3. MERGER

On February 11, 2015, the Company completed the Merger. Immediately prior to the effective time of the Merger, Legacy TGC affected a reverse stock split with respect to its common stock, par value $0.01 per share (“Legacy TGC Common Stock”), on a one-for-three ratio (the “Reverse Stock Split”) to reduce the total number of shares of Legacy TGC Common Stock outstanding. After giving effect to the Reverse Stock Split, at the effective time of the Merger, without any action on the part of any shareholder, each issued and outstanding share of Legacy Dawson’s common stock, par value $0.33-1/3 per share (the “Legacy Dawson Common Stock”), including shares underlying Legacy Dawson’s outstanding equity awards (but excluding any shares of Legacy Dawson Common Stock owned by Legacy TGC, Merger Sub or Legacy Dawson or any wholly-owned subsidiary of Legacy Dawson), were converted into the right to receive 1.760 shares of Legacy TGC Common Stock (the “Exchange Ratio”).

As described in Note 1, the Merger was accounted for as a reverse acquisition under the acquisition method of accounting in accordance with ASC 805, “Business Combinations.” The Company will account for the transaction by using Legacy Dawson’s historical information and accounting policies and adding the assets and liabilities of Legacy TGC at their respective fair values. Consequently, Legacy Dawson’s assets and liabilities retained their carrying values and Legacy TGC’s assets acquired and liabilities assumed by Legacy Dawson as the accounting acquirer in the Merger have been recorded at their fair values measured as of February 11, 2015, the effective date of the Merger.

The Company continues to evaluate the available information, and the purchase price allocation is subject to finalization of the Company’s analysis of the fair value of the assets and liabilities of Legacy TGC as of the effective date of the Merger. Accordingly, the purchase price allocation is preliminary and will be adjusted upon completion of the final valuation. Such adjustments could be material.

The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed at the Merger date (in thousands):

	Estimated Fair
TGC Industries, Inc.-Assets Acquired	Value

Stock Consideration	$	42,902
Interest Bearing Debt Assumed	12,048
Total Purchase Price Consideration	54,950
Debt-free Current Liabilities	12,647
Total Equity and Liabilities	$	67,597

Value of Current Assets
Current Assets excluding Cash and Equivalents	16,156
Cash and Equivalents	12,382
Total Current Assets	$	28,538

Identified Tangible Assets
Fair Value of Property, Plant and Equipment	28,812
Total Identified Tangible Assets	$	28,812

Identified Intagible Assets
Trademarks/Trade Names	1,063
Customer Relationships	1,799
Backlog	491
Total Identifiable Intangible Assets	$	3,353

Deferred Tax Asset	$	6,894

Total Indicated Value of Assets	$	67,597

The value of the stock consideration was determined based on the $5.85 closing price of Legacy TGC on the February 11, 2015 closing date and the 7,333,708 shares outstanding. As a result of the consideration transferred being less than the book value of net assets acquired, the Company is required to analyze the purchase price allocation and the potential reasonableness of reflecting a bargain purchase. Upon completing this analysis, the Company determined that the Merger is not an acquisition of a distressed business or a bargain purchase and accordingly reflected a substantial reduction in the property, plant and equipment to its fair value which is reflected by the value of the consideration transferred. Furthermore, in allocating the remainder of the purchase price to the indicated fair value of the property, plant and equipment, there is not any excess purchase price to be allocated to goodwill. Measurements used to determine fair value are deemed to be level 3 Fair Value Measurements.

Trade receivables and payables, as well as other current and non-current assets and liabilities were valued at the existing carrying values as they represented the fair value of those items at the time of the Merger, based on management’s judgments and estimates.

Property, plant and equipment have been valued using a combination of the income approach, the market approach and cost approach which is based on current replacement and/or reproduction cost of the asset as new, less depreciation attributable to physical, functional, and economic factors. Useful lives of the property, plant and equipment were estimated to be between 2 and 15 years.

Trademarks have been valued using the relief from royalty method. Relief from royalty method under the income approach estimates the cost savings that accrue to the Company which would otherwise have to pay royalties or license fees on revenues earned through the use of the asset. Trademarks are considered to have an indefinite life and as a result are not amortizable.

Customer relationships and backlog were valued using the excess earnings method, where estimated margins, customer attrition, and contributory asset charge assumptions are used. The useful lives of customer relationships is estimated to be 5 years, and the estimated useful weighted average life of backlog is expected to be 5 months. At, March 31, 2015, the carrying value of our customer relationships was approximately $1,799,000 and the accumulated amortization was approximately $147,000, and the carrying value of our back log was $491,000 and the accumulated amortization was $76,000.

Existing long term debt assumed in the Merger was fair valued based on a current market rate.

Deferred income tax assets and liabilities as of the acquisition date represent the expected future tax consequences of temporary differences between the fair values of the assets acquired and liabilities assumed and their tax bases. At the acquisition date the Company accrued $750,000 for contingencies related to certain tax matters.

The Company incurred approximately $2,600,000 in Merger related costs on a pretax basis. The Company also incurred $530,000 related to severance and compensation arrangements pursuant to existing agreements with certain former employees in connection with the Merger. These amounts are reflected in the accompanying statement of operations.

Since the acquisition date, Company’s income statement includes $8,592,000 of revenues from Legacy TGC and $2,837,000 of net loss of Legacy TGC.

Pro Forma Information

The following unaudited pro forma condensed financial information for the three months ended March 31, 2015 and 2014 gives effect to the Merger as if it had occurred on January 1, 2014. The unaudited pro forma condensed financial information has been included for comparative purposes only and is not necessarily indicative of the results that might have occurred had the transactions taken place on the dates indicated and is not intended to be a projection of future results. The unaudited pro forma financial information reflects certain adjustments related to the acquisition, such as (1) to record certain incremental expenses resulting from purchase accounting adjustments, such as reduced depreciation and amortization expense in connection with the fair value adjustments to property, plant and equipment, and intangible assets; and (2) to record the related tax effects. Shares used in the calculations of earnings per share in the table below were 21,647,889 and 21,328,048 in 2015 and 2014, respectively.

	2015			2014
Pro forma total revenues	$	87,332,000		$	125,567,000
Pro forma net (loss) income	$	(10,569,000	)	$	8,958,000

Pro forma net income per share:
Basic	$	(0.49	)	$	0.42
Diluted	$	(0.49	)	$	0.42