Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q are forward-looking statements, including without limitation statements regarding our forecasts, estimates or other expectations regarding future events, operations or financial results, including statements under "Management's Discussion and Analysis of Financial Condition and Results of Operations" regarding technological advancements and our financial position, business strategy, and plans and objectives of our management for future operations; statements regarding our expectations regarding liquidity; statements regarding the anticipated benefits of our purchased single node

channels; and statements regarding any potential transaction(s) with our controlling stockholder and any of its affiliates. In some cases, you can identify forward-looking statements by terms such as "aim," "may," "will," "should," "expects," "plans," "anticipates," "continues," "could," "intends," "goals," "target," "projects," "contemplates," "believes," "estimates," "predicts" or "potential" or the negative of these terms or other similar expressions. 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 factors include, but are not limited to, risks relating to the Company's ability to execute its business strategies and plans for growth; the efficacy of the purchased single node channels; the failure to operationalize the acquired equipment in a timely manner or at all; risks associated with the Company's ability to finance the transaction contemplated by the Equipment Purchase Agreement; risks relating to any potential transaction(s) with our controlling stockholder and any of its affiliates, the impact on our stock price of such potential transaction(s), our ability to consummate any such transaction, and our ability to achieve the anticipated benefits of any such potential transaction(s); our status as a controlled public company, which exempts us from certain corporate governance requirements; the limited market for our common stock; the impact of general economic, industry, market or political conditions, including tariffs; 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 and markets; changes in economic conditions; 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 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; 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; risks that the Company's cash reserves, liquidity or capital resources may be insufficient; risks associated with the identification of suitable acquisition candidates and the successful, efficient execution of acquisition transactions, the integration of any such acquisition candidates, the value of those acquisitions to our customers and shareholders, and the financing of such acquisitions; risks related to our indebtedness and compliance with covenants contained in our revolving credit note; the Company's ability to execute its business strategies and plans for growth; the failure to operationalize the new single node channels in a timely manner or at all; disruptions in the global economy, including the Russian-Ukrainian conflict, the U.S. and Iran conflict, and the unrest in the Middle East, export controls and financial and economic sanctions imposed on certain industry sectors and parties as a result of the developments and broader consequences of the Russian-Ukrainian conflict, the U.S. and Iran conflict, and the unrest in the Middle East 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 Securities and Exchange Commission (the "SEC"). The cautionary statements made in this Form 10-Q should be read as applying to all related forward-looking statements wherever they appear in this Form 10-Q. 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. A discussion of these and other factors, including risks and uncertainties, is set forth in the Company's Annual Report on Form 10-K that was filed with the SEC on March 31, 2026 and any subsequent Quarterly Reports on Form 10-Q filed with the SEC. The Company disclaims any intention or obligation to revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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. In recent years, our primary customer base has consisted of providers of multi-client data libraries. Demand for our services depends upon the level of spending by these companies for exploration, production, development and field management activities, which depends, in a large part, on oil and natural gas prices. Significant fluctuations in domestic oil and natural gas exploration 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 had one large channel crew and three smaller channel crews operating in the first quarter in the United States. Our seasonal operations had solid performance in the first quarter, and their operations continued into the second quarter of 2026. High crew utilization in the first quarter resulted in improved margins and profitability. We continue to schedule and bid larger channel count jobs due to our significant inventory of the new single node channels. Additionally, we have seen an increase in activity related to non-traditional seismic exploration including geothermal, Carbon Capture Utilization and Storage ("CCUS") seismic monitoring, and other rare minerals.

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, without limitation: client demand, commodity prices, whether we enter into turnkey or day-rate 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. Additionally, revenues for our Canadian operations are seasonally limited to the winter season due to rules regarding surface conditions. To the extent we experience these factors, our operating results may be affected and vary 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.

Discussions with Controlling Stockholder

As of March 31, 2026, Wilks Brothers, LLC ("Wilks") and its affiliates control approximately 80% of our common stock. We have been in discussion with Wilks and certain of its affiliates with respect to one or more transactions involving assets owned by Wilks and/or certain of its affiliates, which may include, among other things, asset contributions or sales, a business combination transaction or other similar transactions. In connection with these discussions, we incurred $695,000 in expenses in the first quarter of 2026, which is included in general and administrative expense in our consolidated statement of operations for the three months ended March 31, 2026.

There is no guarantee that we will enter into a definitive agreement with any such parties regarding any such transaction. The terms of any potential agreement between us and Wilks, and/or any of its affiliates, would be contingent on certain conditions, including completion of due diligence and the negotiation of definitive transaction documents. Our Board of Directors has formed a special committee of independent directors (the "Special Committee"), which has retained independent legal and financial advisors, to evaluate, negotiate and make recommendations to the Board regarding any such transaction with Wilks and/or its affiliates, including whether to pursue or decline to pursue any proposed transaction.

Results of Operations

U.S. Fee Revenues. Fee revenues for the first quarter of 2026 increased 665% to $20.9 million compared to $2.7 million for the same period of 2025. The increase was primarily due to an increase in crew utilization due to the purchase of the single node channels.

Canadian Fee Revenues. Fee revenues for the first quarter of 2026 decreased 7% to $11.6 million compared to $12.5 million for the same period of 2025. The decrease was primarily due to a decrease in crew utilization.

Total Revenues. Revenues for the first quarter of 2026 were $36.7 million compared to $16.1 million for the same period of 2025. Total revenues included an increase of $3.4 million in reimbursable revenues.

U.S. Fee Operating Expenses. Fee operating expenses for the first quarter of 2026 increased 200% to $13.9 million compared to $4.6 million for the same period of 2025. The increase was primarily due to an overall increase in crew production and utilization during the period.

Canadian Fee Operating Expenses. Acquisition expenses for the first quarter of 2026 decreased 12.6% to $5.5 million compared to $6.3 million for the same period of 2025. The decrease was primarily due to an overall decrease in crew production and utilization during the period.

Reimbursable Revenues and Costs. These revenues and expenses are passed through to our clients and are job specific and vary significantly from year to year. The costs are agreed to by our clients prior to contracting with outside vendors for the various tasks.

General and Administrative Expenses. General and administrative expenses increased during the first quarter of 2026 compared to the corresponding quarter in 2025, to $2.9 million from $2 million. The increase was primarily due to strategic transactions expenses during the first quarter of 2026 related to a potential transaction(s) with our largest shareholder, Wilks Brothers, LLC, and/or any of its affiliates, as described above under "Discussions with Controlling Stockholder."

Depreciation and Amortization Expense. Depreciation and amortization expenses for the first quarter of 2026 and 2025 totaled $2 million and $1.3 million, respectively. Depreciation expenses increased in 2026 compared to 2025 as a result of purchases of new recording equipment during the fourth quarter of 2025 and first quarter of 2026.

Total Operating Costs. Total operating costs for the first quarter of 2026 were $28.6 million, representing a 90% increase from the same period of 2025. The increase in operating costs for the first quarter of 2026 compared to 2025 was primarily due to the factors described above.

Interest expense. Interest expense for the first quarter of 2026 and 2025 totaled $0.5 million and $0.1 million, respectively. The increase in interest expenses is primarily due to the additional interest expense on the Geospace Notes.

Income Taxes. Income tax benefit for the first quarter of 2026 and 2025 was $10,000 and $3,000, respectively. These amounts represent effective tax rates of 0.1% and 0.3% for the first quarter of 2026 and 2025, respectively. The Company's nominal effective tax rate for the periods above was due to the presence of net operating loss carryovers and adjustments to the valuation allowance on deferred tax assets.

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. For further information, see Note 10 of the Notes to the Condensed Consolidated Financial Statements.

Use of Adjusted EBITDA (a Non-GAAP measure)

We define Adjusted EBITDA as net income (loss) plus interest expense, interest income, income taxes, depreciation, and amortization expense, and non-recurring and other charges, such as strategic transaction expenses or severance expenses. Our management uses Adjusted EBITDA as a supplemental financial measure to assess:

We also understand that such data are used by investors to assess our performance. However, the term Adjusted EBITDA is not defined under generally accepted accounting principles ("GAAP"), and Adjusted EBITDA is not a measure of operating income or operating performance presented in accordance with GAAP. When assessing our operating performance, 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 Adjusted EBITDA may not be comparable to Adjusted EBITDA or similarly titled measures utilized by other companies because other companies may not calculate Adjusted EBITDA in the same manner as us. Further, the results presented by Adjusted EBITDA cannot be achieved without incurring the costs that the measure excludes, such as interest, taxes, and depreciation and amortization.

The reconciliation of our Adjusted EBITDA to our net cash (used in) provided by operating activities and net (loss) income, which are the most directly comparable GAAP financial measures, are provided in the following tables (in thousands):

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Liquidity and Capital Resources

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. Management believes cash flow from operations, cash on hand and amounts available under our Revolving Credit Note (defined below) are sufficient to fund operating and investing cash flow requirements, as well as our obligations under the Geospace Notes.

Cash Flows. Net cash used in operating activities was $0.5 million for the three months ended March 31, 2026, compared to net cash provided by operating activities of $1.8 million for the same period of 2025. This decrease was primarily due to an increase in accounts receivable offset by an increase in net income.

Net cash used in investing activities was $1.3 million for the three months ended March 31, 2026. Net cash provided by investing activities was $185,000 for the three months ended March 31, 2025. The increase in cash used in investing activities between periods of $1.5 million was primarily due to an increase in cash capital expenditure to $1.4 million for the first three months of 2026 compared to capital expenditures of $0 for the same period of 2025.

Net cash used in financing activities was $1.7 million for the three months ended March 31, 2026, and was primarily comprised of principal payments of $1.4 million and $0.3 million under our notes payable and finance leases, respectively. Net cash used in financing activities was $0.6 million for the three months ended March 31, 2025, and was primarily comprised of principal payments of $0.4 million and $0.2 million under our notes payable and finance leases, respectively.

Capital Expenditures. For the three months ended March 31, 2026, we have spent $1.4 million in cash on capital expenditures, primarily for new node channels and rolling stock and maintenance capital requirements. Historically, we have funded most of our capital expenditures through cash flow from operations, cash reserves, equipment term loans and finance leases. Under the Purchase Agreement, we are partially funding our purchase of new single node channels utilizing vendor financing in the form of the Geospace Notes.

Capital Resources. Historically, we have primarily relied on cash flows from operations, cash reserves and borrowings from commercial banks to fund our capital requirements. In connection with the Equipment Purchase Agreement, we issued the Geospace Notes.

Revolving Credit Note

On October 31, 2025, Dawson Geophysical Company and Dawson Operating, as borrowers (the "Borrowers"), entered into a Revolving Credit Note (the "Revolving Credit Note") in favor of Equify Financial, as lender (the "Lender"), a related party affiliated through common control.

Pursuant to the Revolving Credit Note, the Borrowers, jointly and severally, may, from time to time until November 20, 2028, request loans from the Lender for up to an aggregate principal amount of $5,035,032. The loans outstanding under the Revolving Credit Note are payable by the Borrowers in thirty-six (36) monthly installments of principal in the amount of $139,862, together with all accrued and unpaid interest on the outstanding principal balance thereunder, commencing on December 20, 2025, and continuing thereafter until the maturity date. The interest rate applicable to loans outstanding under the Revolving Credit Note is a rate per annum equal to 13%.

The maximum borrowing limit under the Revolving Credit Note is initially $5,035,032, and such amount is reduced by $139,862 on each monthly payment date. During the three months ended March 31, 2026, the Company borrowed and repaid approximately $4.3 million on this revolving credit note. As of March 31, 2026 the amount available to draw on this revolving credit note was approximately $4.5 million, and there were no amounts outstanding. The Borrowers may prepay up to 75% of the then outstanding principal and accrued but unpaid interest at any time without a prepayment fee.

The obligations under the Revolving Credit Note are secured by a lien on our vibrator energy source vehicles, pursuant to a Security Agreement by and between us and Lender, dated as of October 31, 2025.

All outstanding amounts owed under the Revolving Credit Note become due and payable no later than the maturity date of November 20, 2028, and are subject to acceleration upon the occurrence of events of default which we consider usual and customary for an agreement of this type, including failure to make payments under the Revolving Credit Note, non-performance of covenants and obligations or insolvency or bankruptcy (as defined in the Revolving Credit Note).

Other Indebtedness

The Company paid cash of approximately $4.8 million upon execution of the Equipment Purchase Agreement, agreed to pay approximately $1.2 million in cash upon final delivery, and agreed to finance approximately $18.2 million through separate promissory notes to be issued in connection with each delivery of equipment (each, a "Geospace Note" and collectively, the "Geospace Notes"). Each Geospace Note is payable by Dawson Geophysical Company and Dawson Operating, jointly and severally, to GTC. The Geospace Notes will each have a term of 36 months, bear a fixed interest rate of 8.75% annually and may be prepaid in whole or in part at any time without penalty. As of March 31, 2026, the Company has taken delivery of all contracted equipment and issued six Geospace Notes with an aggregate principal of approximately $18.2 million, with $16.1 million outstanding at March 31, 2026.

As of March 31, 2026, we have three outstanding short-term notes payable to finance companies for various insurance premiums totaling $260,000. As of December 31, 2025, we had one outstanding short-term note payable to a finance company for various insurance premiums totaling $258,000.

In addition, we lease certain seismic recording equipment and vehicles under leases classified as finance leases. Our Condensed Consolidated Balance Sheet as of March 31, 2026 and December 31, 2025, include finance leases of $2.6 million and $2.6 million, respectively.

Maturities and Interest Rates of Debt

The following tables set forth the aggregate principal amount (in thousands) under our outstanding notes payable and the interest rates as of March 31, 2026, and December 31, 2025:

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The aggregate maturities of notes payable as of March 31, 2026, are as follows (in thousands):

The aggregate maturities of finance leases (net of imputed interest) as of March 31, 2026, are as follows (in thousands):

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Interest rates on these leases range from 4.86% to 13.33%.

Contractual Obligations

We believe that our capital resources, including our cash on hand, short-term investments, funds available from our Revolving Credit Note and cash flow from operations will be adequate to meet our current operational needs, including any continued strategic transaction expenses. We believe that we will be able to finance our 2026 capital expenditures through cash flow from operations, borrowings from commercial lenders and the Geospace Notes. 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.

Critical Accounting Policies

Information regarding our critical accounting policies and estimates is included in Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2025.

Recently Issued Accounting Pronouncements

In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, ASU 2024-03 enhances the disclosures required for certain expense captions in the Company's annual and interim consolidated financial statements. This ASU is effective prospectively or retrospectively for fiscal years beginning after December 15, 2026, and for interim reporting periods beginning after December 15, 2027. Early adoption is permitted. We are currently evaluating the impact of this standard on its disclosures.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. This ASU introduces a practical expedient to simplify the application of Topic 326, Financial Instruments - Credit Losses, to current accounts receivable and current contract assets arising from revenue transactions accounted for under Topic 606, Revenue from Contracts with Customers. This ASU was implemented January 1, 2026, and did not have a material impact on our disclosures.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. This ASU intends to improve the guidance for interim reporting and clarify when that guidance is applicable. ASU 2025-11 provides a comprehensive list of required disclosures and also requires entities to disclose events since the last annual reporting period that have a material impact on the entity. ASU 2025-11 is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2025-11 on its financial statements and related disclosures.