DAWSON GEOPHYSICAL CO

1.** **Summary of Significant Accounting Policies

Organization and Nature of Operations

The Company is a leading provider of onshore seismic data acquisition and processing services. Founded in 1952, the Company acquires and processes 2-D, 3-D and multi-component seismic data for its clients, ranging from major oil and gas companies to independent oil and gas operators as well as providers of multi-client data libraries. The Company operates in the lower 48 states of the U.S. and in Canada.

Basis of Presentation

The accompanying consolidated financial statements include the accounts of the Company. Intercompany accounts and transactions have been eliminated. In the opinion of the Company’s management, the consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. The preparation of these condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in these consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. Certain prior period amounts in the condensed consolidated financial statements may have been reclassified to conform to the current period’s presentation.

These consolidated financial statements have been prepared using accounting principles generally accepted in the U.S. for interim financial information and the instructions to Form 10-K and applicable rules of Regulation S-X of the Securities and Exchange Commission (the “SEC”).

Asset Purchase Agreement. On March 24, 2023, the Company entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Wilks Brothers, LLC (“Wilks”) and Breckenridge Geophysical, LLC (“Breckenridge”), a wholly owned subsidiary of Wilks. Pursuant to the 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 (the “Transaction”). While the Transaction was structured as an asset purchase, the Company’s financial presentation reflects combined results of the two companies as if the combination occurred on January 14, 2022, the date Wilks became the majority shareholder of the Company. This is due to the fact that both the Company and Breckenridge were under Wilks’ control from January 14, 2022 forward. The presentation is required as a combination of entities under common control. As part of the Purchase Agreement, in addition to the 1,188,235 shares of our common stock issued to Wilks at closing, we entered into a convertible note to deliver approximately 5.8 million shares of common stock to Wilks after the Company receives shareholder approval of the proposal to issue the shares upon conversion of the convertible note in accordance with NASDAQ Listing Rule 5635 (the “Convertible Note”). The shareholders approved conversion of the Convertible Note during a special meeting held on September 13, 2023. Pursuant to the Purchase Agreement, the Convertible Note in the amount of $9,880,000.50 was automatically converted into 5,811,765 newly-issued shares of the Company’s common stock following the requisite shareholder approval, and the Convertible Note was thereby extinguished.

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. 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, Exploration Surveys, Inc. and Breckenridge. All significant intercompany balances and transactions have been eliminated in consolidation.

Cash Equivalents

For purposes of the consolidated financial statements, the Company considers demand deposits, certificates of deposit, overnight investments, money market funds and all highly liquid debt instruments purchased with an initial maturity of three months or less to be cash equivalents.

Allowance for Current Expected Credit Loss

The Company’s allowance for credit losses reflects its current estimate expected to be incurred over the life of the financial instrument and is determined based on a number of factors. Management determines the need for any allowance for credit losses on accounts receivable based on its review of past-due accounts, its past experience of historical write-offs, its current client base, when customer accounts exceed 90 days past due and specific customer account reviews. While the collectability of outstanding client invoices is continually assessed, the inherent volatility of the energy industry’s business cycle can cause swift and unpredictable changes in the financial stability of the Company’s clients. With the adoption of ASU No. 2016-13 in 2020, the Company made an accounting policy election to write off accrued interest amounts by reversing interest income. The Company's allowance for credit losses was $250,000 at January 1, 2023, December 31, 2023, and December 31, 2024. There wereno changes recorded during the years ending December 31, 2023, and December 31, 2024.

Employee Retention Credit Receivable

Under the provisions of the CARES Act, the Company was eligible and, in April 2022, applied for a refundable employee retention credit subject to program conditions and requirements. The Company recognizes these credits as a gain when all uncertainties have been met and the amounts are realizable in accordance with similar gain contingencies. The Company recognized $3.0 million as a gain in other income and $69,000 as interest income in the Consolidated Statement of Operations and Comprehensive Loss for the year ended December 31, 2022 and recognized $3.0 million as an employee retention credit receivable in the Consolidated Balance Sheet as of December 31, 2022. Payments were received in January 2023.

Property and Equipment

Property and equipment is capitalized at historical cost or the fair value of assets acquired in a business combination and is depreciated over the useful life of the asset. Management’s estimation of this useful life is based on circumstances that exist in the seismic industry and information available at the time of the purchase of the asset. As circumstances change and new information becomes available, these estimates could change.

Depreciation is computed using the straight-line method. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the consolidated balance sheet, and any resulting gain or loss is reflected in the results of operations for the period.

Impairment of Long-Lived Assets

Long-lived assets are 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 testedtwo 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.

Leases

The Company leases certain vehicles, seismic recording equipment, real property and office equipment under lease agreements. The Company evaluates each lease to determine its appropriate classification as an operating lease or a finance lease for financial reporting purposes. The Company is the lessee in a lease contract when we obtain the right to control the asset. The majority of our operating leases are non-cancelable operating leases for office, shop and warehouse space in Midland 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. Assets under finance leases are amortized using the straight-line method over the initial lease term. Amortization of assets under finance leases is included in depreciation expense.

For operating leases, where readily determinable, the Company uses the implicit interest rate in determining the present value of future minimum lease payments. In the absence of an implicit rate, the Company uses its incremental borrowing rate based on the information available at the lease commencement date. The Company gives consideration to its outstanding debt, as well as publicly available data for instruments with similar characteristics when calculating its incremental borrowing rates. The ROU assets are amortized to operating lease cost over the lease terms on a straight-line basis and is included in operating expense. The Company does not recognize leases with an initial term of 12 months or less and does not separate lease and non-lease components.

Several of the Company’s leases include options to renew, with renewal terms that canextend fromone to 10 years or more. The exercise of lease renewal options is primarily at the Company’s discretion. To measure operating lease recognition, the Company evaluates its lease agreements to determine if they have economic incentives for renewal or options to purchase. The Company deems leasehold improvements as one of the few economic incentives that would entice the Company to renew a lease and all of its leasehold improvements are currently fully amortized.

Intangibles

The Company has intangible assets consisting primarily of trademarks/tradenames (which are not amortized) resulting from a business combination. The Company tests for impairment on an annual basis during the fourth quarter, and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. No impairment charges were recognized for the years ended December 31, 2024 and 2023.

Revenue Recognition

Services are provided under cancelable service contracts which usually have an original expected duration ofone year or less. These contracts are either turnkey or term agreements. Under both types of agreements, the Company recognizes revenues as the services are performed. Revenue is generally recognized based on receivers laid out and picked up compared to total receivers anticipated to be recorded on the survey using the total estimated revenue for the service contract. In the case of a cancelled service contract, the client is billed and revenue is recognized for any third party charges and square miles of data recorded up to the date of cancellation.

The Company receives reimbursements for certain out-of-pocket expenses under the terms of the service contracts. The amounts billed to clients are included at their gross amount in the total estimated revenue for the service contract.

Clients are billed as permitted by the service contract. Contract assets and contract liabilities are the result of timing differences between revenue recognition, billings and cash collections. If billing occurs prior to the revenue recognition or billing exceeds the revenue recognized, the amount is considered deferred revenue and a contract liability.

Conversely, if the revenue recognition exceeds the billing, the excess is considered an unbilled receivable and a contract asset. As services are performed, those deferred revenue amounts are recognized as revenue.

In some instances, third-party permitting, surveying, drilling, helicopter, equipment rental and mobilization costs that directly relate to the contract are utilized to fulfill the contract obligations. These fulfillment costs are capitalized in other current assets and generally amortized based on the total square miles of data recorded compared to total square miles anticipated to be recorded on the survey using the total estimated fulfillment costs for the service contract.

Estimates for total revenue and total fulfillment cost on any service contract are based on certain qualitative and quantitative judgments supported by underlying facts. Management considers a variety of factors such as whether various components of the performance obligation will be performed internally or externally, cost of third party services, and facts and circumstances unique to the performance obligation in making these estimates.

Additionally, the Company’s policy includes (i) ignoring the financing component when estimating the transaction price for service contracts completed withinone 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. See note 15 for additional disclosures related to disaggregated revenue.

Segments

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. The performance of our segments is evaluated primarily on 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. As a result, our business hastwo reportable segments, US operations and Canada Operations. We have included disclosures about ourtwo reportable segments for all periods presented herein. 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

The Company measures all stock-based compensation awards, which include stock options, restricted stock, restricted stock units and common stock awards, using the fair value method and recognizes compensation expense, net of actual forfeitures, as operating or general and administrative expense, as appropriate, in the Consolidated Statements of Operations and Comprehensive Loss on a straight-line basis over the vesting period of the related awards.

Foreign Currency Translation

The U.S. Dollar is the reporting currency for all periods presented. The functional currency of the Company’s foreign subsidiaries is generally the local currency. Any transactions denominated in a currency other than the functional currency are remeasured with the resulting unrealized gain or loss recognized in the Consolidated Statements of Operations and Comprehensive Loss as other income (expense). All assets and liabilities in the functional currency are then translated into U.S. Dollars at the exchange rate on the consolidated balance sheet date. Income and expenses are translated using the exchange rate applicable to each transaction. Equity transactions are translated using historical exchange rates. Adjustments resulting from translation are recorded as a separate component of accumulated other comprehensive income (loss) in the Consolidated Balance Sheets. Realized foreign currency transaction gains (losses) are included in the Consolidated Statements of Operations and Comprehensive Loss as other income (expense).

Income Taxes

The Company accounts for income taxes by recognizing amounts of taxes payable or refundable for the current year, and by using an asset and liability approach in recognizing the amount of deferred tax assets and liabilities for the future tax consequences of events that have been recognized in the Company’s consolidated financial statements or tax returns. Management determines deferred taxes by identifying the types and amounts of existing temporary differences, measuring the total deferred tax asset or liability using the applicable tax rate in effect for the year in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates of deferred tax assets and liabilities is recognized in income in the year of an enacted rate change. The deferred tax asset is reduced by a valuation allowance if, based on available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized. Management’s methodology for recording income taxes requires judgment regarding assumptions and the use of estimates, including determining the annual effective tax rate and the valuation of deferred tax assets, which can create variances between actual results and estimates and could have a material impact on the Company’s provision or benefit for income taxes. Due to recent operating losses and valuation allowances, the Company may recognize reduced or no tax benefits on future losses on the Consolidated Statements of Operations and Comprehensive Loss. The Company’s effective tax rates differ from the statutory federal rate of 21% for certain items such as state and local taxes, valuation allowances, non-deductible expenses and discrete items.

Use of Estimates in the Preparation of Financial Statements

Preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of certain assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The most sensitive estimates involve the Company’s estimates for total revenues and total fulfillment costs on service contracts. Because of the use of assumptions and estimates inherent in the reporting process, actual results could differ from those estimates.

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. This severance is included on the balance sheet within accrued liabilities in payroll costs and other taxes. This severance will be paid out in bi-weekly payments for (ii) and (iii) until February of 2025, and bi-weekly payments for (i) until December of 2025.

Risks and uncertainties

Our ability to be profitable in the future will depend on many factors beyond our control, but primarily on the level of demand for land-based seismic data acquisition services by oil and natural gas exploration and development companies. We incurred net losses of $4.1 million for the year ended December 31, 2024, and $12.1 million for the year ended December 31, 2023. As of December 31, 2024, we had $1.4 million in cash, and a positive working capital balance of $4.6 million. 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.

The Company hadno 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 ayear.

3. Fair Value of Financial Instruments

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 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.

4. Property and Equipment

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

5. Supplemental Consolidated Financial Statement Information

Other Current Assets and Other Current Liabilities

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

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

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 andno 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. As of December 31, 2023, the Company had approximately $11,000 of outstanding related party accounts payable andno outstanding related party accounts receivable.

Deferred Costs

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, 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. There wereno material impairment losses incurred during these periods.

Deferred Revenue

Deferred revenue was $11.8 million and $7.4 million at January 1, 2024 and 2023, respectively. 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, 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 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.

6**. Debt**

Dominion Loan Agreement

On September 30, 2019, the Company entered into a Loan and Security Agreement with Dominion Bank, a Texas state bank (“Dominion Bank”). 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 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, 2024, the Company hasno 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

As of December 31, 2024, the Company hasone note payable to a finance company for various insurance premiums totaling $168,000.

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, 2024 and 2023 include finance leases of $2.4 million and 1.8 million, respectively.

Maturities of Debt

The Company’s aggregate principal amount of outstanding notes payable and the interest rates and monthly payments as of December 31, 2024 and 2023 are as follows (in thousands):

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

Interest rates on these leases ranged from 4.86% to 8.74%.

7. Leases

The Company leases certain vehicles, seismic recording equipment, real property and office equipment under lease agreements. The Company evaluates each lease to determine its appropriate classification as an operating lease or finance lease for financial reporting purposes. The Company is the lessee in a lease contract when we obtain the right to control the asset. The majority of our operating leases are non-cancelable operating leases for office, shop and warehouse space in Midland 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):

Supplemental cash flow information related to leases for the years ended December 31, 2024 and 2023 was as follows (in thousands):

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

Maturities of lease liabilities at December 31, 2024 are as follows (in thousands):

8. Stock-Based Compensation

Since the date of its effectiveness on May 5, 2016, the Company issues new grants of stock-based awards pursuant to the Dawson Geophysical Company 2016 Stock and Performance Incentive Plan (the “2016 Plan”). All of the Company’s prior plans have expired pursuant to their terms andno awards previously granted under prior plans remain outstanding. The awards outstanding and available under the 2016 Plan, as restated in 2020, and their associated accounting treatment are discussed below.

In 2016, the Company adopted the 2016 Plan, which provides for the issuance of up to 1,000,000 shares of authorized Company common stock, which authorized amount was increased to 1,050,000 as a result of the 5% stock dividend approved by the Board on May 1, 2018. At the annual shareholders’ meeting on June 9, 2020, the Company’s

shareholders approved a restated version of the 2016 Plan (the “Restated 2016 Plan”), which authorized an additional 1,000,000 shares. The total aggregate numbers of shares of Common Stock reserved under the Restated 2016 Plan is 2,050,000 shares. As of December 31, 2024, there were approximately 1,000,879 shares available for future issuance. The Restated 2016 Plan provides for the issuance of stock-based compensation awards, including stock options, common stock, restricted stock, restricted stock units and other forms. Stock option grant prices awarded under the Restated 2016 Plan may not be less than the fair market value of the common stock subject to such option on the grant date, and the term of stock options shall extend no more thanten years after the grant date. The Restated 2016 Plan terminates June 9, 2030.

The Company’s employees and officers that hold unvested restricted stock awarded during 2016 or thereafter are not entitled to dividends when the Company pays dividends.

Impact of Stock-Based Compensation

The following table summarizes stock-based compensation expense, which is included in operating or general and administrative expense, as appropriate, in the Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2024 and 2023 (in thousands):

Stock Options

There wasno stock option activity during the years ended December 31, 2024 and 2023. There wereno outstanding stock options as of December 31, 2024 or 2023.

Restricted Stock Awards

There wasno restricted stock award activity during the years ended December 31, 2024 and 2023.

Restricted Stock Unit Awards

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:

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 inone year. The Company didnot 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 wereno unrecognized compensation costs related to nonvested restricted stock unit awards.

Common Stock Awards

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 didnot grant any common stock awards with immediate vesting to outside directors during the year ended December 31, 2023.

9. Employee Benefit Plans

The Company provides a 401(k) plan as part of its employee benefits package in order to retain quality personnel. The Company elected to match 100% of the employee contributions up to a maximum of 6% of the participant’s applicable compensation under its 401(k) plan for the years ended December 31, 2024 and 2023. 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.

10. Advertising Costs

Advertising costs are charged to expense as incurred. Advertising costs for the years ended December 31, 2024 and 2023 totaled $40,000 and $32,000, respectively.

11. Income Taxes

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):

The Company’s components of income tax benefit (expense) were as follows (in thousands):

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):

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

At December 31, 2024, the Company had a gross NOL for U.S. 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. The Company will carry forward the tax benefits related to federal net NOL of approximately $16,596,000. The Company also had state net NOLs that will affect state taxes of approximately $2,630,000 at December 31, 2024. State NOLs began to expire in 2015 and continue to expire each year. The Company also had a Canadian gross NOL of $24,394,000 that will begin to expire in 2037.

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 didnot have any uncertain tax positions. The Company’s policy is to recognize interest and penalties related to an uncertain tax position in income tax expense.

12. Supplemental Purchase Agreement Transaction Information

Historical financial information for Breckenridge was derived from Breckenridge’s financial statements. In the opinion of the Company’s management, the financial information of Breckenridge reflects all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. The non-cash items associated with the Purchase Agreement shown on the Condensed Consolidated Statements of Cash Flows consist of “Deemed distribution (contribution)” and “Acquisition of Breckenridge net assets” and are derived as follows (in thousands):

Total consideration for the asset purchase is as follows (in thousands):

Because the Transaction constitutes a transaction among entities under common control, the excess purchase price over the historical carrying value of the net assets acquired was recorded as a charge to additional paid in capital. The excess purchase price over the historical carrying value of the assets at the acquisition date is as follows (unaudited and in thousands):

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

13. Net Loss per Share

Basic net loss per share is computed by dividing the net loss by the weighted average shares outstanding. Diluted loss per share is computed by dividing the net loss by the weighted average diluted shares outstanding.

The computation of basic and diluted loss per share was as follows (in thousands, except share and per share data):

The Company had a net loss in the years ended December 31, 2024 and 2023. As a result, all stock options, restricted stock unit awards, and restricted stock awards were anti-dilutive and excluded from weighted average shares used in determining the diluted loss per share of common stock for the respective periods.

The following weighted average numbers of shares related to the convertible note and restricted stock unit awards, have been excluded from the calculation of diluted loss per share of common stock, as their effect would be anti-dilutive for the years ended December 31, 2024 and 2023:

14. Major Clients

The Company hastwo 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:

15. Segments

The U.S. and Canada are the only operating segments for the Company.

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):

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

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):

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

16. Commitments and Contingencies

From time to time, the Company is a party to various legal proceedings arising in the ordinary course of business. Although the Company cannot predict the outcomes of any such legal proceedings, management believes that the resolution of pending legal actions will not have a material adverse effect on the Company’s consolidated financial condition, results of operations or liquidity, as the Company believes it is adequately indemnified and insured.

The Company is also party to the following legal proceeding: On April 1, 2019, Weatherford International, LLC and Weatherford U.S., L.P. (collectively, “Weatherford”) filed a petition in state district court for Midland County, Texas,

in which the Company andeighteen 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 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. While the Company seeks to minimize these disputes and maintain good relations with its clients, the Company has experienced in the past, and may experience in the future, disputes that could affect its revenues and results of operations in any period.

17. Recently Issued Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09,Income Taxes (Topic 740): Improvements to Income Tax Disclosures(“ASU 2023-09”). ASU 2023-09 seeks to improve transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the rate reconciliation and income taxes paid disclosures. The updated guidance is effective for the Company on January 1, 2025. 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.

18. Concentrations of Credit Risk

Financial instruments that potentially expose the Company to concentrations of credit risk at any given time may consist of cash and cash equivalents, restricted cash, money market funds and overnight investment accounts, short-term investments in certificates of deposit, trade and other receivables and other current assets. At December 31, 2024 and 2023, the Company had deposits with domestic and international banks in excess of federally insured limits. Management believes the credit risk associated with these deposits is minimal. Money market funds seek to preserve the value of the investment, but it is possible to lose money investing in these funds.

The Company’s sales are to clients whose activities relate to oil and natural gas exploration and production. The Company generally extends unsecured credit to these clients; therefore, collection of receivables may be affected by the economy surrounding the oil and natural gas industry or other economic conditions. The Company closely monitors extensions of credit and may negotiate payment terms that mitigate risk.