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What changed 10-K

Item 9A. Controls and Procedures

2025-04-02 compared with 2024-04-01 · 190 added, 321 removed, 699 unchanged (42% of the section changed)

11 unchanged sentences

Based on this evaluation, we have concluded that, as of December 31, 2024, our internal control over financial reporting was effective.

Our internal control over financial reporting

as of December 31, 2023 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.

Our internal control over financial reporting as of December 31, 2024 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

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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:

Except as noted below, 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.

The Company has adopted an insider trading policy, a copy of which is filed as Exhibit 19.1 to this Annual Report.

EXECUTIVE COMPENSATION

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Consolidated Statements of Cash Flows

Notes to the Consolidated Financial Statements

Notes to Consolidated Financial Statements

Financial Statement Schedules.

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Form of Indemnification Agreement entered with directors and executive officers, filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on October 9, 2014, and incorporated herein by reference.

Amended and Restated Dawson Geophysical Company 2006 Stock and Performance Incentive Plan (the “Legacy Dawson Plan”), filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on February 11, 2015, and incorporated herein by reference.

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.

Form of Restricted Stock Unit Agreement for the Legacy Dawson Plan, filed as Exhibit 10.6 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.

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.

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.

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.

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.

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001-34404), and incorporated herein by reference.

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.

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.

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.

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.

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.

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.

Second Loan Modification Agreement to Loan and Security Agreement, by and between the Company 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.

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Third Loan Modification Agreement to Loan and Security Agreement, by and between the Company 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.

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.

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.

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.

Fourth Loan Modification Agreement to Loan and Security Agreement, by and between the Company and Dominion Bank, dated March 21, 2023, filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed on March 24, 2023, and incorporated herein by reference.

Employment Agreement, dated June 16, 2023, by and between Anthony Clark and the Company, filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on June 22, 2023, and incorporated herein by reference.

Separation and General Release Agreement, dated November 27, 2023, by and between C.

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Employment Agreement, dated December 14, 2023, by and between Ian Shaw and the Company, filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed on December 20, 2023, and incorporated herein by reference.

Insider Trading Policy.

Subsidiaries of the Company.

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+ Management contract or compensatory plan or arrangement.

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 1 st day of April, 2024.

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 2 nd day of April 2025.

DAWSON GEOPHYSICAL COMPANY

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In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, 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.

Business Combination among Entities under Common Control

As discussed in Notes 1 and 12 to the financial statements, the Company completed a purchase of assets treated as a business combination among entities under common control.

The Company’s financial statements as of and for the year ended December 31, 2022 have been adjusted to show the combined results as if the business combination had occurred on January 14, 2022, the date on which both entities were under common control.

Basis for Opinion

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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.

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 the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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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.

We believe that our audits provide a reasonable basis for our opini on.

Critical Audit Matter

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(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Business combination among entities under common control:

As discussed in Note 1 to the financial statements, on March 24, 2023, the Company entered into an asset purchase agreement with Wilks Brothers, LLC (Wilks) and Breckenridge Geophysical, LLC (Breckenridge), a wholly owned subsidiary of Wilks.

Pursuant to the asset purchase agreement, the Company completed the purchase of substantially all of the Breckenridge assets related to seismic

data acquisition services other than its multi-client data library in exchange for a combination of equity consideration and a convertible note payable.

While this acquisition was structured as an asset purchase, it was determined that the appropriate accounting treatment required implementation of business combination guidance in a manner similar to a pooling of interests.

The Company’s financial presentation reflects combined results of the two companies as if the combination occurred on January 14, 2022, the earliest date on which Wilks became the majority shareholder of both entities in the reporting period.

We identified the business combination among entities under common control as a critical audit matter as management’s assessment of the accounting principles related to such transactions is complex and requires that management make significant judgments, including determining whether the assets acquired from Breckenridge constituted a business;

complying with relevant presentation and disclosure guidance applicable to transactions among entities under common control;

determining the date on which Wilks was in control of both Dawson and Breckenridge;

and whether Dawson or Breckenridge was the receiving entity.

Testing management's judgments in these matters required a high degree of auditor judgment and increased audit effort, including the involvement of subject matter experts to assist in evaluating management's conclusions.

Our audit procedures related to the Company’s accounting for the business combination with entities under common control included the following, among others:

We evaluated the Company’s determination that there was a transaction among entities under common control by considering the following factors:

(1) if the Company is considered the receiving entity in the transaction and (2) the date on which the entities were deemed under common control.

We evaluated the appropriateness of the financial presentation for a transaction between entities under common control by reading management’s audit evidence, including relevant accounting policies, and by considering how the application of US GAAP affected management’s judgments and conclusions.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Impairment Testing of Long-Lived Assets

As discussed in Note 2 to the financial statements, long-lived assets are tested for impairment at the asset group level when events or changes in circumstances indicate the carrying value of the asset group may not be recoverable.

Recognition of an impairment charge is required if future expected undiscounted net cash flows are insufficient to recover the carrying value of the asset group and the fair value of the asset group is below its carrying value.

Depending upon the facts and circumstances, when indicators of asset impairment exist, management will test the asset group for impairment through developing a forecast of future undiscounted cash flows expected to be generated by the asset group or by estimating the fair value of assets within the asset group in lieu of detailed cash flow projections.

If either the future undiscounted cash flows expected to be generated by the asset group or the fair of the assets within the asset group exceeds the carrying value of the asset group no impairment would be

During the year ended December 31, 2024, management tested two of its asset groups for impairment through estimating the fair value of certain assets within the asset groups using a market approach or cost approach, as applicable.

Because the fair value of these assets collectively exceeded the carrying value of the asset groups, no impairment charges were recognized for the year ended December 31, 2024.

We identified management’s impairment testing of long-lived assets as a critical audit matter because of the significant assumptions management used in estimating the fair value of certain assets within the asset groups.

Auditing management’s assumptions involved a high degree of auditor judgment and an increase in audit effort, including the use of our valuation specialists, due to the impact these assumptions could have on the accounting estimate.

Our audit procedures related to the Company’s impairment testing of long-lived assets included the following, among others:

We tested the completeness and accuracy of the underlying data used by management by agreeing it to the underlying support.

We utilized our valuation specialists to assist in the following procedures:

Corroborated management’s estimates through obtaining publicly available market data for certain assets within the population.

Developed an independent estimate of fair value for certain assets within the asset groups, utilizing publicly available market data and other information, and compared our independent estimate to the carrying value of the asset groups.

/s/ RSM US LLP

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(amounts in thousands, except share data)

2022 (as adjusted)

Current assets:

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Short-term investments

Accounts receivable, net of allowance for doubtful accounts of $ 250

Accounts receivable, net of allowance for credit losses of $ 250

at December 31, 2024 and 2023

Employee retention credit receivable

Prepaid expenses and other current assets

3 unchanged sentences

Property and equipment, net

Right-of-use assets

Operating lease right-of-use assets

Intangibles, net

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35,000,000 shares authorized,

30,812,329 and 23,812,329 shares issued, and 30,812,329 and 23,812,329 shares

outstanding at December 31, 2023 and December 31, 2022, respectively

30,983,437 and 30,812,329 shares issued and outstanding at December 31, 2024

and 2023, respectively

Additional paid-in capital

Accumulated deficit

Equity of Breckenridge prior to acquisition

Accumulated other comprehensive loss, net

6 unchanged sentences

Year Ended December 31,

2022 (as adjusted)

Operating revenues:

4 unchanged sentences

Reimbursable operating expenses

Total operating expenses

General and administrative

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Other income, net

Gain from employee retention credit

Loss before income tax

Income tax benefit (expense):

Other comprehensive income (loss):

Net unrealized income (loss) on foreign exchange rate translation

Income tax (expenses) benefit

Other comprehensive (loss) income:

Net unrealized (loss) income on foreign exchange rate translation

Comprehensive loss

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Prior to Acquisition

Income (Loss)

(Loss) Income

Balance January 1, 2023

Net income (loss)

Unrealized loss on foreign exchange rate translation

Income tax benefit (expense)

Other comprehensive loss

Issuance of common stock under stock compensation plans

Stock-based compensation expense

Shares exchanged for taxes on stock-based compensation

Cash settlement of RSUs

Treasury stock sale

Deemed contribution of Breckenridge net assets

Breckenridge cash distributions prior to acquisition

Balance December 31, 2022 (as adjusted)

Unrealized income on foreign exchange rate translation

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Breckenridge cash distributions prior to acquisition

Issuance of common stock as compensation

Deemed distribution of Breckenridge net assets not acquired

1 unchanged sentence

Balance December 31, 2023

Unrealized loss on foreign exchange rate translation

Income tax benefit (expense)

Other comprehensive loss

Issuance of common stock as compensation

Shares exchanged for taxes on stock-based compensation

Unvested stock-based compensation expense

Balance December 31, 2024

See accompanying notes to the consolidated financial statements.

3 unchanged sentences

Year Ended December 31,

2022 (as adjusted)

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Depreciation and amortization

Operating lease cost

Non-cash operating lease cost

Non-cash compensation

Deferred income tax (benefit) expense

Deferred income tax expense (benefit)

Bad debt expense

(Gain) loss on disposal of assets

Remeasurement and other

Gain on disposal of assets

Change in operating assets and liabilities:

(Increase) decrease in accounts receivable

(Increase) decrease in employee retention credit receivable

(Increase) decrease in prepaid expenses and other assets

Increase (decrease) in accounts payable

Increase (decrease) in accrued liabilities

Increase (decrease) in operating lease liabilities

Increase (decrease) in deferred revenue

Net cash provided by (used in) operating activities

Decrease (increase) in accounts receivable

Decrease in employee retention credit receivable

Decrease in prepaid expenses and other assets

(Decrease) increase in accounts payable

(Decrease) increase in accrued liabilities

Decrease in operating lease liabilities

(Decrease) increase in deferred revenue

Net cash (used in) provided by operating activities

Cash flows from investing activities:

Capital expenditures, net of non-cash capital expenditures summarized below

Acquisition of short-term investments

Proceeds from disposal of assets

Proceeds from insurance claim

Proceeds from maturity of short-term investments

Acquisition of short-term investments

Net cash used in investing activities

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Tax withholdings related to stock based compensation awards

Cash settlement of RSUs

Sale of treasury stock

Dividends paid

Breckenridge cash distributions prior to acquisition

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Cash paid for interest

Cash paid for income taxes

Cash received for income taxes

Non-cash operating, investing and financing activities:

(Decrease) increase in accrued purchases of property and equipment

Decrease in accrued purchases of property and equipment

Finance leases incurred

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Deemed distribution of Breckenridge net assets not acquired

Deemed contribution of Breckenridge net assets

Acquisition of net assets of Breckenridge

Acquisition of Breckenridge net assets

See accompanying notes to the consolidated financial statements.

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The Purchase Agreement has been accounted for as a transfer of net assets between entities under common control in a manner similar to a pooling of interests.

The Company’s historical consolidated financial statements have been retrospectively revised to reflect the effects on financial position, cash flows, and results of operations attributable to the activities of Breckenridge for all periods presented and are thus marked “(as adjusted)”.

The Company’s historical consolidated financial statements have been retrospectively revised to reflect the effects on financial position, cash flows, and results of operations attributable to the activities of Breckenridge for all periods presented.

The effects of transactions in Breckenridge’s equity prior to the Transaction have been presented as a separate component of stockholders’ equity on the Condensed Consolidated Balance Sheets and on the Condensed Consolidated Statements of Stockholders’ Equity to demonstrate the effects of those transactions on the Company’s historical consolidated financial statements.

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.

Additionally, Breckenridge has been consolidated on the Company’s statements for the period from January 14, 2022 (the date on which Wilks gained control of Dawson) to December 31, 2022, and for the period from January 1, 2023 to March 24, 2023.

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, Exploration Surveys, Inc.

and Breckenridge.

All significant intercompany balances and transactions have been eliminated in consolidation.

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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 credit losses was $ 250,000 at December 31, 2023 and 2022.

The Company's allowance for credit losses was $ 250,000 at January 1, 2023, December 31, 2023, and December 31, 2024.

There were no changes recorded during the years ending December 31, 2023, and December 31, 2024.

Employee Retention Credit Receivable

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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, 2023 and 2022.

Long-lived assets are tested for impairment at the asset group level when events or changes in circumstances indicate the carrying value of the asset group may not be recoverable.

Recognition of an impairment charge is required if future expected undiscounted net cash flows are insufficient to recover the carrying value of the asset group and the fair value of the asset group is below its carrying value.

Depending upon the facts and circumstances, when indicators of asset impairment exist, management will test the asset group for impairment through developing a forecast of future undiscounted cash flows expected to be generated by the asset group or by estimating the fair value of assets within the asset group in lieu of detailed cash flow projections.

If either the future undiscounted cashflows expected to be generated by the asset group or the fair of the assets within the asset group exceeds the carrying value of the asset group no impairment

would be recognized.

During the year ended December 31, 2024, management tested two of its asset groups for impairment through estimating the fair value of certain assets within the asset groups using a market approach or cost approach, as applicable.

Because the fair value of these assets collectively exceeded the carrying value of the asset group, no impairment charges were recognized for the year ended December 31, 2024.

No impairment test was required during the year ended December 31, 2023.

The Company leases certain vehicles, seismic recording equipment, real property and office equipment under lease agreements.

1 unchanged sentence

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 and Calgary, Alberta.

The majority of our operating leases are non-cancelable operating leases for office, shop and warehouse space in Midland and Plano, Texas, and Calgary and Wheatland County, 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.

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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.

Historically, the chief operating decision maker made operating decisions and evaluated operating results of the Company on a consolidated basis.

In December 2023, we appointed a new Chief Executive Officer who is our current chief operating decision maker.

Currently, our chief operating decision maker reviews the discrete segment financial information on a geographic basis for the US operations and Canada Operations.

See note 15 for additional disclosures related to disaggregated revenue.

Tony Clark, Chief Executive Officer, is our current chief operating decision maker.

Our chief operating decision maker reviews the discrete segment financial information on a geographic basis for the US operations and Canada Operations.

The revenue for both of the Company’s segments is generated by the same services, which utilize the same type of equipment and personnel.

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See Note 15 for additional disclosures related to our reportable segments.

In November 2023, the FASB issued ASU No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which requires public business entities to disclose on an annual and interim basis, 1) significant segment expenses that are regularly provided to the Chief Operating Decision Maker (the “CODM”) and included within each reported measure of segment profit or loss (collectively referred to as the “significant expense principle”) and 2) an amount for other segment items representing the difference between segment revenue less the segment expenses disclosed under the significant expense principle and each reported measure of segment profit or loss.

This ASU also requires public entities to provide all annual disclosures about a reportable segment’s profit or loss and assets currently required by Topic 280 in interim periods, clarifies that if the CODM uses more than one measure of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources, a public entity may report one or more of those additional measures of segment profit or loss but at least one of the reported segment profit or loss measures (or the single reported measure, if only one is disclosed) should be the measure that is most consistent with the measurement principles under GAAP.

This ASU also requires disclosure of the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources, and requires a public entity that has a single reportable segment to provide all the disclosures required by the amendments in this ASU and all existing segment disclosures in Topic 280.

This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

We adopted this ASU 2023-07 for the fiscal year ended December 31, 2024, as required under this standard.

Stock-Based Compensation

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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

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.

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.

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Severance Expense

In 2024, we recorded severance expenses of $ 0.5 million in connection with the termination of a portion of our workforce.

In December 2023, we recorded severance expenses of $ 2.2 million in connection with the termination of the Company’s (i) President and Chief Executive Officer, (ii) Chief Financial Officer, Executive Vice President, Secretary and Treasurer and (iii) Chief Operating Officer and Executive Vice President.

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We believe that our cash flows from operations, and our current financial position are adequate to fund our continued operations.

Subsequent events

We have considered and concluded there were none.

Short-Term Investments

The Company had short-term investments at December 31, 2023 and 2022 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, 2023 or 2022.

The Company had no short-term investments at December 31, 2024, and had short-term investments at December 31, 2023, of $ 265,000 consisting of certificates of deposit with original maturities greater than three months but less than a year .

Fair Value of Financial Instruments

At December 31, 2023 and 2022, 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.

At December 31, 2024 and 2023, the Company’s financial instruments included cash and cash equivalents, restricted cash, short-term investments in certificates of deposit, accounts 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.

Due to the short-term maturities of the Company’s investments in certificates of deposit, the carrying amounts approximate fair value at December 31, 2023.

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.

1 unchanged sentence

Property and equipment, together with the related estimated useful lives at December 31, 2024 and 2023, were as follows (in thousands):

2022 (as adjusted)

Land, building and other

Buildings and other

3 to 40 years

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Prepaid expenses and other current assets consist of the following at December 31, 2024 and 2023 (in thousands):

2022 (as adjusted)

Contract assets

Prepaid expenses

Contract assets

Other current assets

Other current liabilities consisted of the following at December 31, 2024 and 2023 (in thousands):

2022 (as adjusted)

Accrued Payables

Accrued self-insurance reserves

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Related Party Transactions

For the year ending December 31, 2024, the Company incurred related party expenses of $ 187,000 related to hauling charges, $ 9,000 related to entertainment expenses and $ 6,000 related to the merger expenses paid to various commonly controlled companies of Wilks Brothers, LLC, the holder of approximately 80 % of the Company’s outstanding stock.

For the year ended December 31, 2024, the Company recorded approximately $ 30,000 of related party revenue from a commonly controlled company of Wilks Brothers, LLC.

As of December 31, 2024, the Company had approximately $ 26,000 of outstanding related party accounts payable and no outstanding related party accounts receivable.

For the year ending December 31, 2023, the Company incurred related party expenses totaling approximately $ 120,000 related to hauling charges paid to various commonly controlled companies of Wilks Brothers, LLC, the holder of approximately 80 % of the Company’s outstanding stock.

For the year ended December 31, 2023, the Company recorded approximately $ 10,000 of related party revenue from a commonly controlled company of Wilks Brothers, LLC.

The Company did not have any related party transactions during the year ended December 31, 2022.

As of December 31, 2023, the Company had approximately $ 11,000 of outstanding related party accounts payable and no outstanding related party accounts receivable.

For the years ended December 31, 2023, and December 31, 2022, Breckenridge incurred related party expenses totaling approximately $ 110,000 and $ 567,000 , respectively.

For the year ended December 31, 2023, these charges by various commonly controlled companies of Wilks Brothers, LLC consisted of trucking charges of $ 60,000 , management charges of $ 44,000 , and payroll administration charges of $ 6,000 .

For the year ended December 31, 2022, these charges by various commonly controlled companies of Wilks Brothers, LLC consisted of trucking charges of $ 92,000 , management charges of $ 432,000 , and payroll administration charges of $ 43,000 .

Deferred Costs

Deferred costs were $ 5.4 million and $ 1 million at January 1, 2023 and 2022, respectively.

Contract assets consist of deferred costs which were $ 4.3 million and $ 5.4 million at January 1, 2024 and 2023, respectively.

The Company’s prepaid expenses and other current assets at December 31, 2024 and 2023 included deferred costs incurred to fulfill contracts with customers of $ 0.4 million and $ 4.3 million, respectively.

Deferred costs at December 31, 2023 compared to January 1, 2023 decreased primarily as a result of the completion of several projects for clients with significant deferred fulfillment costs at the beginning of the year.

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, 2024 and 2023, compared to January 1, 2024 and 2023, decreased primarily as a result of the completion of several projects for clients with significant deferred fulfillment costs at the beginning of the year.

The amount of total deferred costs amortized for the years ended December 31, 2024 and 2023, was $ 24.9 million and $ 38.3 million, respectively.

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The Company’s deferred revenue at December 31, 2024 and 2023, was $ 1.6 million and $ 11.8 million, respectively.

Deferred revenue at December 31, 2023 and 2022 compared to January 1, 2023 and 2022, increased primarily as a result of various new projects for clients with large third party reimbursables where data has not yet been recorded.

Deferred revenue at December 31, 2024 compared to January 1, 2024 decreased primarily as a result of completing multiple large projects for clients in 2024.

Deferred revenue at December 31, 2023 compared to January 1, 2023 increased primarily as a result of various new projects for clients with large third party reimbursables where data had not yet been recorded.

Revenue recognized for the year ended December 31, 2024 that was included in the contract liability balance at the beginning of 2024 was $ 11.8 million.

Revenue recognized for the year ended December 31, 2023 that was included in the contract liability balance at the beginning of 2023 was $ 7.3 million.

Deferred revenue not recognized during 2023 relates to projects that have not yet started or were cancelled.

Deferred revenue not recognized during 2024 relates to projects that have not yet started or are in process at period end.

Accounts Receivable

Accounts receivable related to contracts with customers was $ 12.5 million and $ 6.7 million at January 1, 2024 and 2023, respectively.

The accounts receivable balance at January 1, 2023 excluded a $ 3.0 million employee retention credit receivable.

Accounts receivable related to contracts with customers was $ 9.9 million and $ 12.5 million at December 31, 2024 and 2023, respectively.

Dominion Loan Agreement

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On September 30, 2023, the Company entered into a Fifth Loan Modification Agreement (the “Fifth Modification Agreement”) 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, (iii) that certain Third Loan Modification Agreement dated as of September 30, 2022, (iv) that certain Fourth Modification Agreement dated as of March 21, 2023, and (v) the Fifth Modification Agreement, the “Loan Agreement”).

The Loan Agreement now provides for a secured revolving credit facility (the “Revolving Credit Facility”) in an amount up to the lesser of (I) an amount equal to the Borrowing Base or (II) $ 5 million.

The Company’s obligations under the Loan Agreement are secured by a Certificate of Deposit with Dominion Bank for $ 5.0 M (the “Deposit”) in the

Company’s collateral account.

As of December 31, 2023, the Company has not borrowed any amounts under the Revolving Credit Facility and has approximately $ 5 million 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 %.

From and after September 30, 2023 and so long as the Deposit held by Dominion Bank remains greater than or equal to the indebtedness (the “Financial Covenant Suspension Threshold”), the testing of the financial covenants set forth in the Loan Agreement has been suspended.

The financial covenant testing shall resume if and when the Financial Covenant Suspension Threshold is no longer satisfied.

The maturity date of the Loan Agreement is September 30, 2024.

The Company does not currently have any notes payable under the Revolving Credit Facility.

The Loan Agreement provided for a secured revolving credit facility (the “Revolving Credit Facility”) in an amount up to the lesser of (I) an amount equal to the Borrowing Base or (II) $ 5 million.

The Company’s obligations under the Loan Agreement were secured by a Certificate of Deposit with Dominion Bank for $ 5 million (the “Deposit”) in the Company’s collateral account.

On May 2, 2024, the collateral deposit of $ 5 million was released and the Loan Agreement was terminated.

Dominion Letters of Credit

As of December 31, 2023, 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.

As of December 31, 2024, the Company has no outstanding letters of credit.

The previously issued letter of credit in the amount of $ 265,000 was not renewed on August 9, 2024.

Other Indebtedness

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In addition, the Company leases certain seismic recording equipment and vehicles under leases classified as finance leases.

The Company’s Consolidated Balance Sheets as of December 31, 2023 and 2022 include finance leases of $ 1.8 million and $ 277,000 , respectively.

The Company’s Consolidated Balance Sheets as of December 31, 2024 and 2023 include finance leases of $ 2.4 million and 1.8 million, respectively.

Maturities of Debt

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Aggregate principal amount outstanding

Interest rate

Interest rates 6.35 % and 8.75 %

The Company’s aggregate maturities of finance leases at December 31, 2024 are as follows (in thousands):

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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 and Calgary, Alberta.

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 and Plano, Texas and Calgary and Wheatland County, Alberta.

The components of lease cost for the years ended December 31, 2024 and 2023 were as follows (in thousands):

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Finance lease cost

Amortization of right-of-use assets

Depreciation of finance lease assets

Interest on lease liabilities

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Operating leases

Finance leases

Supplemental balance sheet information related to leases as of December 31, 2024 and 2023 was as follows (in thousands):

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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.

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.

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Restricted Stock Unit Awards

The Company did no t grant any restricted stock unit awards during the years ended December 31, 2023 or 2022.

As of December 31, 2023, 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, 2023 and 2022 was $ 0 and $ 351,000 , respectively.

The aggregate cash settlement date fair value of restricted stock units for the years ended December 31, 2023 and 2022 was $ 0 and $ 301,000 , 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, 2023 and 2022 of $ 0 and $ 15,000 , respectively.

A summary of the status of the Company’s nonvested restricted stock unit awards as of December 31, 2024 and activity during the year then ended is as follows:

Number of Restricted Stock Unit Awards

Weighted Average Grant Date Fair Value

Nonvested as of December 31, 2023

Cash Settlement

Nonvested as of December 31, 2024

The Company granted 230,550 restricted stock unit awards during the year ended December 31, 2024 with a weighted average grant date fair value of $ 1.94 .

The fair value of restricted stock unit awards equals the market price of the Company's stock on the grant date and generally vest immediately or in one year .

The Company did no t grant any restricted stock unit awards during the year ended December 31, 2023.

As of December 31, 2024, there were approximately $ 90,000 of unrecognized compensation costs related to nonvested restricted stock unit awards.

These costs are expected to be recognized over a weighted average period of 0.5 years.

As of December 31, 2023, there were no unrecognized compensation costs related to nonvested restricted stock unit awards.

Common Stock Awards

The Company did no t grant any common stock awards with immediate vesting to outside directors during the years ended December 31, 2023 and 2022.

The Company granted 76,660 common stock awards with immediate vesting to outside directors with a weighted average grant date fair value of $ 1.63 during the year ended December 31, 2024.

The Company did no t grant any common stock awards with immediate vesting to outside directors during the year ended December 31, 2023.

Employee Benefit Plans

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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, 2024 and 2023.

The Company’s matching

contributions under its 401(k) plan for the years ended December 31, 2023 and 2022 were approximately $ 648,000 and $ 537,000 , respectively.

The Company’s matching contributions under its 401(k) plan for the years ended December 31, 2024 and 2023 were approximately $ 568,000 and $ 648,000 , respectively.

Advertising Costs

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Advertising costs for the years ended December 31, 2024 and 2023 totaled $ 40,000 and $ 32,000 , respectively.

The Company’s components of loss before income tax, exclusive of Breckenridge were as follows (in thousands):

The Company’s components of (loss) income before income tax, with the year ended December 31, 2023 being reported exclusive of Breckenridge, were as follows (in thousands):

Year Ended December 31,

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Current state expense

Deferred federal benefit (expense)

Deferred state benefit (expense)

Income tax benefit (expense)

Deferred federal benefit

Deferred state (expense) benefit

Income tax (expense) benefit

The income tax provision differs from the amount computed by applying the statutory federal income tax rate to loss before income tax as follows (in thousands):

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Tax benefit computed at statutory rate of 21 %

Breckenridge Earnings not subject to tax

Change in valuation allowance

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Foreign losses

Section 382 limited NOL

Income tax benefit (expense)

Income tax (expense) benefit

The principal components of the Company’s net deferred tax assets (liabilities) (in thousands) were as follows:

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Workers’ compensation

Restricted stock and restricted stock unit awards

Gross deferred tax assets

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At December 31, 2024, the Company had a gross NOL for U.S.

federal income tax purposes of approximately $ 163,849,000 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.

federal income tax purposes of approximately $ 173,807,000 but expects approximately $ 94,779,000 to expire unused with the remaining NOL beginning to expire in 2027.

Losses incurred after the year ended December 31, 2017 have no expiration.

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The Company also had a Canadian gross NOL of $ 24,394,000 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 2023, 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.

In evaluating the possible sources of taxable income during 2023 and 2024, 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 and maintained a full valuation allowance against foreign deferred tax assets and its federal and state deferred tax assets with the exception of its trademark intangible.

The change in valuation allowance amounted to $ 1.1 million and $ 5.3 million for the years ended December 31, 2024 and 2023, respectively, including amounts recorded as a component of other comprehensive income or loss.

At December 31, 2024 and 2023, the Company did no t have any uncertain tax positions.

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Deemed distribution of Breckenridge net assets not acquired

Deemed contribution of Breckenridge net assets

Historical Carrying Value of Assets Acquired

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Excess purchase price

The following table reconciles the previously reported Balance Sheet at December 31, 2022 to the current Balance Sheet for the same period (in thousands):

December 31, 2022

Previously Reported

Current assets:

Cash and cash equivalents

Restricted cash

Short-term investments

Accounts receivable, net

Employee retention credit receivable

Prepaid expenses and other current assets

Total current assets

Property and equipment, net

Right-of-use assets

Intangibles, net

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

Accrued liabilities:

Payroll costs and other taxes

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

Stockholders' equity:

Additional paid-in capital

Accumulated earnings (deficit)

Equity of Breckenridge prior to acquisition

Accumulated other comprehensive income (loss), net

Total stockholders' equity

Total liabilities and stockholders' equity

The following tables reconcile the previously reported Statement of Operations for the year ended December 31, 2022 to the current Statement of Operations for the same periods (in thousands):

Year Ended December 31, 2022

Eliminations and

Previously Reported

Other Adjustments

Operating revenues

Reimbursable revenue

Operating costs:

Operating expenses

Fee operating expenses

Reimbursable operating expenses

General and administrative

Depreciation and amortization

Income (loss) from operations

Other income (expense):

Interest income

Interest expense

Other income (expense), net

Gain from employee retention credit

Income (loss) before income tax

Income tax benefit (expense)

Net income (loss)

Other comprehensive income (loss):

Net unrealized income (loss) on foreign exchange rate translation

Comprehensive (loss) income

Basic income (loss) per share of common stock

Diluted income (loss) per share of common stock

Weighted average equivalent common shares outstanding

Weighted average equivalent common shares outstanding

- assuming dilution

The following table reconciles the previously reported Statement of Cash Flows for the year ended December 31, 2022 to the current Statement of Cash Flows for the same period (in thousands):

Year ended December 31, 2022

Previously Reported

Cash flows from operating activities:

Net (loss) income

Adjustments to reconcile net (loss) income to net cash provided by 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:

(Increase) decrease in accounts receivable

Increase in employee retention credit receivable

(Increase) decrease in prepaid expenses and other assets

Increase (decrease) in accounts payable

Increase (decrease) in accrued liabilities

Increase (decrease) in operating lease liabilities

Increase (decrease) in deferred revenue

Net cash (used in) provided by operating activities

Cash flows from investing activities:

Capital expenditures

Proceeds from disposal of assets

Net cash used in investing activities

Cash flows from financing activities:

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

Breckenridge cash contributions prior to acquisition

Net cash used in financing activities

Effect of exchange rate changes on cash and cash equivalents and restricted cash

Net (decrease) increase in cash and cash equivalents and restricted cash

Cash and cash equivalents and restricted cash at beginning of period

Cash and cash equivalents and restricted cash at end of period

Supplemental cash flow information:

Cash paid for interest

Cash received for income taxes

Non-cash operating, investing and financing activities:

Increase in accrued purchases of property and equipment

Financed leases incurred

Increase in right-of-use assets and operating lease liabilities

Financed insurance premiums

Deemed contribution of Breckenridge net assets

The following table details the standalone Breckenridge Statement of Operations for the period from January 1, 2023 through March 24, 2023 (in thousands):

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Year Ended December 31,

2022 (as adjusted)

Net income (loss)

Weighted average common shares outstanding

Dilutive common stock options, restricted stock unit awards and restricted stock awards

Basic income (loss) per share of common stock

Diluted income (loss) per share of common stock

Basic loss per share of common stock

Diluted loss per share of common stock

The Company had a net loss in the years ended December 31, 2024 and 2023.

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Year Ended December 31,

2022 (as adjusted)

Convertible Note

Restricted stock units

Convertible Note

Major Clients

The Company operates in two business segments, contract seismic data acquisition and processing services.

The Company has two operating segments, U.S and Canada, all of the clients whose revenue exceeded 10% of total revenue during the years ended December 31, 2024 and 2023, were U.S.

segment clients.

Sales to these clients, as a percentage of operating revenues that exceeded 10%, were as follows:

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and Canada are the only operating segments for the Company.

The following tables present the Company’s operating revenues, net property and equipment and right-of-use assets by operating segment (in thousands):

The CODM manages and assesses the performance of the reportable segments by their adjusted EBITDA.

We define adjusted EBITDA as our net income (loss), before (i) interest expense, net, (ii) income tax expense or benefit, (iii) depreciation, depletion and amortization and (iv) other unusual or non-recurring charges, such as severance expenses.

The CODM reviews the adjusted EBITDA of the Company’s reportable segments, which drives the evaluation of the performance of the Company’s reportable segments and allocation of resources to those segments.

Beginning in the year ended December 31, 2024, and retroactively applied to the year ended December 31, 2023, a portion of the management charges incurred by the U.S.

segment were allocated to the Canadian segment based upon an activity level determined to be appropriate by management.

These charges totaled approximately $ 0.3 million and $ 0.3 million for the years ended December 31,2024 and 2023, respectively.

The following tables present the Company’s operating revenues, net property and equipment, capital expenditures and right-of-use assets by operating segment (in thousands):

Year Ended December 31,

2022 (as adjusted)

Operating Revenues

United States

Year Ended December 31,

2022 (as adjusted)

Net Property and Equipment

United States

Year Ended December 31,

2022 (as adjusted)

Right-of-use Assets

Capital Expenditures

United States

Total Capital Expenditures

Operating Lease Right-of-use Assets

United States

The following tables present the Company’s income statements by operating segment (in thousands):

Twelve Months Ended December 31, 2023

Year Ended December 31, 2024

USA Operations

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Depreciation and amortization

Loss from operations

(Loss) income from operations

Other income (expense):

1 unchanged sentence

Interest expense

Other income, net

Gain from employee retention credit

Loss before income tax

Income tax benefit

Other comprehensive income:

Net unrealized income on foreign exchange rate translation

Comprehensive loss

Twelve Months Ended December 31, 2022

Other income (expense), net

(Loss) income before income tax

Income tax expense

Net (loss) income

Adjusted EBITDA

Year Ended December 31, 2023

USA Operations

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General and administrative

Severance expense

Depreciation and amortization

(Loss) income from operations

Loss from operations

Other income (expense):

1 unchanged sentence

Interest expense

Other income, net

Gain from employee retention credit

(Loss) income before income tax

Income tax expense

Other income (expense), net

Loss before income tax

Income tax benefit

Adjusted EBITDA

The reconciliation of the Company’s Adjusted EBITDA to its net (loss) income, which is the most directly comparable GAAP financial measure, is provided in the following table (in thousands):

Year Ended December 31,

Net (loss) income

Other comprehensive (loss):

Net unrealized loss on foreign exchange rate translation

Comprehensive loss

Depreciation and amortization

Interest income, net

Income tax expense (benefit)

Severance expense

Adjusted EBITDA

The following table present the Company’s total assets by operating segment (in thousands):

Year Ended December 31,

United States

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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.

(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.

The Company disputed Weatherford’s allegations with respect to the Company, and the lawsuit was dismissed in October 2024.

Additionally, the Company experiences contractual disputes with its clients from time to time regarding the payment of invoices or other matters.

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Recently Issued Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (“ASU 2023-07”) .

ASU 2023-07 seeks to improve disclosures about a public entity’s reportable segments and add disclosures around a reportable segment’s expenses.

The updated guidance is effective for the Company for annual periods beginning January 1, 2024, and interim periods within fiscal years beginning January 1, 2025.

As the Company has two reportable segments, the Company does not expect the adoption of this ASU to have a material impact on its financial statements and disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

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The Company does not expect the adoption of ASU 2023-09 to have a material impact on its financial statements and disclosures.

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.

The Company is currently evaluating the impact of this standard on our disclosures.

Concentrations of Credit Risk

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.