# Dawson Geophysical Co: Form 10-Q for the period ended Mar 31, 2023

- Company: [Dawson Geophysical Co](/companies/dwsn.md) (CIK 799165)
- Form: 10-Q
- Filed: 2023-05-15
- Accepted by EDGAR: May 15, 2023, 17:01 ET
- Period: 2023-03-31
- Accession: 0001558370-23-009945
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/799165/000155837023009945/dwsn-20230331x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/799165/000155837023009945/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-01-01 to 2023-03-31 | $29.4m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Cost of revenue | 3 months, 2023-01-01 to 2023-03-31 | $23.8m | us-gaap:CostOfRevenue |
| Operating income | 3 months, 2023-01-01 to 2023-03-31 | −$573.0k | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-01-01 to 2023-03-31 | $17.0k | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-01-01 to 2023-03-31 | −$17.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-01-01 to 2023-03-31 | −$413.0k | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-01-01 to 2023-03-31 | −$0.02 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-01-01 to 2023-03-31 | −$0.02 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-01-01 to 2023-03-31 | 25,000,564 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2023-01-01 to 2023-03-31 | −$1.8m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2023-01-01 to 2023-03-31 | $1.6m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2023-03-31 | $10.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-03-31 | $42.9m | us-gaap:AssetsCurrent |
| Total assets | at 2023-03-31 | $65.7m | us-gaap:Assets |
| Current liabilities | at 2023-03-31 | $19.0m | us-gaap:LiabilitiesCurrent |
| Shareholders' equity | at 2023-03-31 | $33.1m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 25,442 characters.

### Forward Looking Statements

Statements other than statements of historical fact included in this Form 10-Q that relate to forecasts, estimates or other expectations regarding future events, including without limitation, statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding technological advancements, our financial position, business strategy and plans, objectives of our management for future operations, including statements related to the expected or potential impact of the novel coronavirus (“COVID-19”) pandemic on our business, financial condition and results of operations, may be deemed to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). When used in this Form 10-Q, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” and similar expressions, as they relate to us or our management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by and information currently available to management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors. These risks include, but are not limited to, the Company’s status as a controlled public company, which exempts the Company from certain corporate governance requirements; the limited market for the Company’s shares, which could result in the delisting of the Company’s shares from Nasdaq and the Company no longer being required to make filings with the SEC; the impact of general economic, industry, market or political conditions; dependence upon energy industry spending; changes in exploration and production spending by our customers and changes in the level of oil and natural gas exploration and development; the results of operations and financial condition of our customers, particularly during extended periods of low prices for crude oil and natural gas; the volatility of oil and natural gas prices; changes in economic conditions; the severity and duration of the COVID-19 pandemic, related economic repercussions and the resulting impact on demand for oil and gas; surplus in the supply of oil and the ability of the Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, to agree on and comply with supply limitations; the duration and magnitude of the unprecedented disruption in the oil and gas industry currently resulting from the impact of the foregoing factors, which is negatively impacting our business; the potential for contract delays; reductions or cancellations of service contracts; limited number of customers; credit risk related to our customers; reduced utilization; high fixed costs of operations and high capital requirements; operational challenges relating to the COVID-19 pandemic and efforts to mitigate the spread of the virus, including logistical challenges, protecting the health and well-being of our employees and remote work arrangements; industry competition; external factors affecting the Company’s crews such as weather interruptions and inability to obtain land access rights of way; whether the Company enters into turnkey or day rate contracts; crew productivity; the availability of capital resources; disruptions in the global economy, including export controls and financial and economic sanctions imposed on certain industry sectors and parties as a result of the developments in Ukraine and related activities; and whether or not a future transaction or other action occurs that causes the Company to be delisted from Nasdaq and no longer be required to make filings with the SEC. A discussion of these and other factors, including risks and uncertainties, is set forth in the Company’s Annual Report on Form 10-K that was filed with the SEC on March 13, 2023 and any subsequent Quarterly Reports on Form 10-

Q filed with the SEC. The Company disclaims any intention or obligation to revise any forward-looking statements, whether as a result of new information, future events or otherwise.

### Overview

We are a leading provider of North American onshore seismic data acquisition services with operations throughout the continental U.S. and Canada. Substantially all of our revenues are derived from the seismic data acquisition services we provide to our clients. Our clients consist of major oil and gas companies, independent oil and gas operators, and providers of multi-client data libraries. In recent years, our primary customer base has consisted of providers of multi-client data libraries. Demand for our services depends upon the level of spending by these companies for exploration, production, development and field management activities, which depends, in a large part, on oil and natural gas prices. Significant fluctuations in domestic oil and natural gas exploration and development activities related to commodity prices, as we have recently experienced, have affected, and will continue to affect, demand for our services and our results of operations, and such fluctuations continue to be the single most important factor affecting our business and results of operations.

We began the year with one large channel count crew operating in the lower 48 dropping to one mid-size channel count crew in February through the end of the first quarter. A second mid-size crew deployed in early March. During the Canadian winter season that ended in early April, there were up to four smaller crews in operation. With the conclusion of the winter season, there is currently no crew activity in Canada.

The operation of the two crews in the lower 48 continued into the second quarter, with one larger channel count crew in the Eagle Ford area and one mid-size crew in the Utica Basin. We anticipate that the Utica Basin crew will have an extended period of down time during the middle of the second quarter due to project readiness delays. Efforts are ongoing to fill the near term period of low utilization until the crew returns to the second Utica project later in the second quarter.

Capital spending levels by Exploration and Production companies is improving but remains low compared to pre-pandemic levels. Consequently, demand for seismic services in North America also remains below pre-pandemic levels and bid activity continues to be intermittent. The ability to fill gaps in the schedule with smaller projects remains a focus and visibility for 2023 has improved compared to the same time one year ago. We expect to operate two crews through the third quarter and may encounter periods of low utilization affecting one crew near the end of the third quarter and into the fourth quarter. As mentioned, we are directing efforts to fill the schedule during both periods. Based on currently available information, crew activity in the lower 48 during the fourth quarter and into the first quarter of 2024 is expected to be at high levels.

Our first quarter success is primarily the result of improved market conditions, timing of projects becoming crew ready and operational execution by the Dawson team. Since the onset of the COVID-19 pandemic, Exploration and Production companies have maintained a commitment toward financial discipline. As a result, many seismic projects that were scheduled for 2021 and 2022, in some cases, were either shelved or delayed. Much of this, however, started to change as seismic projects that had been placed on hold began to return to market in late 2022. For the first quarter of 2023, we experienced our first profitable quarter since 2020, absent Breckenridge contribution.

While our revenues are mainly affected by the level of client demand for our services, our revenues are also affected by the pricing for our services that we negotiate with our clients and the productivity and utilization level of our data acquisition crews. Factors impacting productivity and utilization levels include: client demand, commodity prices, whether we enter into turnkey or dayrate contracts with our clients, the number and size of crews, the number of recording channels per crew, crew downtime related to inclement weather, delays in acquiring land access permits, agricultural or hunting activity, holiday schedules, short winter days, crew repositioning and equipment failure. To the extent we experience these factors, our operating results may be affected from quarter to quarter. Consequently, our efforts to negotiate more favorable contract terms in our supplemental service agreements, mitigate permit access delays and improve overall crew productivity may contribute to growth in our revenues.

### Results of Operations

*Operating Revenues*. Operating revenues for the first quarter of 2023 increased 34.1% to $29,408,000 compared to $21,934,000 in the same period of 2022. The increased revenue during the first quarter of 2023 compared to the same period of 2022 was primarily due to increased crew utilization during 2023.

*Operating Expenses*. Operating expenses for the first quarter of 2023 increased 65.1% to $23,782,000 compared to $14,403,000 in the same period of 2022. The increase in operating expenses during the first quarter of 2023 compared to the same period of 2022 was primarily due to the increased crew utilization during 2023.

*General and Administrative Expenses.* General and administrative expenses were 11.9% and 26.8% of revenues in the first quarter of 2023 and 2022, respectively. General and administrative expenses decreased $2,369,000 or 40.4% to $3,499,000 during the first quarter of

2023 from $5,868,000 during the same period of 2022. The primary factors for the decrease in general and administrative expenses during the first quarter of 2023 compared to the same period of 2022 was due to transaction costs of $715,000 in connection with the Purchase Agreement with Breckenridge in the first quarter of 2023 compared to $2,872,000 incurred related to the previously disclosed proposed merger with a subsidiary of Wilks Brothers, LLC during the same period of 2022.

*Depreciation and Amortization Expense*. Depreciation and amortization expense for the first quarter of 2023 totaled $2,700,000 compared to $3,101,000 for the same period of 2022. Depreciation expense decreased in 2023 compared to 2022 as a result of multiple years of reduced capital expenditures.

Total operating costs for the first quarter of 2023 were $29,981,000, representing a 28.3% increase from the same period of 2022. The increase in operating costs for the first quarter of 2023 compared to 2022 was primarily due to the factors described above.

*Income Taxes*. Income tax benefit for the first quarter of 2023 was $17,000, compared to income tax expense of $1,000 for the same period of 2022. These amounts represent effective tax rates of 4.0% and -0.1% for the first quarters of 2023 and 2022, respectively. The Company’s nominal or negative effective tax rate for the periods above was due to the presence of net operating loss carryovers and adjustments to the valuation allowance on deferred tax assets.

Our effective tax rates differ from the statutory federal rate of 21.0% for certain items such as state and local taxes, valuation allowances, and non-deductible expenses. For further information, see Note 9 of the Notes to the Condensed Consolidated Financial Statements.

### Use of EBITDA (a Non-GAAP measure)

We define EBITDA as net income (loss) plus interest expense, interest income, income taxes, and depreciation and amortization expense. Our management uses EBITDA as a supplemental financial measure to assess:

- the financial performance of our assets without regard to financing methods, capital structures, taxes or historical cost basis;
- our liquidity and operating performance over time in relation to other companies that own similar assets and that we believe calculate EBITDA in a similar manner; and
- the ability of our assets to generate cash sufficient for us to pay potential interest costs.

We also understand that such data are used by investors to assess our performance. However, the term EBITDA is not defined under GAAP, and EBITDA is not a measure of operating income, operating performance or liquidity presented in accordance with GAAP. When assessing our operating performance or liquidity, investors and others should not consider this data in isolation or as a substitute for net income (loss), cash flow from operating activities or other cash flow data calculated in accordance with GAAP. In addition, our EBITDA may not be comparable to EBITDA or similarly titled measures utilized by other companies since such other companies may not calculate EBITDA in the same manner as us. Further, the results presented by EBITDA cannot be achieved without incurring the costs that the measure excludes: interest, taxes, and depreciation and amortization.

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

| ​ ​ ​ | ​ ​ ​ | ​ ​ Three Months Ended March 31, ​ 2023 | ​ | ​ ​ ​ 2022 (as adjusted) |
| --- | --- | --- | --- | --- |
| Net loss | ​ | $(413) | ​ | $(1,385) |
| Depreciation and amortization | ​ | ​ 2,700 | ​ | ​ 3,101 |
| Interest (income) expense, net | ​ | ​ (91) | ​ | ​ (15) |
| Income tax (benefit) expense | ​ | ​ (17) | ​ | ​ 1 |
| EBITDA | ​ | $2,179 | ​ | $1,702 |

| ​ ​ ​ | ​ ​ | ​ ​ Three Months Ended March 31, ​ 2023 | ​ ​ | ​ ​ ​ 2022 (as adjusted) |
| --- | --- | ---: | --- | ---: |
| Net cash used in operating activities | ​ | $(1,820) |  | $(9,149) |
| Changes in working capital and other items | ​ | ​ 4,253 |  | ​ 11,385 |
| Non-cash adjustments to net loss | ​ | ​ (254) |  | ​ (534) |
| EBITDA | ​ | $2,179 | ​ | $1,702 |

### Liquidity and Capital Resources

Our principal sources of cash are amounts earned from the seismic data acquisition services we provide to our clients. Our principal uses of cash are the amounts used to provide these services, including expenses related to our operations and acquiring new equipment. Accordingly, our cash position depends (as do our revenues) on the level of demand for our services. Historically, cash generated from our operations along with cash reserves and borrowings from commercial banks have been sufficient to fund our working capital requirements and, to some extent, our capital expenditures.

*Cash Flows*. Net cash used in operating activities was $1,820,000 and $9,149,000 for the three months ended March 31, 2023 and 2022, respectively. This decrease was primarily due to cash received for an employee retention credit of $3,035,000 in 2023 along with various changes in the balances of our operating assets and liabilities.

Net cash used in investing activities was $2,595,000 and $18,000 for the three months ended March 31, 2023 and 2022, respectively. The increase in cash used in investing activities between periods of $2,577,000 was primarily due to an increase in cash capital expenditures to $1,606,000 for the first three months of 2023 compared to capital expenditures of $28,000 for the same period of 2022. Additionally, in connection with the Transaction, Breckenridge acquired $1,000,000 of short-term investments that was a deemed distribution in the non-cash section of our Consolidated Statements of Cash Flows.

Net cash used in financing activities was $3,224,000 for the three months ended March 31, 2023 and was primarily comprised of principal payments of $144,000 and $25,000 under our notes payable and finance leases, respectively. Additionally, in connection with the Transaction, Breckenridge had cash distributions of $3,055,000. Net cash provided by financing activities for the three months ended March 31, 2023 was $1,647,000 and was primarily comprised of principal payments of $328,000 and $9,000 under our notes payable and finance leases, respectively and tax withholdings related to stock-based compensation awards. These amounts were offset by sales of our treasury stock of $113,000 and Breckenridge cash contributions of $1,950,000 in connection with the Transaction.

*Capital Expenditures*. The Board of Directors approved an initial 2023 capital budget in the amount of $5,000,000 for capital expenditures, which was limited to necessary maintenance capital requirements and incremental recording channel replacement or increase. For the three months ended March 31, 2023, we have spent $1,117,000 on capital expenditures, primarily for rolling stock and maintenance capital requirements. In recent years, we have funded most of our capital expenditures through cash flow from operations, cash reserves, equipment term loans and finance leases.

We continually strive to supply our clients with technologically advanced 3-D seismic data acquisition recording services and data processing capabilities. We maintain equipment in and out of service in anticipation of increased future demand for our services.

*Capital Resources*. Historically, we have primarily relied on cash generated from operations, cash reserves and borrowings from commercial banks to fund our working capital requirements and, to some extent, our capital expenditures. We have funded some of our capital expenditures through commercial bank borrowings, finance leases and equipment term loans. The amount of borrowings available to us under our existing credit facility are determined in part by the amount of our eligible accounts receivable.

### Loan Agreement

*Dominion Credit Facility.* On September 30, 2019, we entered into a Loan and Security Agreement with Dominion Bank. On March 21, 2023, we entered into a Fourth Loan 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, and (iv) the Fourth Modification, the “Loan Agreement”) for the purpose of (a) amending the principal amount under our line of credit with Dominion Bank, and (b) obtaining Dominion Bank’s consent with respect to our consummation of the Transaction and related waivers with respect to implicated covenants. The Loan Agreement now provides for a secured revolving credit facility in an amount up to the lesser of (I) $5,000,000 or (II) a sum equal to (A) 80% of our eligible accounts receivable plus (B) 100% of the amount on deposit with Dominion Bank in our collateral account, including a certificate of deposit for $5,000,000. Previously, Dominion Bank’s commitment was for up to $10,000,000. We received a limited waiver and consent from Dominion Bank with respect to any non-compliance with applicable covenants under the Loan Agreement, including the tangible net worth covenant, in connection with the Purchase Agreement and the issuance of the common shares and the Convertible Note in the Transaction. As of March 31, 2023, we have not borrowed any amounts under the Revolving Credit Facility and have approximately $5,000,000 available for withdrawal.

Under the Revolving Credit Facility, interest will accrue at an annual rate equal to the lesser of (i) 7.75% and (ii) the greater of (a) the prime rate as published from time to time in The Wall Street Journal or (b) 4.75%. We will pay a commitment fee of 0.10% per annum on the difference of (a) $10,000,000 minus the Deposit minus (b) the daily average usage of the Revolving Credit Facility. The Loan Agreement contains customary covenants for credit facilities of this type, including limitations on disposition of assets. We are also obligated to meet certain financial covenants under the Loan Agreement, including maintaining a tangible net worth of not less than $38,000,000 and, to be tested as of the end of each calendar quarter, unencumbered liquid assets of not less than $5,000,000, and specified ratios with respect to current assets and liabilities and debt to tangible net worth. Our obligations under the Loan Agreement are secured by a security interest in the collateral account (including the Deposit) with Dominion Bank and future accounts receivable and related collateral. The maturity date of the Loan Agreement is September 30, 2023.

*Dominion Letters of Credit.* As of March 31, 2023, Dominion Bank has issued one letter of credit in the amount of $265,000 to support our workers compensation insurance. The letter of credit is secured by a certificate of deposit with Dominion Bank.

### Convertible Note

As of March 31, 2023, we have a convertible note payable of approximately $9,880,000 payable on or after June 30, 2024 to Wilks upon written demand. With shareholder approval, this Convertible Note may be converted to 5,811,765 shares of common stock at a conversion price equal to $1.70.

### Other Indebtedness

As of March 31, 2023, we have two short-term notes payable to a finance company for various insurance premiums totaling $500,000.

In addition, we lease certain seismic recording equipment and vehicles under leases classified as finance leases. Our Condensed Consolidated Balance Sheet as of March 31, 2023 includes finance leases of $368,000.

### Maturities and Interest Rates of Debt

The following tables set forth the aggregate principal amount (in thousands) under our outstanding notes payable and the interest rates as of March 31, 2023 and December 31, 2022:

| ​ ​ Notes payable to finance company for insurance | ​ ​ | ​ ​ March 31, 2023 ​ ​ | ​ ​ ​ | ​ ​ December 31, 2022 ​ ​ |
| --- | --- | ---: | --- | ---: |
| Aggregate principal amount outstanding | ​ | $500 | ​ | $205 |
| Interest rates range from 7.99% to 8.24% | ​ | ​ ​ | ​ | ​ ​ |

The aggregate maturities of finance leases as of March 31, 2023 are as follows (in thousands):

| ​ | ​ | ​ ​ | ​ | ​ | ​ | ​ |
| --- | --- | --- | --- | --- | --- | --- |
| April 2023 - March 2024 | ​ | $91 | ​ | ​ | ​ | ​ |
| April 2024 - March 2025 | ​ | ​ 97 | ​ | ​ | ​ | ​ |
| April 2025 - March 2026 | ​ | ​ 150 | ​ | ​ | ​ | ​ |
| April 2026 - March 2027 | ​ | ​ 30 | ​ | ​ | ​ | ​ |
| Obligations under finance leases | ​ | $368 | ​ | ​ | ​ | ​ |

Interest rates range from 5.29% to 7.66%.

### Contractual Obligations

We believe that our capital resources, including our cash on hand, short-term investments, cash flow from operations, and funds available under our Revolving Credit Facility will be adequate to meet our current operational needs. We believe that we will be able to finance our 2023 capital expenditures through cash flow from operations, borrowings from commercial lenders, and the funds available under our Revolving Credit Facility. However, our ability to satisfy working capital requirements, meet debt repayment obligations, and fund future capital requirements will depend principally upon our future operating performance, which is subject to the risks inherent in our business, and will also depend on the extent to which the current economic climate adversely affects the ability of our customers, and/or potential customers, to promptly pay amounts owing to us under their service contracts with us.

### Critical Accounting Policies

Information regarding our critical accounting policies and estimates is included in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022.

### Recently Issued Accounting Pronouncements

In August 2020, the FASB issued ASU No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which reduces the number of accounting models for convertible debt instruments. Such limiting results in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. It also simplifies the accounting for convertible instruments, reduces complexity for preparers and practitioners, and improves the decision usefulness and relevance of the information provided to financial statement users. In addition to eliminating certain accounting models, the Board also decided to enhance information transparency by making targeted improvements to the disclosures for convertible instruments and earnings-per-share guidance on the basis of feedback from financial statement users. For smaller reporting companies, this ASU is effective for the annual period beginning after December 15, 2023, including interim periods within that annual period. Early adoption is permitted. This ASU can be adopted through either a modified retrospective or a fully retrospective method of transition. An entity that elects to early adopt in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period; however, we had no transactions subject to this ASU outstanding at the beginning of the fiscal year. We adopted this guidance in the first quarter of 2023 with the modified retrospective method and it did not have a material impact on our consolidated financial statements.

## Market risk

As filed, 3,128 characters.

We are exposed to certain market risks arising from the use of financial instruments in the ordinary course of business. These risks arise primarily as a result of potential changes to operating concentration of credit risk and changes in interest rates. We have not entered into any hedge arrangements, commodity swap agreements, commodity futures, options or other derivative financial instruments. We also conduct business in Canada, which subjects our results of operations and cash flows to foreign currency exchange rate risk.

### Concentration of Credit Risk

Our principal market risks include fluctuations in commodity prices, which affect demand for and pricing of our services, and the risk related to the concentration of our clients in the oil and natural gas industry. Since all of our clients are involved in the oil and natural gas industry, there may be a positive or negative effect on our exposure to credit risk because our clients may be similarly affected by changes in economic and industry conditions. As an example, changes to existing regulations or the adoption of new regulations may unfavorably impact us, our suppliers or our clients. In the normal course of business, we provide credit terms to our clients. Accordingly, we perform ongoing credit evaluations of our clients and maintain allowances for possible losses. Our historical experience supports our allowance for doubtful accounts of $250,000 at March 31, 2023. This does not necessarily indicate that it would be adequate to cover a payment default by one large or several smaller clients.

We generally provide services to certain key clients that account for a significant percentage of our accounts receivable at any given time. Our key clients vary over time. We extend credit to various companies in the oil and natural gas industry, including our key clients, for the acquisition of seismic data, which results in a concentration of credit risk. This concentration of credit risk may be affected by changes in the economic or other conditions of our key clients and may accordingly impact our overall credit risk. If any of these significant clients were to terminate their contracts or fail to contract for our services in the future because they are acquired, alter their exploration or development strategy, or for any other reason, our results of operations could be affected. Because of the nature of our contracts and clients’ projects, our largest clients can change from year to year, and the largest clients in any year may not be indicative of the largest clients in any subsequent year.

### Interest Rate Risk

From time to time, we are exposed to the impact of interest rate changes on the outstanding indebtedness under our Revolving Credit Facility which has variable interest rates.

We generally have cash in the bank which exceeds federally insured limits. Historically, we have not experienced any losses in such accounts; however, volatility in financial markets may impact our credit risk on cash and short-term investments. At March 31, 2023, cash, restricted cash and short term investments totaled $16,209,000.

## Controls and procedures

As filed, 1,723 characters.

### Management’s Evaluation of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive and financial officer, of the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this report. Based upon that evaluation, our President and Chief Executive Officer and our Executive Vice President, Chief Financial Officer, Secretary and Treasurer concluded that, as of March 31, 2023, our disclosure controls and procedures were effective, in all material respects, with regard to the recording, processing, summarizing and reporting, within the time periods specified in the SEC’s rules and forms, for information required to be disclosed by us in the reports that we file or submit under the Exchange Act. Our disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our President and Chief Executive Officer and our Executive Vice President, Chief Financial Officer, Secretary and Treasurer, as appropriate, to allow timely decisions regarding required disclosure.

### Changes in Internal Control Over Financial Reporting

There have not been any changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter ended March 31, 2023 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

## Risk factors

As filed, 309 characters.

In addition to the other information set forth in this Form 10-Q, you should carefully consider the risk factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, which could materially affect our financial condition or results of operations.

Filed May 15, 2023.
Source: SEC EDGAR, the filing index for accession 0001558370-23-009945. Last ingested by Listed: Oct 29, 2026, 16:04 ET. No prices; not investment advice.