MITCHAM INDUSTRIES INC, 424B1, 1997-12-18

MITCHAM INDUSTRIES INC
424B1, 1997-12-18
EQUIPMENT RENTAL & LEASING, NEC

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<PAGE> 1
Filed Pursuant to Rule 424(b)(1)
Registration No. 333-40507

PROSPECTUS

1,820,000 SHARES

[MITCHAM INDUSTRIES, INC. LOGO]

COMMON STOCK
---------------------

Of the shares of common stock, $.01 par value (the "Common Stock"), offered
hereby, 1,800,000 shares are being sold by Mitcham Industries, Inc. (the
"Company") and 20,000 shares are being sold by certain selling shareholders (the
"Selling Shareholders"). The Company will not receive any of the proceeds from
the sale of shares by the Selling Shareholders. The Common Stock is traded on
the Nasdaq National Market under the symbol "MIND." On December 17, 1997, the
last reported sale price of the Common Stock on the Nasdaq National Market was
$20.00 per share. See "Price Range of Common Stock."

---------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2) SELLING SHAREHOLDERS
-------- ------------ ----------- --------------------
<S> <C> <C> <C> <C>
Per Share................... $19.00 $1.14 $17.86 $17.86
Total(3).................... $34,580,000 $2,074,800 $32,148,000 $357,200
</TABLE>

- ---------------

(1) The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated to be $300,000.

(3) The Company has granted to the Underwriters a 30-day option to purchase up
to an additional 273,000 shares of Common Stock on the same terms and
conditions as set forth above, solely to cover over-allotments, if any. If
such option is exercised in full, the total Price to Public, Underwriting
Discount, Proceeds to Company and Proceeds to Selling Shareholders will be
$39,767,000, $2,386,020, $37,023,780 and $357,200, respectively. See
"Underwriting."

---------------------

The shares of Common Stock are being offered by the several Underwriters
subject to prior sale, when, as and if issued to and accepted by the
Underwriters. The Underwriters reserve the right to reject orders in whole or in
part. It is expected that delivery of the shares of Common Stock will be made
against payment therefor in New York, New York on or about December 23, 1997.

---------------------
JEFFERIES & COMPANY, INC.
RAUSCHER PIERCE REFSNES, INC.
GAINES, BERLAND INC.

December 17, 1997

<PAGE> 2

[PICTURES OF AN I/O SYSTEM TWO, A SERCEL SYSTEM, EARTH VIBRATORS AND A PELTON
VIBRATOR CONTROL SYSTEM.]

THE COMPANY LEASES, ON A SHORT-TERM BASIS, A FULL COMPLEMENT OF EQUIPMENT
USED FOR SEISMIC DATA ACQUISITION, INCLUDING INPUT/OUTPUT AND SERCEL DATA
ACQUISITION EQUIPMENT, EARTH VIBRATORS AND PELTON VIBRATOR CONTROL ELECTRONICS.

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK, INCLUDING
OVER-ALLOTMENT AND OTHER STABILIZING TRANSACTIONS AND THE IMPOSITION OF PENALTY
BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP MEMBERS
(IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET MAKING
TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE
WITH RULE 103 OF REGULATION M. SEE "UNDERWRITING."
<PAGE> 3

PROSPECTUS SUMMARY

The following summary should be read in conjunction with, and is qualified
in its entirety by, the more detailed information and Consolidated Financial
Statements (including the Notes thereto) appearing elsewhere in this Prospectus
and incorporated herein by reference. The term "Company" refers to Mitcham
Industries, Inc. and its wholly-owned subsidiary, Mitcham Canada Ltd., an
Alberta corporation. Unless otherwise indicated, all financial and share
information set forth in this Prospectus assumes no exercise of the
Underwriters' over-allotment option.

THE COMPANY
GENERAL

Mitcham Industries, Inc. leases and sells geophysical and other equipment
used primarily by seismic service companies in performing seismic data
acquisition surveys on land and in transition zones (marsh and shallow water
areas). The Company conducts its operations on a worldwide basis and is the
leading independent seismic equipment lessor in North and South America. Demand
for seismic services has increased significantly in the past several years due
to advances in technology and the impact such advances have had on increasing
drilling success rates, thereby reducing the overall costs of finding oil and
gas. As a result, the Company and many seismic contractors have significantly
expanded their seismic equipment fleets. From January 31, 1994 through October
31, 1997, the Company's equipment lease pool, at cost, increased from
approximately $957,000 to $44.3 million, and the number of advanced seismic data
acquisition recording channels in the equipment lease pool increased from 510
channels to 14,538 channels. The Company's sales of new and used seismic
equipment have also increased significantly.

The Company owns a variety of technologically advanced equipment acquired
from the leading seismic manufacturers. The Company's lease pool includes many
types of equipment used in seismic data acquisition, including all components of
land and transition zone seismic data acquisition systems, geophones and cables,
earth vibrators, peripheral equipment and survey and other equipment. A
substantial portion of the Company's lease equipment is provided by two
manufacturers, Input/Output, Inc. ("I/O") and the Sercel subsidiaries of
Compagnie Generale de Geophysique ("Sercel"). The Company believes that most of
the advanced seismic data acquisition systems in use worldwide are either I/O or
Sercel systems. In the last two years, the Company has significantly diversified
its equipment lease pool. At October 31, 1997, approximately 53% of the
Company's equipment lease pool, on a cost basis, consisted of advanced digital
recording channels, with the remainder consisting of peripheral and other
equipment.

The Company leases its equipment on a short-term basis, generally for three
to nine months, to seismic contractors who need additional capacity to complete
a seismic survey. In doing so, the Company enables its customers to achieve
operating and capital investment efficiencies. Demand for short-term seismic
equipment leases is affected by many factors including: (i) the highly variable
size and technological demands of individual seismic surveys, (ii) seasonal
weather patterns and sporadic demand for seismic services in certain regions,
(iii) rapidly changing technology and (iv) costs of seismic equipment. The
Company believes these factors allow seismic contractors to use short-term
seismic equipment leasing as a cost-effective alternative to purchasing
additional equipment. The Company's equipment lease rates vary according to an
item's expected useful life, utilization and initial cost. For example, monthly
lease rates for seismic recording channel boxes range between 6% and 8% of the
original cost of the equipment.

A typical seismic crew uses a wide variety of equipment to perform seismic
data acquisition surveys. The Company's customers may lease a small amount of
equipment to expand an existing crew's capabilities or a complete seismic data
acquisition system to equip an entire crew. The Company believes that it
achieves high utilization of its equipment and operational efficiencies due to
the large number of equipment items it has available for lease, which provides
the flexibility to meet customers' needs. The Company's lease pool utilization
for the nine months ended October 31, 1997 was approximately 71%. Due to the
varying operating conditions created by seasonal weather patterns, the Company
estimates its maximum lease pool utilization is approximately 75-80%.
3
<PAGE> 4

Certain of the Company's leases contain a purchase option, allowing the
customer to apply a portion of the lease payments to the eventual purchase of
the equipment. Additionally, the Company sells a broad range of used seismic
equipment on a worldwide basis and, in certain markets, acts as a sales
representative or distributor for new seismic equipment.

The Company has supply and exclusive lease referral agreements with several
leading seismic equipment manufacturers including I/O, Sercel and Pelton
Company, Inc. ("Pelton"). The Company believes that these agreements provide it
with a significant competitive advantage. Under these agreements, the Company is
the exclusive worldwide short-term leasing representative for certain products,
except in the case of the I/O Agreement, which limits the Company's exclusivity
to the Western Hemisphere. Additional agreements exist with certain of these
manufacturers allowing the Company to act as sales representative or distributor
for such manufacturer's products in selected markets. These agreements have
varying terms and expire in 1998 through 2000, subject to modification or
extension.

THE INDUSTRY

Seismic surveys are a principal source of information used by oil and gas
companies to identify geological conditions that are favorable for the
accumulation of oil and gas and to evaluate the potential for successful
drilling, development and production of oil and gas. Seismic technology has been
used by the oil and gas industry since the 1920's and has advanced significantly
with improvements in computing and electronic technologies. In recent years, the
oil and gas industry has significantly expanded its use of 3-D seismic, which
provides a more comprehensive subsurface image and is believed to have
contributed to improved drilling success rates, particularly in mature oil and
gas basins such as those in North America. Additionally, 2-D seismic data
continues to be used in many areas where 3-D data acquisition is cost
prohibitive or logistical access is limited.

Recent industry advances include the use of high resolution 2-D,
three-component geophones ("3C-3D"), which enhance the 3-D image, and time lapse
("4-D") seismic, where surveys are periodically reacquired to allow the
monitoring of a producing oil and gas field for optimal production and reserve
recovery. These and other technical advances have contributed to increased
drilling success rates and reduced oil and gas finding costs and consequently,
have increased demand for seismic data acquisition equipment and services.

With the expanded use of seismic technology, particularly 3-D seismic, the
size of data acquisition surveys has increased substantially in the past several
years. Demand for higher resolution data, larger surveys and more rapid
completion of such surveys is requiring seismic acquisition companies to use
data acquisition systems with a greater number of seismic recording channels.
Additionally, in many areas, such as North America, the size of seismic surveys
varies significantly, requiring frequent changes in the configuration of
equipment and crews used for seismic surveys. As a result of these advances,
seismic survey channel count has increased from smaller 2-D surveys, which
typically averaged 120 channels, to larger 3-D surveys which today average
approximately 1,500 channels and often use 3,000 or more channels. The Company
believes that many seismic service companies will continue to meet changes in
equipment needs by leasing incremental equipment to expand crew size as
necessary to meet specific survey requirements, and thereby reduce the
substantial capital expenditures necessary to purchase such equipment.

BUSINESS STRATEGY

The Company's business strategy is to meet the expanding needs of users of
seismic equipment through its leasing and support services. To accomplish this,
the Company has identified the following major objectives:

- Enlarge and diversify the seismic equipment lease pool. Due to the
increasing demand for seismic services and the expanding size and
variability of seismic surveys, the Company intends to continue to
increase the size and diversity of its equipment lease pool. The Company
believes that the availability of a larger and more diverse seismic
equipment lease pool will encourage seismic survey companies to lease,
rather than purchase, such equipment, due to the capital and operating
efficiencies provided by short-term leases. The Company is also
evaluating the feasibility of broadening its equipment lease pool to
include certain marine seismic equipment.
4
<PAGE> 5

- Expand international operations. Historically, the Company's activities
outside North America have consisted of equipment sales, with a limited
amount of leasing activities. In fiscal 1998, the Company's leasing
activities in South America and other international locations have
increased significantly. The Company believes that it will be able to
expand its international leasing activities as its equipment lease pool
expands and as its customers' operations continue to grow in
international markets. The Company receives referrals from Sercel and
other manufacturers on a worldwide basis. The Company believes that its
alliances with manufacturers will help it to further penetrate
international markets, where such manufacturers are well-recognized and
have well-developed business relationships.

- Develop and enhance alliances with major seismic equipment
manufacturers. The Company's alliances with leading seismic equipment
manufacturers such as I/O and Sercel allow it to expand its equipment
lease pool on favorable terms and increase customer referrals. The
Company believes such alliances improve its relations with customers and
provide a significant competitive advantage. The Company has exclusive
short-term lease agreements with four manufacturers and is seeking to
expand the scope of existing alliances, as well as develop additional
arrangements.

- Pursue additional business development opportunities. The Company
regularly evaluates opportunities to expand its business activities
within the oil service industry, particularly in the seismic sector. For
example, the Company is evaluating a joint venture with a seismic
acquisition company and a seismic data processing company to pursue
multi-client seismic activities in selected areas of North America.
Multi-client seismic data would be acquired and owned by the joint
venture and marketed to numerous oil and gas companies for use in their
exploration and production operations.

RECENT DEVELOPMENTS

In October 1997, the Company entered into a non-binding letter of intent to
acquire all of the issued and outstanding capital stock of North American
Western Data Services, Inc. ("Western Data"), which leases and sells geophysical
surveying equipment to companies engaged in the seismic services industry. The
total consideration to be paid by the Company is approximately $3 million,
subject to adjustment in certain instances, payable approximately 92% in shares
of Common Stock and 8% in cash. No assurance can be given as to whether the
acquisition of Western Data will be completed. Consummation of the transaction
is subject to satisfactory completion by the Company of its due diligence
review, execution of a definitive agreement and other customary conditions.
---------------

The Company's principal offices are located at 44000 Highway 75 South,
(Post Office Box 1175), Huntsville, Texas, 77342, and its telephone number is
(409) 291-2277.

THE OFFERING

Common Stock Offered by the Company....... 1,800,000 Shares

Common Stock Offered by the Selling
Shareholders.............................. 20,000 Shares

Common Stock Outstanding before the
Offering(1)............................... 7,510,759 Shares

Common Stock Outstanding after the
Offering(1)............................... 9,310,759 Shares

Use of Proceeds........................... To purchase additional equipment
for the Company's lease pool and
for general corporate purposes,
including working capital. See
"Use of Proceeds."

Nasdaq National Market Symbol............. MIND
- ---------------

(1) Based on the number of shares of Common Stock outstanding as of October 31,
1997. Does not include (i) 271,880 shares of Common Stock issuable upon the
exercise of options granted and an additional 39,000 shares that may be
granted in the future under stock option plans and (ii) 394,113 shares of
Common Stock issuable upon the exercise of certain warrants. See
"Description of Capital Stock and Other Securities."
5
<PAGE> 6

SUMMARY HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA

The following table sets forth certain historical consolidated financial
and operating data of the Company for each of the three fiscal years ended
January 31, 1997, which was derived from the Company's consolidated audited
financial statements. Also set forth below is selected financial data for the
nine months ended and as of October 31, 1996 and 1997, which was derived from
the unaudited consolidated financial statements of the Company. In the opinion
of management of the Company, the unaudited consolidated financial statements
include all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the financial data for such period. The
results of operations for the nine months ended October 31, 1996 and 1997 are
not necessarily indicative of results for a full fiscal year. The data should be
read in conjunction with the Consolidated Financial Statements (including the
Notes thereto) and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere herein.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED JANUARY 31, OCTOBER 31,
---------------------------------- -------------------
1995 1996 1997 1996 1997
--------- --------- ---------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND CHANNELS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Leases of seismic equipment.................... $2,424 $5,157 $ 8,345 $ 5,356 $10,901
Sales of seismic equipment..................... 2,860 2,135 6,345 2,007 15,391
------ ------ ------- ------- -------
Total revenues......................... 5,284 7,292 14,690 7,363 26,292
Costs and expenses:
Seismic equipment subleases.................... 245 251 203 111 238
Sales of seismic equipment..................... 2,027 1,085 4,197 1,261 12,666
General and administrative..................... 924 1,344 1,808 1,199 2,189
Provision for doubtful accounts................ 35 627 1,346 418 709
Depreciation................................... 363 1,331 3,112 1,951 3,919
------ ------ ------- ------- -------
Total costs and expenses............... 3,594 4,638 10,666 4,940 19,721
------ ------ ------- ------- -------
Operating income................................. 1,690 2,654 4,024 2,423 6,571
Interest income (expense), net................... (209) (21) (240) (170) 232
Other income..................................... 60 38 367 219..... 586
------ ------ ------- ------- -------
Income before income taxes....................... 1,541 2,671 4,151 2,472 7,389
Provision for income taxes....................... 541 958 1,449 854 2,503
------ ------ ------- ------- -------
Net income....................................... $1,000 $1,713 $ 2,702 $ 1,618 $ 4,886
====== ====== ======= ======= =======
Earnings per share, fully diluted................ $ 0.66 $ 0.50 $ 0.59 $ 0.36 $ 0.66
====== ====== ======= ======= =======
Weighted average shares outstanding (fully
diluted)....................................... 1,514 3,403 4,581 4,489 7,406
OTHER DATA:
EBITDA (1)....................................... $2,113 $4,023 $ 7,503 $ 4,593 $11,076
Capital expenditures............................. $4,496 $5,991 $15,710 $ 8,890 $31,548
Seismic equipment lease pool, at cost (at period
end)........................................... $5,395 $9,580 $21,745 $18,589 $44,250
Number of recording channels (at period end)..... 2,454 3,702 7,954 6,764 14,538
</TABLE>

<TABLE>
<CAPTION>
OCTOBER 31, 1997
-------------------------
ACTUAL AS ADJUSTED(2)
------- ---------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 3,819 $ 8,667
Total assets................................................ 58,108 89,956
Total debt, including current portion....................... -- --
Total shareholders' equity.................................. 38,954 70,802
</TABLE>

- ---------------

(1) EBITDA represents income before interest, taxes, depreciation and
amortization. EBITDA is frequently used by securities analysts and is
presented here to provide additional information about the Company's
operations. EBITDA is not a measurement presented in accordance with
generally accepted accounting principles. EBITDA should not be considered in
isolation or as a substitute for net income, cash flow provided by operating
activities or other income or cash flow data prepared in accordance with
generally accepted accounting principles or as a measure of a company's
profitability or liquidity.

(2) As adjusted to reflect receipt by the Company of estimated net proceeds from
the issuance of 1,800,000 shares of Common Stock and the application of such
proceeds. See "Use of Proceeds" and "Capitalization."
6
<PAGE> 7

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

The discussion in this Prospectus contains forward-looking statements that
involve risks and uncertainties. The Company's actual future results could
differ significantly from those discussed herein. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
in "Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Business," as well as
those discussed elsewhere in this Prospectus. Statements contained in this
Prospectus that are not historical facts are forward-looking statements that are
subject to the safe harbor created by the Private Securities Litigation Reform
Act of 1995.

RISK FACTORS

In evaluating an investment in the Common Stock being offered hereby,
prospective investors should consider carefully, among other things, the
following risk factors.

POSSIBLE ADVERSE EFFECT OF VOLATILITY OF OIL AND GAS INDUSTRY AND DEMAND FOR
SERVICES

Demand for the Company's services depends upon the level of spending by oil
and gas companies for exploration, production and development activities, as
well as on the number of crews conducting land and transition zone seismic data
acquisition worldwide, and especially in North America. Fluctuations in the
price of oil and gas in response to relatively minor changes in the supply and
demand for oil and gas continue to have a major effect on these activities and
thus, on the demand for the Company's services. Although published industry
sources indicate that the number of seismic crews has decreased in the last five
years, the Company believes that utilization of 3-D seismic equipment has
increased. There can be no assurance of an increased demand for additional 3-D
seismic equipment or as to the level of future demand for the Company's
services. See "Business."

DEPENDENCE UPON ADDITIONAL LEASE CONTRACTS

The Company's seismic equipment leases typically have a term of three to
nine months and provide gross revenues that recover only a portion of the
Company's capital investment. The Company's ability to generate lease revenues
and profits is dependent upon obtaining additional lease contracts after the
termination of an original lease. However, lessees are under no obligation to,
and frequently do not, continue to lease seismic equipment after the expiration
of a lease. Although the Company has been successful in obtaining additional
lease contracts with other lessees after the termination of the original leases,
there can be no assurance that it will continue to do so. The Company's failure
to obtain additional or extended leases beyond the initial term would have a
material adverse effect on its operations and financial condition. See
"Business -- Business and Operations."

DEPENDENCE ON KEY PERSONNEL

The Company's success is dependent on, among other things, the services of
certain key personnel, including specifically Billy F. Mitcham, Jr., the
Chairman of the Board, President and Chief Executive Officer of the Company. Mr.
Mitcham's employment agreement has an initial term through January 15, 2002, and
is automatically extended on a year-to-year basis until terminated by either
party giving 30 days notice prior to the end of the current term (subject to
earlier termination upon certain stated events). The agreement prohibits Mr.
Mitcham from engaging in any business activities that are competitive with the
Company's business and from diverting any of the Company's customers to a
competitor, for two years after the termination of his employment. The Company
has obtained a $1.0 million key employee life insurance policy payable to the
Company in the event of Mr. Mitcham's death. The loss of the services of Mr.
Mitcham could have a material adverse effect on the Company. In particular, the
Exclusive Lease Referral Agreement with I/O (the "I/O Agreement") is terminable
at such time as Mr. Mitcham is no longer the President of the Company and the
Exclusive Equipment Lease Agreement with Sercel is terminable at such time as he
is no longer employed by the Company in a senior management capacity. See
"Management -- Employment Agreement with Billy F. Mitcham, Jr."

7
<PAGE> 8

CUSTOMER CONCENTRATION AND CREDIT LOSSES

The Company typically leases and sells significant amounts of seismic
equipment to a relatively small number of customers, the composition of which
changes from year to year as leases are initiated and concluded and customers'
equipment needs vary. Therefore, at any one time, a large portion of the
Company's revenues may be derived from a limited number of customers, and its
ability to maintain profitability includes risks associated with the
creditworthiness and profitability of those customers. In the fiscal years ended
January 31, 1995, 1996 and 1997, the single largest customer accounted for
approximately 16%, 18% and 15%, respectively, of the Company's total revenues.
The termination of any large seismic lease could have a material adverse effect
on the Company's operations if the Company does not replace such business on a
timely basis. See "Business -- Customers; Sales and Marketing."

TECHNOLOGICAL OBSOLESCENCE

The Company has a substantial capital investment in seismic data
acquisition equipment. In addition, under the I/O Agreement, the Company is
required to make an additional investment in seismic and other peripheral
equipment. The Company believes that the technology represented by the equipment
in service and that which it is required to purchase from I/O will not become
obsolete prior to the Company's recovery of its initial investment. However,
there can be no assurance that manufacturers of seismic equipment will not
develop alternative systems that would have competitive advantages over seismic
systems now in use, thus having a potentially adverse effect on the Company's
ability to profitably lease its existing seismic equipment. In the past, the
Company has been successful in avoiding material losses caused by technological
obsolescence by selling its older seismic equipment to seismic contractors and
other parties. However, there can be no assurance that the Company will be able
to sell its older seismic equipment in the future. See "Business -- Key Supplier
Agreements."

VULNERABILITY TO WEATHER CONDITIONS AND SEASONAL RESULTS

The first and fourth quarters of the Company's fiscal year have
historically accounted for and are expected to continue to account for a greater
portion of the Company's revenues than do the second and third quarters of its
fiscal year. This seasonality in revenues is primarily due to the increased
seismic survey activity in Canada from October through March, which affects the
Company due to its significant Canadian operations. This seasonal pattern may
cause the Company's results of operations to vary significantly from quarter to
quarter. Accordingly, period to period comparisons are not necessarily
meaningful and should not be relied on as indicative of future results. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Seasonality" and "Business -- Business and Operations -- Seismic
Equipment Leasing."

DEPENDENCE UPON KEY SUPPLIERS

The Company has and relies upon agreements with I/O, Sercel, Pelton, a
manufacturer and supplier of vibrator control electronics, and StrucTec Systems,
L.L.C. ("StrucTec"), a manufacturer of replacement battery packs and battery
chargers, to purchase seismic equipment that the Company leases and sells to its
customers and, to a lesser extent, to receive lease referrals. The termination
of these agreements for any reason, including any failure by the Company to meet
the minimum purchase requirements under the I/O Agreement, could materially
adversely affect the Company's business. While the Company does not anticipate
any difficulty in obtaining seismic equipment from its suppliers based upon past
experience, any such occurrence could have a material adverse effect upon the
Company's business, financial condition and results of operations. See
"Business -- Key Supplier Agreements."

COMPETITION

Competition in the leasing of seismic equipment is fragmented, and the
Company is aware of several companies that engage in seismic equipment leasing.
The Company believes that its competitors, in general, do not have as extensive
a seismic equipment lease pool as does the Company. The Company also believes

8
<PAGE> 9

that its competitors do not have similar exclusive lease referral agreements
with suppliers. Competition exists to a lesser extent from seismic data
acquisition firms that may lease equipment that is temporarily idle. Under the
I/O Agreement, I/O and its subsidiary, Global Charter Corporation ("Global")
retain the right to continue to (i) lease channel boxes in certain situations
where the Company and a prospective lessee cannot or do not enter into a lease,
as more fully described in the I/O Agreement, (ii) lease channel boxes with a
purchase option in North and South America and (iii) lease channel boxes outside
of North and South America.

The Company has several competitors engaged in seismic equipment leasing
and sales, including seismic equipment manufacturers, companies providing
seismic surveys and oil and gas exploration companies that use seismic
equipment, many of which have substantially greater financial resources than the
Company. There are also several smaller competitors who, in the aggregate,
generate significant revenue from the sale of seismic survey equipment. See
"Business -- Key Supplier Agreements."

NO ANTICIPATED DIVIDENDS

The Company has never paid cash dividends on its Common Stock and does not
presently anticipate paying any cash dividends on the Common Stock in the
foreseeable future. In addition, the loan agreement between the Company and its
commercial lender restricts the payment of dividends. See "Dividend Policy."

POSSIBLE ADVERSE EFFECT OF ANTI-TAKEOVER PROVISIONS; ISSUANCE OF PREFERRED STOCK

Certain provisions of the Company's Articles of Incorporation and the Texas
Business Corporation Act may tend to delay, defer or prevent a potential
unsolicited offer or takeover attempt that is not approved by the Board of
Directors that the Company's shareholders might consider to be in their best
interest, including an attempt that might result in shareholders receiving a
premium over the market price for their shares. Because the Board of Directors
is authorized to issue preferred stock with such preferences and rights as it
determines, it may afford the holders of any series of preferred stock
preferences, rights or voting powers superior to those of the holders of Common
Stock. Although the Company has no shares of preferred stock outstanding and no
present intention to issue any shares of its preferred stock, there can be no
assurance that the Company will not do so in the future. See "Description of
Capital Stock and Other Securities."

LIMITATION ON DIRECTORS' LIABILITY

The Company's Articles of Incorporation provide, as permitted by governing
Texas law, that a director of the Company shall not be personally liable to the
Company or its shareholders for monetary damages for breach of fiduciary duty as
a director, with certain exceptions. These provisions may discourage
shareholders from bringing suit against a director for breach of fiduciary duty
and may reduce the likelihood of derivative litigation brought by shareholders
on behalf of the Company against a director. See "Description of Capital Stock
and Other Securities -- Limitation on Directors' Liability."

9
<PAGE> 10

USE OF PROCEEDS

The net proceeds to the Company from the sale of the Common Stock being
offered hereby (assuming a public offering price of $19.00 per share and after
deducting underwriting discounts and estimated expenses of the Offering) are
estimated to be approximately $31.8 million, ($36.7 million if the Underwriters'
over-allotment option is exercised in full). The Company will not receive any
proceeds from the sale of shares by the Selling Shareholders. Approximately $27
million of the net proceeds will be used to purchase additional seismic
equipment for the Company's lease pool which the Company has ordered from
manufacturers and for which the Company has obtained future lease commitments.
The remaining net proceeds will be used for working capital and other general
corporate purposes, including additional equipment purchases, and may be used in
a potential investment in a joint venture to conduct multi-client seismic data
acquisition activities. See "Business -- Business Strategy." Pending such
application of the net proceeds of this Offering, the Company will invest the
net proceeds in investment-grade short-term interest-bearing securities.

PRICE RANGE OF COMMON STOCK

The Common Stock is traded on the Nasdaq National Market under the symbol
"MIND." Prior to April 26, 1996, the Common Stock was traded on the Nasdaq
SmallCap Market.

The following table sets forth, for the periods indicated, the high and low
bid prices of the Company's Common Stock as reported on the Nasdaq SmallCap
Market and the high and low sales prices as reported on the Nasdaq National
Market, as applicable, after April 26, 1996.

<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
Fiscal Year Ended January 31, 1996:
First Quarter............................................. $ 31/8 $ 25/16
Second Quarter............................................ 4 25/16
Third Quarter............................................. 43/4 35/8
Fourth Quarter............................................ 55/8 33/4
Fiscal Year Ended January 31, 1997:
First Quarter............................................. $ 8 $ 51/8
Second Quarter............................................ 8 53/4
Third Quarter............................................. 61/2 53/8
Fourth Quarter............................................ 97/8 57/8
Fiscal Year Ended January 31, 1998:
First Quarter............................................. $ 91/4 $ 61/8
Second Quarter............................................ 153/8 65/8
Third Quarter............................................. 295/8 141/2
Fourth Quarter (through December 17, 1997)................ 331/8 177/8
</TABLE>

On December 17, 1997, the last reported sale price for the Common Stock on
the Nasdaq National Market was $20.00. As of October 31, 1997, there were 86
shareholders of record of the Common Stock.

DIVIDEND POLICY

The Company has not paid any cash dividends on the Common Stock since its
inception, and the Board of Directors does not contemplate the payment of cash
dividends in the foreseeable future. It is the present policy of the Board of
Directors to retain earnings, if any, for use in developing and expanding the
Company's business. In addition, the Company's bank loan agreement restricts the
payment of dividends. In the future, payment of dividends by the Company will
also depend on the Company's financial condition, results of operations and such
other factors as the Board of Directors may consider. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

10
<PAGE> 11

CAPITALIZATION

The following table sets forth the capitalization of the Company at October
31, 1997 and as adjusted to reflect the sale by the Company of 1,800,000 shares
of Common Stock and the application of the estimated net proceeds therefrom, as
described under "Use of Proceeds." This table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's Consolidated Financial Statements and Notes
thereto that are included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
OCTOBER 31, 1997
----------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt, including current portion................... $ -- $ --
Shareholders' equity:
Preferred stock, $1.00 par value; 1,000,000 shares
authorized; none issued and outstanding................ -- --
Common stock, $.01 par value; 20,000,000 shares
authorized; 7,510,759 shares issued and outstanding and
9,310,759 shares as adjusted(1)........................ 75 93
Additional paid-in capital................................ 27,607 59,437
Retained earnings......................................... 11,264 11,264
Cumulative translation adjustment......................... 8 8
------- -------
Total shareholders' equity........................... $38,954 $70,802
------- -------
Total capitalization............................ $38,954 $70,802
======= =======
</TABLE>

- ---------------

(1) Does not include (i) 271,880 shares of Common Stock issuable upon the
exercise of options granted and an additional 39,000 shares that may be
granted in the future under stock option plans and (ii) 394,113 shares of
Common Stock issuable upon the exercise of certain warrants. See
"Description of Capital Stock and Other Securities."

11
<PAGE> 12

SELECTED CONSOLIDATED FINANCIAL DATA

The following table sets forth certain historical financial and operating
data of the Company for each of the five fiscal years ended and as of January
31, 1997, which was derived from the Company's audited consolidated financial
statements. Also set forth below is selected financial data for the nine months
ended and as of October 31, 1996 and 1997, which was derived from the unaudited
consolidated financial statements of the Company. In the opinion of management
of the Company, the unaudited consolidated financial statements include all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the financial data for such period. The results of
operations for the nine months ended October 31, 1996 and 1997 are not
necessarily indicative of results for a full fiscal year. The data should be
read in conjunction with the Consolidated Financial Statements (including the
Notes thereto) and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere herein.

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
FISCAL YEAR ENDED JANUARY 31, OCTOBER 31,
-------------------------------------------- -----------------
1993 1994 1995 1996 1997 1996 1997
------ ------ ------ ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND CHANNELS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Leases of seismic equipment....................... $1,266 $1,601 $2,424 $ 5,157 $ 8,345 $ 5,356 $10,901
Sales of seismic equipment........................ 1,156 2,926 2,860 2,135 6,345 2,007 15,391
------ ------ ------ ------- ------- ------- -------
Total revenues.............................. 2,422 4,527 5,284 7,292 14,690 7,363 26,292
Costs and expenses:
Seismic equipment subleases....................... 915 896 245 251 203 111 238
Sales of seismic equipment........................ 796 1,772 2,027 1,085 4,197 1,261 12,666
General and administrative........................ 655 655 924 1,344 1,808 1,199 2,189
Provision for doubtful accounts................... -- 38 35 627 1,346 418 709
Depreciation...................................... 29 62 363 1,331 3,112 1,951 3,919
------ ------ ------ ------- ------- ------- -------
Total costs and expenses.................... 2,395 3,423 3,594 4,638 10,666 4,940 19,721
------ ------ ------ ------- ------- ------- -------
Operating income.................................... 27 1,104 1,690 2,654 4,024 2,423 6,571
Interest income (expense), net...................... (4) (16) (209) (21) (240) (170) 232
Other income........................................ 19 20 60 38 367 219 586
------ ------ ------ ------- ------- ------- -------
Income before income taxes.......................... 42 1,108 1,541 2,671 4,151 2,472 7,389
Provision for income taxes.......................... 7 405 541 958 1,449 854 2,503
------ ------ ------ ------- ------- ------- -------
Net income.......................................... $ 35 $ 703 $1,000 $ 1,713 $ 2,702 $ 1,618 $ 4,886
====== ====== ====== ======= ======= ======= =======
Earnings per share, fully diluted................... $ 0.03 $ 0.51 $ 0.66 $ 0.50 $ 0.59 $ 0.36 $ 0.66
====== ====== ====== ======= ======= ======= =======
Weighted average shares outstanding (fully
diluted).......................................... 1,380 1,380 1,514 3,403 4,581 4,489 7,406
OTHER DATA:
EBITDA(1)........................................... $ 75 $1,186 $2,113 $ 4,023 $ 7,503 $ 4,593 $11,076
Capital expenditures................................ $ 28 $ 900 $4,496 $ 5,991 $15,710 $ 8,890 $31,548
Seismic equipment lease pool, at cost (at period
end).............................................. $ 82 $ 957 $5,395 $ 9,580 $21,745 $18,589 $44,250
Number of recording channels (at period end)........ -- 510 2,454 3,702 7,954 6,764 14,538
</TABLE>

<TABLE>
<CAPTION>
JANUARY 31, OCTOBER 31,
-------------------------------------------- ------------------
1993 1994 1995 1996 1997 1996 1997
------ ------ ------ ------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.......................... $ 127 $ 639 $ 874 $ 637 $ 301 $ 3,330 $ 3,819
Total assets....................................... 15 2,427 8,199 12,239 24,293 23,252 58,108
Total debt, including current portion.............. 60 635 690 2,020 4,611 3,848 --
Total shareholders' equity......................... 274 977 6,176 8,048 15,242 13,736 38,954
</TABLE>

- ---------------

12
<PAGE> 13

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion is intended to assist in understanding the
Company's historical financial position at January 31, 1995, 1996 and 1997, and
October 31, 1997, and results of operations and cash flows for each of the three
years in the period ended January 31, 1997 and the unaudited nine-month periods
ended October 31, 1996 and 1997. The Company's consolidated historical financial
statements and notes thereto included elsewhere in this Prospectus contain
detailed financial information that should be referred to in conjunction with
the following discussion.

OVERVIEW

The Company leases and sells seismic equipment primarily to seismic data
acquisition companies and oil and gas companies conducting land and transition
zone seismic surveys worldwide. The Company provides short-term leasing of
seismic equipment to meet a customer's requirements and offers maintenance and
support during the lease term. All leases at October 31, 1997 were for a term of
one year or less. Seismic equipment held for lease is carried at cost, net of
accumulated depreciation.

For the years ended January 31, 1995, 1996 and 1997, revenues from foreign
customers totaled $1.8 million, $3.8 million and $6.8 million, respectively.
While most of the Company's transactions with foreign customers are denominated
in United States dollars, some of the Company's transactions with Canadian
customers are denominated in Canadian dollars. The Company has not been subject
to material gains or losses resulting from currency fluctuations and has not
engaged in currency hedging activities.

SEASONALITY

Historically, seismic equipment leasing has been susceptible to weather
patterns in certain geographic regions. There is some seasonality to the
Company's lease revenues from customers operating in Canada, where a significant
percentage of the seismic survey activity occurs in the winter months, from
October through March. During the months in which the weather is warmer, certain
areas are not accessible to trucks, earth vibrators and other heavy equipment
because of the unstable terrain. This seasonal leasing activity by the Company's
Canadian customers has historically resulted in increased lease revenues in the
Company's first and fourth fiscal quarters. See "Business -- Business and
Operations -- Seismic Equipment Leasing."

RESULTS OF OPERATIONS

Nine Months Ended October 31, 1997 Compared with Nine Months Ended October 31,
1996

Revenues of $26.3 million for the nine months ended October 31, 1997
increased 257% over revenues of $7.4 million for the same prior year period.
Leasing services generated revenues of $10.9 million for the nine months ended
October 31, 1997, a $5.5 million, or 104% increase, compared to leasing revenues
for the same prior year period. This increase reflected additions to the
equipment lease pool throughout fiscal 1997 and the first three quarters of
fiscal 1998. Seismic equipment sales for the nine months ended October 31, 1997
were $15.4 million, an increase of $13.4 million, or 667%, from $2.0 million for
the same prior year period. The increase in sales was due primarily to the
exercise of lease purchase option contracts in the period totaling $12.0
million.

The Company's sublease costs increased by $127,000, or 114%, and
depreciation, which related primarily to equipment available for lease,
increased by $2.0 million, or 101%, due to the increase in the equipment lease
pool, resulting in an increase in net leasing revenues of $3.5 million.

Gross margins on seismic equipment sales were 18% and 37% for the nine
months ended October 31, 1997 and 1996, respectively. Gross margins decreased
substantially in the nine months ended October 31, 1997 because the Company sold
primarily newer equipment when customers exercised purchase options on leased
equipment that had only recently been purchased and added to the Company's
equipment lease pool. In

13
<PAGE> 14

the same prior year period and in the past, the Company sold primarily older,
fully depreciated equipment, yielding significantly greater margins.

General and administrative expenses increased $990,000, or 83%, for the
nine months ended October 31, 1997, as compared to the same prior year period.
Although general and administrative expenses increased due in part to increased
personnel costs and costs associated with the office in Canada, general and
administrative expenses decreased as a percentage of total revenues from 16% to
8% between the two periods.

The Company's provision for doubtful accounts expense increased to $709,000
for the nine months ended October 31, 1997 from $418,000 in the same prior year
period. The increase was a result of additional provisions for the allowance
account in connection with the bankruptcy filing of one of the Company's
customers, Grant Geophysical, Inc. ("Grant"). The provision for doubtful
accounts expense was 3% of total revenues in the nine months ended October 31,
1997, as compared to 6% of total revenues in the same prior year period. As of
October 31, 1997, the Company's allowance for doubtful accounts was $891,000.
See "--Liquidity and Capital Resources."

Net income for the nine months ended October 31, 1997 was $4.9 million,
which increased by $3.3 million, or 202%, as compared to the same prior year
period.

Fiscal Year Ended January 31, 1997 Compared with Fiscal Year Ended January 31,
1996

Revenues for fiscal 1997 of $14.7 million represented an increase of $7.4
million, or 101%, over fiscal 1996 revenues of $7.3 million. Leasing services
generated revenues of $8.3 million for fiscal 1997, an increase of $3.2 million,
or 62%, as compared to $5.2 million for fiscal 1996. This increase reflected
additions to the equipment lease pool throughout fiscal 1997 to meet lease
demand. Seismic equipment sales for fiscal 1997 were $6.3 million, an increase
of $4.2 million, or 197%, as compared to $2.1 for fiscal 1996. The increase in
sales was due primarily to the exercise of various lease purchase options
throughout the year totaling $3.5 million.

The Company's sublease costs decreased by $48,000, or 19%, and
depreciation, which related primarily to equipment available for lease,
increased by $1.8 million, or 134%, due to the increase in the equipment lease
pool, resulting in an increase in net leasing revenues of $1.5 million.

Gross margins on seismic equipment sales were 34% and 49% for fiscal 1997
and 1996, respectively. Gross margins decreased substantially in the fiscal year
ended January 31, 1997 because the Company sold primarily newer equipment when
customers exercised purchase options on leased equipment that had only recently
been purchased and added to the Company's equipment lease pool. In the same
prior year period and in the past, the Company sold primarily older, fully
depreciated equipment, yielding significantly greater margins.

General and administrative expenses increased $464,000, or 35%, in fiscal
1997 as compared to fiscal 1996 and were 12% and 18% of total revenues for
fiscal 1997 and 1996, respectively. This decrease in general and administrative
expenses as a percentage of total revenues was the result of overhead expenses
remaining relatively constant as revenues increased, offset in part by increases
in legal and accounting expenses associated with being a public company.

The Company's provision for doubtful accounts expense increased from
$627,000 in fiscal 1996 to $1.3 million in fiscal 1997. The increase was a
result of additional provisions for the allowance account. Of the increase,
approximately $500,000 was attributable to the bankruptcy filing of Grant. The
provision for doubtful accounts expense was 9% of total revenues in fiscal 1997
and fiscal 1996. As of January 31, 1997, the Company's allowance for doubtful
accounts was $1.5 million. See "-- Liquidity and Capital Resources."

Net income for fiscal 1997 was $2.7 million, which increased by $989,000,
or 58%, as compared to fiscal 1996.

14
<PAGE> 15

Fiscal Year Ended January 31, 1996 Compared with Fiscal Year Ended January 31,
1995

Revenues for fiscal 1996 of $7.3 million represented an increase of $2.0
million, or 38%, over fiscal 1995 revenues of $5.3 million. Leasing services
generated revenues of $5.2 million for fiscal 1996, an increase of $2.7 million,
or 113%, as compared to fiscal 1995. The majority of this increase was
attributable to additions of lease pool equipment throughout fiscal 1996 to meet
lease demand. Seismic equipment sales for the year ended January 31, 1996 were
$2.1 million, a decrease of $725,000, or 25%, from fiscal 1995.

The Company's sublease costs increased by $6,000, or 2%, and depreciation,
which related primarily to equipment available for lease, increased by $968,000,
or 267%, due to the increase in the equipment lease pool, resulting in an
increase in net leasing revenues of $1.8 million.

Gross margins on seismic equipment sales were 49% and 29% for fiscal 1996
and 1995, respectively. The margin for fiscal 1996 was significantly higher
because of a few high-margin transactions related to older more
fully-depreciated equipment.

General and administrative expenses increased $420,000, or 45%, in fiscal
1996 as compared to fiscal 1995 and were 18% and 17% of total revenues for
fiscal 1996 and 1995, respectively. The increase was due primarily to increased
personnel costs and higher legal and accounting expenses associated with being a
public company.

The Company's provision for doubtful accounts expense increased from
$35,000 in fiscal 1995 to $627,000 in fiscal 1996. The increase reflected the
write-off of amounts due from a leasing customer which became severely past due
and were ultimately settled for $272,000 less than the amounts owed, and
additional allowances provided for amounts due from a second leasing customer
with an outstanding receivable of $459,000 at January 31, 1996, the majority of
which was past due at that date. The latter outstanding receivable was
ultimately collected in full. The provision for doubtful accounts expense was 9%
of total revenues in fiscal 1996 as compared to 1% of total revenues in fiscal
1995. As of January 31, 1996, the Company's allowance for doubtful accounts was
$347,000.

Net income for fiscal 1996 was $1.7 million, which increased by $713,000,
or 71%, as compared to fiscal 1995.

LIQUIDITY AND CAPITAL RESOURCES

As of October 31, 1997, the Company had net working capital of
approximately $2.0 million and $5.0 million of availability under its bank
credit facilities. Net cash provided by operating activities for the nine months
ended October 31, 1997 decreased by $374,000, as compared to the same prior year
period, primarily as a result of an increase in trade accounts receivable. At
October 31, 1997, the Company had trade accounts receivable of $2.9 million that
were more than 90 days past due, with four customers owing an aggregate of $1.5
million of such amount. As of such date, the Company's allowance for doubtful
accounts was $891,000. In addition, at such date, the Company had receivables
due from one customer of approximately $539,000, $449,000 of which was more than
12 months past due.

Grant's plan of reorganization was approved by the bankruptcy court on
September 30, 1997. As of October 31, 1997, the Company had received payments
from Grant totaling $1.2 million, which represents final settlement on the
amounts owed the Company representing post-bankruptcy petition claims of
approximately $1.6 million. The Company expects to collect one-half of
pre-bankruptcy petition claims, which total approximately $755,000, prior to
fiscal year end. All of the approximately $750,000 that will not be collected
from Grant has been written off. The Company is currently leasing seismic
equipment to Grant.

During March 1997, the Company completed a public offering of 3,450,000
shares of Common Stock, of which 2,875,000 shares were sold by the Company and
575,000 shares were sold by selling shareholders. The net proceeds to the
Company from the offering (after deducting underwriting discounts and
commissions and expenses of the offering) were approximately $18.2 million. The
net proceeds were used to purchase additional 3-D seismic data acquisition
equipment, to pay outstanding debt to its commercial lender under a revolving
line of credit and a term loan and for certain other purposes.

15
<PAGE> 16

Prior to December 8, 1997, the Company had a $5.0 million line of credit
with Bank One, Texas, N.A. ("Bank One"). At October 31, 1997, the Company had
not drawn any amounts under that line of credit. As of December 8, 1997, the
Company replaced the previous line of credit with a working capital revolving
line of credit of up to $15 million from Bank One (the "New Revolver"). Interest
on advances under the New Revolver will be payable monthly at a variable rate
which is based upon either, at the Company's option, LIBOR or Bank One's base
lending rate. The LIBOR rate, if elected, will range between LIBOR plus 1.75%
and LIBOR plus 2.75% depending upon the debt service coverage ratio the Company
maintains. Similarly, the Bank One base lending rate, if elected, will range
between the base rate minus 0.25% and the base rate plus 0.25%, again depending
upon the Company's debt service coverage ratio. Additionally, the Company will
owe Bank One each fiscal quarter a fee equal of 0.25% of the average daily
unused portion of the New Revolver calculated for the previous quarter. Advances
will be limited to the total of 80% of eligible accounts receivable and 50% of
all eligible lease pool equipment. The New Revolver contains restrictions, among
others, on the ability of the Company to incur indebtedness and pay dividends
and requires the Company to meet certain financial covenants, including a
minimum tangible net worth, a debt service coverage ratio, aging of accounts
receivable and net income. The New Revolver will expire on December 8, 1999, at
which time the unpaid principal amount of the New Revolver will be due and
payable in full.

As of October 31, 1997, capital expenditures for fiscal 1998 totaled
approximately $31.5 million. The Company has budgeted capital expenditures of
$18.3 million for the remainder of fiscal 1998 and approximately $25 million for
fiscal 1999. Included in these budgeted amounts is approximately $27 million of
seismic equipment which the Company has ordered from manufacturers and for which
the Company has obtained future lease commitments. At October 31, 1997, the
Company had satisfied or exceeded the minimum purchase requirements for the
period ended May 1998 under the I/O Agreement, and had exceeded the minimum
purchase requirements under its Exclusive Equipment Lease Agreement with Sercel.
The remaining $4.7 million of seismic equipment required to be purchased under
the I/O Agreement through May 2000 is included in the Company's fiscal 1998 and
1999 budgeted capital expenditures. See "Business -- Key Supplier Agreements."
Management believes that the net proceeds of this Offering, cash provided by
operations and funds available from its commercial lender will be sufficient to
fund its operations and budgeted capital expenditures for the remainder of
fiscal 1998 and 1999.

16
<PAGE> 17

BUSINESS

GENERAL

The Company owns a variety of technologically advanced equipment acquired
from the leading seismic manufacturers. The Company's lease pool includes many
types of equipment used in seismic data acquisition, including all components of
land and transition zone seismic data acquisition systems, geophones and cables,
earth vibrators, peripheral equipment and survey and other equipment. A
substantial portion of the Company's lease equipment is provided by two
manufacturers, Input/Output, Inc. and the Sercel subsidiaries of Compagnie
Generale de Geophysique. The Company believes that most of the advanced seismic
data acquisition systems in use worldwide are either I/O or Sercel systems. In
the last two years, the Company has significantly diversified its equipment
lease pool. At October 31, 1997, approximately 53% of the Company's equipment
lease pool, on a cost basis, consisted of advanced digital recording channels,
with the remainder consisting of peripheral and other equipment.

The Company has supply and exclusive lease referral agreements with several
leading seismic equipment manufacturers including I/O, Sercel and Pelton. The
Company believes that these agreements provide it with a significant competitive
advantage. Under these agreements, the Company is the exclusive worldwide short-
term leasing representative for certain products, except in the case of the I/O
Agreement, which limits the

17
<PAGE> 18

Company's exclusivity to the Western Hemisphere. Additional agreements exist
with certain of these manufacturers allowing the Company to act as sales
representative or distributor for such manufacturer's products in selected
markets. These agreements have varying terms and expire in 1998 through 2000,
subject to modification or extension. See "-- Key Supplier Agreements."

BUSINESS STRATEGY

SEISMIC TECHNOLOGY AND THE INDUSTRY

Seismic surveys are a principal source of information used by oil and gas
companies to identify geological conditions that are favorable for the
accumulation of oil and gas and to evaluate the potential for successful
drilling, development and production of oil and gas. Seismic technology has been
used by the oil and gas industry since the 1920's and has advanced significantly
with improvements in computing and electronic technologies. In recent years, the
oil and gas industry has significantly expanded its use of 3-D seismic which
provides a more comprehensive subsurface image and is believed to have
contributed to improved drilling success rates, particularly in mature oil and
gas basins such as those in North America. Additionally, 2-D seismic data
continues to be used in many areas where 3-D data acquisition is cost
prohibitive or logistical access is limited.

Oil and gas exploration companies utilize seismic data generated from the
use of digital seismic systems and peripheral equipment in determining optimal
locations for drilling oil and gas wells, in the development of oil and gas
reserves, and in reservoir management for the production of oil and gas. A
complete digital seismic

18
<PAGE> 19

data acquisition system generally consists of (i) a central electronics unit
that records and stores digital data ("CEU"), (ii) seismic recording channel
boxes that contain from one to six seismic channels ("channel boxes"), (iii)
geophones, or seismic sensors, (iv) energy sources including dynamite,
compressed air guns or earth vibrators that create the necessary acoustic wave
to be recorded and (v) other peripheral, or accessory, equipment. Peripheral
equipment includes geophysical cables that transmit digital seismic data from
the channel boxes to the CEU, survey equipment, drilling equipment for shot
holes and other equipment.

In seismic data acquisition, an acoustic wave is discharged at or below the
earth's surface through the discharge of compressed air, the detonation of small
explosive charges or the use of vibrators. As the acoustic wave travels through
the earth, portions are reflected by variations in the underlying rock layers
and the reflected energy is captured by the geophones, which are situated at
intervals along paths from the point of acoustical impulse. The resulting
signals are then transmitted to the channel boxes, which convert the reflected
energy wave from analog to digital data and transmit this data via cable to the
CEU. The CEU stores the seismic data on magnetic tape for processing. The
digital data is then input into a specialized seismic processing system that
uses sophisticated computer software programs to enhance the recorded signal and
produce an image of the subsurface strata. By interpreting seismic data, oil and
gas exploration companies create detailed maps of exploration prospects and oil
and gas reservoirs.

In the past, the 2-D seismic survey was the standard data acquisition
technique used to describe geologic formations over a broad area. 2-D seismic
data can be visualized as a single vertical plane of subsurface information.
Data gathered from a 3-D seismic survey is best visualized as a cube of
information that can be sliced into numerous planes, providing different views
of a geologic structure with much higher resolution than is available with
traditional 2-D seismic survey techniques. 3-D seismic surveys require much
larger data acquisition systems. By using a greater number of channels and
flexible configuration, 3-D seismic data provides more extensive and detailed
information regarding the subsurface geology than does 2-D data. As a result,
3-D data allows the geophysicists interpreting the data to more closely select
the optimal location of a prospective drillsite or oil and gas reservoir.

In the exploration and development process, oil and gas companies establish
requirements for seismic data acquisition programs based on their technical
objectives. Because of the expense associated with drilling oil and gas wells,
decisions whether or where to drill are critical to the overall process. Because
3-D seismic data increase drilling success rates and reduce costs, the Company
believes that oil and gas companies are increasingly requiring 3-D seismic
surveys in their activities. As a result of the increasing requirements for this
higher resolution data, which in turn requires additional channels to collect
and transmit the data, seismic data acquisition systems have been expanding in
size during the past several years.

19
<PAGE> 20

BUSINESS AND OPERATIONS

Seismic Equipment Leasing. The Company typically purchases new and used
seismic equipment for short-term (less than one year) lease to its customers,
which primarily include seismic service companies. After the termination of the
original equipment lease, the Company enters into additional short-term leases
with other customers, often leasing such equipment multiple times until the end
of its useful life or its sale. The Company's equipment leasing services
generally include the lease of the various components of seismic data
acquisition systems and related equipment to meet a customer's job
specifications. Such specifications frequently vary as to the number of required
recording channels, geophones, energy sources (e.g., earth vibrators) and other
equipment. The Company's customers generally lease seismic equipment to meet
shortages of recording channels and related equipment for specific surveys.
Typically, the Company does not lease all of the channel boxes and other
peripheral equipment required for seismic surveys, although it has the
capability to lease equipment for an entire seismic system and, from time to
time, will do so.

The Company currently has an equipment lease pool comprising a total of
approximately 14,500 seismic recording channels (each channel being capable of
electronically converting seismic data from analog to digital format and
transmitting the digital data), geophones and cables, earth vibrators,
peripheral equipment and survey and other equipment. All of the Company's lease
pool equipment is manufactured by leading seismic equipment manufacturers and is
widely used in the seismic industry.

The Company's equipment leases generally have terms of three to nine months
and are typically renewable on a month-to-month basis. The Company offers
maintenance of its leased equipment during the lease term for malfunctions due
to failure of material and parts and will provide replacement equipment as
necessary. In addition, the Company provides telephone support services to
answer its lease customers' questions.

The Company's equipment lease rates vary according to an item's expected
useful life, utilization and initial cost. For example, monthly lease rates for
seismic recording channel boxes range between 6% and 8% of the original cost of
the equipment. Lease payments are due and payable on the first day of each month
of the lease term. The lessee must also obtain and keep in force insurance for
the replacement value of the equipment and a specified minimum amount of general
liability and casualty insurance on the leased equipment during the term of the
lease. Before equipment is delivered, the lessee must provide certification that
the Company has been named an additional insured and loss payee on its policies.
The lessee is responsible for all maintenance and repairs of leased equipment
other than those arising from normal wear and tear. All taxes (other than U.S.
federal income taxes) and assessments are the contractual obligation of the
lessee. To the extent foreign taxes are not paid by the lessee, the relevant
foreign taxing authority might seek to collect such taxes from the Company. To
date, no such collection action has been taken against the Company.

A majority of the Company's leasing revenues have historically come from
North American operations. Within North America, a significant portion of the
Company's total revenues are attributable to Canadian operations. Management
believes that the United States and Canada will continue to be the focal points
of the Company's seismic equipment leasing operations for the foreseeable
future, although the Company is pursuing an expanded presence in other
international locations such as South America and the Far East.

Historically, seismic equipment leasing has been susceptible to weather
patterns in certain geographic regions. There is some seasonality to the
Company's lease operations in Canada, where a significant percentage of the
seismic survey activity usually occurs in the winter season, from October
through March. During the months in which the weather is warmer, certain areas
are not accessible to trucks, earth vibrators and other heavy equipment because
of the unstable terrain. In the United States, most of the seismic survey work
is not usually affected by weather. As a result of weather conditions, the
Company attempts to manage its equipment lease pool to meet seasonal demands.
Equipment leased in Canada during the winter months may be moved to the United
States in the warmer months.

20
<PAGE> 21

Seismic Equipment Sales. The Company's equipment sales business serves a
diverse base of industry, governmental, university and research customers. The
Company typically buys used equipment for resale and new equipment in response
to specific customer orders. On occasion, the Company will also hold equipment
of third parties and sell such equipment on consignment.

KEY SUPPLIER AGREEMENTS

The I/O Agreement

Under the I/O Agreement, which was originally entered into in February
1994, the Company is the exclusive third-party recipient of requests from I/O
customers and others to lease, on a short-term basis, channel boxes and certain
peripheral equipment in North and South America through May 31, 2000. The
Company may also acquire certain equipment from I/O at favorable prices based
upon the volume of channel boxes purchased. Subject to certain exceptions, I/O
may not recommend or suggest any competitor of the Company as a potential lessor
of I/O channel boxes in North and South America. As a manufacturer of complete
data acquisition systems that are compatible only with I/O channel boxes, I/O
typically receives inquiries to lease I/O channel boxes from customers desiring
to expand the capacities of their systems on a short-term basis.

A condition of the I/O Agreement is that the Company must purchase an
aggregate of $13.25 million of I/O 3-D channel boxes on or before May 31, 2000
in the following stated installments: (i) by November 30, 1996, at least $3.0
million, (ii) from January 1, 1997 through May 31, 1997, at least $1.25 million
and (iii) in each of the years from June 1, 1997 through May 31, 1998, June 1
through May 31, 1999, and June 1, 1999 through May 31, 2000, at least $3.0
million. As of October 31, 1997, the Company had purchased I/O equipment
totaling $8.6 million under the I/O Agreement, thereby exceeding its purchase
requirements through May 1998.

Under the I/O Agreement, I/O must inform the Company by telephone,
facsimile or letter of the identity of the third party prospective lessee and
the terms, if any, that have been discussed regarding a proposed lease. The
Company may then contact the prospective lessee and negotiate the terms of a
proposed lease of channel boxes. If the Company (i) is unable to lease the
channel boxes due to a shortage in its lease fleet, (ii) cannot agree with a
prospective lessee on the terms of a proposed lease within 72 hours of the
lessee's introduction to the Company or (iii) otherwise chooses not to lease to
a prospective lessee, then I/O may lease channel boxes to the prospective
lessee. I/O has indicated that the 72-hour time period may be extended as long
as the Company and a prospective lessee are engaged in good faith negotiations
and neither of them has terminated such negotiations.

Leases of channel boxes with purchase options are specifically excluded
from the I/O Agreement. Therefore, I/O may continue to enter into leases with
purchase options in North and South America during the term of the I/O
Agreement. I/O may also continue to sell channel boxes during the term of the
I/O Agreement.

The Company primarily purchases new channel boxes from I/O, but from time
to time purchases channel boxes from I/O's existing lease fleet. All of the new
channel boxes purchased from I/O have a warranty which covers, with certain
exceptions, defects in workmanship for six months and defects in materials and
parts for 12 months. Used channel boxes acquired from I/O's existing lease fleet
will be refurbished by I/O and have a warranty which covers, with certain
exceptions, defects in workmanship for three months.

The I/O Agreement is subject to termination by I/O upon the occurrence of
(i) the Company's failure to comply with the terms of the I/O Agreement after
having received written notice of its non-compliance, (ii) the Company's
discontinuance as a going concern, (iii) the Company's default in the payment of
any obligations to I/O after having received notice that payment is due, (iv)
the Company's insolvency or bankruptcy, (v) Billy F. Mitcham, Jr. no longer
owning at least 250,000 shares of Common Stock of the Company, (vi) Billy F.
Mitcham, Jr. no longer remaining as the President of the Company, (vii) any
transfer

21
<PAGE> 22

of the I/O agreement by merger, consolidation, or liquidation or (viii) the
Company's assignment, or attempted assignment of its rights under the agreement.

The Sercel Lease Agreement

In September 1996, the Company entered into the Exclusive Equipment Lease
Agreement with Sercel (the "Sercel Lease Agreement"), under which the Company
acts as Sercel's exclusive worldwide short-term leasing representative and
Sercel must refer to the Company all requests it receives (other than requests
from its affiliates) to lease its 3-D data acquisition equipment and other field
equipment, through December 31, 1999. Subject to the exceptions discussed below,
Sercel may not recommend or suggest any competitor of the Company as a potential
lessor of such data acquisition equipment. In addition, the Company may not
engage in financing leases and leases for a duration of more than one year.

A condition of the Sercel Lease Agreement is that the Company purchase an
aggregate of $10.2 million of Sercel data acquisition and other field equipment
on or before December 31, 1999. At October 31, 1997, the Company had exceeded
its purchase requirements under the Sercel Lease Agreement.

Sercel must inform the Company of the identity of the third party
prospective lessee and the terms, if any, that have been discussed regarding a
proposed lease. If the Company either (i) is unable to lease the Sercel
equipment due to a shortage in its lease fleet, (ii) cannot agree with a
prospective lessee on the terms of a proposed lease within five business days of
the lessee's introduction to the Company or (iii) otherwise chooses not to lease
to a prospective lessee, then Sercel may lease its equipment to the prospective
lessee.

The agreement is subject to termination by Sercel (i) at any time upon (a)
Sercel's reasonable belief that the Company has violated or intends to violate
the Foreign Corrupt Practices Act of 1977, as amended, (b) the Company's refusal
or inability to certify that it is in compliance with laws applicable to its
activities or (c) the Company's insolvency, voluntary or involuntary bankruptcy,
assignment for the benefit of creditors or discontinuance as a going concern and
(ii) upon 90 days prior written notice if the Company no longer employs Billy F.
Mitcham, Jr. in a senior management capacity.

The Sercel Sales Agreement

Through Mitcham Canada Ltd., the Company's wholly-owned subsidiary formed
in September 1996, the Company entered into the Commercial Representation
Agreement (the "Sercel Sales Agreement") with Georex, Inc. ("Georex"), a
wholly-owned subsidiary of Sercel, under which the Company is Sercel's
designated sales representative in Canada for its data acquisition and other
field equipment through September 19, 1999, subject to earlier termination after
September 20, 1998, on 90 days prior notice. If not sooner terminated, the
agreement will automatically be extended for successive one-year periods after
September 19, 1999. Under the agreement, the Company is entitled to receive a
commission on all Sercel equipment and spare parts sold in Canada.

In November 1996, in connection with the Sercel Sales Agreement and the
Sercel Lease Agreement, the Company established an office in Calgary, Alberta,
Canada to sell, service and lease Sercel equipment and to lease and service
equipment of other manufacturers. The Company is prohibited from selling certain
seismic equipment that competes with Sercel equipment during the term of the
agreement and for six months thereafter, except that the Company may sell
individual components that compete with components of Sercel equipment, such as
I/O channel boxes and Pelton vibrator control electronics, as well as any
seismic equipment previously used in its lease fleet.

The Sercel Sales Agreement is subject to termination by Georex upon (i)
Georex's reasonable belief that the Company has violated or intends to violate
the Foreign Corrupt Practices Act of 1977, as amended, (ii) the Company's
refusal or inability to certify that it is in compliance with laws applicable to
its activities or (iii) the Company's insolvency, voluntary or involuntary
bankruptcy, assignment for the benefit of creditors or discontinuance as a going
concern.

22
<PAGE> 23

Other Agreements

In May 1996, the Company entered into an exclusive lease referral agreement
(the "Pelton Agreement") with Pelton. The Company believes Pelton is the leading
manufacturer and supplier of vibrator control electronics. The terms of the
Pelton Agreement regarding exclusive lease referrals and favorable prices are
substantially similar to those of the I/O Agreement, except that the Company has
the exclusive referral rights with respect to Pelton's vibrator control
electronics worldwide, through December 31, 1998. Thereafter, such agreement is
automatically extended until terminated by either party upon three months prior
written notice.

In October 1997, the Company entered into the Exclusive Lease
Representative and Distributor Agreement with StrucTec (the "StrucTec
Agreement"), which manufactures and distributes replacement batteries and
battery packs for seismic data acquisition equipment of several manufacturers.
Under the StrucTec Agreement, through October 29, 1999, the Company is the
exclusive worldwide short-term leasing representative and distributor of
replacement batteries, battery packs and certain other peripheral equipment
manufactured by StrucTec. The Company is also the exclusive worldwide
distributor of StrucTec products, except that StrucTec may continue to sell its
products to seismic equipment manufacturers.

The Company is also engaged in discussions with other seismic equipment
manufacturers regarding terms pursuant to which the Company would act as an
exclusive lease or sales representative with respect to their equipment.

CUSTOMERS; SALES AND MARKETING

The Company's major lease customers are seismic data acquisition companies
and major and independent oil and gas companies. The Company typically has a
small number of lease customers, the composition of which changes yearly as
leases are negotiated and concluded and equipment needs vary. As of October 31,
1997, the Company had 26 lease customers with active leases of various lengths.
Customers of the Company's used and new seismic equipment sales and service
business include its lease customers, foreign governments, universities,
engineering firms and research organizations worldwide.

The Company participates in both domestic and international trade shows and
expositions to inform the oil and gas industry of its products and services. In
addition to advertising in major geophysical trade journals, direct advertising
in the form of a biannual listing of equipment offerings is mailed to over 3,000
oil and gas industry participants. The Company believes this mailing generates
significant seismic equipment lease and sales revenues. In addition, the Company
advertises its alliances with each of I/O, Sercel and Pelton in several major
geophysical trade journals. The Company also maintains a web site on which it
lists its seismic equipment for sale and lease.

The Company works with a network of representatives in several
international markets, including Europe, the Far East and the Commonwealth of
Independent States. These agents generate equipment sales and, to a lesser
extent, equipment leasing business for the Company and are compensated on a
commission basis. The Company also expends resources in the areas of customer
service, product support and the maintenance of customer relationships. In
November 1996, the Company established an office in Calgary, Alberta, Canada
from which it leases and sells seismic equipment.

COMPETITION

Competition in seismic equipment leasing is fragmented, and the Company is
aware of several companies that engage in seismic equipment leasing. The Company
believes that its competitors, in general, do not have as extensive a seismic
equipment lease pool as does the Company. The Company also believes that its
competitors do not have similar exclusive lease referral agreements with
suppliers. Competition exists to a lesser extent from seismic data acquisition
firms that may lease equipment that is temporarily idle. Under the I/O
Agreement, I/O and its subsidiary, Global Charter Corporation, retain the right
to continue to (i) lease channel boxes in certain situations where the Company
and a prospective lessee cannot or do not enter into a lease, as more fully
described in the I/O Agreement, (ii) lease channel boxes with a purchase option
in North and South America and (iii) lease channel boxes outside of North and
South America. Global owns and

23
<PAGE> 24

operates a lease fleet of rental seismic equipment, including 3-D channel boxes.
Global leases seismic equipment subject to purchase options and arranges the
financing for such leases. The Company does not believe those equipment leases
compete with the Company's seismic equipment leases, as the Company does not
typically engage in lease/purchase arrangements for I/O seismic equipment. See
"Risk Factors -- Competition."

The Company competes for seismic equipment leases on the basis of (i) price
and delivery, (ii) availability of both peripheral seismic equipment and
complete data acquisition systems which may be configured to meet a customer's
particular needs and (iii) length of lease term. The Company competes in the
used equipment sales market with a broad base of seismic equipment owners,
including seismic service companies which use and eventually dispose of seismic
equipment, many of which have substantially greater financial resources than the
Company. The Company believes there is one competitor in the used seismic
equipment sales business that generates comparable revenues from such sales, as
well as numerous, smaller competitors who, in the aggregate, generate
significant revenue from such sales.

SUPPLIERS

The Company has several suppliers of seismic equipment for its lease fleet.
The Company currently acquires the majority of the 3-D channel boxes for its
lease fleet from I/O and Sercel and acquires the majority of its vibrator
control electronics from Pelton. The Company believes that I/O and Sercel
manufacture most of the land-based seismic systems and equipment in use. Other
suppliers of peripheral seismic equipment include OYO Geospace Corporation
(geophones, cables and seismic cameras), Charge-Air Compression Systems
(compressors), Steward Cable (cables), Trace Exploration (seismic vibrators),
Mark Products (geophones and cables) and Mertz, Inc. (seismic vibrators). From
time to time, the Company purchases new and used peripheral seismic equipment
from various other manufacturers. Management believes that its current
relationships with its suppliers are satisfactory.

EMPLOYEES

As of October 31, 1997, the Company had 26 employees, none of whom is
covered by a collective bargaining agreement. Twenty employees are involved in
sales, management and administration and six work in field operations. The
Company considers its employee relations to be satisfactory.

PROPERTIES

The Company owns its corporate office and warehouse facilities in
Huntsville, Texas. Its headquarters facility consists of 25,000 square feet of
office and warehouse space on approximately six acres. The Company also leases
approximately 10,000 square feet of office and warehouse space at its facilities
in Calgary, Alberta, Canada.

LEGAL PROCEEDINGS

The Company is not a party to any legal proceedings.

24
<PAGE> 25

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information with respect to the
directors and executive officers of the Company:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Billy F. Mitcham, Jr...... 49 Chairman of the Board of Directors, President and Chief
Executive Officer
Paul C. Mitcham........... 33 Vice President -- Operations and Director
William J. Sheppard....... 49 Vice President -- International Operations and Director
Roberto Rios.............. 39 Vice President -- Finance, Secretary, Treasurer and Director
Gordon M. Greve........... 62 Director
Randal Dean Lewis......... 54 Director
John F. Schwalbe.......... 53 Director
</TABLE>

Billy F. Mitcham, Jr. has been Chairman of the Board of Directors,
President and Chief Executive Officer of the Company since its founding in 1987.
He has more than 20 years of experience in the geophysical industry. From 1979
to 1987, he served in various management capacities with Mitcham Associates,
Inc., a seismic equipment leasing company. From 1975 to 1979, Mr. Mitcham served
in various capacities with Halliburton Services, an oilfield services company.

Paul C. Mitcham is Vice President -- Operations and a director of the
Company and has been employed by the Company in various management positions
since 1989. Prior to 1989, he worked in various field positions in the
geophysical industry. Paul C. Mitcham is the brother of Billy F. Mitcham, Jr.

William J. Sheppard was elected Vice President -- International Operations
and a director of the Company in 1994. Mr. Sheppard has more than 25 years of
experience in the geophysical industry. From 1987 until 1994, Mr. Sheppard was
the President of Alberta Supply Company, a Canadian seismic equipment sales and
services company.

Roberto Rios was elected Vice President -- Finance, Secretary and Treasurer
and a director of the Company in 1994. From 1990 through 1994, Mr. Rios held
several senior-level positions, including Vice President and General Manager,
with ADVO, Incorporated, a publicly-traded nationwide direct mail distribution
company. From 1980 through 1989, he held several financial positions, including
Controller, of The Shoppers' Guide, a company that produces a direct mail
advertising guide and that is a subsidiary of Harte-Hanks Communications, Inc.,
a multimedia company. Mr. Rios is a Certified Public Accountant and a member of
the American Institute of Certified Public Accountants.

Gordon M. Greve was elected a director of the Company in 1995. He held
various management positions with Amoco Corporation from 1977 through 1994 and
has more than 30 years of experience in the geophysical industry. With Amoco, he
served as the Acting Vice President of Exploration Technology and Services from
February through September 1994. He was manager of exploration from 1991 through
1994 and a manager in geophysics from 1986 to 1991. Mr. Greve served as the
President of the Society of Exploration Geophysicists for the 1995-1996 term.

Randal Dean Lewis was elected a director of the Company in 1995. Mr. Lewis
is the interim Dean of the Business School at Sam Houston State University and
he has served in this capacity since 1995. From 1987 to 1995, Mr. Lewis was the
Associate Dean and Professor of Marketing at Sam Houston State University. Prior
to 1987, Mr. Lewis held a number of executive positions in the banking and
finance industries.

John F. Schwalbe was elected a director of the Company in 1994. Mr.
Schwalbe has been a Certified Public Accountant in private practice since 1978,
with primary emphasis on tax planning, consultation and compliance.

25
<PAGE> 26

EMPLOYMENT AGREEMENT WITH BILLY F. MITCHAM, JR.

Billy F. Mitcham, Jr.'s employment agreement with the Company is for a term
of five years, beginning January 15, 1997, which term is automatically extended
for successive one-year periods unless either party gives written notice of
termination at least 30 days prior to the end of the current term. The agreement
provides for an annual salary of $150,000 and a bonus at the discretion of the
Board of Directors. It may be terminated prior to the end of the initial term or
any extension thereof if Mr. Mitcham dies; if it is determined that Mr. Mitcham
has become disabled (as defined); if Mr. Mitcham gives three months prior notice
of resignation; if the Company's Board of Directors gives Mr. Mitcham notice of
termination "without cause"; or if the Board of Directors determines that Mr.
Mitcham has breached the employment agreement in any material respect, has
appropriated a material business opportunity of the Company or has engaged in
fraud or dishonesty with respect to the Company's business or is convicted of or
indicted for any felony criminal offense or any crime punishable by
imprisonment. If Mr. Mitcham terminates his employment within 60 days following
(i) a material reduction in his duties and responsibilities (without his
consent) or (ii) a reduction in, or failure by the Company to pay when due, any
portion of his salary, he will be entitled to payments equal to $450,000,
payable ratably over the 24 months following such termination. For a period of
two years after the termination of the agreement, Mr. Mitcham is prohibited from
engaging in any business activities that are competitive with the Company's
business and from diverting any of the Company's customers to a competitor. The
Company has no employment agreements with any of its other executive officers.
See "Risk Factors -- Dependence on Key Personnel."

CERTAIN TRANSACTIONS AND RELATIONSHIPS

Effective September 20, 1993, the Company and Billy F. Mitcham, Jr. entered
into a Voting Agreement (the "Voting Agreement") with Billy F. Mitcham, Sr.,
Paul C. Mitcham and two trusts established for the benefit of Mr. Mitcham, Jr.'s
sons. Under the Voting Agreement, the holders of shares subject thereto have
agreed that Mr. Mitcham, Jr. has the authority to vote an additional 279,490
shares of Common Stock. Mr. Mitcham, Jr. has voting control of an aggregate of
534,490 shares, or 7.1%, of Common Stock, as of October 31, 1997, and will have
voting control of an aggregate of 484,490 shares, or 5.2%, after the Offering.
The Voting Agreement will terminate on the earlier of the agreement of the
parties, the transfer by the parties of their shares or the expiration of 25
years. See "Principal and Selling Shareholders."

Since April 1994, the Company has engaged Billy F. Mitcham, Sr. under a
consulting agreement. Mr. Mitcham, Sr. has been involved in the energy industry
since 1952 and was formerly the owner and the President of Mitcham Associates,
Inc., which was previously engaged in the leasing and sale of seismic equipment.
Mr. Mitcham, Sr. has served as an industry expert and consultant for the Company
since 1987. The agreement calls for monthly payments to Mr. Mitcham, Sr. of
$5,500. The Company paid Mr. Mitcham, Sr. a total of $66,000 under the agreement
in fiscal 1997. The consulting agreement prohibits Mr. Mitcham, Sr. from
providing consulting services to, and from contacting or soliciting in an effort
to provide services to, any competitor of the Company for two years after the
termination of his engagement. The current term of the agreement expires January
31, 1999, subject to earlier termination on the occurrence of certain stated
events, and is renewable for successive one-year terms at the Company's option.
The Company believes Mr. Mitcham, Sr. could successfully compete with the
Company, given his contacts and extensive knowledge of the seismic leasing
industry. For the above reasons, the Company believes the terms of Mr. Mitcham,
Sr.'s consulting agreement are no less favorable than could be obtained from an
unaffiliated third party with similar experience.

26
<PAGE> 27

PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth certain information with respect to
beneficial ownership of Common Stock as of October 31, 1997 by (i) each of the
Company's directors; (ii) each Selling Shareholder; (iii) each person who is
known by the Company to own beneficially more than 5% of the Common Stock; and
(iv) all executive officers and directors as a group.

<TABLE>
<CAPTION>
SHARES OWNED SHARES OWNED
BEFORE OFFERING NUMBER OF AFTER OFFERING
NAME AND ADDRESS OF --------------------- SHARES ------------------
BENEFICIAL OWNER(1) NUMBER PERCENT OFFERED NUMBER PERCENT
------------------- -------- ------- --------- ------- -------
<S> <C> <C> <C> <C> <C>
Billy F. Mitcham, Jr.................... 676,062(2) 8.8% 20,000(3) 656,062 6.9%
Paul C. Mitcham......................... 129,430(4) 1.7% -- 129,430 1.4%
Billy F. Mitcham III Trust.............. 45,981(5) * 10,000 35,981 *
Benjamin R. Mitcham Trust............... 45,981(5) * 10,000 35,981 *
Roberto Rios............................ 34,422(6) * -- 34,422 *
William J. Sheppard..................... 32,422(7) * -- 32,422 *
Gordon M. Greve......................... 2,000(8) * -- 2,000 *
387 Horse Thief Lane
Durango, Colorado 81301
Randal Dean Lewis....................... 1,000(8) * -- 1,000 *
College of Business Administration
P. O. Box 2056
Sam Houston State University
Huntsville, Texas 77341
John F. Schwalbe........................ 3,000(8) * -- 3,000 *
10700 Richmond Avenue #219
Houston, Texas 77042
All executive officers and directors as
a group (7 persons)................... 748,906(9) 9.7% 20,000(3) 728,906 7.7%
FMR Corp................................ 446,500(10) 5.9% -- 446,500 4.8%
82 Devonshire Street
Boston, Massachusetts 02109
Wellington Management Company, LLP...... 385,000(11) 5.1% -- 385,000 4.1%
75 State Street
Boston, Massachusetts 02109
</TABLE>

- ---------------

* Less than 1%

(1) The business address of each shareholder is the same as the address of the
Company's principal executive offices, unless otherwise indicated.

(2) Includes an aggregate of 279,490 shares of Common Stock owned by Billy F.
Mitcham, Sr. (115,040 shares), Paul C. Mitcham (89,930 shares) and two
trusts established for the benefit of Mr. Mitcham, Jr.'s sons (74,520
shares), and as to which shares Mr. Mitcham, Jr. has the right to vote
under the Voting Agreement. Also includes shares underlying currently
exercisable options to purchase an aggregate of 141,572 shares of Common
Stock, as follows: Billy F. Mitcham, Jr. (38,880 shares), Billy F. Mitcham,
Sr. (45,750 shares), Paul C. Mitcham (39,500 shares) and the two trusts
(17,442 shares).

(3) Represents the shares being sold by the indicated Selling Shareholders, as
to which Billy F. Mitcham, Jr. has the right to vote under the Voting
Agreement.

(4) Includes shares underlying currently exercisable options to purchase 39,500
shares.

(5) Includes shares underlying currently exercisable warrants to purchase 8,721
shares.

27
<PAGE> 28

(6) Includes shares underlying currently exercisable options to purchase 30,000
shares and a currently exercisable warrant to purchase 2,422 shares.

(7) Represents shares underlying currently exercisable options and warrants.

(8) Represents shares underlying currently exercisable options.

(9) Includes shares underlying currently exercisable options and warrants to
purchase an aggregate of 212,416 shares of Common Stock, as follows: the
141,572 shares referred in footnote (2) above, Roberto Rios (32,422
shares), William J. Sheppard (32,422 shares), Gordon M. Greve (2,000
shares), Randal Dean Lewis (1,000 shares) and John F. Schwalbe (3,000
shares).

(10) Based solely on information contained in a Schedule 13G, dated February 14,
1997, filed by FMR Corp. with the Securities and Exchange Commission (the
"Commission").

(11) Based solely upon information contained in a Schedule 13G, dated February
12, 1997, filed by Wellington Management Company, LLP with the Commission.

28
<PAGE> 29

DESCRIPTION OF CAPITAL STOCK AND OTHER SECURITIES

The authorized capital stock of the Company consists of 20,000,000 shares
of Common Stock, par value $.01 per share, and 1,000,000 shares of Preferred
Stock, par value $1.00 per share. As of October 31, 1997, there were outstanding
7,510,759 shares of Common Stock, no shares of Preferred Stock, options to
purchase up to 271,880 shares of Common Stock, and warrants to purchase up to
394,113 shares of Common Stock. Upon completion of this Offering, there will be
9,310,759 issued and outstanding shares of Common Stock.

The following description of the Company's capital stock and other
securities and selected provisions of its Amended and Restated Articles of
Incorporation (the "Amended Articles") and Restated Bylaws is a summary and is
qualified in its entirety by the Company's Amended Articles and Restated Bylaws,
copies of which have been filed with the Commission.

COMMON STOCK

Holders of the Common Stock are entitled to one vote per share for the
election of directors and other corporate matters. Holders of Common Stock are
not entitled to cumulative voting rights in connection with the election of
directors. Therefore, the holders of a majority of the shares voting for the
election of directors may elect all the directors. The Amended Articles permit
actions to be taken by the shareholders of the Company without a meeting, by
written consent, including a written consent signed by less than all of the
shareholders of the Company. Section 9.10A of the Texas Business Corporation Act
("TBCA") requires that prompt notice of the taking of any action by shareholders
without a meeting by less than unanimous written consent be given to all
shareholders who did not consent in writing to the action.

Subject to the rights of any outstanding shares of Preferred Stock, the
holders of Common Stock are entitled to dividends in such amounts and at such
times as may be declared by the Board of Directors of the Company out of funds
legally available therefor. Upon liquidation or dissolution, holders of the
Common Stock are entitled to share ratably in all assets remaining available for
distribution to them after payment or provision for all liabilities and any
preferential rights of any Preferred Stock then outstanding. The Common Stock
carries no preemptive rights. All outstanding shares of Common Stock are, and
the shares of Common Stock to be sold by the Company in the Offering will be,
upon payment therefor as contemplated herein, validly issued, fully paid and
nonassessable securities of the Company.

WARRANTS

As of October 31, 1997, there were outstanding warrants to acquire an
aggregate of 394,113 shares of Common Stock at exercise prices from $3.50 to
$28.12 per share, at a weighted average price of $8.75 per share, expiring on
various dates through October 28, 2002.

The warrants contain provisions providing for appropriate adjustment in the
event of any merger, consolidation, recapitalization, reclassification, stock
dividend, stock split or similar transaction. The warrants contain net issuance
provisions permitting the holder thereof to elect to exercise the warrants in
whole or in part and instruct the Company to withhold from the shares issuable
upon exercise a number of shares, valued at the current fair market value on the
date of exercise, to pay the exercise price. Such net exercise provision has the
effect of requiring the Company to issue shares of Common Stock without a
corresponding increase in capital. A net exercise of the warrants will have the
same dilutive effect on the interests of the Company's shareholders as will a
cash exercise.

OPTIONS

As of October 31, 1997, there were outstanding options to acquire an
aggregate of 271,880 shares of Common Stock, 204,130 of which are currently
exercisable. Such options were exercisable at prices ranging from $2.88 per
share to $22 per share, at a weighted average exercise price of $7.88 per share,
expiring on various dates through October 3, 2007.

29
<PAGE> 30

PREFERRED STOCK

The Board of Directors of the Company is empowered, without approval of the
Company's shareholders, to cause shares of Preferred Stock to be issued in one
or more series and to establish the number of shares to be included in each such
series and the designations, preferences, limitations and relative rights,
including voting rights, of the shares of any series. Because the Board of
Directors has the power to establish the preferences and rights of each series,
it may afford the holders of any series of Preferred Stock preferences, powers
and rights, voting or otherwise, senior to the rights of holders of Common
Stock. This includes, among other things, voting rights, conversion privileges,
dividend rates, redemption rights, sinking fund provisions and liquidation
rights which shall be superior to the Common Stock. The issuance of shares of
Preferred Stock could have the effect of delaying or preventing a change in
control of the Company. No shares of Preferred Stock will be outstanding at the
consummation of this Offering, and the Board of Directors has no current plans
to issue any shares of Preferred Stock.

BUSINESS COMBINATION LAW

The Company is subject to Part Thirteen of the TBCA, known as the "Business
Combination Law." The Business Combination Law prohibits certain mergers, sales
of assets, reclassifications and other transactions between shareholders
beneficially owning 20% or more of the outstanding stock of an "issuing public
corporation" (such shareholders being defined as affiliated shareholders) for a
period of three years following the affiliated shareholder acquiring shares
representing 20% or more of the corporation's voting power, unless two-thirds of
the unaffiliated shareholders approve the transactions at a meeting held no
earlier than six months after the shareholder acquires that ownership. However,
the provisions requiring such a vote of shareholders will not apply to any
transaction with an affiliated shareholder if the transaction or the purchase of
shares by the affiliated shareholder is approved by the board of directors
before the affiliated shareholder acquires beneficial ownership of 20% of the
shares or if the affiliated shareholder was an affiliated shareholder prior to
December 31, 1996, and continued as such through the date of the transaction.

An "issuing public corporation" is defined as a corporation organized under
the laws of Texas that has: (i) 100 or more shareholders, (ii) any class or
series of its voting shares registered under the Exchange Act of 1934, as
amended, or similar or successor statute or (iii) any class or series of its
voting shares qualified for trading in a national market system. The Business
Combination Law also contains an opt-out provision that allows a corporation to
elect out of the statute by adopting a by-law or charter amendment prior to
December 31, 1997, but the Company does not intend to do so.

Under certain circumstances, the Business Combination Law makes it more
difficult for an affiliated shareholder to effect various business combinations
with a corporation for a three-year period. The provisions of the Business
Corporation Law may encourage companies interested in acquiring the Company to
negotiate in advance with the Board of Directors of the Company, since the
shareholder approval requirement would be avoided if a majority of the directors
then approve, before the shareholder becomes an affiliated shareholder, either
the business combination or the transaction that results in the shareholder
becoming an affiliated shareholder.

LIMITATION ON DIRECTORS' LIABILITY

The Amended Articles limit the liability of the Company's directors to the
Company or its shareholders (in their capacity as directors but not in their
capacity as officers) to the fullest extent permitted by Texas law.
Specifically, directors of the Company will not be personally liable for
monetary damages for an act or omission in the director's capacity as a director
except for liability (i) for any breach of the director's duty of loyalty to the
Company or its shareholders, (ii) for acts or omissions not in good faith that
constitute a breach of duty of the director to the Company or that involve
intentional misconduct or a knowing violation of law, (iii) for any transaction
from which the director derived an improper personal benefit or (iv) an act or
omission for which the liability of the director is expressly provided for by an
applicable statute.

The inclusion in the Company's Amended Articles of the limitation of the
personal liability of the Company's directors to the Company may have the effect
of reducing the likelihood of derivative litigation

30
<PAGE> 31

against those directors, and may deter shareholders or management from bringing
a lawsuit against those directors for breach of their duty of care, even though
such an action, if successful, might otherwise have benefitted the Company and
its shareholders.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is North American
Transfer Co. Its address is 147 West Merrick Road, Freeport, New York 11520.

31
<PAGE> 32

UNDERWRITING

Subject to the terms and conditions set forth in the Underwriting
Agreement, the Company and the Selling Shareholders have agreed to sell to the
Underwriters named below (the "Underwriters"), for whom Jefferies & Company,
Inc., Rauscher Pierce Refsnes, Inc. and Gaines, Berland Inc. are acting as
representatives (the "Representatives"), and the Underwriters have severally
agreed to purchase the number of shares of Common Stock set forth opposite their
respective names in the table below at the public offering price less the
underwriting discount set forth on the cover page of this Prospectus:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Jefferies & Company, Inc.................................... 638,000
Rauscher Pierce Refsnes, Inc................................ 478,500
Gaines, Berland Inc......................................... 478,500
Rodman & Renshaw, Inc. ..................................... 75,000
Simmons & Company International............................. 75,000
Southwest Securities, Inc. ................................. 75,000
---------
Total............................................. 1,820,000
=========
</TABLE>

The Underwriting Agreement provides that the obligation of the Underwriters
to purchase the shares of Common Stock is subject to certain conditions. The
Underwriters are committed to purchase all of the shares of Common Stock offered
(other than those covered by the over-allotment option described below), if any
are purchased.

The Underwriters propose to offer the Common Stock to the public initially
at the public offering price set forth on the cover page of this Prospectus and
to certain dealers at such price less a concession not in excess of $0.62 per
share. The Underwriters may allow, and such dealers may reallow, a discount not
in excess of $0.10 per share to certain other dealers. After the public offering
of Common Stock, the public offering price and concessions to selected dealers
and the reallowance to other dealers may be changed by the Representatives.

The Company has granted the Underwriters an option, exercisable for 30 days
from the date of this Prospectus, to purchase up to 273,000 additional shares of
Common Stock at the public offering price, less the underwriting discount. To
the extent such option is exercised, each Underwriter will become obligated,
subject to certain conditions, to purchase additional shares of Common Stock
proportionate to such Underwriter's initial commitment as indicated in the
preceding table. The Underwriters may exercise such right of purchase only for
the purpose of covering overallotments, if any, made in connection with the
shares of Common Stock.

The Company, the directors and executive officers of the Company and the
Selling Shareholders have agreed not to offer for sale, sell or otherwise
dispose of any shares for Common Stock, or any securities convertible into or
exchangeable for shares of Common Stock, for a period of 180 days from the date
of this Prospectus, without the prior written consent of Jefferies & Company,
Inc.

The Representatives have informed the Company and the Selling Shareholders
that they do not expect the Underwriters to confirm sales of shares of Common
Stock offered by this Prospectus to any accounts over which they exercise
discretionary authority.

The Representatives have advised the Company that, pursuant to Regulation M
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
certain persons participating in the Offering may engage in transactions,
including stabilizing bids, syndicate covering transactions or the imposition of
penalty bids, which may have the effect of stabilizing or maintaining the market
price of the Common Stock at a level above that which might otherwise prevail in
the open market. A "stabilizing bid" is a bid for or the purchase of the Common
Stock on behalf of the Underwriters for the purpose of fixing or maintaining the
price of the Common Stock. A "syndicate covering transaction" is the bid for or
the purchase of the Common Stock on behalf of the Underwriters to reduce a short
position incurred by the Underwriters in connection with the

32
<PAGE> 33

Offering. A "penalty bid" is an arrangement permitting the Representatives to
reclaim the selling concession otherwise accruing to an Underwriter or syndicate
member in connection with the Offering if the Common Stock originally sold by
such Underwriter or syndicate member is purchased by the Representatives in a
syndicate covering transaction and has therefore not been effectively placed by
such Underwriter or syndicate member. The Representatives have advised the
Company that such transactions may be effected on the Nasdaq National Market or
otherwise and, if commenced, may be discontinued at any time.

In connection with the Offering, certain Underwriters and selling group
members (if any) who are qualified market makers on The Nasdaq Stock Market may
engage in passive market making transactions in the Common Stock on The Nasdaq
Stock Market in accordance with Rule 103 of Regulation M during the business day
prior to the pricing of the Offering before the commencement of offers or sales
of the Common Stock. Passive market makers must comply with applicable volume
and price limitations and must be identified as such. In general, a passive
market maker must display its bid at a price not in excess of the highest
independent bid for such security, if all independent bids are lowered below the
market maker's bid, however, such bid must then be lowered when certain purchase
limits are exceeded.

The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain civil liabilities that may be incurred in
connection with the Offering, including liabilities under the Securities Act of
1933 (the "Securities Act"), or to contribute to payments the Underwriters may
be required to make in respect thereof.

LEGAL MATTERS

Certain legal matters with respect to the Common Stock offered hereby will
be passed upon for the Company by Norton, Jacobs, Kuhn & McTopy, L.L.P. and for
the Underwriters by Vinson & Elkins L.L.P., Houston, Texas. Carl L. Norton owns
16,000 shares of Common Stock. The Norton Family Trust, of which Carl L. Norton
is a beneficiary, and Sabrina A. McTopy own warrants to acquire an additional
aggregate of 118,230 shares of Common Stock. Carl L. Norton and Sabrina A.
McTopy are partners in Norton, Jacobs, Kuhn & McTopy, L.L.P.

EXPERTS

The Consolidated Financial Statements of the Company as of January 31, 1996
and 1997 and for each of the years in the three-year period ended January 31,
1997 included in this Prospectus have been audited by Hein + Associates LLP,
independent certified public accountants, as set forth in their report appearing
elsewhere herein, and is included herein in reliance upon such report and upon
the authority of such firm as experts in accounting and auditing.

AVAILABLE INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act with respect to the Common Stock offered by this
Prospectus. This Prospectus does not contain all of the information set forth in
such Registration Statement, certain parts of which were omitted in accordance
with the rules and regulations of the Commission. For further information with
respect to the Company and to the securities offered hereby, reference is made
to such Registration Statement, including the exhibits thereto. Statements
contained in this Prospectus as to the contents of any contract or other
document are not necessarily complete, and in each instance reference is made to
the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.

The Company is subject to the informational requirements of the Exchange
Act and in accordance therewith files periodic reports, proxy and information
statements and other information filed with the Commission. Reports, proxy
statements, and other information filed by the Company with the Commission are
available at the web site that the Commission maintains at http://www.sec.gov.
and can be inspected and

33
<PAGE> 34

copied at the public reference facilities maintained by the Commission at its
principal offices at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington D.C. 20549 and at the regional offices of the Commission located at 7
World Trade Center, New York, New York, 10048, and the Chicago Regional Office,
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material may also be obtained from the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Common Stock is quoted on the Nasdaq National Market
and such reports, proxy and information statements and other information
concerning the Company are available at the offices of the Nasdaq National
Market located at 1735 K Street, N.W., Washington, D.C. 20006.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed with the Commission by the Company are
incorporated herein by reference:

(1) The Company's Annual Report on Form 10-KSB for the year ended
January 31, 1997;

(2) The Company's Quarterly Report on Form 10-QSB for the quarter
ended April 30, 1997;

(3) The Company's Quarterly Report on Form 10-QSB/A for the quarter
ended July 31, 1997;

(4) The Company's Quarterly Report on Form 10-QSB for the quarter
ended October 31, 1997;

(5) The Company's Current Report on Form 8-K, dated February 24, 1997;

(6) The Company's Proxy Statement, dated May 12, 1997, for the
Company's 1997 Annual Meeting of Shareholders; and

(7) The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A, effective December 19, 1994.

All documents filed by the Company pursuant to Section 13(a), 13(c), 14, or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of this Offering shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing such documents. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document that also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.

THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM A COPY OF
THIS PROSPECTUS IS DELIVERED, UPON THE WRITTEN OR ORAL REQUEST BY SUCH PERSON, A
COPY OF ANY OR ALL OF THE FOREGOING DOCUMENTS INCORPORATED HEREIN BY REFERENCE,
EXCEPT THAT EXHIBITS TO SUCH DOCUMENTS WILL NOT BE PROVIDED UNLESS THEY ARE
SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS. WRITTEN OR TELEPHONE
REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO THE COMPANY AT 44000 HIGHWAY 75
SOUTH, (POST OFFICE BOX 1175), HUNTSVILLE, TEXAS 77342, ATTENTION: ROBERTO RIOS,
TELEPHONE NUMBER (409) 291-2277.

34
<PAGE> 35

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditor's Report................................ F-2
Consolidated Balance Sheets as of January 31, 1996 and 1997
and October 31, 1997 (unaudited).......................... F-3
Consolidated Statements of Income for the Years Ended
January 31, 1995, 1996 and 1997 and the Nine Months Ended
October 31, 1996 and 1997 (unaudited)..................... F-4
Consolidated Statements of Changes in Shareholders' Equity
for the Years Ended January 31, 1995, 1996 and 1997 and
the Nine Months Ended October 31, 1997 (unaudited)........ F-5
Consolidated Statements of Cash Flows for the Years Ended
January 31, 1995, 1996 and 1997 and the Nine Months Ended
October 31, 1996 and 1997 (unaudited)..................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>

F-1
<PAGE> 36

INDEPENDENT AUDITOR'S REPORT

Board of Directors and Shareholders
Mitcham Industries, Inc.
Huntsville, Texas

We have audited the accompanying consolidated balance sheets of Mitcham
Industries, Inc. and Subsidiary as of January 31, 1996 and 1997, and the related
consolidated statements of income, changes in shareholders' equity and cash
flows for each of the years in the three year period ended January 31, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Mitcham Industries, Inc. and
Subsidiary as of January 31, 1996 and 1997, and the results of their operations
and their cash flows for each of the years in the three year period ended
January 31, 1997, in conformity with generally accepted accounting principles.

/s/ HEIN + ASSOCIATES LLP

Hein + Associates LLP

Houston, Texas
March 12, 1997

F-2
<PAGE> 37

MITCHAM INDUSTRIES, INC.

CONSOLIDATED BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
JANUARY 31,
-------------------------- OCTOBER 31,
1996 1997 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash.............................................. $ 637,000 $ 301,000 $ 3,819,000
Accounts receivable, net of allowance for doubtful
accounts of $347,000, $1,500,000 and $891,000
at January 31, 1996 and 1997 and October 31,
1997, respectively............................. 2,277,000 3,598,000 10,366,000
Installment trade receivables..................... 193,000 1,141,000 3,894,000
Inventory......................................... 206,000 473,000 1,527,000
Prepaid expenses and other current assets......... 274,000 100,000 93,000
Income taxes recoverable.......................... -- -- 177,000
----------- ----------- -----------
Total current assets...................... 3,587,000 5,613,000 19,876,000
Seismic equipment lease pool, net of accumulated
depreciation...................................... 8,115,000 17,963,000 37,450,000
Property and equipment, net of accumulated
depreciation...................................... 472,000 619,000 782,000
Other assets........................................ 65,000 98,000 --
----------- ----------- -----------
Total assets.............................. $12,239,000 $24,293,000 $58,108,000
=========== =========== ===========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Notes payable to bank............................. $ 400,000 $ 999,000 $ --
Current installments of long-term debt............ 447,000 938,000 --
Accounts payable.................................. 491,000 1,941,000 16,040,000
Income taxes payable.............................. 311,000 267,000 --
Deferred income taxes payable..................... 544,000 902,000 113,000
Accrued liabilities and other current
liabilities.................................... 474,000 685,000 1,744,000
----------- ----------- -----------
Total current liabilities................. 2,667,000 5,732,000 17,897,000
----------- ----------- -----------
Long-term debt:
Long-term debt, net of current installments....... 1,155,000 2,674,000 --
Capital lease obligations, net of current
portion........................................ 18,000 -- --
Deferred income taxes............................... 351,000 645,000 1,257,000
----------- ----------- -----------
Total liabilities......................... 4,191,000 9,051,000 19,154,000
Commitments and contingencies
Shareholders' equity:
Preferred stock, $1.00 par value; 1,000,000 shares
authorized; none issued and outstanding........ -- -- --
Common stock, $.01 par value; 20,000,000 shares
authorized; 3,221,000, 4,474,880 and 7,510,759
shares, respectively, issued and outstanding... 32,000 45,000 75,000
Additional paid-in capital........................ 4,340,000 8,819,000 27,607,000
Retained earnings................................. 3,676,000 6,378,000 11,264,000
Cumulative translation adjustment................. -- -- 8,000
----------- ----------- -----------
Total shareholders' equity................ 8,048,000 15,242,000 38,954,000
----------- ----------- -----------
Total liabilities and shareholders'
equity.................................. $12,239,000 $24,293,000 $58,108,000
=========== =========== ===========
</TABLE>

The accompanying Notes are an integral part of these financial statements.

F-3
<PAGE> 38

MITCHAM INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED JANUARY 31, ENDED OCTOBER 31,
------------------------------------- ------------------------
1995 1996 1997 1996 1997
---------- ---------- ----------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Leases of seismic equipment.... $2,424,000 $5,157,000 $ 8,345,000 $5,356,000 $10,901,000
Sales of seismic equipment..... 2,860,000 2,135,000 6,345,000 2,007,000 15,391,000
---------- ---------- ----------- ---------- -----------
Total revenues.............. 5,284,000 7,292,000 14,690,000 7,363,000 26,292,000
---------- ---------- ----------- ---------- -----------
Costs and expenses:
Seismic equipment subleases.... 245,000 251,000 203,000 111,000 238,000
Sales of seismic equipment..... 2,027,000 1,085,000 4,197,000 1,261,000 12,666,000
General and administrative..... 924,000 1,344,000 1,808,000 1,199,000 2,189,000
Provision for doubtful
accounts.................... 35,000 627,000 1,346,000 418,000 709,000
Depreciation................... 363,000 1,331,000 3,112,000 1,951,000 3,919,000
---------- ---------- ----------- ---------- -----------
Total costs and expenses.... 3,594,000 4,638,000 10,666,000 4,940,000 19,721,000
---------- ---------- ----------- ---------- -----------
Operating income................. 1,690,000 2,654,000 4,024,000 2,423,000 6,571,000
Other income (expense):
Interest, net.................. (209,000) (21,000) (240,000) (170,000) 232,000
Other, net..................... 60,000 38,000 367,000 219,000 586,000
---------- ---------- ----------- ---------- -----------
Total other income
(expense)................. (149,000) 17,000 127,000 49,000 818,000
---------- ---------- ----------- ---------- -----------
Income before income taxes....... 1,541,000 2,671,000 4,151,000 2,472,000 7,389,000
Provision for income taxes....... 541,000 958,000 1,449,000 854,000 2,503,000
---------- ---------- ----------- ---------- -----------
Net income....................... $1,000,000 $1,713,000 $ 2,702,000 $1,618,000 $ 4,886,000
========== ========== =========== ========== ===========
Earnings per common and common
equivalent share:
Primary..................... $ 0.66 $ 0.52 $ 0.60 $ 0.37 $ 0.67
Assuming full dilution...... 0.66 0.50 0.59 0.36 0.66
========== ========== =========== ========== ===========
Shares used in computing earnings
per common and common
equivalent share:
Primary..................... 1,514,000 3,306,000 4,522,000 4,431,000 7,330,000
Assuming full dilution...... 1,514,000 3,403,000 4,581,000 4,489,000 7,406,000
========== ========== =========== ========== ===========
</TABLE>

The accompanying Notes are an integral part of these financial statements.

F-4
<PAGE> 39

MITCHAM INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL CUMULATIVE
------------------- PAID-IN RETAINED TRANSLATION
SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT TOTAL
--------- ------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balances, February 1, 1994........... 1,380,000 $14,000 $ -- $ 963,000 $ -- $ 977,000
Issuance of common stock, net of
offering expenses................ 1,790,000 18,000 4,181,000 -- -- 4,199,000
Net income......................... -- -- -- 1,000,000 1,000,000
--------- ------- ----------- ----------- ------- -----------
Balances, January 31, 1995........... 3,170,000.. 32,000 4,181,000 1,963,000 -- 6,176,000
Compensation on stock options
issued to employees.............. -- -- 37,000 -- -- 37,000
Issuance of common stock upon
exercise of warrants............. 51,000 -- 122,000 -- -- 122,000
Net income......................... -- -- -- 1,713,000 -- 1,713,000
--------- ------- ----------- ----------- ------- -----------
Balances, January 31, 1996........... 3,221,000 32,000 4,340,000 3,676,000 -- 8,048,000
Issuance of common stock upon
exercise of warrants............. 1,254,000 13,000 4,479,000 -- -- 4,492,000
Net income......................... -- -- -- 2,702,000 -- 2,702,000
--------- ------- ----------- ----------- ------- -----------
Balances, January 31, 1997........... 4,475,000 45,000 8,819,000 6,378,000 -- 15,242,000
Issuance of common stock, net of
offering expenses (unaudited).... 2,875,000 29,000 18,138,000 -- -- 18,167,000
Issuance of common stock upon
exercise of warrants and options
(unaudited)...................... 161,000 1,000 650,000 -- -- 651,000
Cumulative translation adjustment
(unaudited)...................... -- -- -- -- 8,000 8,000
Net income (unaudited)............. -- -- -- 4,886,000 -- 4,886,000
--------- ------- ----------- ----------- ------- -----------
Balances, October 31, 1997,
(unaudited)........................ 7,511,000 $75,000 $27,607,000 $11,264,000 $ 8,000 $38,954,000
========= ======= =========== =========== ======= ===========
</TABLE>

The accompanying Notes are an integral part of these financial statements.

F-5
<PAGE> 40

MITCHAM INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED JANUARY 31, OCTOBER 31,
---------------------------------------- --------------------------
1995 1996 1997 1996 1997
----------- ----------- ------------ ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income................................... $ 1,000,000 $ 1,713,000 $ 2,702,000 $ 1,618,000 $ 4,886,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation............................... 363,000 1,331,000 3,112,000 1,951,000 3,919,000
Provision for doubtful accounts, net of
chargeoffs............................... (3,000) 257,000 1,153,000 268,000 (609,000)
Loss on disposal of assets................. 12,000 -- -- -- --
Deferred income taxes...................... 467,000 284,000 608,000 666,000 (177,000)
Trade accounts receivable.................. (1,404,000) (742,000) (3,422,000) (1,158,000) (8,912,000)
Accounts payable and other current
liabilities.............................. 71,000 554,000 193,000 (193,000) 4,513,000
Other, net................................. (46,000) (171,000) (126,000) (540,000) (1,382,000)
----------- ----------- ------------ ----------- ------------
Net cash provided by (used in)
operating activities................ 460,000 3,226,000 4,220,000 2,612,000 2,238,000
----------- ----------- ------------ ----------- ------------
Cash flows from investing activities:
Purchases of seismic equipment held for
lease...................................... (1,938,000) (5,321,000) (14,011,000) (5,750,000) (20,624,000)
Purchases of property and equipment.......... (22,000) (444,000) (231,000) (131,000) (279,000)
Proceeds from sale of lease pool equipment
and property and equipment................. -- 846,000 2,603,000 -- 7,976,000
----------- ----------- ------------ ----------- ------------
Net cash used in investing
activities.......................... (1,960,000) (4,919,000) (11,639,000) (5,881,000) (12,927,000)
----------- ----------- ------------ ----------- ------------
Cash flows from financing activities:
Proceeds from short-term borrowings.......... 1,413,000 400,000 1,000,000 -- --
Payments on short-term borrowings............ (4,242,000) (256,000) (401,000) (400,000) (1,937,000)
Proceeds from long-term debt................. 500,000 1,372,000 3,126,000 3,126,000 --
Payments on long-term debt and capitalized
lease obligations.......................... (97,000) (182,000) (1,134,000) (834,000) (2,674,000)
Capitalized stock issuance costs and deferred
financing charges.......................... (25,000) -- -- -- --
Proceeds from issuance of common stock, net
of offering expenses....................... 4,186,000 122,000 4,492,000 4,070,000 18,818,000
----------- ----------- ------------ ----------- ------------
Net cash provided by financing
activities.......................... 1,735,000 1,456,000 7,083,000 5,962,000 14,207,000
----------- ----------- ------------ ----------- ------------
Net increase (decrease) in cash................ 235,000 (237,000) (336,000) 2,693,000 3,518,000
Cash, beginning of period...................... 639,000 874,000 637,000 637,000 301,000
----------- ----------- ------------ ----------- ------------
Cash, end of period............................ $ 874,000 $ 637,000 $ 301,000 $ 3,330,000 $ 3,819,000
=========== =========== ============ =========== ============
Supplemental cash flow information:
Cash paid for:
Interest................................... $ 196,000 $ 78,000 $ 385,000 $ 289,000 $ 143,000
Taxes...................................... 800 384,000 865,000 515,000 2,835,000
=========== =========== ============ =========== ============
Equipment acquired under capital lease....... $ 36,000 $ -- $ -- $ -- $ --
Equipment purchases in accounts payable...... -- 226,000 1,468,000 3,009,000 10,645,000
Equipment purchased with vendor financing.... 2,500,000 -- -- -- --
=========== =========== ============ =========== ============
</TABLE>

The accompanying Notes are an integral part of these financial statements.

F-6
<PAGE> 41

MITCHAM INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION SUBSEQUENT TO JANUARY 31, 1997 IS UNAUDITED)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization -- Mitcham Industries, Inc. (the Company), is a Texas
corporation formed on January 29, 1987. The Company and its wholly-owned
Canadian subsidiary provide full-service equipment leasing, sales and services
to the seismic industry worldwide, primarily in North and South America.

The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned Canadian subsidiary. All intercompany
transactions and balances have been eliminated in consolidation.

Description of leasing arrangements -- The Company leases various types of
seismic equipment to seismic data acquisition companies. All leases at October
31, 1997 are for one year or less. Lease revenue is recognized ratably over the
term of the lease.

Equipment sold on the installment basis -- The Company periodically sells
seismic equipment on an installment basis. The terms of the sale agreements
generally require twelve payments, with two payments due upon delivery of the
equipment and the remaining payments due over the succeeding ten months. To the
extent a down payment equal to at least 16.5% of the sales price is not
received, the gross profit from the sale is deferred until sufficient payments
have been received to warrant full revenue recognition.

Lease/purchase transactions -- The Company periodically leases equipment
with an option to purchase. The percentage of the lease payments that may be
credited towards the purchase price is recorded as deferred revenues until the
customer exercises the option to purchase the equipment; at which time the
transaction is recorded as a sale.

Inventories -- Inventories consist primarily of used seismic equipment
purchased in bulk liquidation sales. Inventories are valued at the lower of cost
or market using the average cost method.

Seismic equipment held for lease -- Seismic equipment held for lease
consists primarily of remote signal conditioners (channel boxes) and peripheral
equipment and is carried at cost, net of accumulated depreciation. Depreciation
is computed on the straight-line method over the estimated useful lives of the
equipment, which is seven years for channel boxes and three to seven years for
other peripheral equipment.

Property and equipment -- Property and equipment is carried at cost, net of
accumulated depreciation. Depreciation is computed on the straight-line method
over the estimated useful lives of the property and equipment. The estimated
useful lives of equipment range from three to seven years. Buildings are
depreciated over 40 years and property improvements over 10 years.

Income taxes -- The Company accounts for its taxes under the liability
method, whereby the Company recognizes on a current and long-term basis,
deferred tax assets and liabilities which represent differences between the
financial and income tax reporting bases of its assets and liabilities.
Historically the Company has paid income taxes on the cash basis of accounting.
Beginning in fiscal 1998, the Company will no longer be eligible to report on
the cash basis of accounting for federal income tax reporting purposes.

Cash equivalents -- For purposes of presenting cash flows, the Company
considers all highly liquid investments with an original maturity of three
months or less to be cash equivalents.

Earnings per share -- Primary earnings per common and common equivalent
share and earnings per common and common equivalent share assuming full dilution
are computed on the weighted average number of shares outstanding adjusted for
the incremental shares attributed to outstanding options and warrants to
purchase common stock.

Use of estimates -- The preparation of the Company's financial statements
in conformity with generally accepted accounting principles requires the
Company's management to make estimates and assumptions that

F-7
<PAGE> 42

MITCHAM INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

affect the amounts reported in these financial statements and accompanying
notes. Actual results could differ from these estimates.

Industry concentration -- The Company's revenues are derived from seismic
equipment leased to companies providing seismic acquisition services. The
seismic industry has rapidly expanded its 3-D seismic acquisition capabilities
over the past few years as this technology has gained broader market acceptance
from oil and gas exploration companies. With this expansion, many of the seismic
acquisition companies in North America, while experiencing rapid growth in 3-D
seismic acquisition revenues, have not experienced corresponding increases in
profitability and have become increasingly leveraged. Should the financial
performance of the companies in this industry not improve, the Company could be
exposed to additional credit risk and be subjected to declining demand for its
leasing services.

New accounting pronouncements -- The Financial Accounting Standards Board
(FASB) issued SFAS No. 121 entitled Impairment of Long-Lived Assets. SFAS No.
121, which became effective beginning February 1, 1996, provides that in the
event that facts and circumstances indicate that the cost of operating assets or
other assets may be impaired, an evaluation of recoverability would be
performed. If an evaluation is required, the estimated future undiscounted cash
flows associated with the asset would be compared to the carrying amount of the
asset to determine if a writedown to market value or discounted cash flow is
required. SFAS No. 121 did not have a material impact on its operating results
or financial condition of the Company upon implementation.

The FASB also issued SFAS No. 123, Accounting for Stock Based Compensation,
effective for fiscal years beginning after December 15, 1995. This statement
allows companies to choose to adopt the statement's new rules for accounting for
employee stock-based compensation plans. For those companies which choose not to
adopt the new rules, the statement requires disclosures as to what earnings per
share would have been if the new rules had been adopted. Management adopted the
disclosure requirements of this statement during fiscal 1997. See Note 12 for
further discussion.

The FASB also issued SFAS No. 128, entitled Earnings Per Share, during
February 1997. The new statement, which is effective for financial statements
issued after December 31, 1997, including interim periods, establishes standards
for computing and presenting earnings per share. The new statement requires
retroactive restatement of all prior-period earnings per share data presented.
The Company does not believe the new statement will have a material impact upon
previously presented earnings per share information.

The FASB also issued SFAS No. 130, Reporting Comprehensive Income and SFAS
No. 131, Disclosures About Segments of an Enterprise and Related Information.
SFAS No. 130 establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income is defined
to include all changes in equity except those resulting from investments by
owners and distributions to owners. Among other disclosures, SFAS No. 130
requires that all items that are required to be recognized under current
accounting standards as components of comprehensive income be reported in a
financial statement that displays with the same prominence as other financial
statements. SFAS No. 131 supersedes SFAS No. 14, Financial Reporting for
Segments of a Business Enterprise. SFAS No. 131 establishes standards on the way
that public companies report financial information about operating segments in
annual financial statements and requires reporting of selected information about
operating segments in interim financial statements issued to the public. It also
establishes standards for disclosures regarding products and services,
geographic areas and major customers. SFAS No. 131 defines operating segments as
components of a company about which separate financial information is available
that is evaluated regularly by the chief operating decision maker in deciding
how to allocate resources and in assessing performance.

SFAS Nos. 130 and 131 are effective for financial statements for periods
beginning after December 15, 1997 and require comparative information for
earlier years to be restated. Because of the recent issuance of these standards,
management has been unable to fully evaluate the impact, if any, the standards
may have on

F-8
<PAGE> 43

MITCHAM INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the future financial statement disclosures. Results of operations and financial
position, however, will be unaffected by implementation of these standards.

Foreign Currency Translation -- All balance sheet accounts of the Canadian
subsidiary are translated at the current exchange rate as of the end of the
accounting period. Income statement items are translated at average currency
exchange rates. The resulting translation adjustment is recorded as a separate
component of shareholders' equity.

Unaudited Interim Information -- The accompanying financial information as
of October 31, 1997 and for the nine month periods ended October 31, 1996 and
1997 has been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. The financial statements
reflect all adjustments, consisting of normal recurring accruals, which are, in
the opinion of management, necessary to fairly present such information in
accordance with generally accepted accounting principles.

2. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<CAPTION>
JANUARY 31,
-------------------- OCTOBER 31,
1996 1997 1997
-------- -------- -----------
<S> <C> <C> <C>
Land............................................ $ 25,000 $ 25,000 $ 25,000
Building and improvements....................... 346,000 360,000 392,000
Furniture and fixtures.......................... 153,000 288,000 535,000
Autos and trucks................................ 37,0000 122,000 122,000
-------- -------- ---------
561,000 795,000 1,074,000
Less accumulated depreciation................... (889,000) (176,000) (292,000)
-------- -------- ---------
$472,000 $619,000 $ 782,000
======== ======== =========
</TABLE>

3. NOTES PAYABLE TO BANK

On January 31, 1996, the Company executed a new line of credit with a bank.
The Company may borrow up to $1,000,000 under the line of credit which bears
interest at prime plus 0.5% (9% at January 31, 1997). Advances under the line of
credit are collateralized by accounts receivable and inventory. Borrowings under
the line were limited to 80% of eligible accounts receivable and 50% of eligible
inventory, as defined. This line was replaced by the credit facility discussed
in Note 4.

F-9
<PAGE> 44

MITCHAM INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
JANUARY 31,
------------------------ OCTOBER 31,
1996 1997 1997
---------- ---------- -----------
<S> <C> <C> <C>
Note payable to a bank due in monthly installments of
$13,889 plus interest at 1% over its base lending
rate (10.5% and 10.75% at January 31, 1995 and
1996), due June 1997, collateralized by lease pool
equipment........................................... $ 234,000 $ -- $ --
Note payable to a bank, due in monthly installments of
$2,803, including interest at 9%, due September
1998, collateralized by land and a building......... 274,000 264,000 --
Note payable to a bank, due in monthly installments of
$833 plus interest at its base lending rate plus 1%
(9.75% at January 31, 1996), due September 2000,
collateralized by land and a building............... 48,000 -- --
Note payable to a bank under a $4,206,000 term loan
facility, due in monthly installments of $26,270,
including interest at 9.5%, through March 2000,
collateralized primarily by lease pool equipment and
an assignment of leases............................. 1,046,000 3,348,000 --
---------- ---------- -------
1,602,000 3,612,000 --
Less current maturities.......................... (447,000) (938,000) --
---------- ---------- -------
$1,155,000 $2,674,000 --
========== ========== =======
</TABLE>

All long-term debt balances outstanding as of March 1997 were paid off with
the proceeds of the offering of common stock discussed in Note 14.

In January 1997, the Company established a second revolving line of credit
for up to $4.0 million (the "Equipment Revolver") to be used solely for
short-term financing of up to 75% of the seismic equipment purchased by the
Company for approved lease/purchase contracts, and a second term loan of $1.0
million (the "Second Term Loan") to be used solely for long-term financing of up
to 80% of the purchase price of other seismic equipment. Interest on the
Equipment Revolver and the Second Term Loan accrues at a floating rate of
interest equal to the bank's rate of interest ("Base Rate") plus 0.5%. Interest
on amounts advanced under the Equipment Revolver is payable monthly, and the
principal amount is due six months after the date of the initial advance;
provided, however, that if the lessee under a lease/purchase contract does not
purchase the seismic equipment subject to the lease, and there has been no
default (as defined) under the lease, then the Company may extend the maturity
date for an additional 18 months (the "Extended Term"). In such event, the
principal amount of and interest on the amount advanced under the Equipment
Revolver would be payable in ratable monthly installments over the Extended
Term. Interest on the principal amount of the Second Term Loan is payable in
ratable monthly installments over a two-year period through and including
January 1999. No advances had been made on either of these two credit facilities
at October 31, 1997.

As of December 8, 1997, the Company replaced the previous line of credit
with a working capital revolving line of credit of up to $15 million from Bank
One (the "New Revolver"). Interest on advances under the New Revolver will be
payable monthly at a variable rate which is based upon either, at the Company's
option, LIBOR or Bank One's base lending rate. The LIBOR rate, if elected, will
range between LIBOR plus 1.75% and LIBOR plus 2.75% depending upon the debt
service coverage ratio the Company maintains. Similarly, the Bank One base
lending rate, if elected, will range between the base rate minus 0.25% and the
base rate plus 0.25%, again depending upon the Company's debt service coverage
ratio. Additionally, the

F-10
<PAGE> 45

MITCHAM INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Company will owe Bank One each fiscal quarter a fee equal of 0.25% of the
average daily unused portion of the New Revolver calculated for the previous
quarter. Advances will be limited to the total of 80% of eligible accounts
receivable and 50% of all eligible lease pool equipment. The New Revolver
contains restrictions, among others, on the ability of the Company to incur
indebtedness and pay dividends and requires the Company to meet certain
financial covenants, including a minimum tangible net worth, a debt service
coverage ratio, aging of accounts receivable and net income. The New Revolver
will expire on December 8, 1999, at which time the unpaid principal amount of
the New Revolver will be due and payable in full. The Company's subsidiary,
Mitcham Canada Ltd., has guaranteed full repayment of the New Revolver.

5. LEASES

The Company leases and subleases seismic equipment to customers under
operating leases with non-cancelable terms of one year or less. These leases are
generally renewable on a month-to-month basis. All taxes (other than U.S.
federal income taxes) and assessments are the contractual responsibility of the
lessee. To the extent the foreign taxes are not paid by the lessee, the relevant
foreign taxing authorities might seek to collect such taxes from the Company.
Under the terms of its lease agreements, any amounts paid by the Company to such
foreign taxing authorities may be billed and collected from the lessee. If the
Company is unable to collect the foreign taxes it paid on behalf of its lessees,
the Company may have foreign tax credits in the amounts paid which could be
applied against its U.S. income tax liability subject to certain limitations.
The Company is not aware of any foreign tax obligations as of October 31, 1997.

The Company leases seismic equipment from others under month-to-month
operating leases. Lease expense incurred by the Company in connection with such
leases amounted to $245,000, $251,000 and $203,000 for the years ended January
31, 1995, 1996 and 1997, respectively, and $111,000 and $238,000 for the nine
months ended October 31, 1996 and 1997, respectively.

A summary of the equipment held for lease to others is as follows:

<TABLE>
<CAPTION>
JANUARY 31,
------------------------- OCTOBER 31,
1996 1997 1997
----------- ----------- ----------------
<S> <C> <C> <C>
Remote signal conditioners (channel boxes)... $ 6,764,000 $13,274,000 $23,566,000
Other peripheral equipment................... 2,816,000 8,471,000 20,684,000
Less: accumulated depreciation............... (1,465,000) (3,782,000) (6,800,000)
----------- ----------- -----------
$ 8,115,000 $17,963,000 $37,450,000
=========== =========== ===========
</TABLE>

F-11
<PAGE> 46

MITCHAM INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. INCOME TAXES

The components of income tax expense are as follows:

<TABLE>
<CAPTION>
JANUARY 31,
--------------------------------
1995 1996 1997
-------- -------- ----------
<S> <C> <C> <C>
Current:
Federal........................................... $ 71,000 $698,000 $ 775,000
State............................................. 3,000 (24,000) 22,000
-------- -------- ----------
74,000 674,000 797,000
Deferred............................................ 467,000 284,000 652,000
-------- -------- ----------
$541,000 $958,000 $1,449,000
======== ======== ==========
</TABLE>

The components of the Company's deferred tax liability are as follows:

<TABLE>
<CAPTION>
JANUARY 31,
-----------------------
1996 1997
--------- -----------
<S> <C> <C>
Deferred tax asset -- allowance for doubtful accounts....... $ 123,000 $ 536,000
Deferred tax liabilities:
Conversion from accrual to cash method of accounting...... (667,000) (1,660,000)
Depreciation.............................................. (351,000) (423,000)
--------- -----------
Deferred tax liability, net............................... $(895,000) $(1,547,000)
========= ===========
</TABLE>

The following is a reconciliation of expected to actual income tax expense:

<TABLE>
<CAPTION>
YEARS ENDED JANUARY 31,
--------------------------------
1995 1996 1997
-------- -------- ----------
<S> <C> <C> <C>
Federal income tax expense at 34%................... $524,000 $913,000 $1,411,000
State income taxes and nondeductible expenses....... 17,000 45,000 38,000
-------- -------- ----------
$541,000 $958,000 $1,449,000
======== ======== ==========
</TABLE>

7. RELATED PARTY TRANSACTIONS

The Company completed transactions with companies controlled by a
shareholder of the Company or in which a shareholder of the Company has a
substantial ownership interest. The following is a summary of transactions with
these companies:

<TABLE>
<CAPTION>
YEARS ENDED JANUARY 31,
----------------------------
1995 1996 1997
------- -------- -------
<S> <C> <C> <C>
Office and warehouse rent expense....................... $48,000 $ 32,000 $ --
Equipment lease expense and purchases................... 11,000 28,000 --
Seismic equipment sales................................. -- -- --
Purchase of office and warehouse........................ -- 325,000 --
</TABLE>

F-12
<PAGE> 47

MITCHAM INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. SALES AND MAJOR CUSTOMERS

The components of sales revenue are as follows:

<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED JANUARY 31, ENDED OCTOBER 31,
------------------------------------ ------------------------
1995 1996 1997 1996 1997
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Sales -- seismic
equipment............... $2,860,000 $2,135,000 $2,809,000 $2,007,000 $ 3,424,000
Sales -- seismic equipment
under lease purchase
options................. -- -- 3,536,000 -- 11,967,000
---------- ---------- ---------- ---------- -----------
$2,860,000 $2,135,000 $6,345,000 $2,007,000 $15,391,000
========== ========== ========== ========== ===========
</TABLE>

A summary of the Company's revenues from foreign customers by geographic
region is as follows:

<TABLE>
<CAPTION>
YEARS ENDED JANUARY 31,
------------------------------------
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Canada........................................... $ 346,000 $1,022,000 $3,287,000
UK/Europe........................................ 339,000 699,000 1,657,000
South America.................................... -- 949,000 1,271,000
Asia............................................. 885,000 943,000 393,000
Other............................................ 222,000 213,000 178,000
---------- ---------- ----------
Totals................................. $1,792,000 $3,826,000 $6,786,000
========== ========== ==========
</TABLE>

One customer represented 16% and 18% of the Company's total revenues for
fiscal 1995 and 1996, respectively, and three customers represented 15%, 14% and
12%, respectively, of fiscal 1997 total revenues. Three customers represented
20%, 12% and 10%, respectively, of total revenues for the nine months ended
October 31, 1997. No other customer exceeded 10% of revenues for fiscal 1995,
1996 and 1997 and the nine months ended October 31, 1997.

9. CONCENTRATIONS OF CREDIT RISK

As of January 31, 1996 and 1997 and October 31, 1997, amounts due from
customers which exceeded 10% of accounts receivable amounted to an aggregate of
$1.1 million from three customers, $1.7 million from two customers, and $7.4
million from three customers, respectively.

One of the Company's significant customers filed for bankruptcy protection
during December 1996. Revenues derived from this customer amounted to 15% of
total revenues for the fiscal year ended January 31, 1997. As of that date,
amounts due from this customer totaled approximately $1.2 million. As of January
31, 1997, the Company's allowance for doubtful accounts was $1.5 million, which
amount was intended to fully reserve all amounts due from this customer and
provide for any potential loss associated with the Company's remaining trade
accounts receivable. For the nine months ended October 31, 1997, this customer
represented approximately 7% of the Company's revenues. Through October 1997,
the Company has received payments from this customer totaling $1.2 million,
which represents final settlement on the amounts owed the Company representing
post-bankruptcy petition claims of approximately $1.6 million. The Company
expects to collect one-half of pre-bankruptcy petition claims, which are
approximately $755,000 as of October 31, 1997. All of the approximately $750,000
that will not be collected from Grant has been written off. The Company's
allowance for doubtful accounts balance at October 31, 1997 is $891,000.

The Company maintains deposits with banks which exceed the Federal Deposit
Insurance Corporation (FDIC) insured limit and has a money market account
included in its cash balances which is not FDIC insured. Management believes the
risk of loss in connection with these accounts is minimal.

F-13
<PAGE> 48

MITCHAM INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10. SHAREHOLDERS' EQUITY

The Company has 1,000,000 shares of preferred stock authorized, none of
which are outstanding as of July 31, 1997. The preferred stock may be issued in
multiple series with various terms, as authorized by the Company's Board of
Directors. The Company has 20,000,000 shares of common stock authorized, of
which 7,510,759 are issued and outstanding as of October 31, 1997. Warrants to
acquire 892,750 shares of the Company's common stock at $3.50 per share issued
in connection with the Company's 1995 initial public offering were exercised
during fiscal 1997. During March 1997, the Company consummated a public offering
of its common stock, as more fully discussed in Note 14, in which it sold to
underwriters 2,875,000 shares of common stock.

The Company issued warrants to various shareholders during fiscal 1995 to
acquire 49,500 shares of the Company's common stock at $5.00 per share. The
number of shares and exercise price of the warrants were adjusted to 63,953 and
$3.87, respectively, during fiscal 1996 as a result of the anti-dilution
provisions of the warrants. Of these warrants, 49,113 remained unexercised at
October 31, 1997.

In July 1995, the Company issued warrants to acquire 35,000 shares of its
common stock to a public relations firm engaged by the Company. The warrants are
exercisable at $3.50 per share for a period of five years from their issuance
and 10,000 remain unexercised at October 31, 1997.

In January 1995, the Company issued warrants to acquire 85,000 units
(consisting of two shares of common stock and one warrant to purchase one share
of common stock at $4.20 per share) at $7.97 per unit to underwriters in
connection with the Company's initial public offering. The securities underlying
these warrants, as well as the common stock underlying currently outstanding
warrants, are subject to certain piggy-back registration rights. As of October
31, 1997, 5,000 of these warrants remained unexercised.

In August 1996, in exchange for services, the Company issued warrants to
its legal counsel to purchase 50,000 shares of its common stock for $6.43 per
share, exercisable for a period of four years from issuance. Of this amount,
warrants to acquire 40,000 shares are unexercised at October 31, 1997. In
December 1996, in exchange for services, the Company issued warrants to its
legal counsel to purchase 50,000 shares of its common stock at $9.28 per share,
exercisable beginning December 14, 1997 for a period of four years from their
issuance. In October 1997, in exchange for services, the Company issued warrants
to its legal counsel to purchase 25,000 shares of its common stock for $28.12
per share, exercisable beginning October 28, 1998 for a period of four years
from their issuance.

Warrants to acquire 200,000 shares of the Company's common stock were
issued to underwriters in connection with the Company's secondary offering in
March 1997. The warrants are exercisable at $8.40 per share for a period of two
years from their issuance and are unexercised at October 31, 1997.

11. COMMITMENTS AND CONTINGENCIES

Equipment purchases -- On February 22, 1994, the Company executed an
agreement with Input/Output, Inc. (I/O) under which I/O will notify the Company
of any inquiries it receives to lease I/O's channel boxes and other peripheral
equipment in North and South America and will allow the Company the opportunity
to provide such leasing. In the event the Company and a prospective customer are
unable to reach agreement on such leases in a 72-hour period, I/O shall have the
right to offer the equipment for lease to the prospective customer. Effective
June 1, 1996, the Company entered into an agreement with I/O to amend the terms
of and extend the Exclusive Lease Referral Agreement through May 31, 2000. Under
the I/O Agreement as amended, the Company must purchase an aggregate of $13.25
million of I/O equipment as follows: $3.0 million of I/O equipment between June
1 and November 30, 1996 (the "Renewal purchase"), with a minimum of $1.5 million
to be purchased by August 31, 1996. Thereafter, from January 1, 1997 through May
31, 1997, the Company must purchase at least an aggregate of $1.25 million of
I/O equipment. In each of the years from June 1, 1997 through May 31, 1997, June
1 through May 31, 1999 and June 1, 1999 through May 31, 2000, the Company must
purchase at least an aggregate of $3.0 million of I/O equipment (of

F-14
<PAGE> 49

MITCHAM INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

an aggregate additional $10.25 million after the $3.0 million Renewal Purchase
is made). As of October 31, 1997, the Company believes it has fulfilled the
terms of the agreement, including the minimum purchase commitments through such
date.

In September 1996, the Company entered into two agreements with the Sercel
subsidiaries of Compagnie Generale de Geophysique ("Sercel"). One agreement, the
Exclusive Equipment Lease Agreement provides that until December 31, 1999, the
Company will be Sercel's short-term leasing representative throughout the world
and that Sercel will refer to the Company all requests it receives from its
customers to lease its 3-D data acquisition equipment and other field equipment.
The second agreement, the Commercial Representation Agreement, provides that
until September 19, 1999, subject to certain termination after September 19,
1998, the Company will be Sercel's exclusive sales agent in Canada. In
connection with entering into this agreement, the Company established an office
in Calgary, Alberta, Canada in November 1996. As of October 31, 1997, the
Company believes it has fulfilled the terms of the agreement, including the
minimum purchase commitments.

These agreements are subject to termination under certain circumstances
including, among others, non-payment of amounts due, insolvency of the Company,
and the current President of the Company no longer being employed.

Employment Agreement -- Effective January 15, 1997, the Company entered
into an employment agreement with the Company's President for a term of five
years, beginning January 15, 1997, which term is automatically extended for
successive one-year periods unless either party gives written notice of
termination at least 30 days prior to the end of the current term. The agreement
provides for an annual salary of $150,000, subject to increase by the Board of
Directors. It may be terminated prior to the end of the initial term or any
extension thereof if the President dies; if it is determined that the President
has become disabled; if the Board of Directors determines that the President has
breached the employment agreement in any material respect, has appropriated a
material business opportunity of the Company or has engaged in fraud or
dishonesty with respect to the Company's business that is punishable by
imprisonment. If the President's employment is terminated by the Company prior
to the end of the initial five-year term other than for a reason enumerated
above, the President will be entitled to payments equal to $450,000, payable
ratably over the 24 months following such termination. For a period of two years
after the termination of the agreement, the President is prohibited from
engaging in any business activities that are competitive with the Company's
business and from diverting any of the Company's customers to a competitor.

Consulting agreements -- The Company has a contract with the father of the
Company's President, to provide sales consulting services. The agreement calls
for payments of $5,500 per month through April 1999, subject to earlier
termination on the occurrence of certain events.

12. STOCK OPTION PLANS

The Company has a stock option plan under which options to purchase a
maximum of 400,000 shares of common stock may be issued to officers, employee
directors, key employees and consultants of the Company. The stock option plan
provides both for the grant of options intended to qualify as "incentive stock
options" under the Internal Revenue Code of 1986, as amended (the Code), as well
as options that do not so qualify.

F-15
<PAGE> 50

MITCHAM INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Activity in the 1994 Stock Option Plan and Director Plan (as defined
below), for the years ended January 31, 1995, 1996 and 1997 and the nine months
ended October 31, 1997 was as follows:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
NUMBER OF PRICE
SHARES PER SHARE
--------- ---------
<S> <C> <C>
Outstanding, January 31, 1994............................... -- $ --
Exercised................................................. -- --
Granted................................................... 183,250 5.00
Expired................................................... -- --
------- ------
Outstanding, January 31, 1995............................... 183,250 5.00
Exercised................................................. -- --
Granted................................................... 68,000 3.27
Expired................................................... -- --
------- ------
Outstanding, January 31, 1996............................... 251,250 4.54
Exercised................................................. -- --
Granted................................................... 43,500 5.87
Expired................................................... (1,000) --
------- ------
Outstanding, January 31, 1997............................... 293,750 4.73
Exercised................................................. (89,120) 4.68
Granted................................................... 67,750 21.52
Expired................................................... (500) 3.29
------- ------
Outstanding, October 31, 1997............................... 271,880 $ 8.91
======= ======
</TABLE>

As of October 31, 1997, options to acquire 204,130 shares of the Company's
common stock were fully vested and exercisable at a weighted average exercise
price of $4.73 per share. The remaining options which have a weighted average
exercise price of $21.52 per share, will vest in fiscal 1999.

If not previously exercised, options outstanding at October 31, 1997, will
expire as follows: 39,880 options expire on May 9, 1999; 9,000 options expire on
August 14, 2001; 67,250 options expire on May 9, 2004; 1,000 options expire on
March 16, 2005; 2,000 options expire on June 8, 2005; 51,000 options expire on
December 4, 2005; 3,000 options expire on June 12, 2006; 31,000 options expire
on August 14, 2006; 3,000 options expire on June 11, 2007; and 64,750 expire on
October 3, 2007.

With respect to incentive stock options, no option may be granted more than
ten years after the effective date of the stock option plan or exercised more
than ten years after the date of grant (five years if the optionee owns more
than 10% of the common stock of the Company at the date of grant). Additionally,
with regard to incentive stock options, the exercise price of the option may not
be less than 100% of the fair market value of the common stock at the date of
grant (110% if the optionee owns more than 10% of the common stock of the
Company). Subject to certain limited exceptions, options may not be exercised
unless, at the time of exercise, the optionee is in the service of the Company.
As of October 31, 1997, options to purchase an aggregate of 262,880 shares of
common stock are issued and outstanding under the 1994 Stock Option Plan,
107,130 of which are exercisable at a price of $5.00 per share, 51,000 of which
are exercisable at $3.29 per share, 39,000 of which are exercisable at $5.75 per
share, 1,000 of which are exercisable at $6.00 per share and 64,750 of which are
exercisable at $22.00 per share.

The Company has a non-employee director stock option plan (the Director
Plan) which provides for the grant of options that do not qualify as "incentive
stock options" under the Code. Options granted under the Director Plan must have
an exercise price at least equal to the fair market value of the Company's
common

F-16
<PAGE> 51

MITCHAM INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

stock on the date of grant. Pursuant to the Director Plan, options to purchase
1,000 shares of common stock are granted to each non-employee director upon his
election to the Board and every year thereafter so long as he is re-elected to
the Board of Directors. Options granted under the Director Plan are fully vested
one year after their grant and expire ten years after the date of the grant. As
of October 31, 1997 options to purchase an aggregate of 9,000 shares of common
stock are issued and outstanding under the Director Plan, 1,000 of which are
exercisable at $2.88 per share, 2,000 of which are exercisable at $3.13 per
share, 3,000 of which are exercisable at $5.75 per share and 3,000 of which are
exercisable at $11.13 per share.

The Company applies APB Opinion No. 25, Accounting for Stock Issued to
Employees, and related Interpretations in accounting for its plans. Accordingly,
no compensation cost has been recognized for its stock option plans. Had
compensation expense for the Company's stock-based compensation plans been
determined based on the fair value at the grant dates for awards under those
plans, consistent with the method of SFAS No. 123, the Company's net income and
income per common share would have been decreased to the pro forma amounts
indicated below:

<TABLE>
<CAPTION>
YEARS ENDED JANUARY 31,
------------------------
1996 1997
---------- ----------
<S> <C> <C>
Net income
As reported............................................... $1,713,000 $2,702,000
Pro forma................................................. 1,657,000 2,443,000
Net income per common share (primary)
As reported............................................... $ .52 $ .60
Pro forma................................................. .50 .54
</TABLE>

The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option pricing model with the following assumptions;
risk free rates of 5.4% to 7%; volatility of 48.4%; no assumed dividend yield;
and expected lives of five to ten years.

13. FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments consist of trade receivables and
payables and notes payable to banks. The Company believes the carrying value of
these financial instruments approximate their estimated fair value.

14. PUBLIC OFFERINGS OF COMMON STOCK

During March 1997, the Company completed a public offering of a total of
3,450,00 shares of its common stock, of which 2,875,000 shares were sold by the
Company and 575,000 shares were sold by the selling shareholders. The net
proceeds to the Company from the offering (after deducting underwriting
discounts and commissions and estimated expenses of the offering) were
approximately $18.2 million.

The Company has filed a registration statement with the Securities and
Exchange Commission for an offering of 1,820,000 shares of its common stock, of
which 1,800,000 shares are being sold by the Company and 20,000 shares are being
sold by selling shareholders. The Company has granted an option to the
underwriters to purchase up to 273,000 shares on the same terms to satisfy
over-allotments in the sale of the 1,820,000 shares.

F-17
<PAGE> 52

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS, IN CONNECTION WITH THE OFFER MADE
BY THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE
UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER TO SELL OR SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH SOLICITATION.

---------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................... 3
Risk Factors............................. 7
Use of Proceeds.......................... 10
Price Range of Common Stock.............. 10
Dividend Policy.......................... 10
Capitalization........................... 11
Selected Consolidated Financial Data..... 12
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................. 13
Business................................. 17
Management............................... 25
Certain Transactions and Relationships... 26
Principal and Selling Shareholders....... 27
Description of Capital Stock and Other
Securities............................. 29
Underwriting............................. 32
Legal Matters............................ 33
Experts.................................. 33
Available Information.................... 33
Incorporation of Certain Documents by
Reference.............................. 34
Index to Financial Statements............ F-1
</TABLE>

1,820,000 SHARES

[MITCHAM INDUSTRIES, INC. LOGO]
COMMON STOCK
PROSPECTUS
JEFFERIES & COMPANY, INC.

RAUSCHER PIERCE REFSNES, INC.

GAINES, BERLAND INC.

December 17, 1997