Part I

ITEM 1. BUSINESS.

General

TGC Industries, Inc. isDawson Geophysical Company, a Texas corporation and its wholly-owned subsidiary, Eagle Canada, Inc., a Delaware corporation (collectively “TGC” or the “Company”(the "Company"), are primarily engaged inis a leading provider of North America onshore seismic data acquisition services with operations throughout the geophysical service business of conducting three-dimensional (“3-D”) surveyscontinental United States and Canada. We acquire and process 2-D, 3-D and multi-component seismic data for our clients, in theranging from major oil and gas business.  TGC’scompanies to independent oil and gas operators as well as providers of multi-client data libraries. Our principal business office is located at 101 E. Park Blvd.508 West Wall, Suite 800, Midland, Texas 79701 (Telephone: 432-684-3000), Suite 955, Plano, Texas 75074 (Telephone: 972-881-1099).  TGC’sand our internet address is www.tgcseismic.com.  TGC makeswww.dawson3d.com. We make available free of charge on itsour website itsour annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K as soon as reasonably practicable after filing or furnishing such information with the Securities and Exchange Commission.

History

In April of 1980, SupremeOn February 11, 2015, the Company, which was formerly known as TGC Industries, Inc. (“Supreme”("Legacy TGC"), consummated a strategic business combination with Dawson Operating Company, which was formerly ESI Industries, Inc.known as Dawson Geophysical Company ("Legacy Dawson"), formedpursuant to which a wholly-owned

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subsidiary of Legacy TGC merged with and into Legacy Dawson, with Legacy Dawson continuing after the merger as the surviving entity and a wholly-owned subsidiary Tidelandsof Legacy TGC (the "Merger"). In connection with the Merger, Legacy Dawson changed its name to "Dawson Operating Company" and Legacy TGC changed its name to "Dawson Geophysical Co., Inc. (“Tidelands”) that acquired certain equipment, instruments,Company." Legacy TGC was formed in 1980. Legacy Dawson was formed in 1952.

        Except as otherwise specifically noted herein, references herein to the "Company," "we," "us" or "our" refer to post-combination Dawson Geophysical Company and related supplies from a Houston-based corporation that was engaged in the business of conductingits consolidated subsidiaries, including Legacy Dawson.

        We provide our seismic gravity, and magnetic surveys under contracts fordata acquisition services primarily to onshore oil and natural gas companies.  On June 30, 1986, the Boards of Directors of Supremeexploration and Tidelands approved a spin-off of substantially all of the shares of Tidelands owned by Supreme which were distributed as a stock dividend to Supreme’s security holders.  In July of 1986, our name was changed from “Tidelands Geophysical Co., Inc.” to “TGC Industries, Inc.” (“TGC”).  On October 19, 2009, we disclosed our entry into an agreement regarding the acquisition of the stock of Eagle Canada, Inc. (“Eagle Canada”), a Delaware corporation.  Eagle Canada was a wholly-owned subsidiary of Eagle Geophysical, Inc. and Eagle Geophysical Onshore, Inc. (the “Debtors”) which were debtors in a Chapter 11 bankruptcy proceeding in Houston, Texas.  Eagle Canada isdevelopment companies for use in the businessonshore drilling and production of providing seismic dataoil and surveying services to the Canadian energy industry and has its principal place of business locatednatural gas in Calgary, Alberta, Canada.  By Order dated October 14, 2009, the Bankruptcy Court approved the sale of the Eagle Canada stock by the Debtors to TGC and authorized the Debtors to enter into a stock purchase agreement with TGC.  In accordance with the terms of the stock purchase agreement, the sale transaction closed on October 16, 2009, with TGC acquiring the Eagle Canada stock for a total purchase price of approximately $10.3 million paid from existing cash.

We are a leading provider of seismic data acquisition services throughout the continental United States and Canada.Canada as well as providers of multi-client data libraries. The main factors influencing demand for seismic data acquisition services in our industry are the level of drilling activity by oil and natural gas companies and the sizes of such companies' exploration and development budgets, which, in turn, depend largely on current and anticipated future crude oil and natural gas prices and depletion rates of the companies' oil and natural gas reserves.

        As of December 31, 2012,2015, we operated 14ten seismic crews, consisting of nineeight crews in the U.S.United States and two crews in Canada, and one seismic data processing center. During the three months ended December 31, 2015, we operated a maximum of ten crews in the United States and two in Canada. We are currently operating five crews in Canada.  Thesethe United States with limited activity in Canada as the Canadian winter operating season comes to an end. We anticipate operating between four and six crews in the United States with limited activity in Canada into the second quarter of 2016. Visibility for active crew count beyond the second quarter is limited due to uncertainty in oil prices and demand levels. Demand for our services is likely to be at reduced levels in North America in response to the reduced expenditures by our clients related to the recent drop in crude oil prices. Our seismic crews supply seismic data primarily to companies engaged in the exploration and development of oil and natural gas on land and in land-to-water transition areas. Eagle Canada’s seismicSeismic acquisition services of our wholly-owned subsidiary, Eagle Canada, Inc. ("Eagle Canada"), are also used by the potash mining industry in Canada, and Eagle Canada has particular expertise through its heliportable capabilities. Our customersclients rely on seismic data to identify areas where subsurface conditions are favorable for the accumulation of existing hydrocarbons, to optimize the development and production of hydrocarbon reservoirs, to better delineate existing oil and natural gas fields, and to augment reservoir management techniques.

We acquire geophysical data using the latest in 3-D seismic survey techniques. We introduce acoustic energy into the ground by using vibration equipment or dynamite detonation, depending on the surface terrain, area of operation, and subsurface requirements. The reflected energy, or echoes, is received through geophones, converted into a digital signal at a multi-channel recording unit, and then transmitted to a central recording vehicle. Subsurface requirements dictate the number of channels necessary to perform our services. We generally use thousands of recording channels in our seismic surveys. Additional recording channels enhance the resolution of the seismic survey through increased imaging analysis and provide improved operational efficiencies for our clients. With our state-of-the-art seismic equipment, including computer technology and multiple channels, we acquire, on a cost effective basis, immense volumes of seismic data that, when processed and interpreted, produce more precise images of the earth’searth's subsurface. Our customersclients then use our seismic data to generate 3-D geologic models that help reduce drilling risks, finding and development costs and improve recovery rates from existing wells.fields.

        In addition to conventional 2-D and 3-D seismic surveys, we provide what the industry refers to as multi-component seismic data surveys. Multi-component surveys involve the recording of alternative seismic waves known as shear waves. Shear waves can be recorded as wave conversion of conventional energy sources (3-C converted waves) or from horizontal vibrator energy source units (shear wave vibrators). Multi-component data are utilized in further analysis of subsurface rock type, fabric and

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reservoir characterization. We own equipment required for onshore multi-component surveys. The majority of the projects in Canada require multi-component recording equipment. We have operated one to two multi-component equipped crews in the United States routinely over the past few years. The use of multi-component seismic data could increase in North America over the next few years if industry conditions improve and potentially require capital expenditures for additional equipment.

        In recent years, we have begun providing surface-recorded microseismic services utilizing equipment we currently own. Microseismic monitoring is used by clients who use hydraulic fracturing to extract hydrocarbon deposits to monitor their hydraulic fracturing operations.

        We market and supplement our services in the continental United States from our headquarters in Midland, Texas and from additional offices in three other cities in Texas (Denison, Houston and Plano) as well as two additional states, Oklahoma (Oklahoma City) and Colorado (Denver). In addition, we market and supplement our services in Canada from our facilities in Calgary, Alberta.

The Industry

Technological advances in seismic equipment and computing allow the seismic industry to acquire and process, on a cost-effective basis, immense volumes of seismic data which produce precise images of the earth’searth's subsurface. The latest accepted method of seismic data acquisition, processing, and the subsequent interpretation of the processed data is the 3-D seismic method. Geophysicists use computer workstations to interpret 3-D data volumes, identify subsurface anomalies, and generate a geologic model of subsurface features. In contrast with the 3-D method, the 2-D method involves the collection of seismic data in a linear fashion, thus generating a single plane of subsurface seismic data.

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3-D seismic data are used in the exploration and development of new reserves and enable oil and natural gas companies to better delineate existing fields and to augment their reservoir management techniques. Benefits of incorporating high resolution 3-D seismic surveys into exploration and development programs include reducing drilling risk, decreasing oil and natural gas finding costs, and increasing the efficiencies of reservoir location, delineation, and management. In order to meet the requirements necessary to fully realize the benefits of 3-D seismic data, there is an increasing demand for improved data quality with greater subsurface resolution.

Currently, the North American seismic data acquisition industry is made up of a number of companies divided into two groups. The first group is made up of four publicly-traded companies with long operating histories that field numerous crews and work in a number of different regions and terrain.companies. This group includes us, Dawson Geophysical Company, Geokinetics,SAExploration Holdings, Inc., ("SAE") and CGG-Veritas.  These companies field approximately 50% of the seismic crews currently operating in the continental U.S. and Canada.Tesla Exploration, Ltd. ("Tesla"). The second group is made up of Geokinetics, Inc. ("Geokinetics"), Global Geophysical Services, Inc. ("Global Geophysical"), Breckenridge Geophysical Inc. ("Breckenridge"), Paragon Geophysical Services, Inc. ("Paragon"), LoneStar Geophysical Surveys ("LoneStar"), and smaller companies which generally run one or two seismic crews and often specialize in specific regions or types of operations.

We provide our seismic data acquisition services primarily to onshore oil and natural gas exploration and development companies for use in the onshore drilling and production of oil and natural gas in the continental U.S. and Canada. The main factors influencing demand for seismic data acquisition services in our industry are the levels of drilling activity by oil and natural gas companies and the sizes of such companies’ exploration and development budgets, which, in turn, depend largely on current and anticipated future crude oil and natural gas prices and depletion rates.

Equipment and Crews

During 2010, 2011 and 2012, anIn recent years, we have experienced continued increases in recording channel capacity on a per crew or project basis. This increase in channel count demand is driven by client needs and is necessary in order to produce higher resolution images, increase crew efficiencies and undertake larger scale projects. Due to the increase in demand for seismic services allowedhigher channel counts, we have continued our investments in additional channels. In response to project-based channel requirements, we routinely deploy a variable number of channels on a variable number of crews in an effort to maximize asset utilization and meet client needs. While the number of recording systems we own may exceed the number utilized in the field at any given time, we maintain the excess equipment to provide additional operational flexibility and to allow us to quickly deploy additional recording channels and energy source units as needed to respond to client demand and desire for an expansionimproved data quality with greater subsurface images. We believe we will realize the

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benefit of increased channel counts and flexibility of deployment through increased crew efficiencies, higher revenues and margins in improved conditions.

        In addition, since 2011, we have purchased or leased a significant number of cable-less recording channels. We have utilized this equipment primarily as stand-alone recording systems, but on occasion we have utilized it in conjunction with our cable-based systems. As a result of the Company’sintroduction of cable-less recording systems, we have realized increased crew count from sixefficiencies and increased revenue on projects using this equipment. We believe we will experience continued demand for cable-less recording systems in the future. While we have replaced cable-based recording equipment with cable-less equipment on certain crews, atthe cable-based recording equipment continues to be deployed on existing crews.

        As of December 31, 2009 to 11 crews at December 31, 2010, to 12 crews at December 31, 2011, and to 14 crews at December 31, 2012.

In June of 2010, the Company acquired a new 3,000 channel OYO Geospace Seismic Recording System (“GSR System”).  This new GSR System uses cable-free/radio-free autonomous nodal data recorders which have a built-in GPS and disciplined clock. The GSR System provides for up to 30 days of continuous data recording.  This system is fully compatible with our current ARAM recording equipment. In addition, our crews continue to utilize the state-of-the-art ARAM ARIES recording systems.  These systems employ cable telemetry technology enhanced by multiple baseline and redundant cable connections that provide seismic data acquisition services with increased reliability.  In January of 2011, the Company acquired its second new 3,000 channel GSR system financed by a note payable with a commercial lender, and in April of 2011 the Company purchased an additional 2,500 channels with existing cash that were added to this system.  In May of 2011, the Company purchased five new INOVA vibration vehicles with existing cash.  In July of 2011, the Company acquired its third new GSR system financed by a note payable with a commercial bank.  The third GSR system contains 5,000 channels.  In September of 20112015, we purchased with existing cash an additional 5,000 channels of ARAM equipment to supplement existing ARAM systems.  In October of 2011 the Company purchased two new INOVA vibration vehicles with existing cash.  In November of 2011 the Company purchased an additional 3,000 channels of GSR equipment with existing cash.   In January of 2012 we purchased an additional 14,200 channels of GSR equipment financed by existing cash and a note payable with a commercial bank.  In April of 2012 the Company purchased seven new INOVA vibration vehicles with existing cash.  Also in April of 2012 the Company purchased 13,000 channels of GSR equipment financed partially with existing cash and partially by a note payable with a commercial bank.  In October of 2012 we purchased 8,000 stations of 3-channel GSX wireless recording system, along with all peripheral equipment.  GSX wireless recording systems are the most current GSR wireless recording systems available.  The purchase of the OYO Geospace GSX recording system equipment was financed partially with existing cash and partially by a note payable with a commercial bank.

We currently ownowned equipment for 1622 land-based seismic data acquisition crews, 217 vibrator energy source units, approximately 248,000 recording channels and 73 vibration vehicles.22 central recording systems. Of the 22 recording systems we owned at December 31, 2015, 12 were Geospace Technologies GSR cable-less recording systems, eight were ARAM ARIES cable-based recording systems, one was a Wireless Seismic RT System 2 system, and one was a cable-less INOVA Hawk system. Each crew consists of approximately 40 to 80100 technicians with associated vehicles, geophones, a seismic recording system, energy sources, cables, and a variety of other equipment. Each ARAM crew has one central recording vehicle which captures seismic data. The GSR, GSX and GSXINOVA Hawk crews utilize a recorder to manage the data acquisition while the individual system captures and holds the data until they are placed in the Data Transfer Module. The data is then transferred to a CD ROM orvarious data tapestorage media, which isare delivered to a data processing center selected by the customer.

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Equipment Acquisition and Capital Expenditures

We believe that it is essential to take advantage ofmonitor and evaluate advances in seismicgeophysical technology and to commit capital funds to purchase and updatethe equipment we deem most effective to maintain our equipmentcompetitive position cost-effectively. Purchasing and updating seismic equipment and technology involves a commitment to capital spending. We also tie our capital expenditures closely to demand for our services. As a result duringof the year ended December 31, 2012continuing softening in demand for seismic services beginning in early 2014 and the Company's belief that its current equipment base is sufficient to meet current demand, the Company has adopted a maintenance capital expenditures of approximately $57,108,000 were used to acquire, maintain,program and replace seismichas generally curtailed large equipment and vehicles. Major purchases in 2012 included our fourth GSR System with 7,200 channels, our fifth GSR System with 7,000 channels, our sixth GSR System with 13,000 channels, some of which were added to existing systems, an 8,000 station 3-channel GSX wireless recording system, and seven new INOVA vibration vehicles.  During the year ended December 31, 2011 capital expenditures of approximately $30,730,000 were used to acquire, maintain, and replace seismic equipment and vehicles. Major purchases in 2011 included our second GSR System with 3,000 channels to which we added an additional 2,500 channels, our third GSR System with 5,000 channels, an additional 3,000 GSR System channels which were added to existing systems, 5,000 additional ARAM channels, and seven new INOVA vibration vehicles.  During the year ended December 31, 2010 capital expenditures of approximately $15,226,000 were used to acquire, maintain, and replace seismic equipment and vehicles.  Major purchases in 2010 included a new 3,000 channel GSR System, approximately 5,000 additional GSR System channels and 8,500 additional ARAM channels.  These major investments should continue to bring us the benefits of these new technologies and allow us to be in a cash building mode in 2013.purchases.

Clients

Customers

Our customers are major and independent oil and natural gas exploration and development companies. The services we provide to our customers vary according to the size and needs of each customer.        Our services are marketed by supervisory and executive personnel who contact customersclients to determine theirgeophysical needs and respond to customerclient inquiries regarding the availability of crews. Contactscrews or processing schedules. These contacts are based principally upon professional relationships developed over a number of years.

Our clients range from major oil and gas companies to small independent oil and gas operators and also providers of multi-client data libraries. The services we provide to our clients vary according to the size and needs of each client. During 2012, our largest customer accounted for approximately 16% of revenues.  During 2011, our largest customer accounted for approximately 17% of revenues.  During 2010, our largest customer accounted for approximately 15% of revenues.  Atthe twelve months ended December 31, 20122015, sales to two clients represented more than 36% of our revenue. The remaining balance of our revenue was derived from varied clients and December 31, 2011,none represented 10% or more of our backlog was approximately $81 millionrevenues. We anticipate that sales to these two clients will represent a smaller percentage of our overall revenues during 2016.

        We do not acquire seismic data for our own account or for future sale, maintain multi-client seismic data libraries or participate in oil and $118 million, respectively, allgas ventures. The results of which we anticipate filling during fiscal years 2013 and 2012, respectively.  Dueseismic surveys conducted for a client belong to that client. It is also our backlog, we would not expect the losspolicy that none of any single customer to have a material adverse effect on our operations.

In order to avoid potential conflicts of interest with our customers, we do notofficers, directors or employees actively participate in oil and natural gas ventures. The results of a seismic survey conducted for a customer belong to that customer. All of our customers’clients' information is maintained in the strictest confidence.

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Domestic and Foreign Operations

        We derive our revenue from domestic and foreign sources. Total revenues for the twelve months ended December 31, 2015 were approximately $234,685,000, of which $222,154,000 were earned in the United States and $12,531,000 were earned in Canada. Total revenue for the twelve months ended December 31, 2014 were approximately $244,304,000, of which $240,751,000 were earned in the United Stated and $3,553,000 were earned in Canada.

        Long lived assets as of December 31, 2015 were approximately $345,619,000, with $329,467,000 owned in the United States and $16,152,000 owned in Canada. Long lived assets as of December 31, 2014 were approximately $339,245,000, with $337,945,000 owned in the United States and $1,300,000 owned in Canada.

Contracts

Our contracts are obtained either through competitive bidding or as a result of customerclient negotiations. Our services are conducted under general service agreements for seismic data acquisition services which define certain obligations for us and for our customers.clients. A supplemental agreement setting forth the terms of a specific project, which may be cancelledcanceled by either party upon 30 days’ advance writtenon short notice, is entered into for every project. We currently operate under supplemental agreements that are either “turnkey”"turnkey" agreements providing for a fixed fee to be paid to us for each unit of data acquired or “term”"term" agreements providing for a fixed hourly, daily, or monthly fee during the term of the project or projects.

        Currently, as in recent years, most of our projects are operated under turnkey agreements. Turnkey agreements generally provide us more profit potential, but involve more risks because of the potential of crew downtime or operational delays. We attempt to negotiate on a project-by-project basis some level of weather downtime protection within the turnkey agreements. Under the term agreements, we forego an increased profit potential in exchange for a more consistent revenue stream with improved protection from crew downtime or operational delays.

Competition

The acquisition of seismic data for the oil and natural gas industry is a highly competitive business. Contracts for such services generally are awarded on the basis of price quotations, crew experience, and the availability of crews to perform in a timely manner, although factors other than price, such as crew safety, performance history, and technological and operational expertise, are often determinative. Our competition includes publicly traded competitors, such as Tesla and SAE. Our other major competitors include companies with financial resources that are significantly greater than our own as well as companies of comparableGeokinetics, Global Geophysical, Breckenridge, Paragon and smaller size. Our primary competitors are Dawson Geophysical Company, Geokinetics, Inc. and CGG-Veritas.LoneStar. In addition to thethese previously named companies, we also compete for projects from time to time with smaller seismic companies which operate in local markets with only one or two crews. Further, the barriers to entry in the seismic industry are not prohibitive, and it would not be difficult for seismic companies outside of the United States to enter the United States market and compete with us.

Employees

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