural or
hunting activity, holiday schedules, short winter days, crew repositioning and equipment failure. To the extent we
experience these factors, our operating results may be affected from quarter to quarter. Consequently, our efforts to
negotiate more favorable contract terms in our supplemental service agreements, mitigate permit access delays and
improve overall crew productivity may contribute to growth in our revenues.
The majority of our revenues were derived from turnkey contracts for the years ending December 31, 2022 and
2021. While turnkey contracts allow us to capitalize on improved crew productivity, we also bear more risks related to
weather and crew 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.
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Over time, we have experienced continued increases in recording channel capacity on a per-crew or project basis
and high utilization of cableless and multicomponent equipment. This increase in channel count demand is driven by client
needs and is necessary in order to produce higher resolution images, increase crew efficiencies and undertake larger scale
projects. In response to project-based channel requirements, we routinely deploy a variable number of channels on a
variable number of crews in an effort to maximize asset utilization and meet client needs.
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 opportunities
exist for us to enhance our market position by responding to our clients’ continuing desire for higher resolution subsurface
images.
Results of Operations
Year Ended December 31, 2022 versus Year Ended December 31, 2021
Operating Revenues. Operating revenues for the year ended December 31, 2022 were $37,480,000 compared to
$24,695,000 for the same period of 2021. The increase in revenues for the year ended December 31, 2022 compared to the
same period of 2021 was primarily a result of increased demand for our services.
Operating Expenses. Operating expenses for the year ended December 31, 2022 increased to $37,910,000
compared to $29,016,000 for the same period of 2021. The increase in operating expenses was mainly due to an overall
increase in crew production and utilization.
General and Administrative Expenses. General and administrative expenses were 36.8% of revenues in the year
ended December 31, 2022 compared to 48.8% of revenues in the same period of 2021 primarily due to the increase in
operating revenues discussed above. General and administrative expenses increased to $13,785,000 during the year ended
December 31, 2022 from $12,046,000 during the same period of 2021. The primary factors for the increase in general and
administrative expenses are related to increases in professional fees and accounting charges in 2022. We anticipate general
and administrative charges for 2023 to be similar to those in 2022.
Depreciation Expense. Depreciation for the year ended December 31, 2022 was $9,795,000 compared to
$12,863,000 for the same period of 2021. The decrease in depreciation expense is a result of limiting capital expenditures
to necessary maintenance capital requirements in recent years. Our depreciation expense is expected to remain flat or
decline slightly during 2023 primarily due to limited capital expenditures to maintain our existing asset base.
Our total operating costs for the year ended December 31, 2022 were $61,490,000, representing a 14.0% increase
from the corresponding period of 2021. This change was primarily due to the factors described above.
Other Income (Expense). Under the provisions of the Coronavirus Aid, Relief, and Economic Security Act (“the
CARES Act”) and its subsequent amendments, we were eligible and, in April 2022, we applied for a refundable employee
retention credit subject to program conditions and requirements. We recognize these credits as a gain when all uncertainties
have been met and the amounts are realizable in accordance with similar gain contingencies. We recognized $2,966,000 as
a gain in other income and $69,000 as interest income on the Consolidated Statement of Operations and Comprehensive
Loss for the year ended December 31, 2022 and recognized $3,035,000 as an employee retention credit receivable in the
Consolidated Balance Sheet as of December 31, 2022. Payments were received in January 2023. No additional credits are
expected to be received.
Income Taxes. Income tax expense was $107,000 for the year ended December 31, 2022 compared to income tax
benefit of $26,000 for the same period of 2021. The effective tax expense/benefit rates for the years ended December 31,
2022 and 2021 were approximately -0.5% and 0.1%, respectively. Our effective tax rate decreased compared to the
corresponding period from the prior year primarily due to a change in the valuation allowance on a portion of the NOL’s
due to an Internal Revenue Code section 382 limitation. Our effective tax rates differ from the statutory federal rate of 21%
for certain items such as state and local taxes, valuation allowances, and non-deductible expenses.
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Use of EBITDA (Non-GAAP measure)
We define EBITDA as net income (loss) plus interest expense, interest income, income taxes, and depreciation
and amortization 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 or
historical cost basis;
● our liquidity and operating performance over time in relation to other companies that own similar assets and
that we believe calculate 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
not defined 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 or
liquidity, investors and others should not consider this data in isolation or as a substitute for net income (loss), cash flow
from operating activities or other cash flow data calculated in accordance with GAAP. In addition, our EBITDA may not
be comparable to EBITDA or similarly titled measures utilized by other companies since such other companies may not
calculate EBITDA in the same manner as us. Further, the results presented by EBITDA cannot be achieved without
incurring the costs that the measure excludes: interest, taxes, and depreciation and amortization.
The reconciliation of our EBITDA to our net loss and net cash used in operating activities, which are the most
directly comparable GAAP financial measures, are provided in the following tables (in thousands):
Net loss
Depreciation and amortization
Interest (income) expense, net
Income tax expense (benefit)
EBITDA
Net cash used in operating activities
Changes in working capital and other items
Non-cash adjustments to net loss
EBITDA
Liquidity and Capital Resources
Year Ended December 31,
2022
2021
(20,451)
9,795
(285)
107
(10,834)
$
$
(29,091)
12,863
(199)
(26)
(16,453)
Year Ended December 31,
2022
2021
(8,961)
(462)
(1,411)
(10,834)
$
$
(16,050)
1,142
(1,545)
(16,453)
$
$
$
$
Introduction. Our principal sources of cash are amounts earned from the seismic data acquisition services we
provide to our clients. Our principal uses of cash are the amounts used to provide these services, including expenses related
to our operations and acquiring new equipment. Accordingly, our cash position depends (as do our revenues) on the level
of demand for our services. Historically, cash generated from our operations along with cash reserves and borrowings from
commercial banks have been sufficient to fund our working capital requirements and, to some extent, our capital
expenditures.
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Cash Flows. The following table shows our sources and uses of cash (in thousands) for the years ended December
31, 2022 and 2021:
Net cash (used in) provided by
Operating activities
Investing activities
Financing activities
Effect of exchange rate changes on cash, cash equivalents and restricted cash
Net change in cash and cash equivalents and restricted cash
Year Ended December 31, 2022 versus Year Ended December 31, 2021
Year Ended December 31,
2022
2021
$
$
(8,961)
(669)
(1,567)
(265)
(11,462)
$
$
(16,050)
264
95
112
(15,579)
Net cash used in operating activities was $8,961,000 for the year ended December 31, 2022 and $16,050,000 for
the same period of 2021. The decrease in cash used in operating activities was primarily due to a decreased net loss
combined with an increase in our operating level of deferred revenue offset by increases in contract assets and other
prepaid expenses as of December 31, 2022. The gain from employee retention credit is offset by the increase in employee
retention credit receivable.
Net cash used in investing activities was $669,000 for the year ended December 31, 2022 and includes cash
capital expenditures of $894,000 offset by $225,000 in proceeds from the disposal of assets. Net cash provided by investing
activities was $264,000 for the year ended December 31, 2021 and includes $318,000 of proceeds from maturities of short-
term investments that were not reinvested and $451,000 in proceeds from the disposal of assets offset by cash capital
expenditures of $505,000.
Net cash used in financing activities was $1,567,000 for the year ended December 31, 2022 and includes principal
payments of $1,253,000 on our notes and $47,000 on our finance leases and outflows of $301,000 associated with cash
settlement of restricted stock units and $79,000 associated with taxes related to stock compensation awards vesting offset
by $113,000 received for sale of treasury stock. Net cash provided by financing activities was $95,000 for the year ended
December 31, 2021 and includes $787,000 of proceeds from notes payable offset by principal payments of $562,000 on our
notes and $55,000 on our finance leases and outflows of $75,000 associated with taxes related to stock compensation
awards vesting.
We continually strive to supply our clients with technologically advanced 3-D data acquisition recording services
and data processing capabilities. We maintain equipment in and out of service in anticipation of increased future demand
for our services.
Capital Resources. Historically, we have primarily relied on cash generated from operations, cash reserves and
borrowings from commercial banks to fund our working capital requirements and, to some extent, our capital expenditures.
Recently, we have funded some of our capital expenditures through finance leases and equipment term loans. From time to
time in the past, we have also funded our capital expenditures and other financing needs through public equity offerings.
We believe that our capital resources, including our cash and short-term investments, cash flow from operations, and funds
available under our Revolving Credit Facility are sufficient to meet our operational needs.
Dominion Credit Facility. On September 30, 2019, we entered into a Loan and Security Agreement with Dominion
Bank, a Texas state bank (“Dominion Bank”). On September 30, 2022, we entered into a Third Loan Modification
Agreement (the “Third Modification”) to the Loan and Security Agreement (as amended by (i) that certain Loan
Modification Agreement dated as of September 30, 2020, (ii) that certain Second Loan Modification Agreement dated as of
September 30, 2021, and (iii) the Third Modification, the “Loan Agreement”) for the purpose of (a) amending and
extending the maturity of our line of credit with Dominion Bank by one year and (b) amending the principal amount under
the Loan Agreement, (c) amending the interest rate under the Loan Agreement, (d) amending our obligation to maintain a
certain tangible net worth and (e) adding our obligation to maintain a minimum liquidity amount. The Loan Agreement
provides for a secured revolving credit facility (the “Revolving Credit Facility”) in an amount up to the lesser of (i)
$10,000,000 or (ii) a sum equal to (a) 80% of our eligible accounts receivable plus (b) 100% of the amount on deposit with
Dominion Bank in our collateral account, including a restricted IntraFi Network Deposit account of $5,000,000 (the
“Deposit”). As of December 31, 2022, we have not borrowed any amounts under the Revolving Credit Facility and have
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approximately $9,017,000 available for withdrawal.
Under the Revolving Credit Facility, interest will accrue at an annual rate equal to the lesser of (i) 7.75% and (ii) the
greater of (a) the prime rate as published from time to time in The Wall Street Journal or (b) 4.75%. We will pay a
commitment fee of 0.10% per annum on the difference of (a) $10,000,000 minus the Deposit minus (b) the daily average
usage of the Revolving Credit Facility. The Loan Agreement contains customary covenants for credit facilities of this type,
including limitations on disposition of assets. We are also obligated to meet certain financial covenants under the Loan
Agreement, including maintaining a tangible net worth of not less than $38,000,000 and, to be tested as of the end of each
calendar quarter, unencumbered liquid assets of not less than $5,000,000, and specified ratios with respect to current assets
and liabilities and debt to tangible net worth. We received a limited waiver from Dominion Bank with respect to any non-
compliance with the tangible net worth covenant for the period ended December 31, 2022. Our obligations under the Loan
Agreement are secured by a security interest in the collateral account (including the Deposit) with Dominion Bank and
future accounts receivable and related collateral. The maturity date of the Loan Agreement is September 30, 2023.
We do not currently have any notes payable under the Revolving Credit Facility.
Dominion Letters of Credit. As of December 31, 2022, Dominion Bank has issued one letter of credit in the
amount of $265,000 to support our workers compensation insurance. The letter of credit is secured by a certificate of
deposit with Dominion Bank.
Other Indebtedness. As of December 31, 2022, we have one note payable to a finance company for various
insurance premiums totaling $205,000.
In addition, we lease certain seismic recording equipment and vehicles under leases classified as finance leases.
Our Consolidated Balance Sheet as of December 31, 2022 includes finance leases of $277,000.
Contractual Obligations. We believe that our capital resources, including our short-term investments, cash flow
from operations, and funds available under our Revolving Credit Facility, will be adequate to meet our current operational
needs. We believe that we will be able to finance our 2023 capital expenditures through cash flow from operations,
borrowings from commercial lenders, and the funds available under our Revolving Credit Facility. However, our ability to
satisfy working capital requirements, meet debt repayment obligations, and fund future capital requirements will depend
principally upon our future operating performance, which is subject to the risks inherent in our business, and will also
depend on the extent to which the current economic climate adversely affects the ability of our customers, and/or potential
customers, to promptly pay amounts owing to us under their service contracts with us.
Off-Balance Sheet Arrangements
As of December 31, 2022, we had no off-balance sheet arrangements.
Critical Accounting Policies
The preparation of our financial statements in conformity with GAAP requires that certain assumptions and
estimates be made that affect the reported amounts of assets and liabilities at the date of our financial statements and the
reported amounts of revenues and expenses during the reporting periods. Because of the use of assumptions and estimates
inherent in the reporting process, actual results could differ from those estimates.
Allowance for Doubtful Accounts. Our allowance for doubtful accounts reflects our current estimate of credit
losses expected to be incurred over the life of the financial instrument and is determined based on a number of factors. We
prepare our allowance for doubtful accounts receivable based on our review of past-due accounts, our past experience of
historical write-offs, our current client base, when customer accounts exceed 90 days past due and specific customer
account reviews. While the collectability of outstanding client invoices is continually assessed, the inherent volatility of the
energy industry’s business cycle can cause swift and unpredictable changes in the financial stability of our clients. With the
adoption of ASU 2016-13 in 2020, we made an accounting policy election to write off accrued interest amounts by
reversing interest income. Our allowance for doubtful accounts was $250,000 at December 31, 2022 and 2021.
Impairment of Long-Lived Assets. We review long-lived assets for impairment when triggering events occur
suggesting deterioration in the assets’ recoverability or fair value. Recognition of an impairment charge is required if future
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expected undiscounted net cash flows are insufficient to recover the carrying value of the assets, and the fair value of the
assets is below the carrying value of the assets. Our forecast of future cash flows used to perform impairment analysis
includes estimates of future revenues and expenses based on our anticipated future results while considering anticipated
future oil and gas prices, which is fundamental in assessing demand for our services. If the carrying amounts of the assets
exceed the estimated expected undiscounted future cash flows, we measure the amount of possible impairment by
comparing the carrying amount of the asset to its fair value. No impairment charges were recognized for the years ended
December 31, 2022 and 2021.
Leases. We lease certain vehicles, seismic recording equipment, real property and office equipment under lease
agreements. We evaluate each lease to determine its appropriate classification as an operating lease or a finance lease for
financial reporting purposes. We are the lessee in a lease contract when we obtain the right to control the asset. The
majority of our operating leases are non-cancelable operating leases for office, shop and warehouse space in Midland,
Plano, Houston, Oklahoma City and Calgary, Alberta.
The assets and liabilities under finance leases are recorded at the lower of the present value of the minimum lease
payments or the fair market value of the related assets. Assets under finance leases are amortized using the straight-line
method over the initial lease term. Amortization of assets under finance leases is included in depreciation expense.
For operating leases, where readily determinable, we use the implicit interest rate in determining the present value
of future minimum lease payments. In the absence of an implicit rate, we use our incremental borrowing rate based on the
information available at the lease commencement date. We give consideration to our outstanding debt, as well as publicly
available data for instruments with similar characteristics when calculating our incremental borrowing rates. The ROU
assets are amortized to operating lease cost over the lease terms on a straight-line basis. We do not recognize leases with an
initial term of 12 months or less and we do not separate lease and non-lease components.
Several of our leases include options to renew, with renewal terms that can extend from one to 10 years or more.
The exercise of lease renewal options is primarily at our discretion. To measure operating lease recognition, we evaluate
our lease agreements to determine if they have economic incentives for renewal or options to purchase. We deem leasehold
improvements as one of the few economic incentives that would entice us to renew a lease and all of our leasehold
improvements are currently fully amortized.
Revenue Recognition. Our services are provided under cancelable service contracts which usually have an original
expected duration of one year or less. These contracts are either turnkey or term agreements. Under both types of
agreements, we recognize revenue as the services are performed. Revenue is generally recognized based on square miles of
data recorded compared to total square miles anticipated to be recorded on the survey using the total estimated revenue for
the service contract. In the case of a cancelled service contract, the client is billed and revenue is recognized for any third
party charges 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. 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
timing differences between revenue recognition, billings and cash collections. If billing occurs prior to the revenue
recognition or billing exceeds the revenue recognized, the amount is considered deferred revenue and a contract liability.
Conversely, if the revenue recognition exceeds the billing, the excess is considered an unbilled receivable and a contract
asset. As services are performed, 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 costs
that directly relate to the contract are utilized to fulfill the contract obligations. These fulfillment costs are capitalized in
other current assets and amortized based on the total square miles of data recorded compared to total square miles
anticipated to 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 certain qualitative and
quantitative judgments supported by underlying facts. Management considers a variety of factors such as whether various
components of the performance obligation will be performed internally or externally, cost of third party services, and facts
and circumstances unique to the performance obligation in making these estimates.
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Additionally, our policy includes (i) ignoring the financing component when estimating the transaction price for
service contracts completed within one year, (ii) excluding sales tax collected from the customer when determining the
transaction price, and (iii) expensing incremental costs to obtain a customer contract if the amortization period for those
costs would otherwise be one year or less.
Income Taxes. We account 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 tax consequences of events that have been recognized in our financial statements or tax returns. We determine
deferred taxes by identifying the types and amounts of existing temporary differences, measuring the total deferred tax
asset or liability using the applicable tax rate in effect for the year in which those temporary differences are expected to be
recovered or settled. The effect of a change in tax rates of deferred tax assets and liabilities is recognized in income in the
year of an enacted rate change. The deferred tax asset is reduced by a valuation allowance if, based on available evidence,
it is more likely than not that some portion or all of the deferred tax asset will not be realized. Our methodology for
recording income taxes requires judgment regarding assumptions and the use of estimates, including determining our
annual effective tax rate and the valuation of deferred tax assets, which can create a variance between actual results and
estimates and could have a material impact on our provision or benefit for income taxes. Due to recent operating losses and
valuation allowances, we may recognize reduced or no tax benefits on future losses on the Consolidated Statements of
Operations and Comprehensive Loss. Our effective tax rates differ from the statutory federal rate of 21% for certain items
such as state and local taxes, valuation allowances, and non-deductible expenses.
Recently Issued Accounting Pronouncements
None.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to certain market risks arising from the use of financial instruments in the ordinary course of
business. These risks arise primarily as a result of potential changes to operating concentration of credit risk and changes in
interest rates. We have not entered into any hedge arrangements, commodity swap agreements, commodity futures, options
or other derivative financial instruments. We also conduct business in Canada, which subjects our results of operations and
cash flows to foreign currency exchange rate risk.
Concentration of Credit Risk. Our principal market risks include fluctuations in commodity prices, which affect
demand for and pricing of our services, and the risk related to the concentration of our clients in the oil and natural gas
industry. Since all of our clients are involved in the oil and natural gas industry, there may be a positive or negative effect
on our exposure to credit risk because our clients may be similarly affected by changes in economic and industry
conditions. As an example, changes to existing regulations or the adoption of new regulations may unfavorably impact us,
our suppliers or our clients. In the normal course of business, we provide credit terms to our clients. Accordingly, we
perform ongoing credit evaluations of our clients and maintain allowances for possible losses. Our historical experience
supports our allowance for doubtful accounts of $250,000 at December 31, 2022. This does not necessarily indicate that it
would be adequate to cover a payment default by one large or several smaller clients.
We generally provide services to certain key clients that account for a significant percentage of our accounts
receivable at any given time. Our key clients vary over time. We extend credit to various companies in the oil and natural
gas industry, including our key clients, for the acquisition of seismic data, which results in a concentration of credit risk.
This concentration of credit risk may be affected by changes in the economic or other conditions of our key clients and may
accordingly impact our overall credit risk. If any of these significant clients were to terminate their contracts or fail to
contract for our services in the future because they are acquired, alter their exploration or development strategy, or for any
other reason, our results of operations could be affected. Because of the nature of our contracts and clients’ projects, our
largest clients can change from year to year, and the largest clients in any year may not be indicative of the largest clients in
any subsequent year. During the twelve months ended December 31, 2022, our three largest clients accounted for
approximately 35% of revenue. The remaining balance of our revenue derived from varied clients and none represented
more than 10% of revenue.
Interest Rate Risk. From time to time, we are exposed to the impact of interest rate changes on the outstanding
indebtedness under our Loan Agreement.
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We generally have cash in the bank which exceeds federally insured limits. Historically, we have not experienced
any losses in such accounts; however, volatility in financial markets may impact our credit risk on cash and short-term
investments. At December 31, 2022, cash, restricted cash and short term investments totaled $19,179,000.
For further information, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results
of Operations” and “Item 1A. Risk Factors.”
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item appears on pages F-1 through F-21 hereof and are incorporated herein by
reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
Item 9A. CONTROLS AND PROCEDURES
Management’s Evaluation of Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of our management, including our
principal executive, financial and accounting officers, of the effectiveness of our disclosure controls and procedures
pursuant to 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 that evaluation, our President and Chief Executive Officer, and our Executive Vice President, Chief Financial Officer,
Secretary, and Treasurer concluded that, as of December 31, 2022, our disclosure controls and procedures were effective, in
all material respects, with regard to the recording, processing, summarizing and reporting, within the time periods specified
in the SEC’s rules and forms, for information required to be disclosed by us in the reports that we file or submit under the
Exchange Act. Our disclosure controls and procedures include controls and procedures designed to ensure that information
required to be disclosed 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 Reporting
Our 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 financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Under
the supervision and with the participation of 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 financial reporting as of December 31, 2022 using the criteria set forth in Internal Control — Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based
on this evaluation, we have concluded that, as of December 31, 2022, our internal control over financial reporting was
effective. Our internal control over financial reporting as of December 31, 2022 has not been audited by RSM US LLP, the
independent registered public accounting firm who audited our financial statements as this audit is not required because the
company qualifies for smaller reporting company filing status.
Changes in Internal Control over Financial Reporting
There have not been any changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and
15d-15(f) of the Exchange Act) during the quarter ended December 31, 2022 that have materially affected or are
reasonably likely to materially affect our internal control over financial reporting.
25
Table of Contents
Item 9B. OTHER INFORMATION
None.
Part III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by Item 10 of Form 10-K is hereby incorporated by reference from the earlier filed of:
(i) an amendment to this annual report on Form 10-K or (ii) the Company’s definitive proxy statement which will be filed
pursuant to Regulation 14A within 120 days after the Company’s year-end for the year covered by this report.
Item 11. EXECUTIVE COMPENSATION
The information required by Item 11 of Form 10-K is hereby incorporated by reference from the earlier filed of:
(i) an amendment to this annual report on Form 10-K or (ii) the Company’s definitive proxy statement which will be filed
pursuant to Regulation 14A within 120 days after the Company’s year-end for the year covered by this report.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The information required with respect to our equity compensation plans is set forth in Item 5 of this Form 10-K.
Other information required by Item 12 of Form 10-K is hereby incorporated by reference from the earlier filed of: (i) an
amendment to this annual report on Form 10-K or (ii) the Company’s definitive proxy statement which will be filed
pursuant to Regulation 14A within 120 days after the Company’s year-end for the year covered by this report.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information required by Item 13 of Form 10-K is hereby incorporated by reference from the earlier filed of:
(i) an amendment to this annual report on Form 10-K or (ii) the Company’s definitive proxy statement which will be filed
pursuant to Regulation 14A within 120 days after the Company’s year-end for the year covered by this report.
Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by Item 14 of Form 10-K is hereby incorporated by reference from the earlier filed of:
(i) an amendment to this annual report on Form 10-K or (ii) the Company’s definitive proxy statement, which will be filed
pursuant to Regulation 14A within 120 days after the Company’s year-end for the year covered by this report.
26
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-21 and
are incorporated by reference into Part II, Item 8:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive Loss
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes 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 financial statements or notes thereto.
(3)
Exhibits.
The information required by this item 15(a)(3) is set forth in the Index to Exhibits accompanying this
Annual Report on Form 10-K and is hereby incorporated by reference.
27
Table of Contents
EXHIBIT NO.
DESCRIPTION
INDEX TO EXHIBITS
2.1 Agreement and Plan of Merger, dated October 25, 2021, by and between the Registrant, Wilks Brothers,
LLC and WB Acquisitions Inc., filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed on
October 25, 2021, and incorporated herein by reference.
2.2 Amendment No. 1 to Agreement and Plan of Merger, dated December 14, 2021, by and between the
Registrant, Wilks Brothers, LLC and WB Acquisitions Inc., filed as Exhibit 2.1 to the Company’s Current
Report on Form 8-K, filed on December 17, 2021, and incorporated herein by reference.
2.3 Amendment No. 2 to Agreement and Plan of Merger, dated January 4, 2022, by and between the Registrant,
Wilks Brothers, LLC and WB Acquisitions Inc., filed as Exhibit 2.1 to the Company’s Current Report on
Form 8-K, filed on January 5, 2022, and incorporated herein by reference.
2.4 Amendment No. 3 to Agreement and Plan of Merger, dated January 10, 2022, by and between the
Registrant, Wilks Brothers, LLC and WB Acquisitions Inc., filed as Exhibit 2.1 to the Company’s Current
Report on Form 8-K, filed on January 10, 2022, and incorporated herein by reference.
3.1 Amended and Restated Certificate of Formation, as amended February 11, 2015, filed as Exhibit 3.1 to the
Registrant’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.
3.3 Statement of Resolutions Establishing Series of Shares designated Series A Junior Participating Preferred
Stock of the Registrant, filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed April 8,
2021, 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,
filed on February 11, 2015, and incorporated herein by reference.
*4.2 Description of Securities.
4.3 Rights Agreement, dated as of April 8, 2021 between the Registrant and American Stock Transfer & Trust
Company, LLC, as Rights Agent, filed as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, filed
April 8, 2021, and incorporated herein by reference.
4.4 Amendment to Rights Agreement, dated October 25, 2021, between the Registrant and American Stock
Transfer & Trust Company, LLC, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed
on October 25, 2021, and incorporated herein by reference.
+10.1 The Executive Nonqualified “Excess” Plan Adoption Agreement, filed as Exhibit 10.1 to the Registrant’s
Current Report on Form 8-K, filed on January 8, 2013, and incorporated herein by reference.
+10.2 The Executive Nonqualified Excess Plan Document, filed as Exhibit 10.2 to the Registrant’s Current Report
on Form 8-K, filed on January 8, 2013, and incorporated herein by reference.
+10.3 Form of Indemnification Agreement entered with directors and executive officers, filed as Exhibit 10.1 to
the Registrant’s Current Report on Form 8-K, filed on October 9, 2014, and incorporated herein by
reference.
28
Table of Contents
EXHIBIT NO.
DESCRIPTION
+10.4 Employment Agreement, dated October 8, 2014, by and between the Registrant and Stephen C. Jumper,
filed as Exhibit 10.5 to the Registrant’s Current Report on Form 8-K, filed on October 9, 2014, and
incorporated herein by reference.
+10.5 Employment Agreement, dated October 8, 2014, by and between the Registrant and C. Ray Tobias, filed as
Exhibit 10.6 to the Registrant’s Current Report on Form 8-K, filed on October 9, 2014, and incorporated
herein by reference.
+10.6 Employment Agreement, dated October 8, 2014, by and between the Registrant and James K. Brata, filed as
Exhibit 10.3 to the Registrant’s Current Report on Form 8-K, filed on October 9, 2014, and incorporated
herein by reference.
+10.7 Employment Agreement, dated October 8, 2014, by and between the Registrant and James W. Thomas, filed
as Exhibit 10.8 to the Registrant’s Current Report on Form 8-K, filed on October 9, 2014, and incorporated
herein by reference.
+10.8 Letter Agreement, dated February 15, 2016, by and between James K. Brata and the Company, filed as
Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on February 19, 2016, and incorporated
herein by reference.
+10.9 Letter Agreement, dated February 15, 2016, by and between Stephen C. Jumper and the Company, filed as
Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed on February 19, 2016, and incorporated
herein by reference.
+10.10 Letter Agreement, dated February 15, 2016, by and between James W. Thomas and the Company, filed as
Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed on February 19, 2016, and incorporated
herein by reference.
+10.11 Letter Agreement, dated February 15, 2016, by and between C. Ray Tobias and the Company, filed as
Exhibit 10.5 to the Company’s Current Report on Form 8-K, filed on February 19, 2016, and incorporated
herein by reference.
+10.12 Letter Agreement, dated May 4, 2018, by and between James K. Brata and the Company, filed as Exhibit
10.1 to the Company’s Current Report on Form 8-K, filed on May 4, 2018, and incorporated herein by
reference.
+10.13 Letter Agreement, dated May 4, 2018, by and between Stephen C. Jumper and the Company, filed as
Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on May 4, 2018, and incorporated herein
by reference.
+10.14 Letter Agreement, dated May 4, 2018, by and between James W. Thomas and the Company, filed as Exhibit
10.3 to the Company’s Current Report on Form 8-K, filed on May 4, 2018, and incorporated herein by
reference.
+10.15 Letter Agreement, dated May 4, 2018, by and between C. Ray Tobias and the Company, filed as Exhibit
10.4 to the Company’s Current Report on Form 8-K, filed on May 4, 2018, and incorporated herein by
reference.
29
Table of Contents
EXHIBIT NO.
DESCRIPTION
+10.16 Amended and Restated Dawson Geophysical Company 2006 Stock and Performance Incentive Plan (the
“Legacy Dawson Plan”), filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed on
February 11, 2015, and incorporated herein by reference.
+10.17 Form of Restricted Stock Agreement for the Legacy Dawson Plan, filed as Exhibit 10.5 to Dawson
Operating Company’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.
+10.18 Form of Restricted Stock Unit Agreement for the Legacy Dawson Plan, filed as Exhibit 10.5 to Dawson
Operating Company’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.
+10.19 Form of Stock Option Agreement for the Legacy Dawson Plan, filed as Exhibit 10.4 to Dawson Operating
Company’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.
+10.20 Form of Stock Option Agreement for the Legacy Dawson Plan, filed as Exhibit 10.9 to Dawson Operating
Company’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.
+10.21 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 (File
No. 001-34404), and incorporated herein by reference.
10.22 Form of Master Geophysical Data Acquisition Agreement, filed as Exhibit 10.10 to Dawson Operating
Company’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.
10.23 Form of Supplemental Agreement to Master Geophysical Data Acquisition Agreement, filed as
Exhibit 10.11 to Dawson Operating Company’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.
+10.24 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 as Exhibit 10.1 to the Company’s
Current Report on Form 8-K (File No. 001-32472), filed on June 5, 2015, and incorporated herein by
reference.
+10.25 Dawson Geophysical Company 2016 Stock and Performance Incentive Plan, filed as Exhibit 10.2 to the
Registrant’s Current Report on Form 8-K, filed on May 5, 2016, and incorporated herein by reference.
10.26 Loan and Security Agreement, by and between Dawson Geophysical Company and Dominion Bank, dated
September 30, 2019, filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed on October
1, 2019, and incorporated herein by reference.
10.27 Loan Modification Agreement to Loan and Security Agreement, by and between Dawson Geophysical
Company and Dominion Bank, dated September 30, 2020, filed as Exhibit 10.1 to the Registrant’s Current
Report on Form 8-K, filed on September 30, 2020, and incorporated herein by reference.
30
Table of Contents
EXHIBIT NO.
DESCRIPTION
+10.28 Letter Agreement, dated April 15, 2020, by and between James K. Brata and the Company, filed as Exhibit
10.2 to the Company’s Current Report on Form 8-K, filed on April 21, 2020, and incorporated herein by
reference.
+10.29 Letter Agreement, dated April 15, 2020, by and between Stephen C. Jumper and the Company, filed as
Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed on April 21, 2020, and incorporated
herein by reference.
+10.30 Letter Agreement, dated April 15, 2020, by and between James W. Thomas and the Company, filed as
Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed on April 21, 2020, and incorporated
herein by reference.
+10.31 Letter Agreement, dated April 15, 2020, by and between C. Ray Tobias and the Company, filed as Exhibit
10.5 to the Company’s Current Report on Form 8-K, filed on April 21, 2020, and incorporated herein by
reference.
+10.32 Letter Agreement, dated September 30, 2020, by and between Stephen C. Jumper and the Company, filed as
Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on September 30, 2020, and incorporated
herein by reference.
+10.33 Amended and Restated Dawson Geophysical Company 2016 Stock and Performance Incentive Plan,
effective as of April 24, 2020, filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed
on May 14, 2021, and incorporated herein by reference.
10.34 Second Loan Modification Agreement to Loan and Security Agreement, by and between the Registrant and
Dominion Bank, dated September 30, 2021, filed as Exhibit 10.1 to the Company’s Current Report on Form
8-K, filed on October 1, 2021, and incorporated herein by reference.
+10.35 Waiver Acknowledgement, dated January 10, 2022, by and between the Registrant and Stephen C. Jumper,
filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on January 10, 2022, and
incorporated herein by reference.
10.36 Third Loan Modification Agreement to Loan and Security Agreement, by and between the Registrant and
Dominion Bank, dated September 30, 2022, filed as Exhibit 10.1 to the Company’s Current Report on Form
8-K, filed on October 4, 2022, and incorporated herein by reference.
+10.37 Letter Agreement, dated November 11, 2022, by and between C. Ray Tobias and the Company, filed as
Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on November 16, 2022, and incorporated
herein by reference.
+10.38 Letter Agreement, dated November 11, 2022, by and between James K. Brata and the Company, filed as
Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on November 16, 2022, and incorporated
herein by reference.
+10.39 Letter Agreement, dated February 14, 2023, by and between Stephen C. Jumper and the Company, filed as
Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on February 21, 2023, and incorporated
herein by reference.
*21.1 Subsidiaries of the Registrant.
31
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EXHIBIT NO.
DESCRIPTION
*23.1 Consent of RSM US LLP, independent registered public accounting firm to incorporation of report by
reference.
*31.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 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 to
Section 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 to
Section 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 to
Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS* Inline XBRL Instance Document.
101.SCH* Inline XBRL Taxonomy Extension Schema Document.
101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB* Inline XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104* Cover Page Interactive Data File (embedded within the Inline XBRL document).
* Filed herewith.
+ Management contract or compensatory plan or arrangement.
32
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Midland, and the State of Texas, on
the 13th day of March, 2023.
DAWSON GEOPHYSICAL COMPANY
By:
/S/ STEPHEN JUMPER
Stephen Jumper
President and Chief Executive Officer
Pursuant to the requirements of the Exchange Act, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
Signature
/S/ MATTHEW WILKS
Matthew Wilks
/S/ BRUCE BRADLEY
Bruce Bradley
/s/ ALBERT CONLY
Albert Conly
/s/ JOSE CARLOS FERNANDES
Jose Carlos Fernandes
/S/ SERGEI KRYLOV
Sergei Krylov
/s/ STEPHEN JUMPER
Stephen Jumper
/s/ JAMES BRATA
James Brata
Title
Chairman of the Board of Directors
Director
Director
Director
Director
President and Chief Executive Officer
(principal executive officer)
Executive Vice President, Chief Financial
Officer, Secretary, and Treasurer
(principal financial and accounting officer)
33
Date
03-13-23
03-13-23
03-13-23
03-13-23
03-13-23
03-13-23
03-13-23
Table of Contents
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Financial Statements of Dawson Geophysical Company
Report of Independent Registered Public Accounting Firm (PCAOB ID 49)
Consolidated Balance Sheets as of December 31, 2022 and 2021
Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31,
2022 and 2021
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2022 and 2021
Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021
Notes to Consolidated Financial Statements
Page
F-2
F-3
F-4
F-5
F-6
F-7
F-1
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors of
Dawson Geophysical Company
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Dawson Geophysical Company and its subsidiaries (the
Company) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss,
stockholders’ equity and cash flows for the years then ended, and the related notes to the consolidated financial statements
(collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the
financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows
for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the
Company in accordance with U.S. federal securities laws and the 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 and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement,
whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control
over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal
control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of
the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated
or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the
financial statements and (2) involved our especially challenging, subjective or complex judgments. We determined that
there were no critical audit matters.
/s/ RSM US LLP
We have served as the Company's auditor since 2016.
Houston, Texas
March 13, 2023
F-2
Table of Contents
DAWSON GEOPHYSICAL COMPANY
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share data)
December 31,
2022
December 31,
2021
Assets
Current assets:
Cash and cash equivalents
Restricted cash
Short-term investments
Accounts receivable, net of allowance for doubtful accounts of $250
at December 31, 2022 and 2021
Employee retention credit receivable
Prepaid expenses and other current assets
Total current assets
Property and equipment
Less accumulated depreciation
Property and equipment, net
Right-of-use assets
Intangibles, net
Total assets
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable
Accrued liabilities:
Payroll costs and other taxes
Other
Deferred revenue
Current maturities of notes payable and finance leases
Current maturities of operating lease liabilities
Total current liabilities
Long-term liabilities:
Notes payable and finance leases, net of current maturities
Operating lease liabilities, net of current maturities
Deferred tax liabilities, net
Total long-term liabilities
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,
23,812,329 and 23,692,379 shares issued, and 23,812,329 and 23,643,934 shares
outstanding at December 31, 2022 and December 31, 2021, respectively
Additional paid-in capital
Accumulated deficit
Treasury stock, at cost; 0 and 48,445 shares at December 31, 2022 and 2021, respectively
Accumulated other comprehensive loss, net
Total stockholders’ equity
$
$
$
$
13,914
5,000
265
6,945
3,035
8,876
38,035
244,830
(226,703)
18,127
4,010
369
25,376
5,000
265
8,905
—
3,313
42,859
253,066
(226,717)
26,349
4,435
395
60,541
$
74,038
4,015
$
1,973
1,178
7,199
275
1,118
15,758
207
3,331
136
3,674
—
—
238
155,413
(112,469)
—
(2,073)
41,109
2,580
1,066
1,338
1,344
302
961
7,591
8
3,942
20
3,970
—
—
237
155,268
(92,018)
—
(1,010)
62,477
Total liabilities and stockholders’ equity
$
60,541
$
74,038
See accompanying notes to the consolidated financial statements.
F-3
Table of Contents
DAWSON GEOPHYSICAL COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(amounts in thousands, except share and per share data)
Operating revenues
Operating costs:
Operating expenses
General and administrative
Depreciation and amortization
Loss from operations
Other income (expense):
Interest income
Interest expense
Other income (expense), net
Gain from employee retention credit
Loss before income tax
Income tax benefit (expense):
Current
Deferred
Net loss
Other comprehensive (loss) income:
Net unrealized (loss) income on foreign exchange rate translation
Comprehensive loss
Basic loss per share of common stock
Diluted loss per share of common stock
Year Ended December 31,
2022
2021
$
37,480
$
24,695
37,910
13,785
9,795
61,490
29,016
12,046
12,863
53,925
(24,010)
(29,230)
316
(31)
415
2,966
220
(21)
(86)
—
(20,344)
(29,117)
9
(116)
(107)
27
(1)
26
(20,451)
(29,091)
(1,063)
(21,514)
(0.86)
(0.86)
$
$
$
190
(28,901)
(1.23)
(1.23)
$
$
$
Weighted average equivalent common shares outstanding
23,782,796
23,570,455
Weighted average equivalent common shares outstanding - assuming dilution
23,782,796
23,570,455
See accompanying notes to the consolidated financial statements.
F-4
Table of Contents
Balance January 1, 2021
Net loss
DAWSON GEOPHYSICAL COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(amounts in thousands, except share data)
Common Stock
Additional
Number
Paid-in
Of Shares Amount Capital
$ 154,866
23,526,517
235
$
Accumulated
Other
Accumulated Comprehensive
Deficit
$
(62,927)
(Loss) Income Total
(1,200)
$ 90,974
$
(29,091)
(29,091)
Unrealized income on foreign exchange rate translation
190
190
Issuance of common stock under stock compensation
plans
174,000
2
Stock-based compensation expense
Issuance of common stock as compensation
23,272
(2)
419
60
Shares exchanged for taxes on stock-based
compensation
(31,410)
—
(75)
—
419
60
(75)
Balance December 31, 2021
23,692,379
237
155,268
(92,018)
(1,010)
62,477
Net loss
(20,451)
(20,451)
Unrealized loss on foreign exchange rate translation
(1,063)
(1,063)
Issuance of common stock under stock compensation
plans
155,000
1
Stock-based compensation expense
Shares exchanged for taxes on stock-based
compensation
(35,050)
—
Cash settlement of RSUs
Treasury stock sale
(1)
413
(79)
(301)
113
—
413
(79)
(301)
113
Balance December 31, 2022
23,812,329
$
238
$ 155,413
$
(112,469)
$
(2,073)
$ 41,109
See accompanying notes to the consolidated financial statements.
F-5
Table of Contents
DAWSON GEOPHYSICAL COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
Operating lease cost
Non-cash compensation
Deferred income tax expense
Gain on disposal of assets
Remeasurement and other
Change in operating assets and liabilities:
Decrease (increase) in accounts receivable
Increase in employee retention credit receivable
(Increase) decrease in prepaid expenses and other assets
Increase in accounts payable
Increase (decrease) in accrued liabilities
Decrease in operating lease liabilities
Increase (decrease) in deferred revenue
Year Ended December 31,
2022
2021
$
(20,451)
$
(29,091)
9,795
998
413
116
(219)
(18)
1,311
(3,035)
(4,382)
873
802
(1,026)
5,862
12,863
1,066
479
1
(198)
(278)
(1,272)
—
1,397
983
(453)
(1,112)
(435)
Net cash used in operating activities
(8,961)
(16,050)
Cash flows from investing activities:
Capital expenditures, net of non-cash capital expenditures summarized below (if
applicable)
Proceeds from maturity of short-term investments
Proceeds from disposal of assets
Net cash (used in) provided by investing activities
Cash flows from financing activities:
Proceeds from notes payable
Principal payments on notes payable
Principal payments on finance leases
Tax withholdings related to stock-based compensation awards
Cash settlement of RSUs
Sale of treasury stock
Net cash (used in) provided by financing activities
Effect of exchange rate changes on cash and cash equivalents and restricted cash
(894)
—
225
(669)
—
(1,253)
(47)
(79)
(301)
113
(1,567)
(265)
(505)
318
451
264
787
(562)
(55)
(75)
—
—
95
112
Net decrease in cash and cash equivalents and restricted cash
(11,462)
(15,579)
Cash and cash equivalents and restricted cash at beginning of period
30,376
45,955
Cash and cash equivalents and restricted cash at end of period
Supplemental cash flow information:
Cash paid for interest
Cash paid for income taxes
Cash received for income taxes
Non-cash operating, investing and financing activities:
Increase in accrued purchases of property and equipment
Finance leases incurred
Increase in right-of-use assets and operating lease liabilities
Financed insurance premiums
$
$
$
$
$
$
$
$
18,914
$
30,376
31
$
— $
$
7
605
279
598
1,193
$
$
$
$
20
81
21
—
—
1
—
See accompanying notes to the consolidated financial statements.
F-6
Table of Contents
DAWSON GEOPHYSICAL COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Organization and Nature of Operations
The Company is a leading provider of onshore seismic data acquisition and processing services. Founded in 1952,
the Company acquires and processes 2-D, 3-D and multi-component seismic data for its clients, ranging from major oil and
gas companies to independent oil and gas operators as well as providers of multi-client data libraries. The Company
operates in the lower 48 states of the U.S. and in Canada.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries,
Dawson Operating LLC, Dawson Seismic Services Holdings, Inc., Eagle Canada, Inc., Eagle Canada Seismic Services
ULC and Exploration Surveys, Inc. All significant intercompany balances and transactions have been eliminated in
consolidation.
Cash Equivalents
For purposes of the consolidated financial statements, the Company considers demand deposits, certificates of
deposit, overnight investments, money market funds and all highly liquid debt instruments purchased with an initial
maturity of three months or less to be cash equivalents.
Allowance for Doubtful Accounts
The Company’s allowance for doubtful accounts reflects its current estimate of credit losses expected to be
incurred over the life of the financial instrument and is determined based on a number of factors. Management determines
the need for any allowance for doubtful accounts receivable based on its review of past-due accounts, its past experience of
historical write-offs, its current client base, when customer accounts exceed 90 days past due and specific customer account
reviews. While the collectability of outstanding client invoices is continually assessed, the inherent volatility of the energy
industry’s business cycle can cause swift and unpredictable changes in the financial stability of the Company’s clients.
With the adoption of ASU No. 2016-13 in 2020, the Company made an accounting policy election to write off accrued
interest amounts by reversing interest income. The Company's allowance for doubtful accounts was $250,000 at December
31, 2022 and 2021.
Employee Retention Credit Receivable
Under the provisions of the CARES Act, the Company was eligible and, in April 2022, applied for a refundable
employee retention credit subject to program conditions and requirements. The Company recognizes these credits as a gain
when all uncertainties have been met and the amounts are realizable in accordance with similar gain contingencies. The
Company recognized $2,966,000 as a gain in other income and $69,000 as interest income in the Consolidated Statement
of Operations and Comprehensive Loss for the year ended December 31, 2022 and recognized $3,035,000 as an employee
retention credit receivable in the Consolidated Balance Sheet as of December 31, 2022. Payments were received in January
2023. No additional credits are expected to be received.
Property and Equipment
Property and equipment is capitalized at historical cost or the fair value of assets acquired in a business
combination and is depreciated over the useful life of the asset. Management’s estimation of this useful life is based on
circumstances that exist in the seismic industry and information available at the time of the purchase of the asset. As
circumstances change and new information becomes available, these estimates could change.
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Depreciation is computed using the straight-line method. When assets are retired or otherwise disposed of, the
cost and related accumulated depreciation are removed from the consolidated balance sheet, and any resulting gain or loss
is reflected in the results of operations for the period.
Impairment of Long-Lived Assets
Long-lived assets are reviewed for impairment when triggering events occur suggesting deterioration in the assets’
recoverability or fair value. Recognition of an impairment charge is required if future expected undiscounted net cash flows
are insufficient to recover the carrying value of the assets and the fair value of the assets is below the carrying value of the
assets. Management’s forecast of future cash flows used to perform impairment analysis includes estimates of future
revenues and expenses based on the Company’s anticipated future results, while considering anticipated future oil and
natural gas prices which is fundamental in assessing demand for the Company’s services. If the carrying amounts of the
assets exceed the estimated expected undiscounted future cash flows, the Company measures the amount of possible
impairment by comparing the carrying amount of the assets to the fair value. No impairment charges were recognized for
the years ended December 31, 2022 and 2021.
Leases
The Company leases certain vehicles, seismic recording equipment, real property and office equipment under
lease agreements. The Company evaluates each lease to determine its appropriate classification as an operating lease or a
finance lease for financial reporting purposes. The Company is the lessee in a lease contract when we obtain the right to
control the asset. The majority of our operating leases are non-cancelable operating leases for office, shop and warehouse
space in Midland, Plano, Houston, Oklahoma City and Calgary, Alberta.
The assets and liabilities under finance leases are recorded at the lower of the present value of the minimum lease
payments or the fair market value of the related assets. Assets under finance leases are amortized using the straight-line
method over the initial lease term. Amortization of assets under finance leases is included in depreciation expense.
For operating leases, where readily determinable, the Company uses the implicit interest rate in determining the
present value of future minimum lease payments. In the absence of an implicit rate, the Company uses its incremental
borrowing rate based on the information available at the lease commencement date. The Company gives consideration to
its outstanding debt, as well as publicly available data for instruments with similar characteristics when calculating its
incremental borrowing rates. The ROU assets are amortized to operating lease cost over the lease terms on a straight-line
basis and is included in operating expense. The Company does not recognize leases with an initial term of 12 months or
less and does not separate lease and non-lease components.
Several of the Company’s leases include options to renew, with renewal terms that can extend from one to 10
years or more. The exercise of lease renewal options is primarily at the Company’s discretion. To measure operating lease
recognition, the Company evaluates its lease agreements to determine if they have economic incentives for renewal or
options to purchase. The Company deems leasehold improvements as one of the few economic incentives that would entice
the Company to renew a lease and all of its leasehold improvements are currently fully amortized.
Intangibles
The 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, and
between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of
the reporting unit below its carrying amount. No impairment charges were recognized for the years ended December 31,
2022 and 2021.
Revenue Recognition
Services are provided under cancelable service contracts which usually have an original expected duration of one
year or less. These contracts are either turnkey or term agreements. Under both types of agreements, the Company
recognizes revenues as the services are performed. Revenue is generally recognized based on square miles of data recorded
compared to total square miles anticipated to be recorded on the survey using the total estimated revenue for the service
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contract. In the case of a cancelled service contract, the client is billed and revenue is recognized for any third party charges
and square miles of 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
timing differences between revenue recognition, billings and cash collections. If billing occurs prior to the revenue
recognition or billing exceeds the revenue recognized, the amount is considered deferred revenue and a contract liability.
Conversely, if the revenue recognition exceeds the billing, the excess is considered an unbilled receivable and a contract
asset. As services are performed, those deferred revenue amounts are recognized as revenue.
In some instances, third-party permitting, surveying, drilling, helicopter, equipment rental and mobilization costs
that directly relate to the contract are utilized to fulfill the contract obligations. These fulfillment costs are capitalized in
other current assets and generally amortized based on the total square miles of data recorded compared to total square miles
anticipated to 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 certain qualitative and
quantitative judgments supported by underlying facts. Management considers a variety of factors such as whether various
components of the performance obligation will be performed internally or externally, cost of third party services, and facts
and circumstances unique to the performance obligation in making these estimates.
Additionally, the Company’s policy includes (i) ignoring the financing component when estimating the transaction
price for service contracts completed within one year, (ii) excluding sales tax collected from the customer when
determining the transaction price, and (iii) expensing incremental costs to obtain a customer contract if the amortization
period for those costs would otherwise be one year or less.
Stock-Based Compensation
The 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 of
actual forfeitures, as operating or general and administrative expense, as appropriate, in the Consolidated Statements of
Operations and Comprehensive Loss on a straight-line basis over the vesting period of the related awards.
Foreign Currency Translation
The U.S. Dollar is the reporting currency for all periods presented. The functional currency of the Company’s
foreign subsidiaries is generally the local currency. Any transactions denominated in a currency other than the functional
currency are remeasured with the resulting unrealized gain or loss recognized in the Consolidated Statements of Operations
and Comprehensive Loss as other income (expense). All assets and liabilities in the functional currency are then translated
into U.S. Dollars at the exchange rate on the consolidated balance sheet date. Income and expenses are translated using the
exchange rate applicable to each transaction. Equity transactions are translated using historical exchange rates.
Adjustments resulting from translation are recorded as a separate component of accumulated other comprehensive income
(loss) in the Consolidated Balance Sheets. Realized foreign currency transaction gains (losses) are included in the
Consolidated Statements of Operations and Comprehensive Loss as other income (expense).
Income Taxes
The Company accounts for income taxes by recognizing amounts of taxes payable or refundable for the current
year, and by using an asset and liability approach in recognizing the amount of deferred tax assets and liabilities for the
future tax consequences of events that have been recognized in the Company’s consolidated financial statements or tax
returns. Management determines deferred taxes by identifying the types and amounts of existing temporary differences,
measuring the total deferred tax asset or liability using the applicable tax rate in effect for the year in which those
temporary differences are expected to be recovered or settled. The effect of a change in tax rates of deferred tax assets and
liabilities is recognized in income in the year of an enacted rate change. The deferred tax asset is reduced by a valuation
allowance if, based on available evidence, it is more likely than not that some portion or all of the deferred tax asset will
not be
F-9
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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
variances between actual results and estimates and could have a material impact on the Company’s provision or benefit for
income taxes. Due to recent operating losses and valuation allowances, the Company may recognize reduced or no tax
benefits on future losses on the Consolidated Statements of Operations and Comprehensive Loss. The Company’s effective
tax rates differ 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 Statements
Preparation of the accompanying consolidated financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues
and expenses during the reporting period. Because of the use of assumptions and estimates inherent in the reporting
process, actual results could differ from those estimates.
2.
Short-Term Investments
The Company had short-term investments at December 31, 2022 and 2021 consisting of certificates of deposit
with original maturities greater than three months but less than a year. Certificates of deposit with any given banking
institution did not exceed the FDIC insurance limit at December 31, 2022 or 2021.
3. Fair Value of Financial Instruments
At December 31, 2022 and 2021, the Company’s financial instruments included cash and cash equivalents,
restricted cash, short-term investments in certificates of deposit, accounts receivable, employee retention credit receivable,
other current assets, accounts payable, other current liabilities, notes payable, finance leases and operating lease liabilities.
Due to the short-term maturities of cash and cash equivalents, restricted cash, accounts receivable, employee retention
credit receivable, other current assets, accounts payable and other current liabilities, the carrying amounts approximate fair
value at the respective balance sheet dates. The carrying value of the notes payable, finance leases and operating lease
liabilities approximate their fair value based on a comparison with the prevailing market interest rates. Due to the short-
term maturities of the Company’s investments in certificates of deposit, the carrying amounts approximate fair value at the
respective balance sheet dates. The fair values of the Company’s notes payable, finance leases, operating lease liabilities
and investments in certificates of deposit are level 2 measurements in the fair value hierarchy.
4. Property and Equipment
Net book value of property and equipment (in thousands) decreased $8,222 or 31.1% from December 31, 2021 to
December 31, 2022. This is primarily due to capital expenditure purchases of $1,778 during the year ended December 31,
2022 offset by depreciation expense of $9,795 for the same period. Property and equipment (in thousands), together with
the related estimated useful lives at December 31, 2022 and 2021, were as follows:
Land, building and other
Recording equipment
Vibrator energy sources
Vehicles
Less accumulated depreciation
Property and equipment, net
December 31,
2022
2021
$
$
12,553
147,675
64,110
20,492
244,830
(226,703)
18,127
$
$
15,156
148,330
69,239
20,341
253,066
(226,717)
26,349
Useful Lives
3 to 40 years
5 to 10 years
5 to 15 years
1.5 to 10 years
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Table of Contents
5. Supplemental Consolidated Financial Statement Information
Other Current Assets and Other Current Liabilities (in thousands)
Prepaid expenses and other current assets consist of the following at December 31, 2022 and 2021:
Contract assets
Prepaid expenses
Other assets
Other current assets
December 31,
2022
2021
$
$
5,433
2,252
1,191
8,876
$
$
972
1,101
1,240
3,313
The Company did not have any specific account within other current liabilities that accounted for more than 5% of
total current liabilities at December 31, 2022. The Company had accrued self-insurance reserves of approximately $599
and other accrued expenses and current liabilities of $739 at December 31, 2021.
Related Party Transactions (in thousands)
As of December 31, 2022, the Company had accounts receivable due from related parties of $121. This receivable is
due from Breckenridge Geophysical, LLC, which is a wholly owned subsidiary of Wilks Brothers, LLC, the holder of
approximately 74.46% of the Company’s outstanding common stock. This receivable is primarily related to rental of
seismic equipment to Breckenridge. For the year ended December 31, 2022, the Company received approximately $2,200
of related party revenue from Breckenridge. All outstanding receivables from Breckenridge have been received as of the
filing of this 10-K. During 2021, the Company did not have any related party revenue.
Disaggregated Revenues (in thousands)
The Company has one line of business, acquiring and processing seismic data in North America. Our chief
operating decision maker (President and CEO) makes operating decisions and assesses performance based on the Company
as a whole. Accordingly, the Company is considered to be in a single reportable segment. The following table presents the
Company’s operating revenues disaggregated by geographic region:
Operating Revenues
United States
Canada
Total
Deferred Costs (in thousands)
Year Ended December 31,
2021
2022
$
$
22,202
15,278
37,480
$
$
17,772
6,923
24,695
Deferred costs were $972 and $1,847 at January 1, 2022 and 2021, respectively. The Company’s prepaid expenses
and other current assets at December 31, 2022 and 2021 included deferred costs incurred to fulfill contracts with customers
of $5,433 and $972, respectively.
Deferred costs at December 31, 2022 compared to January 1, 2022 increased primarily as a result of new projects
for clients with significant deferred fulfillment costs at December 31, 2022. Deferred costs at December 31, 2021
compared to January 1, 2021 decreased primarily as a result of the completion of several projects for clients with
significant deferred fulfillment costs at the beginning of 2021.
The amount of total deferred costs amortized for the years ended December 31, 2022 and 2021 was $6,824 and
$6,563, respectively. There were no material impairment losses incurred during these periods.
F-11
Table of Contents
Deferred Revenue (in thousands)
Deferred revenue was $1,344 and $1,779 at January 1, 2022 and 2021, respectively. The Company’s deferred
revenue at December 31, 2022 and 2021 was $7,199 and $1,344, respectively.
Deferred revenue at December 31, 2022 compared to January 1, 2022 increased primarily as a result of new
projects for clients with large third party reimbursables where data has not yet been recorded. Deferred revenue at
December 31, 2021 compared to January 1, 2021 decreased primarily as a result of completing multiple large projects for
clients throughout 2021.
Revenue recognized for the year ended December 31, 2022 that was included in the contract liability balance at
the beginning of 2022 was $1,092. Revenue recognized for the year ended December 31, 2021 that was included in the
contract liability balance at the beginning of 2021 was $1,779. Deferred revenue not recognized during 2022 relates to
projects that have not yet started or were cancelled.
6. Debt
Dominion Loan Agreement
On September 30, 2019, the Company entered into a Loan and Security Agreement with Dominion Bank. On
September 30, 2022, the Company entered into a Third Loan Modification Agreement to the Loan and Security Agreement
for the purpose of (a) amending and extending the maturity of its line of credit with Dominion Bank by one year, (b)
amending the principal amount under the Loan Agreement, (c) amending the interest rate under the Loan Agreement, (d)
amending the Company’s obligation to maintain a certain tangible net worth and (e) adding the Company’s obligation to
maintain a minimum liquidity amount. The Loan Agreement provides for a secured revolving credit facility in an amount
up to the lesser of (i) $10,000,000 or (ii) a sum equal to (a) 80% of the Company’s eligible accounts receivable plus (b)
100% of the amount on deposit with Dominion Bank in the Company’s collateral account, including a restricted IntraFi
Network Deposit account of $5,000,000. As of December 31, 2022, the Company has not borrowed any amounts under the
Revolving Credit Facility and has approximately $9,017,000 available for withdrawal.
Under the Revolving Credit Facility, interest will accrue at an annual rate equal to the lesser of (i) 7.75% and (ii)
the greater of (a) the prime rate as published from time to time in The Wall Street Journal or (b) 4.75%. The Company will
pay a commitment fee of 0.10% per annum on the difference of (a) $10,000,000 minus the Deposit minus (b) the daily
average usage of the Revolving Credit Facility. The Loan Agreement contains customary covenants for credit facilities of
this type, including limitations on disposition of assets. The Company is also obligated to meet certain financial covenants
under the Loan Agreement, including maintaining a tangible net worth of not less than $38,000,000 and, to be tested as of
the end of each calendar quarter, unencumbered liquid assets of not less than $5,000,000, and specified ratios with respect
to current assets and liabilities and debt to tangible net worth. The Company received a limited waiver from Dominion
Bank with respect to any non-compliance with the tangible net worth covenant for the period ended December 31, 2022.
The Company’s obligations under the Loan Agreement are secured by a security interest in the collateral account
(including the Deposit) with Dominion Bank and future accounts receivable and related collateral. The maturity date of the
Loan Agreement is September 30, 2023.
The Company does not currently have any notes payable under the Revolving Credit Facility.
Dominion Letters of Credit
As of December 31, 2022, Dominion Bank has issued one letter of credit in the amount of $265,000 to support the
Company’s workers compensation insurance. The letter of credit is secured by a certificate of deposit with Dominion Bank.
Other Indebtedness
As of December 31, 2022, the Company has one note payable to a finance company for various insurance
premiums totaling $205,000.
In addition, the Company leases certain seismic recording equipment and vehicles under leases classified as
F-12
Table of Contents
finance leases. The Company’s Consolidated Balance Sheets as of December 31, 2022 and 2021 include finance leases of
$277,000 and $45,000, respectively.
Maturities of Debt
The Company’s aggregate principal amount (in thousands) of outstanding notes payable and the interest rates and
monthly payments as of December 31, 2022 and 2021 are as follows:
Notes payable to finance company for insurance
Aggregate principal amount outstanding
Interest rate
December 31, 2022
December 31, 2021
$
205
8.24%
$
265
4.99%
The Company’s aggregate maturities of finance leases (in thousands) at December 31, 2022 are as follows:
January 2023 - December 2023
January 2024 - December 2024
January 2025 - December 2025
Obligations under finance leases
$
$
70
68
139
277
Interest rates on these leases ranged from 5.37% to 7.66%.
7. Leases
The Company leases certain vehicles, seismic recording equipment, real property and office equipment under
lease agreements. The Company evaluates each lease to determine its appropriate classification as an operating lease or
finance lease for financial reporting purposes. The Company is the lessee in a lease contract when we obtain the right to
control the asset. The majority of our operating leases are non-cancelable operating leases for office, shop and warehouse
space in Midland, Plano, Houston, Oklahoma City and Calgary, Alberta.
The components of lease cost (in thousands) for the years ended December 31, 2022 and 2021 were as follows:
Finance lease cost
Amortization of right-of-use assets
Interest on lease liabilities
Total finance lease cost
Operating lease cost
Short-term lease cost
Total lease cost
Year Ended December 31,
2022
2021
$
$
1,273
3
1,276
1,242
—
2,518
$
$
1,350
4
1,354
1,338
—
2,692
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Table of Contents
Supplemental cash flow information related to leases (in thousands) for the years ended December 31, 2022 and
2021 was as follows:
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases
Operating cash flows from finance leases
Financing cash flows from finance leases
Right-of-use assets obtained in exchange for lease obligations
Operating leases
Finance leases
Year Ended December 31,
2022
2021
$
$
$
$
$
(1,271)
(3)
(47)
$
$
$
598
$
— $
(1,375)
(5)
(55)
1
—
Supplemental balance sheet information related to leases (in thousands) as of December 31, 2022 and 2021 was as
follows:
Operating leases
Operating lease right-of-use assets
Operating lease liabilities - current
Operating lease liabilities - long-term
Total operating lease liabilities
Finance leases
Property and equipment, at cost
Accumulated depreciation
Property and equipment, net
Finance lease liabilities - current
Finance lease liabilities - long-term
Total finance lease liabilities
Weighted average remaining lease term
Operating leases
Finance leases
Weighted average discount rate
Operating leases
Finance leases
$
$
$
$
$
$
$
December 31,
2022
2021
4,010
1,118
3,331
4,449
8,942
(7,336)
1,606
70
207
277
$
$
$
$
$
$
$
3.9 years
2.8 years
5.03%
7.21%
4,435
961
3,942
4,903
8,663
(6,293)
2,370
37
8
45
4.8 years
0.8 years
5.04%
5.04%
Maturities of lease liabilities (in thousands) at December 31, 2022 are as follows:
January 2023 - December 2023
January 2024 - December 2024
January 2025 - December 2025
January 2026 - December 2026
January 2027 - December 2027
Thereafter
Total payments under lease agreements
Less imputed interest
Total lease liabilities
Operating Leases
Finance Leases
$
$
1,316
1,311
1,002
1,021
267
—
4,917
(468)
$
4,449
$
88
81
145
—
—
—
314
(37)
277
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8. Stock-Based Compensation
Since the date of its effectiveness on May 5, 2016, the Company issues new grants of stock-based awards pursuant
to the Dawson Geophysical Company 2016 Stock and Performance Incentive Plan (the “2016 Plan”). All of the Company’s
prior plans have expired pursuant to their terms and no awards previously granted under prior plans remain outstanding.
The awards outstanding and available under the 2016 Plan, as restated in 2020, 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 of
authorized Company common stock, which authorized amount was increased to 1,050,000 as a result of the 5% stock
dividend approved by the Board on May 1, 2018. At the annual shareholders’ meeting on June 9, 2020, the Company’s
shareholders approved a restated version of the 2016 Plan (the “Restated 2016 Plan”), which authorized an additional
1,000,000 shares. The total aggregate numbers of shares of Common Stock reserved under the Restated 2016 Plan is
2,050,000 shares. As of December 31, 2022, there were approximately 1,264,487 shares available for future issuance. The
Restated 2016 Plan provides for the issuance of stock-based compensation awards, including stock options, common stock,
restricted stock, restricted stock units and other forms. Stock option grant prices awarded under the Restated 2016 Plan
may not be less than the fair market value of the common stock subject to such option on the grant date, and the term of
stock options shall extend no more than ten years after the grant date. The Restated 2016 Plan terminates June 9, 2030.
The Company’s employees and officers that hold unvested restricted stock awarded during 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 operating
or general and administrative expense, as appropriate, in the Consolidated Statements of Operations and Comprehensive
Loss for the years ended December 31, 2022 and 2021:
Restricted stock unit awards
Common stock awards
Total compensation expense
Stock Options
Year Ended December 31,
2022
2021
$
$
413
—
413
$
$
419
60
479
There was no stock option activity during the years ended December 31, 2022 and 2021. There were no
outstanding stock options as of December 31, 2022 or 2021.
Restricted Stock Awards
There was no restricted stock award activity during the years ended December 31, 2022 and 2021.
Restricted Stock Unit Awards
The Company did not grant any restricted stock unit awards during the year ended December 31, 2022. The
Company granted 335,000 restricted stock unit awards during the year ended December 31, 2021 with a weighted average
grant date fair value of $1.98. The fair value of restricted stock unit awards equals the market price of the Company’s stock
on the grant date and generally vest in one to three years or in annual increments over three years.
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Table of Contents
A summary of the Company’s nonvested restricted stock unit awards as of December 31, 2022 and activity during
the year then ended is as follows:
Nonvested as of December 31, 2021
Granted
Vested
Cash Settlement
Forfeited
Nonvested as of December 31, 2022
Number of Restricted
Stock Unit Awards
Weighted Average Grant
Date Fair Value
335,000
(155,000)
(180,000)
$
— $
$
$
— $
— $
1.98
—
1.98
1.98
—
—
As of December 31, 2022, there was no unrecognized compensation cost related to nonvested restricted stock unit
awards.
The aggregate vesting date fair value of restricted stock units for the years ended December 31, 2022 and 2021
was $351,000 and $416,000, respectively.
The aggregate cash settlement date fair value of restricted stock units for the years ended December 31, 2022 and
2021 was $301,000 and $0, respectively. An additional 5% over fair value of restricted stock units was issued for those
who chose the cash settlement option with an aggregate value for the years ended December 31, 2022 and 2021 of $15,000
and $0, respectively.
Common Stock Awards
The Company granted common stock awards with immediate vesting to outside directors during the years ended
December 31, 2022 and 2021 as follows:
Year ended December 31, 2022
Year ended December 31, 2021
9. Dividends
Number of Common
Stock Awards
Weighted Average
Grant Date Fair Value
— $
$
23,272
—
2.58
The Company did not issue any stock dividends during calendar years 2022 or 2021.
The Company has not paid cash dividends during calendar years 2022 and 2021. While there are currently no
restrictions prohibiting the Company from paying cash dividends, the Board of Directors, after consideration of economic
and market conditions affecting the energy industry in general, and the oilfield services business in particular, determined
that the Company would not pay a cash dividend in respect of the Company’s common stock for the foreseeable future.
Payment of any type of dividend in the future will be at the discretion of the Company’s board and will depend on the
Company’s financial condition, results of operations, capital and legal requirements, and other factors deemed relevant by
the board.
10. Employee Benefit Plans
The Company provides a 401(k) plan as part of its employee benefits package in order to retain quality personnel.
The Company elected to match 100% of the employee contributions up to a maximum of 6% of the participant’s applicable
compensation under its 401(k) plan for the years ended December 31, 2022 and 2021. The Company’s matching
contributions under its 401(k) plan for the years ended December 31, 2022 and 2021 were approximately $537,000 and
$483,000, respectively.
11. Advertising Costs
Advertising costs are charged to expense as incurred. Advertising costs for the years ended December 31, 2022
and 2021 totaled $29,000 and $28,000, respectively.
F-16
Table of Contents
12. Income Taxes
The Company’s components of loss before income tax (in thousands) were as follows:
Domestic
Foreign
Loss before income tax
Year Ended December 31,
2022
2021
$
$
(20,566)
222
(20,344)
$
$
(25,931)
(3,186)
(29,117)
The Company’s components of income tax benefit (expense) (in thousands) were as follows:
Current federal benefit
Current state benefit
Deferred federal expense
Deferred state (expense) benefit
Income tax (expense) benefit
Year Ended December 31,
2022
2021
$
$
9
—
(109)
(7)
(107)
$
$
21
6
(159)
158
26
The income tax provision (in thousands) differs from the amount computed by applying the statutory federal
income tax rate to loss before income tax as follows:
Tax benefit computed at statutory rate of 21%
Change in valuation allowance
State income tax (expense) benefit, net of federal tax
Foreign losses
Section 382 limited NOL
Other
Income tax (expense) benefit
Year Ended December 31,
2022
2021
$
$
4,272
15,352
(5)
70
(19,904)
108
(107)
$
$
6,047
(6,632)
130
706
—
(225)
26
The CARES Act was enacted on March 27, 2020 resulting in tax law changes that impacted the Company by
accelerating the AMT credit owed to the Company and allowed for a temporary change in NOL taxable income limitations.
For tax years beginning January 1, 2018 and those prior to 2021, an NOL deduction equal to 100% of taxable income is
allowed. Tax years 2021 and forward will revert back to the 80% limitation established by the 2017 Tax Cuts and Jobs
F-17
Table of Contents
Act. The Consolidated Appropriations Act, 2021 (“The ACT”) was enacted by Congress on December 27, 2020. The ACT
did not have a material impact to the Company’s consolidated financial statements.
The principal components of the Company’s net deferred tax assets (liabilities) (in thousands) were as follows:
Deferred tax assets:
Federal tax net operating loss ("NOL") carryforward
Foreign tax NOL carryforward
State tax NOL carryforward
Other comprehensive income
Deferred revenue
Foreign deferred taxes
Right-of-use assets
Canadian start-up costs
Restricted stock and restricted stock unit awards
Other
Self-insurance
Workers’ compensation
Gross deferred tax assets
Less valuation allowances
Net deferred tax assets
Deferred tax liabilities:
Property and equipment
Net deferred tax liabilities
Domestic deferred tax liabilities
Foreign deferred tax liabilities
Net deferred tax liabilities
December 31,
2022
2021
$
$
$
$
$
13,373
6,423
1,398
458
379
252
80
74
—
52
37
8
22,534
(21,184)
1,350
(1,486)
(136)
(136)
—
(136)
$
$
$
30,649
6,947
2,194
235
—
197
125
90
55
48
45
11
40,596
(37,571)
3,025
(3,045)
(20)
(20)
—
(20)
At December 31, 2022, the Company had a gross NOL for U.S. federal income tax purposes of approximately
$158,460,000 but expects approximately $94,779,000 to expire unused due to the 382 event discussed below. The
remaining NOL will begin to expire in 2027. Losses incurred after the year ended December 31, 2017 have no expiration.
The Company will carry forward the tax benefits related to federal net NOL of approximately $13,373,000. The Company
also had state net NOLs that will affect state taxes of approximately $1,398,000 at December 31, 2022. State NOLs began
to expire in 2015 and continue to expire each year. The Company also had a Canadian gross NOL of $24,702,000 that will
begin to expire in 2037.
On January 14, 2022, the Company was subject to an Internal Revenue Code section 382 event that limited some
of our NOL utilization in future periods. The 382 limitation rendered a substantial portion of the NOLs unusable and
caused the Company to write off approximately $19,904,000 of the federal net NOLs against the valuation allowance. It
also caused the Company to adjust the valuation allowance so we are still in a naked credit position domestically, but it did
not have a material impact on tax expense.
In evaluating the possible sources of taxable income during 2022, the Company determined it is more likely than
not that the remaining deferred tax assets will not be realizable. As a result, the Company recorded full valuation allowance
against foreign deferred tax assets and its federal and state deferred tax assets with the exception of its trademark
intangible.
At December 31, 2022 and 2021, the Company did not have any uncertain tax positions. The Company’s policy is
to recognize interest and penalties related to an uncertain tax position in income tax expense.
13. Net Loss per Share
Basic net loss per share is computed by dividing the net loss by the weighted average shares outstanding. Diluted
loss per share is computed by dividing the net loss by the weighted average diluted shares outstanding.
F-18
Table of Contents
The computation of basic and diluted loss per share (in thousands, except share and per share data) was as
follows:
Net loss
Weighted average common shares outstanding
Basic
Dilutive common stock options, restricted stock unit awards and restricted
stock awards
Diluted
Basic loss per share of common stock
Diluted loss per share of common stock
Year Ended December 31,
2021
2022
$
(20,451)
$
(29,091)
23,782,796
23,570,455
—
23,782,796
—
23,570,455
$
$
(0.86)
(0.86)
$
$
(1.23)
(1.23)
The Company had a net loss in the years ended December 31, 2022 and 2021. As a result, all stock options,
restricted stock unit awards, and restricted stock awards were anti-dilutive and excluded from weighted average shares
used in 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 have been excluded from the calculation of diluted loss per share of common stock, as their effect would be anti-
dilutive for the years ended December 31, 2022 and 2021:
Stock options
Restricted stock units
Restricted stock awards
Total
14. Major Clients
Year Ended December 31,
2022
2021
—
147,191
—
147,191
—
197,687
—
197,687
The Company operates in only one business segment, contract seismic data acquisition and processing services.
Sales to these clients, as a percentage of operating revenues that exceeded 10%, were as follows:
A
B
C
D
E
Year Ended December 31,
2022
2021
13%
12%
10%
—
—
—
—
12%
30%
23%
15. Areas of Operation
The U.S. and Canada are the only countries of operation for the Company.
The following tables present the Company’s operating revenues, net property and equipment, and right-of-use
assets (in thousands) by area of operation:
Operating Revenues
United States
Canada
Total
Year Ended December 31,
2021
2022
$
$
22,202
15,278
37,480
$
$
17,772
6,923
24,695
F-19
Table of Contents
Net Property and Equipment
United States
Canada
Total
Right-of-use Assets
United States
Canada
Total
Year Ended December 31,
2022
2021
15,370
2,757
18,127
$
$
22,446
3,903
26,349
Year Ended December 31,
2022
2021
3,722
288
4,010
$
$
3,977
458
4,435
$
$
$
$
16. Commitments and Contingencies
From time to time, the Company is a party to various legal proceedings arising in the ordinary course of business.
Although the Company cannot predict the outcomes of any such legal proceedings, management believes that the
resolution of pending legal actions will not have a material adverse effect on the Company’s consolidated financial
condition, results of operations or liquidity, as the Company believes it is adequately indemnified and insured.
The Company is also party to the following legal proceeding: On April 1, 2019, Weatherford International, LLC
and Weatherford U.S., L.P. (collectively, “Weatherford”) filed a petition in state district court for Midland County, Texas, in
which the Company and eighteen other parties were named as defendants, alleging the Company and/or the other named
defendants contributed
to or caused contamination of groundwater at and around property owned by
Weatherford. Weatherford is seeking declaratory judgment, recovery and contribution for past and future costs incurred in
responding to or correcting the contamination at and around the property from each defendant. The Company disputes
Weatherford’s allegations with respect to the Company and intends to vigorously defend itself in this case. Subsequent to
the filing of the petition, Weatherford filed for bankruptcy protection on July 1, 2019. While the outcome and impact of this
legal proceeding on the Company cannot be predicted with certainty, based on currently available information,
management believes that the resolution of this proceeding will not have a material adverse effect on our consolidated
financial condition, results of operations or liquidity.
Additionally, the Company experiences contractual disputes with its clients from time to time regarding the
payment of invoices or other matters. While the Company seeks to minimize these disputes and maintain good relations
with its clients, the Company has experienced in the past, and may experience in the future, disputes that could affect its
revenues and results of operations in any period.
17. Recently Issued Accounting Pronouncements
None.
18. Concentrations of Credit Risk
Financial instruments that potentially expose the Company to concentrations of credit risk at any given time may
consist of cash and cash equivalents, restricted cash, money market funds and overnight investment accounts, short-term
investments in certificates of deposit, trade and other receivables and other current assets. At December 31, 2022 and 2021,
the Company had deposits with domestic and international banks in excess of federally insured limits. Management
believes the credit risk associated with these deposits is minimal. Money market funds seek to preserve the value of the
investment, but it is possible to lose money investing in these funds.
The Company’s sales are to clients whose activities relate to oil and natural gas exploration and production. The
Company generally extends unsecured credit to these clients; therefore, collection of receivables may be affected by the
economy surrounding the oil and natural gas industry or other economic conditions. The Company closely monitors
extensions of credit and may negotiate payment terms that mitigate risk.
F-20
Table of Contents
F-21
DESCRIPTION OF SECURITIES
Exhibit 4.2
As of December 31, 2022, Dawson Geophysical Company (the “Company”) had one class of securities
registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”): common stock,
par value $0.01 per share, listed on the NASDAQ Stock Market under the symbol “DWSN.”
The following description of our common stock is a summary and does not purport to be complete. It is
subject to and qualified in its entirety by reference to the Company’s Amended and Restated Certificate of Formation
(the “Certificate of Formation”) and the Company’s Amended and Restated Bylaws (as amended, the “Bylaws”),
which are exhibits to this Annual Report on Form 10-K and are incorporated by reference herein. The following
description may not contain all of the information that is important to you. To understand them fully, you should read
the Company’s Certificate of Formation and Bylaws, as amended, and the applicable provisions of the Texas Business
Organizations Code.
Authorized Capital Stock
The Company’s authorized capital stock consists of 35,000,000 shares of common stock, par value $0.01 per
share, and 4,000,000 shares of preferred stock, par value $1.00 per share. As of March 10, 2023, there were 23,812,329
shares of common stock outstanding and zero shares of preferred stock outstanding.
Common Stock
Dividend Rights
We can pay dividends if, as and when declared by our Board of Directors, subject to compliance with limitations
imposed by law. The holders of our common stock will be entitled to receive and share equally in these dividends as
they may be declared by our Board of Directors out of funds legally available for such purpose. If we issue preferred
stock, the holders of such preferred stock may have a priority over the holders of the common stock with respect to
dividends.
Voting Rights
Each holder of our common stock is entitled to one vote per share and will not have any right to cumulate votes in the
election of directors. Directors will be elected by a plurality of the shares actually voting on the matter. If we issue
preferred stock, holders of the preferred stock may also possess voting rights.
Liquidation Rights
In the event of liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the holders of
our common stock would be entitled to receive, after payment or provision for payment of all its debts and liabilities,
all of the assets of the Company available for distribution. If preferred stock is issued, the holders thereof may have a
priority over the holders of the common stock in the event of a liquidation or dissolution.
Preferred Stock
Our Board of Directors is authorized to fix and determine the relative rights and preferences of the shares of any series
of our preferred stock and to provide for the issuance of the preferred stock. The holders of our preferred stock may
have preferences over holders of our common stock in the payment of dividends, upon liquidation of the Company, in
respect of voting rights and in the redemption of the capital stock of the Company. Series of preferred stock issued by
the Company may also, in the discretion of our Board of Directors, be made convertible into our common stock or
other securities and may have sinking fund requirements.
Our Certificate of Formation and Bylaws; Anti-Takeover Effects of Texas Law
Authorized but Unissued Capital Stock
We have authorized but unissued shares of preferred stock and common stock, and our board of directors may
authorize the issuance of one or more series of preferred stock without shareholder approval.
Board Classification
If our Board of Directors were increased to nine (9) directors, it may, by resolution, divide into three equal classes. If
our Board of Directors effects a board classification, the directors in each class will serve for a three-year term, one
class being elected each year by our shareholders. In addition, our Certificate of Formation provides that directors may
only be removed for cause by the affirmative vote of the holders of eighty percent (80%) or more of the outstanding
shares of common stock of the Company. Additionally, the provisions in our Certificate of Formation concerning the
supermajority vote for director removal may not be amended, altered, changed or repealed in any respect unless such
action is approved by the affirmative vote of the holders of eighty percent (80%) or more of the outstanding shares of
our common stock.
Supermajority Vote for Certain Business Combinations
Our Certificate of Formation provides that the affirmative vote of the holders of eighty percent (80%) of the
outstanding shares of our common stock is required for the approval or authorization of (1) any merger or
consolidation of the Company with or into another corporation or entity or (2) any sale of all or substantially all of the
Company’s assets to another corporation or entity. Additionally, the provisions in our Certificate of Formation
concerning the supermajority vote for certain business combinations may not be amended, altered, changed or repealed
in any respect unless such action is approved by the affirmative vote of the holders of eighty percent (80%) or more of
the outstanding shares of our common stock.
Requirements for Advance Notification of Shareholder Nominations and Proposals
Our Bylaws establish advance notice procedures with respect to shareholder proposals and the nomination of
candidates for election as directors, other than nominations made by or at the direction of our Board of Directors.
Ability of the Board of Directors to Amend or Repeal the Bylaws
Our Certificate of Formation vests the power to alter, amend or repeal the Bylaws in our Board of Directors. The
Bylaws provide that this power is subject to repeal or change by action of our shareholders.
Business Combinations under Texas Law
A number of provisions of Texas law, our Certificate of Formation and Bylaws could make more difficult the
acquisition of the Company by means of a tender offer, a proxy contest or otherwise and the removal of incumbent
officers and directors. These provisions are intended to discourage coercive takeover practices and inadequate takeover
bids and to encourage persons seeking to acquire control of the Company to negotiate first with our Board of
Directors.
We are subject to the provisions of Title 2, Chapter 21, Subchapter M of the Texas Business Organizations Code (the
“Texas Business Combination Law”). That law provides that a Texas corporation may not engage in specified types of
business combinations, including mergers, consolidations and asset sales, with a person, or an affiliate or associate of
that person, who is an “affiliated shareholder.” An “affiliated shareholder” is generally defined as (i) the holder of 20%
or more of the corporation’s voting shares or (ii) a person who, during the preceding three year period, was a holder of
20% or more of the corporation’s voting shares. The law’s prohibitions do not apply if:
● the business combination or the acquisition of shares by the affiliated shareholder was approved by the board
of directors of the corporation before the affiliated shareholder became an affiliated shareholder; or
● the business combination was approved by the affirmative vote of the holders of at least two-thirds of the
outstanding voting shares of the corporation not beneficially owned by the affiliated shareholder, at a meeting
of shareholders called for that purpose, not less than six months after the affiliated shareholder became an
affiliated shareholder.
Because we have a class of voting shares registered under the Exchange Act, we are considered an “issuing public
corporation” for purposes of this law. The Texas Business Combination Law does not apply to the following:
● the business combination of an issuing public corporation: where the corporation’s original charter or bylaws
contain a provision expressly electing not to be governed by the Texas Business Combination Law; or that
adopts an amendment to its charter or bylaws, by the affirmative vote of the holders, other than affiliated
shareholders, of at least two-thirds of the outstanding voting shares of the corporation, expressly electing not
to be governed by the Texas Business Combination Law and so long as the amendment does not take effect
for 18 months following the date of the vote and does not apply to a business combination with an affiliated
shareholder who became affiliated on or before the effective date of the amendment;
● a business combination of an issuing public corporation with an affiliated shareholder that became an
affiliated shareholder inadvertently, if the affiliated shareholder divests itself, as soon as possible, of enough
shares to no longer be an affiliated shareholder and would not at any time within the three-year period
preceding the announcement of the business combination have been an affiliated shareholder but for the
inadvertent acquisition;
● a business combination with an affiliated shareholder who became an affiliated shareholder through a transfer
of shares by will or intestacy and continuously was an affiliated shareholder until the announcement date of
the business combination; and
● a business combination of a corporation with its wholly owned Texas subsidiary if the subsidiary is not an
affiliate or associate of the affiliated shareholder other than by reason of the affiliated shareholder’s beneficial
ownership of voting shares of the corporation.
Neither our Certificate of Formation nor our Bylaws contain any provision expressly providing that we will not be
subject to the Texas Business Combination Law. The Texas Business Combination Law may have the effect of
inhibiting a non-negotiated merger or other business combination involving the Company, even if that event would be
beneficial to our shareholders.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is American Stock Transfer & Trust Company, LLC. The
transfer agent’s address is 6201 15th Avenue, Brooklyn, New York 11219 and its telephone number is (800) 937-5449.
SUBSIDIARIES OF THE REGISTRANT
Exhibit 21.1
Dawson Operating LLC, a Texas limited liability company
Eagle Canada, Inc., a Delaware corporation
Dawson Seismic Services Holdings, Inc., a Delaware corporation
Eagle Canada Seismic Services ULC, a Canadian corporation
Exploration Surveys, Inc., a Texas corporation
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
With respect to the following Registration Statements of Dawson Geophysical Company:
(1) Registration Statement (Form S-8 No. 333-199922) pertaining to the Post-Effective Amendment to the
Registration Statement on Form S-4 related to the Amended and Restated Dawson Geophysical Company 2006
Stock and Performance Incentive Plan (the “Legacy Dawson Plan”),
(2) Registration Statement (Form S-8 No. 333-142221) pertaining to the TGC Industries, Inc. 2006 Stock Awards
Plan (the “Legacy TGC Plan”),
(3) Registration Statement (Form S-8 No. 333-201923) pertaining to the Legacy TGC Plan,
(4) Registration Statement (Form S-8 No.333-204643) pertaining to the Legacy Dawson Plan,
(5) Registration Statement (Form S-8 No. 333-212577) pertaining to the Dawson Geophysical Company 2016 Stock
and Performance Incentive Plan, and
(6) Registration Statement (Form S-8 No. 333-257475) pertaining to the Amended and Restated Dawson Geophysical
Company 2016 Stock and Performance Incentive Plan.
We consent to the incorporation by reference of our report dated March 13, 2023, relating to the consolidated financial
statements of Dawson Geophysical Company, appearing in the Annual Report to Shareholders, which is incorporated in
this Annual Report on Form 10-K of Dawson Geophysical Company for the year ended December 31, 2022.
/s/ RSM US LLP
Houston, Texas
March 13, 2023
Exhibit 31.1
I, Stephen C. Jumper, certify that:
CERTIFICATIONS
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Dawson Geophysical Company;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present 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;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting.
Dated: March 13, 2023
/s/ STEPHEN C. JUMPER
Stephen C. Jumper
President and Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
I, James K. Brata, certify that:
CERTIFICATIONS
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Dawson Geophysical Company;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present 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;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting.
Dated: March 13, 2023
/s/ JAMES K. BRATA
James K. Brata
Executive Vice President, Chief Financial Officer, Secretary,
and Treasurer
(Principal Financial and Accounting Officer)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the annual report of Dawson Geophysical Company (the “Company”) on Form 10-K for the
fiscal year ended December 31, 2022, 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 to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1)
(2)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934 (15 U.S.C. 78m or 78o(d)); and
The information contained in the Report fairly presents, in all material respects, the financial condition
and results of operations of the Company.
Dated: March 13, 2023
/s/ STEPHEN C. JUMPER
Stephen C. Jumper
President and Chief Executive Officer
(Principal Executive Officer)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
In connection with the annual report of Dawson Geophysical Company (the “Company”) on Form 10-K for the
fiscal year ended December 31, 2022, 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)
(2)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934 (15 U.S.C. 78m or 78o(d)); and
The information contained in the Report fairly presents, in all material respects, the financial condition
and results of operations of the Company.
Dated: March 13, 2023
/s/ JAMES K. BRATA
James K. Brata
Executive Vice President, Chief Financial Officer, Secretary,
and Treasurer
(Principal Financial and Accounting Officer)