##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
  Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the Fiscal Year Ended
    September 30, 2007o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the Transition Period
    From          to   Commission File
    No. 0-10144
  DAWSON GEOPHYSICAL
    COMPANY
  Texas

75-0970548(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)   508 West Wall, Suite 800, Midland, Texas 79701
 (Principal Executive Office)
 Telephone Number: 432-684-3000
  Securities registered pursuant to Section 12(b) of the
    Act:
 None
  Securities registered pursuant to Section 12(g) of the
    Act:
  Title of Each Class
  1 3
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  o þ o
  Rule 12b-2 o þ
  1 3
  1 3
    DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K.




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##### 



TABLE OF
    CONTENTS
  PagePART IItem 1.


Business


2Item 1A.


Risk Factors


6Item 1B.


Unresolved Staff Comments


9Item 2.


Properties


10Item 3.


Legal Proceedings


10Item 4.


Submission of Matters to a Vote of Security Holders


10PART IIItem 5.


Market for Our Common Equity and Related Stockholder Matters


11Item 6.


Selected Financial Data


14Item 7.


Managements Discussion and Analysis of Financial Condition
    and Results of Operations


14Item 7A.


Quantitative and Qualitative Disclosures about Market Risk


20Item 8.


Financial Statements and Supplementary Data


20Item 9.


Changes in and Disagreements with Accountants on Accounting and
    Financial Disclosure


20Item 9A.


Controls and Procedures


20Item 9B.


Other Information


21PART IIIItem 10.


Directors and Executive Officers of the Registrant


21Item 11.


Executive Compensation


21Item 12.


Security Ownership of Certain Beneficial Owners and Management


21Item 13.


Certain Relationships and Related Transactions


21Item 14.


Principal Accounting Fees and Services


21PART IVItem 15.


Exhibits, Financial Statement Schedules and Reports on
    Form 8-K


22Signatures


23Index to Financial Statements


F-1Index to ExhibitsConsent of Independent Registered Public Accounting FirmCertification of Chief Executive OfficerCertification of Chief Financial OfficerCertification of Chief Executive OfficerCertification of Chief Financial Officer   1




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##### Table of Contents



DAWSON
    GEOPHYSICAL COMPANY
  FORM 10-K
    For the Fiscal Year Ended September 30, 2007
  DISCLOSURE
    REGARDING FORWARD-LOOKING STATEMENTS
  Form 10-K, Form 10-K,
  Part I
  Item 1.
    BUSINESS  General
  2-D, 3-D, 3-D
  3-D
   2




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##### Table of Contents



3-D
  Business
    Strategy
    
    Attracting and retaining skilled and experienced personnel for
    our data acquisition and processing operations;
    Providing integrated in-house services necessary in each phase
    of seismic data acquisition and processing, including project
    design, land access permitting, surveying and related support
    functions as well as continuing the enhancement of our in-house
    health, safety, security and environmental programs;
    Maintaining the focus of our operations solely on the domestic
    onshore seismic market;
    Continuing to operate with conservative financial discipline;
    Updating our capabilities to incorporate advances in geophysical
    and supporting technologies; and
    Acquiring equipment to expand the recording channel capacity on
    our existing crews and equipping additional crews as market
    conditions permit.  Business
    Description
  Geophysical Services Overview.
  2-D 3-D 2-D 3-D 3-D 3-D
  3-D 3-D 3-D
  Data Acquisition.
 3




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##### Table of Contents



3-D
        Q-Land
  Q-Land Q-Land Q-Land Q-Land Q-Land Q-Land
    Data Processing.
   4




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##### Table of Contents



Integrated Services.
  Equipment
    Acquisition and Capital Expenditures
    Clients
        Contracts
   5




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##### Table of Contents



project-by-project
    Competition
    Employees
    Available
    Information
  Form 10-K, Form 10-Q, Form 8-K, Form 10-K. 1-800-SEC-0330
  Item 1A.
    RISK
    FACTORS  An investment in our common stock is subject to a number of
    risks discussed below. You should carefully consider these
    discussions of risk and the other information included in this
    Form 10-K.
    If any of the following risks were actually to occur, our
    business, financial condition or results of operations could be
    materially adversely affected.
  If oil
    and gas prices or the level of capital expenditures by oil and
    gas companies were to decline, demand for our services would
    decline and our results of operations would be adversely
    affected.
   6




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##### Table of Contents




    level of demand for oil and natural gas;
    worldwide political, military and economic conditions, including
    the ability of the Organization of Petroleum Exporting Countries
    to set and maintain production levels and prices for oil;
    level of oil and natural gas production;
    government policies regarding the exploration for, and
    production and development of, oil and natural gas reserves;
    level of taxation relating to the energy industry, including
    taxation of consumption of energy sources; and
    weather conditions.    The
    high fixed costs of our operations could adversely affect our
    results of operations.
    Our
    revenues are subject to fluctuations that are beyond our control
    which could adversely affect our results of operations in any
    financial period.
    Our
    operations are subject to weather conditions which could
    adversely affect our results of operations.
    Our
    operations are subject to delays related to obtaining land
    access rights of way from third parties which could affect our
    results of operations.
  and/or
  We
    face intense competition in our business that could result in
    downward pricing pressure and the loss of market
    share.
   7




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##### Table of Contents



If we
    do not manage our recent growth effectively, our results of
    operations could be affected.
    We may
    be unable to attract and retain skilled and technically
    knowledgeable employees which could adversely affect our
    business and our growth.
    A
    limited number of customers account for a significant portion of
    our revenues, and the loss of one of these customers could harm
    our results of operations.
    Capital
    requirements for our operations are large. If we are unable to
    finance these requirements, our ability to continue our
    expansion and maintain our profitability could be
    affected.
    Technological
    change in our business creates risks of technological
    obsolescence and requirements for future capital expenditures.
    If we are unable to keep up with these technological advances,
    we may not be able to compete effectively.
   8




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##### Table of Contents



We
    operate under hazardous conditions that subject us to risk of
    damage to property or personal injuries and may interrupt our
    business.
        Our
    industry is subject to governmental regulation which may
    adversely affect our future operations.
    Certain
    provisions of our charter and bylaws and our shareholder rights
    plan may make it difficult for a third party to acquire us, even
    in situations that may be viewed as desirable by
    shareholders.
    Failure
    to maintain effective internal controls in accordance with
    Section 404 of the Sarbanes-Oxley Act could have a material
    adverse effect on our stock price.
    Item 1B.
    UNRESOLVED
    STAFF COMMENTS   9




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##### Table of Contents



Item 2.
    PROPERTIES    Owned or



Building AreaLocation

Leased

Purpose

Square FeetMidland, TX

Leased

Executive offices and data processing


29,960Midland, TX

Owned

Field office


58,472Equipment fabrication facilityMaintenance and repairs shop       Item 3.
    LEGAL
    PROCEEDINGS    Item 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS    Executive
    Officers
    Name

Age

PositionL. Decker Dawson


87


Chairman of the Board of DirectorsStephen C. Jumper


46


President, Chief Executive Officer and DirectorC. Ray Tobias


50


Executive Vice President, Chief Operating OfficerChristina W. Hagan


52


Executive Vice President, Secretary and Chief Financial OfficerHowell W. Pardue


71


Executive Vice PresidentK.S. Forsdick


56


Vice President       L. Decker Dawson. (1989-1990),
 10




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##### Table of Contents



Stephen C. Jumper. 3-D
  C. Ray Tobias.
  Christina W. Hagan.
  Howell W. Pardue.
  K.S. Forsdick.
  Part II
  Item 5.
    MARKET
    FOR OUR COMMON EQUITY AND RELATED STOCKHOLDER
    MATTERS  ®
  Quarter Ended

High


LowDecember 31, 2005

$
32.44


$
25.00March 31, 2006

$
34.74


$
23.74June 30, 2006

$
39.06


$
27.51September 30, 2006

$
32.85


$
25.70December 31, 2006

$
40.26


$
26.56March 31, 2007

$
53.82


$
30.50June 30, 2007

$
63.89


$
48.03September 30, 2007

$
85.67


$
51.52      11




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##### Table of Contents



Equity
    Compensation Plan Information
  Number ofSecurities RemainingAvailable forNumber of





Future IssuanceSecurities to





Under Equitybe Issued





Compensation PlansUpon Exercise


Weighted-Average Exercise


(Excluding Securitiesof Outstanding


Price of


Reflected inPlan Category

Options


Outstanding Options


Column (a))(a)


(b)


(c)Equity compensation plans approved by security holders


58,500


$
12.35



988,550
(1)Equity compensation plans not approved by security holders










Total


58,500


$
12.35



988,550
(1)     (1)
    
    Although 238,550 shares are available to be issued under
    the 2000 Incentive Stock Plan and the 2004 Incentive Stock Plan,
    the Company does not intend to grant additional shares from
    either Plan. There are 750,000 shares available to be
    issued under the 2006 Stock and Performance Incentive Plan. 12




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##### Table of Contents



Performance
    Graph
    Comparison
    of 5-Year
    Cumulative Total Return* Among
    Dawson Geophysical Company, the S & P 500 Index
    and the Value-Line Oilfield Services Industry Index
  
  9/02

9/03

9/04

9/05

9/06

9/07DAWSON GEOPHYSICAL COMPANY


100.00



131.49



399.24



577.29



566.79



1479.20S & P 500


100.00



124.40



141.65



159.01



176.17



205.13VALUE-LINE OILFIELD SERVICES


100.00



115.15



166.93



268.84



279.01



394.14   *
    $100 invested on
    9/30/02 in
    stock or index-including reinvestment of dividends. Fiscal year
    ending September 30.  ©
 13




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##### Table of Contents



Item 6.
    SELECTED
    FINANCIAL DATA    Years Ended September 30

2007


2006


2005


2004


2003(In thousands, except per share amounts)Operating revenues

$
257,763


$
168,550


$
116,663


$
69,346


$
51,592Net income (loss)

$
27,158


$
15,855


$
10,016


$
8,618


$
(899
)Net income (loss) per common share

$
3.57


$
2.11


$
1.50


$
1.55


$
(0.16
)Weighted average equivalent common shares outstanding


7,602



7,518



6,706



5,559



5,485Total assets

$
195,862


$
149,418


$
114,127


$
56,759


$
42,792Line of Credit

$
5,000


$



$



$



$
Long-term debt-less current maturities

$



$



$



$



$
Stockholders equity

$
149,155


$
119,208


$
101,904


$
50,282


$
40,662     Item 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  Form 10-K. Form 10-K.
  Overview
       14




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##### Table of Contents



Fiscal
    2007 Highlights
    
    Deployed our thirteenth crew in October 2006 equipped with an
    existing I/O System II cable-based recording system.
    Deployed our fourteenth crew in April 2007 equipped with a
    10,000-channel ARAM ARIES recording system, the Companys
    largest crew in its
    55-year
    history.
    Replaced an I/O System II MRX recording system on an
    existing crew with a 9,500-channel ARAM ARIES recording system
    in July 2007.
    Deployed our fifteenth crew in September 2007 equipped with a
    5,000-channel ARAM ARIES recording system.
    Increased channel count from approximately 70,000 to in excess
    of 102,000.
    Added over 113,000 geophones.
    Took delivery of eighteen vibrator energy source units
    increasing the total count to 113 units company-wide.
    Added 119 vehicles to our fleet.
    Operated in West Texas, the Fort Worth Basin, South Texas,
    Oklahoma, North Dakota, New Mexico, Wyoming, New York, West
    Virginia, Pennsylvania, Alabama, Arkansas, Utah and Mississippi.
    Added GPS navigation and tracking systems to the vibrator energy
    source units on two crews for improved efficiency and accuracy
    of source point location.
    Added Data Processing services to the Oklahoma City office.
    Took delivery of a 5,000-channel ARAM ARIES recording system
    which replaced an I/O System II MRX recording system on an
    existing crew in November 2007.  Fiscal
    Year Ended September 30, 2007 Versus Fiscal Year Ended
    September 30, 2006
  Operating Revenues.
  Operating Costs. start-up
 15




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##### Table of Contents



Taxes.
  Fiscal
    Year Ended September 30, 2006 Versus Fiscal Year Ended
    September 30, 2005
  Operating Revenues.
  Operating Costs. start-up
        Taxes.
 16




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##### Table of Contents



Liquidity
    and Capital Resources
  Introduction.
  Cash Flows.
      Capital Expenditures.
  3-D
  Capital Resources.
     17




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##### Table of Contents



Payments Due by Period (in 000s)Less than


1-3


3-5


More thanTotal


1 Year


Years


Years


5 YearsOperating lease obligations

$
1,214


$
440


$
499


$
275


$
     Off-Balance
    Sheet Arrangements
    Effect of
    Inflation
    Critical
    Accounting Policies
    Revenue Recognition.
    Allowance for Doubtful Accounts.
  Impairment of Long-Lived Assets.
 18




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##### Table of Contents



Depreciable Lives of Property, Plant and
    Equipment.
  Tax Accounting.
  Stock-Based Compensation.
  Recently
    Issued Accounting Pronouncements
       19




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##### Table of Contents



Item 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK    Item 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA    Item 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    Item 9A.
    CONTROLS
    AND PROCEDURES  Managements
    Evaluation of Disclosure Controls and Procedures
  Rule 13a-15
  Managements
    Report on Internal Control over Financial Reporting
  Rule 13a-15(f) Internal Control  Integrated
    Framework page F-3.
 20




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##### Table of Contents



Changes
    in Internal Control over Financial Reporting
  Rule 13a-15(f)
  Item 9B.
    OTHER
    INFORMATION    Part III
  Item 10.
    DIRECTORS
    AND EXECUTIVE OFFICERS OF THE REGISTRANT  Regulation S-K) http://www.dawson3d.com
  Item 11.
    EXECUTIVE
    COMPENSATION    Item 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
    MANAGEMENT  Form 10-K.
  Item 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS    Item 14.
    PRINCIPAL
    ACCOUNTING FEES AND SERVICES   21




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##### Table of Contents



Part IV
  Item 15.
    EXHIBITS,
    FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
    FORM 8-K    Financial Statements.
           Financial Statement Schedules.
  page F-19
      Exhibits.
  Form 10-K
 22




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##### Table of Contents



SIGNATURES
      By:
    /s/  Stephen
    C. Jumper        Signature

Title

Date/s/  L.
    Decker DawsonL.
    Decker Dawson

Chairman of the Board of Directors

12-7-07/s/  Stephen
    C. JumperStephen
    C. Jumper

President, Chief Executive Officer and Director (principal
    executive officer)

12-7-07/s/  Paul
    H. BrownPaul
    H. Brown

Director

12-7-07/s/  Gary
    M. HooverGary
    M. Hoover

Director

12-7-07/s/  Tim
    C. ThompsonTim
    C. Thompson

Director

12-7-07/s/  Christina
    W. HaganChristina
    W. Hagan

Executive Vice President, Secretary and Chief Financial Officer
    (principal financial and accounting officer)

12-7-07  23




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##### Table of Contents



INDEX
    TO FINANCIAL STATEMENTS
  Financial Statements of Dawson Geophysical Company

PageReports of Independent Registered Public
    Accounting Firm, dated December 5, 2007


F-2Balance Sheets as of September 30, 2007 and
    2006


F-4Statements of Operations for the years ended
    September 30, 2007, 2006 and 2005


F-5Statements of Stockholders Equity and Other
    Comprehensive Income for the years ended September 30,
    2007, 2006 and 2005


F-6Statements of Cash Flows for the years ended
    September 30, 2007, 2006 and 2005


F-7Notes to Financial Statements


F-8Financial Statement Schedule:Schedule II  Valuation and Qualifying
    Accounts for the years ended September 30, 2007, 2006 and
    2005


F-19  F-1




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##### Table of Contents



REPORT
    OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
           Internal Control 
    Integrated Framework
    KPMG LLP
  Dallas,
    Texas
    December 5, 2007
 F-2




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
     Internal Control 
    Integrated Framework
        Internal Control  Integrated
    Framework
      Dallas,
    Texas
    December 5, 2007
 F-3




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##### Table of Contents



DAWSON
    GEOPHYSICAL COMPANY
  BALANCE
    SHEETS
  September 30,


September 30,2007


2006ASSETSCurrent assets:Cash and cash equivalents

$
14,875,000


$
8,064,000Short-term investments






6,437,000Accounts receivable, net of allowance for doubtful accounts of
    $176,000 in 2007 and $148,000 in 2006


56,707,000



46,074,000Prepaid expenses and other assets


815,000



690,000Current deferred tax asset


693,000



1,619,000Total current assets


73,090,000



62,884,000Property, plant and equipment


207,427,000



160,740,000Less accumulated depreciation


(84,655,000
)


(74,206,000
)Net property, plant and equipment


122,772,000



86,534,000$
195,862,000


$
149,418,000LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
12,816,000


$
16,280,000Accrued liabilities:Payroll costs and other taxes


2,325,000



1,958,000Other


14,263,000



4,195,000Deferred revenue


2,922,000



863,000Line of credit


5,000,000



Total current liabilities


37,326,000



23,296,000Deferred tax liability


9,381,000



6,914,000Stockholders equity:Preferred stock-par value $1.00 per share; 5,000,000 shares
    authorized, none outstanding






Common stock-par value
    $.331/3
    per share; 50,000,000 shares authorized; 7,658,494 and
    7,549,244 shares issued and outstanding in each period


2,553,000



2,517,000Additional paid-in capital


85,090,000



82,370,000Other comprehensive expense, net of tax






(33,000
)Retained earnings


61,512,000



34,354,000Total stockholders equity


149,155,000



119,208,000$
195,862,000


$
149,418,000    F-4




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##### Table of Contents



DAWSON
    GEOPHYSICAL COMPANY
  STATEMENTS OF OPERATIONS
  Years Ended September 30,2007


2006


2005Operating revenues

$
257,763,000


$
168,550,000


$
116,663,000Operating costs:Operating expenses


190,117,000



125,848,000



90,465,000General and administrative


6,195,000



4,808,000



4,490,000Depreciation


18,103,000



13,338,000



8,179,000214,415,000



143,994,000



103,134,000Income from operations


43,348,000



24,556,000



13,529,000Other income:Interest income


749,000



582,000



507,000Interest expense


(145,000
)






(65,000
)Other


506,000



75,000



551,000Income before income tax


44,458,000



25,213,000



14,522,000Income tax expense:Current


(13,906,000
)


(4,886,000
)


(2,035,000
)Deferred


(3,394,000
)


(4,472,000
)


(2,471,000
)(17,300,000
)


(9,358,000
)


(4,506,000
)Net income

$
27,158,000


$
15,855,000


$
10,016,000Net income per common share

$
3.57


$
2.11


$
1.50Net income per common share-assuming dilution

$
3.54


$
2.09


$
1.48Weighted average equivalent common shares outstanding


7,601,889



7,518,372



6,705,791Weighted average equivalent common shares outstanding-assuming
    dilution


7,669,462



7,599,555



6,795,295    F-5




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##### Table of Contents



DAWSON
    GEOPHYSICAL COMPANY
  STATEMENTS OF STOCKHOLDERS EQUITY AND
    OTHER COMPREHENSIVE INCOME
  AccumulatedCommon Stock


Additional


Other


RetainedNumber





Paid-in


Comprehensive


Earningsof Shares


Amount


Capital


Income/(Expense)


(Deficit)


TotalBalance September 30, 2004


5,633,794


$
1,878,000


$
39,949,000


$
(28,000
)

$
8,483,000


$
50,282,000Net income


















10,016,000



10,016,000Other comprehensive income net of tax:Unrealized loss on securities:Unrealized holding losses arising during period














(194,000
)Less: Reclassification adjustment for gain included in net income














100,000Income tax expense














45,000Other comprehensive expense














(49,000
)






(49,000
)Comprehensive income for the period






















9,967,000Excess tax benefit of employee stock plan










243,000











243,000Issuance of common stock-public offering


1,800,000



600,000



40,396,000











40,996,000Issuance of common stock as compensation


3,500



1,000



73,000











74,000Exercise of stock options


46,750



16,000



326,000











342,000Balance September 30, 2005


7,484,044



2,495,000



80,987,000



(77,000
)


18,499,000



101,904,000Net income


















15,855,000



15,855,000Other comprehensive income net of tax:Unrealized loss on securities:Unrealized holding gain arising during period














35,000Less: Reclassification adjustment for gain included in net income














31,000Income tax benefit














(22,000
)Other comprehensive income














44,000







44,000Comprehensive income for the period






















15,899,000Excess tax benefit of employee stock plan










180,000











180,000Stock-based compensation expense










289,000











289,000Issuance of common stock as compensation


18,450



6,000



560,000











566,000Exercise of stock options


46,750



16,000



354,000











370,000Balance September 30, 2006


7,549,244



2,517,000



82,370,000



(33,000
)


34,354,000



119,208,000Net income


















27,158,000



27,158,000Other comprehensive income net of tax:Realization of gains on investments














51,000Income tax benefit














(18,000
)Other comprehensive income














33,000







33,000Comprehensive income for the period






















27,191,000Excess tax benefit of employee stock plan










1,312,000











1,312,000Stock-based compensation expense










588,000











588,000Issuance of common stock as compensation


3,000



1,000



119,000











120,000Exercise of stock options


106,250



35,000



701,000











736,000Balance September 30, 2007


7,658,494


$
2,553,000


$
85,090,000


$



$
61,512,000


$
149,155,000    F-6




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##### Table of Contents



DAWSON
    GEOPHYSICAL COMPANY
  STATEMENTS
    OF CASH FLOWS
  Years Ended September 30,2007


2006


2005CASH FLOWS FROM OPERATING ACTIVITIES:Net income

$
27,158,000


$
15,855,000


$
10,016,000Adjustments to reconcile net income to net cash provided by
    operating activities:Depreciation


18,103,000



13,338,000



8,179,000Non-cash compensation


707,000



855,000



74,000Deferred income tax expense


3,394,000



4,472,000



2,471,000Excess tax benefit from share-based payment arrangement


(1,312,000
)


(180,000
)


Other


995,000



119,000



270,000Change in current assets and liabilities:Increase in accounts receivable


(10,633,000
)


(17,378,000
)


(11,717,000
)(Increase) decrease in prepaid expenses


(125,000
)


437,000



(687,000
)Increase in accounts payable


646,000



4,779,000



3,244,000Increase in accrued liabilities


10,435,000



2,773,000



1,667,000Increase (decrease) in deferred revenue


2,059,000



673,000



(1,217,000
)Net cash provided by operating activities


51,427,000



25,743,000



12,300,000CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from disposal of assets


537,000



453,000



191,000Capital expenditures, net of $790,000 and $4,900,000 noncash
    capital expenditures in 2007 and 2006, respectively


(58,701,000
)


(35,477,000
)


(38,219,000
)Proceeds from sale of short-term investments






8,993,000



16,334,000Proceeds from maturity of short-term investments


6,500,000



5,000,000



Acquisition of short-term investments










(32,737,000
)Net cash used in investing activities


(51,664,000
)


(21,031,000
)


(54,431,000
)CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from exercise of stock options


736,000



369,000



343,000Proceeds from line of credit


5,000,000







10,000,000Repayment on line of credit










(10,000,000
)Proceeds from stock offering










41,004,000Excess tax benefit from share-based payment arrangement


1,312,000



180,000



Net cash provided by financing activities


7,048,000



549,000



41,347,000Net increase (decrease) in cash and cash equivalents


6,811,000



5,261,000



(784,000
)CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD


8,064,000



2,803,000



3,587,000CASH AND CASH EQUIVALENTS AT END OF PERIOD

$
14,875,000


$
8,064,000


$
2,803,000SUPPLEMENTAL CASH FLOW INFORMATION:Cash paid for interest expense

$
145,000


$



$
65,000Cash paid during the period for income taxes

$
10,259,000


$
4,177,000


$
1,882,000NON CASH INVESTING ACTIVITIES:Unrealized loss on investments

$



$
(10,000
)

$
(194,000
)    F-7




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##### Table of Contents



DAWSON
    GEOPHYSICAL COMPANY
  NOTES TO FINANCIAL STATEMENTS
  1.
    Summary
    of Significant Accounting Policies  Organization
    and Nature of Operations
  2-D, 3-D
  Cash
    Equivalents
    Short-Term
    Investments
    Fair
    Value of Financial Instruments
    Concentrations
    of Credit Risk
    Property,
    Plant and Equipment
     F-8




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##### Table of Contents



DAWSON
    GEOPHYSICAL COMPANY
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  Impairment
    of Long-Lived Assets
    Revenue
    Recognition
        Allowance
    for Doubtful Accounts
    Tax
    Accounting
    Use of
    Estimates in the Preparation of Financial
    Statements
   F-9




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##### Table of Contents



DAWSON
    GEOPHYSICAL COMPANY
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  Reclassifications
    Stock-Based
    Compensation
        September2005Net income, as reported

$
10,016,000Add: Stock-based employee compensation expense included in net
    income, 
    net of tax


74,000Deduct: Stock-based employee compensation expense determined
    under fair value based method (SFAS 123), net of tax


(495,000
)Net income, pro forma

$
9,595,000Basic:Net income per common share, as reported

$
1.50Net income per common share, pro forma

$
1.43Diluted:Net income per common share, as reported

$
1.48Net income per common share, pro forma

$
1.41      F-10




---



##### Table of Contents



DAWSON
    GEOPHYSICAL COMPANY
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
        Incentive
    Stock Options:
      WeightedWeighted


AverageNumber of


Average


RemainingOptioned


Exercise


Contractual


Aggregate IntrinsicShares


Price


Term in Years


Value ($000)Balance as of September 30, 2004


227,000


$
6.75Granted


45,000


$
17.91Exercised


(46,750
)

$
7.34Cancelled or Expired


(750
)

$
5.21Balance as of September 30, 2005


224,500


$
8.87



2.65


$
4,803Granted





$
Exercised


(46,750
)

$
7.90Expired


(6,500
)

$
9.27Balance as of September 30, 2006


171,250


$
9.12



2.22


$
3,535Granted





$
Exercised


(106,250
)

$
6.93Forfeited


(6,500
)

$
15.82Balance as of September 30, 2007


58,500


$
12.35



1.60


$
3,875Exercisable as of September 30, 2007


34,500


$
10.83



1.60


$
2,337  F-11




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##### Table of Contents



DAWSON
    GEOPHYSICAL COMPANY
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
      Number of


Weighted AverageNonvested


Grant DateShare Awards


Fair ValueNonvested Shares Outstanding September 30, 2006


72,000


$
11.35Granted






Vested


(41,500
)


8.81Forfeited


(6,500
)


15.82Nonvested Shares Outstanding September 30, 2007


24,000


$
14.52     No. 00-15.
      Stock
    Awards:
    Number of


Weighted AverageRestricted


Grant DateShare Awards


Fair ValueNonvested Restricted Shares Outstanding September 30, 2006






Granted


59,000


$
27.05Forfeited


(3,000
)


27.05Nonvested Restricted Shares Outstanding September 30, 2007


56,000


$
27.05    F-12




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##### Table of Contents



DAWSON
    GEOPHYSICAL COMPANY
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
        2.
    Short-Term
    Investments    3.
    Property,
    Plant and Equipment    September 302007


2006


Useful LivesLand, building and other

$
4,435,000


$
3,843,000



3 to 40 yearsRecording equipment


141,648,000



110,874,000



5 to 10 yearsVibrator energy sources


39,900,000



29,189,000



10 to 15 yearsVehicles


21,059,000



16,609,000



2 to 10 yearsOther(a)


385,000



225,000



207,427,000



160,740,000Less accumulated depreciation


(84,655,000
)


(74,206,000
)Net property, plant and equipment

$
122,772,000


$
86,534,000   (a)
    
    Other represents accumulated costs associated with equipment
    fabrication and modification not yet completed.  4.
    Other
    Current Liabilities    September 30,2007


2006Accrued self insurance reserves

$
6,373,000


$
1,226,000Accrued bonus and profit sharing


3,078,000



1,434,000Income taxes payable


2,314,000



Other accrued expenses and current liabilities


2,498,000



1,535,000Total other current liabilities

$
14,263,000


$
4,195,000  F-13




---



##### Table of Contents



DAWSON
    GEOPHYSICAL COMPANY
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  5.
    Debt    6.
    Employee
    Benefit Plans    7.
    Advertising
    Costs    8.
    Income
    Taxes      Year Ended September 30,2007


2006


2005Current

$
13,906,000


$
4,886,000


$
2,035,000Deferred


3,394,000



4,472,000



2,471,000Total

$
17,300,000


$
9,358,000


$
4,506,000  F-14




---



##### Table of Contents



DAWSON
    GEOPHYSICAL COMPANY
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    Year Ended September 30,2007


2006


2005Tax expense computed at statutory rates

$
15,560,000


$
8,573,000


$
4,900,000Change in valuation allowance


(2,000
)


90,000



State income tax


1,505,000



569,000



113,000Other


237,000



126,000



(507,000
)Income tax expense

$
17,300,000


$
9,358,000


$
4,506,000     September 30,2007


2006Deferred tax assets:Net operating loss carryforwards

$
19,000


$
29,000Alternative minimum tax credit carryforwards






1,119,000Receivables


64,000



52,000Other


881,000



509,000Total gross deferred tax assets


964,000



1,709,000Less valuation allowance


(88,000
)


(90,000
)Total deferred tax assets


876,000



1,619,000Deferred tax liabilities:Property and equipment


(9,564,000
)


(6,914,000
)Total gross deferred tax liabilities


(9,564,000
)


(6,914,000
)Net deferred tax liability

$
(8,688,000
)

$
(5,295,000
)Current portion of net deferred tax asset/liability

$
693,000


$
1,619,000Noncurrent portion of net deferred tax asset/liability


(9,381,000
)


(6,914,000
)Total net deferred tax liability

$
(8,688,000
)

$
(5,295,000
)     9.
    Net
    Income per Common Share   F-15




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##### Table of Contents



DAWSON
    GEOPHYSICAL COMPANY
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    2007


2006


2005Numerator:Net income and numerator for basic and diluted net income per
    common share: income available to common shareholders

$
27,158,000


$
15,855,000


$
10,016,000Denominator:Denominator for basic net income per common share-weighted
    average common shares


7,601,889



7,518,372



6,705,791Effect of dilutive securities-employee stock options and
    restricted stock grants


67,573



81,183



89,504Denominator for diluted net income per common share-adjusted
    weighted average common shares and assumed conversions


7,669,462



7,599,555



6,795,295Net income per common share

$
3.57


$
2.11


$
1.50Net income per common share-assuming dilution

$
3.54


$
2.09


$
1.48   10.
    Major
    Customers    2007


2006


2005A


49
%


24
%


10
%B






11
%


15
%C










13
%       11.
    Commitments
    and Contingencies     F-16




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##### Table of Contents



DAWSON
    GEOPHYSICAL COMPANY
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    Payments Due by Period (in 000s)Less than








More thanTotal


1 Year


1-3 Years


3-5 Years


5 YearsOperating lease obligations

$
1,214


$
440


$
499


$
275


$
       12.
    Rights
    Agreement          13.
    Recently
    Issued Accounting Pronouncements   F-17




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##### Table of Contents



DAWSON
    GEOPHYSICAL COMPANY
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
        14.
    Quarterly
    Financial Data (Unaudited)  Quarter EndedDecember 31


March 31


June 30


September 30Fiscal 2006:Operating revenues

$
35,493,000


$
40,042,000


$
41,524,000


$
51,491,000Income from operations

$
3,252,000


$
6,431,000


$
6,636,000


$
8,237,000Net income

$
2,300,000


$
4,351,000


$
4,241,000


$
4,963,000Net income per common share

$
.31


$
.58


$
.56


$
.66Net income per common share assuming dilution

$
.30


$
.57


$
.56


$
.65Fiscal 2007:Operating revenues

$
53,654,000


$
59,935,000


$
68,637,000


$
75,537,000Income from operations

$
8,468,000


$
8,568,000


$
12,595,000


$
13,717,000Net income

$
5,435,000


$
5,368,000


$
7,561,000


$
8,794,000Net income per common share

$
.72


$
.71


$
.99


$
1.15Net income per common share assuming dilution

$
.71


$
.70


$
.98


$
1.14  F-18




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##### Table of Contents



Schedule II
  Dawson
    Geophysical Company
  Valuation
    and Qualifying Accounts
  Balance at


Charged to





Balance atBeginning


Costs and





End ofof Period


Expenses


Deductions


PeriodAllowance for doubtful accounts*:Fiscal Year:2007

$
148,000


$
51,000


$
23,000


$
176,0002006


331,000



20,000



203,000



148,0002005


199,000



136,000



4,000



331,000Valuation allowance for deferred tax assets:Fiscal Year:2007

$
90,000


$
(2,000
)

$



$
88,0002006






90,000







90,0002005














     *
    
    Deductions related to allowance for doubtful accounts represent
    amounts that have been deemed uncollectible and written off by
    the Company. F-19




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##### Table of Contents



INDEX
    TO EXHIBITS
  Number

Exhibit3
.1

Second Restated Articles of Incorporation of the Company, as
    amended (filed on February 9, 2007 as Exhibit 3.1 to
    the Companys Quarterly Report on
    Form 10-Q
    for the first quarter ended December 31, 2006 (File
    No. 000-10144)
    and incorporated herein by reference and filed on
    November 28, 2007 as Exhibit 3.1 to the Companys
    Current Report on
    Form 8-K
    (File
    No. 000-10144)
    and incorporated herein by reference).3
.2

Amended and Restated Bylaws of the Company (filed on
    August 7, 2007 as Exhibit 3.2 to the Companys
    Quarterly Report on
    Form 10-Q
    for the third quarter ended June 30, 2007 (File
    No. 000-10144)
    and incorporated herein by reference).4
.1

Rights Agreement by and between the Company and Mellon Investor
    Services, LLC (f/k/a Chasemellon Shareholder Services, L.L.C.),
    as Rights Agent, dated July 13, 1999 (filed on
    December 11, 2003 as Exhibit 4 to the
    Registrants Annual Report on
    Form 10-K
    for the fiscal year ended September 30, 2003 (File
    No. 000-10144)
    and incorporated herein by reference).10
.1

Dawson Geophysical Company 2006 Stock and Performance Incentive
    Plan (the 2006 Plan), dated November 28, 2006
    (filed on January 29, 2007 as Exhibit 10.1 to the
    Companys Current Report on
    Form 8-K
    (File
    No. 000-10144)
    and incorporated herein by reference).10
.2

Dawson Geophysical Company 2004 Incentive Stock Plan (filed on
    March 12, 2004 as Exhibit 10.1 to the Companys
    Registration Statement on
    Form S-8
    (File
    No. 333-113576)
    and incorporated herein by reference).10
.3

Dawson Geophysical Company 2000 Incentive Stock Plan (filed on
    August 3, 2001 as Exhibit 10.1 to the Companys
    Registration Statement on
    Form S-8
    (File
    No. 333-66666)
    and incorporated herein by reference).10
.4

Form of Restricted Stock Agreement for the 2006 Plan (filed on
    August 6, 2007 as Exhibit 10.1 to the Companys
    Current Report on
    Form 8-K
    (File
    No. 000-10144)
    and incorporated herein by reference).10
.5

Form of Stock Option Agreement for the 2006 Plan (filed on
    August 6, 2007 as Exhibit 10.2 to the Companys
    Current Report on
    Form 8-K
    (File
    No. 000-10144)
    and incorporated herein by reference).10
.6

Description of Profit Sharing Plan (filed on December 3,
    2007 as Exhibit 10.1 to the Companys Current Report
    on
    Form 8-K
    (File
    No. 000-10144)
    and incorporated herein by reference).10
.7

Form of Master Geophysical Data Acquisition Agreement (filed on
    December 11, 2003 as Exhibit 10 to the
    Registrants Annual Report on
    Form 10-K
    for the fiscal year ended September 30, 2003 (File
    No. 000-10144)
    and incorporated herein by reference).10
.8

Revolving Line of Credit Loan Agreement, dated January 18,
    2007, between the Company and Western National Bank (filed on
    February 9, 2007 as Exhibit 10.2 to the Companys
    Quarterly Report on
    Form 10-Q
    for the first quarter ended December 31, 2006 (File
    No. 000-10144)
    and incorporated herein by reference).23
.1*

Consent of Independent Registered Public Accounting Firm.31
.1*

Certification of Chief Executive Officer of Dawson Geophysical
    Company pursuant to
    Rule 13a-14(a)
    promulgated under the Securities Exchange Act of 1934, as
    amended.31
.2*

Certification of Chief Financial Officer of Dawson Geophysical
    Company pursuant to
    Rule 13a-14(a)
    promulgated under the Securities Exchange Act of 1934, as
    amended.32
.1*

Certification of Chief Executive Officer of Dawson Geophysical
    Company pursuant to
    Rule 13a-14(b)
    promulgated under the Securities Exchange Act of 1934, as
    amended, and Section 1350 of Chapter 63 of
    Title 18 of the United States Code. Pursuant to SEC Release
    34-47551,
    this Exhibit is furnished to the SEC and shall not be deemed to
    be filed.32
.2*

Certification of Chief Financial Officer of Dawson Geophysical
    Company pursuant to
    Rule 13a-14(b)
    promulgated under the Securities Exchange Act of 1934, as
    amended, and Section 1350 of Chapter 63 of
    Title 18 of the United States Code. Pursuant to SEC Release
    34-47551,
    this Exhibit is furnished to the SEC and shall not be deemed to
    be filed.     *
    
    Filed herewith.
    
    Identifies exhibit that consists of or includes a management
    contract or compensatory plan or arrangement.