MITCHAM INDUSTRIES INC, 424A, 1997-02-03

MITCHAM INDUSTRIES INC
424A, 1997-02-03
INDUSTRIAL MACHINERY & EQUIPMENT

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<PAGE> 1
Filed Pursuant to Rule 424(a)
Registration No. 333-19997

***************************************************************************
* *
* Information contained herein is subject to completion or amendment. A *
* Registration Statement relating to these securities has been filed *
* with the Securities and Exchange Commission. These securities may not *
* be sold nor may offers to buy be accepted prior to the time the *
* Registration Statement becomes effective. This Prospectus shall not *
* constitute an offer to sell or the solicitation of an offer to buy *
* nor shall there be any sale of these securities in any State in which *
* such offer, solicitation or sale would be unlawful prior to *
* registration or qualification under the securities laws of any such *
* State. *
***************************************************************************

SUBJECT TO COMPLETION, DATED JANUARY 31, 1997

3,000,000 SHARES

[MITCHAM INDUSTRIES, INC., LOGO]
COMMON STOCK

Of the 3,000,000 shares of Common Stock offered hereby, 2,500,000 shares
are being offered by Mitcham Industries, Inc. (the "Company"), and 500,000
shares are being offered by the selling shareholders (the "Selling
Shareholders"). The Company will not receive any proceeds from the sale of
shares by the Selling Shareholders.

The Common Stock is quoted on the Nasdaq National Market under the symbol
"MIND." The last reported sale price of the Common Stock on January 31, 1997, as
reported by the Nasdaq National Market, was $8 5/8 per share. See "Price Range
of Common Stock."

FOR A DISCUSSION OF CERTAIN MATERIAL FACTORS THAT SHOULD BE CONSIDERED IN
CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK, SEE "RISK FACTORS" COMMENCING
ON PAGE 6 HEREOF.

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

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>
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) SHAREHOLDERS(2)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share.............................. $ $ $ $
- -----------------------------------------------------------------------------------------------------------------------
Total(3)............................... $ $ $ $
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
</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, as amended. Does not reflect additional compensation
to the Underwriters in the form of (i) a non-accountable expense allowance
of $ ($ if the Underwriters' over-allotment option is
exercised in full) and (ii) warrants to purchase an aggregate of 200,000
shares of Common Stock at 120% of the Price to Public for two years
beginning one year after the effective date of the Registration Statement of
which this Prospectus is a part. For additional information with respect to
the arrangements between the Company and the Representatives, see
"Underwriting."

(2) Before deducting offering expenses payable by the Company, estimated to be
approximately $225,000.

(3) The Company and the Selling Shareholders have granted to the Underwriters a
30-day option to purchase up to 450,000 additional shares of Common Stock
solely to cover over-allotments, if any, on the same terms and conditions as
the shares offered hereby. If such option is exercised in full, the total
Price to Public, Underwriting Discounts and Commissions, Proceeds to Company
and Proceeds to Selling Shareholders will be $ , $ ,
$ and $ , respectively. See "Underwriting."

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

The shares of Common Stock are offered by the several Underwriters named
herein, subject to receipt and acceptance by them and subject to their right to
reject any order in whole or in part. It is expected that delivery of such
shares will be made at the offices of Rodman & Renshaw, Inc., New York, New
York, on or about , 1997.

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

RODMAN & RENSHAW, INC. SIMMONS & COMPANY
INTERNATIONAL

The date of this Prospectus is , 1997.
<PAGE> 2

[ILLUSTRATIONS]

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.

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 10b-6A UNDER THE EXCHANGE ACT. SEE "UNDERWRITING."

2
<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 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 and a public offering price of $8 5/8 per
share. See "Glossary of Terms" for certain terms relating to the seismic
industry used in this Prospectus. Investors should carefully consider the
information set forth in "Risk Factors" beginning on page 6.

THE COMPANY

Mitcham Industries, Inc. leases and sells seismic data acquisition
equipment to companies engaged in the oil and gas industry. The Company believes
it is the leading independent lessor of land-based three-dimensional ("3-D")
seismic data acquisition equipment, including channel boxes and other peripheral
equipment. Seismic data acquisition equipment is used in the identification and
graphic definition of subsurface geologic structures and formations that
potentially contain oil and gas. Channel boxes are remote data acquisition units
that collect and transmit seismic data. The Company has exclusive lease referral
and supply agreements with the two principal manufacturers of land-based 3-D
seismic equipment, Input/Output, Inc. ("I/O") and Societe E'tudes Recherches et
Construction Electroniques, S.A. ("SERCEL"). From January 1, 1994 through
December 31, 1996, the Company's lease fleet of 3-D channel boxes increased from
85 to approximately 2,000 (or from 510 channels to approximately 12,000
channels). Earnings before interest, taxes, depreciation and amortization
("EBITDA") of approximately $4.0 million for the fiscal year ended January 31,
1996 represented an increase of 90.4% over the fiscal year ended January 31,
1995, and EBITDA of approximately $4.6 million for the nine months ended October
31, 1996 represented an increase of 82.6% over the same prior year period.

Demand for channel boxes has increased significantly in recent years
primarily due to the increasing use of 3-D seismic surveys. Current 3-D seismic
techniques use a greater number of channels and channel boxes than two
dimensional ("2-D") surveys, thereby providing higher resolution data for a
better representation of the earth's subsurface. Additionally, oil and gas
companies are contracting for 3-D surveys over larger geographical areas and
often specify an increase in the concentration of channel boxes as a means of
increasing data resolution. Consequently, seismic survey companies frequently
use more than twice the number of channels for surveys than they typically own.
The Company believes that many companies providing land-based seismic surveys
will meet this additional requirement by leasing channel boxes and supporting
peripheral equipment on a short-term basis rather than making the substantial
capital expenditures necessary to purchase such equipment.

The Company leases its seismic equipment primarily to seismic data
acquisition companies and major oil and gas exploration companies conducting
land-based seismic data acquisition surveys. The leases generally have terms
between three and nine months and are renewable thereafter on a month-to-month
basis. Rates for 3-D channel boxes range from between 6% to 8% per month of the
equipment's purchase price. For the nine months ending October 31, 1996, the
Company maintained a utilization rate of its 3-D channel boxes in excess of 80%.

The Company has entered into supply and exclusive referral agreements with
each of I/O and SERCEL. The Company believes that most of the land-based 3-D
seismic systems and equipment currently in use and being put into use are I/O
and SERCEL systems. The agreement with I/O, originally entered into in February
1994, has been the source of a majority of the Company's lease pool equipment to
date. Pursuant to this agreement, I/O must refer to the Company, on an exclusive
basis, any requests it receives to lease its 3-D channel boxes and certain
peripheral equipment in North and South America. A condition of the agreement
with I/O is that the Company must purchase, at favorable rates, $13.3 million of
equipment from I/O by May 31, 2000. Through December 31, 1996, the Company has
met $4.8 million of this requirement.

SERCEL must refer to the Company all requests it receives to lease its 3-D data
acquisition equipment and peripheral equipment. This agreement also provides
that the Company must purchase, at favorable rates, up to $10.2 million of 3-D
data acquisition equipment and other field equipment from SERCEL. Through
December 31, 1996, the Company has met $4.5 million of this requirement. The
second agreement provides that until September 19, 1999, subject to earlier
termination after September 20, 1997, the Company will be SERCEL's exclusive
sales agent in Canada. See "Business -- I/O Agreement" and "-- SERCEL
Agreements."

BUSINESS STRATEGY

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

- Enlarge and diversify its lease pool of seismic equipment. To meet
customer demand, the Company will continue to increase its lease pool of
channel boxes and peripheral seismic equipment, such as seismic
vibrators, vibrator control electronics and geophones. The Company
believes that the availability of a larger and more complete pool of 3-D
seismic equipment for lease will encourage seismic survey companies to
increasingly lease, rather than purchase, such equipment. The Company is
also evaluating the feasibility of a lease pool of marine seismic
equipment.

- Expand its international presence. The Company receives referrals from
SERCEL on a worldwide basis and is its exclusive sales agent in Canada,
where the Company has an office in Calgary, Alberta. The Company believes
that its alliances with I/O and SERCEL will help the Company to further
penetrate, on a cost-effective basis, international markets, where such
manufacturers are well-recognized and have well-developed business
relationships. The Company is also evaluating the feasibility of opening
additional foreign offices.

- Develop and enhance alliances with major seismic equipment manufacturers.
The Company uses alliances with manufacturers such as I/O and SERCEL to
acquire and build its lease pool of equipment and increase customer
referrals. The Company continues to seek to expand the scope of these
alliances, as well as develop similar arrangements with other equipment
manufacturers.

The Company was formed in January 1987. Its principal offices are located
at 44000 Highway 75 South, (Post Office Box 1175), Huntsville, Texas, and its
telephone number is (409) 291-2277.

THE OFFERING

<TABLE>
<S> <C>
Common Stock Offered by the Company................ 2,500,000
Common Stock Offered by the Selling Shareholders... 500,000
Common Stock to be Outstanding after the
Offering......................................... 6,974,880 shares (1)
Use of Proceeds.................................... To purchase additional 3-D seismic data
acquisition equipment for the Company's lease
pool, for repayment of debt and for other
working capital purposes. See "Use of Proceeds."
Nasdaq National Market Symbol...................... "MIND"
</TABLE>

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

(1) Does not include (i) 293,750 shares of Common Stock issuable upon the
exercise of options granted and an additional 106,250 shares that may be
granted in the future under stock option plans, (ii) 246,723 shares of
Common Stock issuable upon the exercise of certain warrants and (iii)
200,000 shares of Common Stock issuable upon the exercise of the
Representatives' Warrants. See "Description of Capital Stock and Other
Securities." Does not reflect the exercise of a warrant for 8,380 shares of
Common Stock to be sold in the Offering by one of the Selling Shareholders.
See "Principal and Selling Shareholders."
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<PAGE> 5

SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The following table sets forth selected financial data of the Company for
each of the four fiscal years ended January 31, 1996, which was derived from the
Company's audited financial statements, and the fiscal year ended January 31,
1992, which was derived from unaudited financial statements of the Company. Also
set forth below is selected financial data for the nine months ended October 31,
1995 and 1996 and at October 31, 1996, which was derived from the unaudited
financial statements of the Company. In the opinion of management of the
Company, the unaudited 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, 1995 and 1996 are not necessarily indicative of results for a
full fiscal year. The data should be read in conjunction with the 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
FISCAL YEAR ENDED JANUARY 31, ENDED OCTOBER 31,
----------------------------------------------- ------------------
1992 1993 1994 1995 1996 1995 1996
----------- ------ ------ ------ ------ ------- -------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED STATEMENTS OF OPERATIONS DATA:
Revenues:
Leases of seismic equipment........ $ 602 $1,266 $1,601 $2,424 $5,157 $3,431 $5,356
Sales of seismic equipment......... 1,510 1,156 2,926 2,860 2,135 1,643 2,007
------ ------ ------ ------ ------ ------ ------
Total......................... 2,112 2,422 4,527 5,284 7,292 5,074 7,363
Expenses:
Seismic equipment subleases........ 335 915 896 245 251 222 111
Sales of seismic equipment......... 1,002 796 1,772 2,027 1,085 1,000 1,261
General and administrative......... 651 655 655 924 1,344 990 1,199
Depreciation....................... 17 29 62 363 1,331 825 1,951
Provision for doubtful accounts.... -- -- 38 35 627 372 418
------ ------ ------ ------ ------ ------ ------
Total expenses................ 2,005 2,395 3,423 3,594 4,638 3,409 4,940
------ ------ ------ ------ ------ ------ ------
Other income (expense)............... (44) 15 4 (149) 17 20 49
------ ------ ------ ------ ------ ------ ------
Income before income taxes........... 63 42 1,108 1,541 2,671 1,685 2,472
Provision for income taxes........... 19 7 405 541 958 605 854
------ ------ ------ ------ ------ ------ ------
Net income........................... $ 44 $ 35 $ 703 $1,000 $1,713 $1,080 $1,618
====== ====== ====== ====== ====== ====== ======
SELECTED PER SHARE DATA:
Net income(1)........................ $ 0.03 $ 0.03 $ 0.51 $ 0.66 $ 0.52 $ 0.34 $ 0.37
====== ====== ====== ====== ====== ====== ======
Weighted average common shares
outstanding(2)..................... 1,380 1,380 1,380 1,514 3,306 3,170 4,431
SELECTED CASH FLOW AND OTHER DATA:
EBITDA(3)............................ $ 74 $ 75 $1,186 $2,113 $4,023 $2,516 $4,593
Capital expenditures................. $ -- $ 28 $ 900 $4,496 $5,765 $4,099 $8,890
</TABLE>

<TABLE>
<CAPTION>
AT JANUARY 31, AT OCTOBER 31, 1996
---------------------------------------------- ------------------------
1992 1993 1994 1995 1996 ACTUAL AS ADJUSTED(5)
----------- ---- ------ ------ ------- ------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED BALANCE SHEET DATA:
Total assets.................. $581 $615 $2,427 $8,199 $12,239 $23,252 $38,421
Total liabilities............. 342 341 1,450 2,023 4,191 9,516 5,116
Long-term debt(4)............. -- -- -- 261 1,173 2,910 --
Shareholders' equity.......... 239 274 977 6,176 8,048 13,736 33,305
</TABLE>

- ---------------
(1) There was no dilutive effect to earnings per share for the fiscal years
ended January 31, 1992, 1993, 1994 and 1995 and for the nine months ended
October 31, 1995. Fully diluted earnings per share was $0.50 for the fiscal
year ended January 31, 1996 and $0.36 for the nine months ended October 31,
1996.
(2) The fully diluted weighted average common shares outstanding was 3,403,000
at January 31, 1996 and 4,489,000 at October 31, 1996.
(3) EBITDA is income before interest, taxes, depreciation and amortization.
EBITDA is a financial measure commonly used in the Company's industry and
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.
(4) Long-term debt includes long-term debt net of current maturities and capital
lease obligations net of current portion.
(5) As adjusted to reflect receipt by the Company of estimated net proceeds from
the issuance of 2,500,000 shares of Common Stock and the application of such
proceeds. See "Use of Proceeds" and "Capitalization."
5
<PAGE> 6

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

The discussion in this Prospectus contains forward-looking statements that
involve risks and uncertainties. The Company's actual 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 INSTABILITY 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 for land-based seismic data acquisition operating
in the world, 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 natural 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; UNCERTAIN FUTURE RESULTS

The Company's operating risks occur primarily in its seismic equipment
leasing business. The Company's leases typically have a term of three to nine
months and provide gross revenues equal to approximately 20% to 70% of the
original acquisition cost of the equipment, thereby recovering only a portion of
the Company's capital investment. The Company's ability to generate lease
revenues, and thus its profitability, is dependent upon obtaining additional
lease contracts after the termination of an initial 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 three to nine month equipment 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 -- Operations."

DEPENDENCE ON KEY PERSONNEL

The Company's success is dependent on, among other things, the services of
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 provides for an annual salary of $150,000 and a bonus at the
discretion of the Company's Board of Directors. The agreement also 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 (the "SERCEL Lease Agreement")
is terminable at such time

6
<PAGE> 7

as he is no longer employed by the Company in a senior management capacity. See
"Management -- Employment Agreement with Billy F. Mitcham, Jr."

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 negotiated and concluded and 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, 1994,
1995 and 1996, the single largest customer accounted for approximately 36%, 16%
and 18%, 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."

Grant Geophysical, Inc. ("Grant") filed for bankruptcy protection during
December 1996. Revenues derived from Grant amount to 18.5% of total revenues for
the eleven-month period ended December 31, 1996. As of that date, amounts due
from Grant totalled approximately $1.0 million. During December 1996, the
Company increased its allowance for trade accounts receivable from $615,000 at
October 31, 1996 to $1.5 million at December 31, 1996, which amount was intended
to fully reserve all amounts due from Grant and provide for any potential loss
associated with the Company's remaining trade accounts receivable. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

TECHNOLOGICAL OBSOLESCENCE

The Company has a substantial capital investment in 3-D seismic equipment.
In addition, under the I/O Agreement and the SERCEL Lease Agreement, the Company
is required to make a substantial additional investment in 3-D seismic and other
peripheral equipment. The Company believes that the technology represented by
the 3-D equipment in service and to be acquired from I/O and SERCEL 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 3-D seismic equipment. In the
past, the Company has been successful in avoiding material losses caused by
technological obsolescence by selling its older technology 2-D seismic equipment
in the international market and, to a lesser extent, to smaller seismic survey
firms in the domestic market. However, there can be no assurance that the
Company will be able to sell technologically obsolete equipment in the future.
See "Business -- I/O Agreement" and "-- SERCEL 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 in the future to account for a
greater portion of the Company's revenues than do the second and third quarters
of its fiscal year. This fluctuation in revenues is primarily due to the
increased seismic survey activity in Canada from October through March, which
significantly affects the Company because about one-half of the Company's total
revenues are historically attributable to 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 -- Seismic Equipment
Leasing."

DEPENDENCE UPON KEY SUPPLIERS

The Company relies upon and has agreements with I/O, SERCEL and Pelton
Company, Inc. ("Pelton"), a manufacturer and supplier of vibrator control
electronics, to manufacture and sell to the

7
<PAGE> 8

Company the seismic equipment that the Company leases and sells to its customers
and, to a lesser extent, to refer leasing customers to the Company. The
termination of the agreements for any reason, including any failure by the
Company to meet the minimum purchase requirements under the I/O Agreement or the
SERCEL Lease Agreement, could materially adversely affect the Company's
business. While the Company does not anticipate any difficulty in obtaining
seismic equipment or lease referrals from I/O, SERCEL or Pelton based upon past
experience or in meeting the minimum purchase requirements under the I/O
Agreement or the SERCEL Lease Agreement, any such occurrence could have a
material adverse effect upon the Company's business, financial condition and
results of operations. See "Business -- I/O Agreement," "-- SERCEL Agreements"
and "-- Pelton Agreement."

COMPETITION

Competition in the leasing of seismic equipment is fragmented, and the
Company is aware of numerous companies that engage in such equipment leasing.
The Company believes that its competitors do not lease seismic equipment of
several manufacturers or have as extensive a seismic equipment lease pool as
does the Company. The Company also believes that its competitors do not have
exclusive lease referral agreements with suppliers similar to the Company's.
Competition exists to a lesser extent from seismic data acquisition firms
seeking to generate revenue from 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 sales,
including companies providing land-based seismic surveys and major oil and gas
exploration companies that use seismic equipment, many of which have
substantially greater financial resources than the Company. There are also
numerous smaller competitors who, in the aggregate, generate significant revenue
from the sale of seismic survey equipment. See "Business -- I/O Agreement,"
" -- SERCEL Agreements" and "-- Competition."

SHARES ELIGIBLE FOR FUTURE SALE

Sales of significant amounts of Common Stock in the public market following
this Offering could adversely affect prevailing market prices. The Company's
executive officers and directors, who collectively own 1,183,070 shares, or
26.4%, of the outstanding Common Stock, have agreed that for a period of 180
days after the date of this Prospectus they will not offer for sale, sell or
otherwise dispose of any shares of Common Stock (other than the 325,000 shares
being sold herein by the executive officers and directors who are Selling
Shareholders) or any securities convertible into or exchangeable for shares of
Common Stock, without the prior written consent of Rodman & Renshaw, Inc. on
behalf of the Underwriters. Upon the expiration of such agreements, all of the
shares held by such persons will be eligible for sale subject to the volume
limitations and other restrictions of Rule 144 under the Securities Act of 1933,
as amended (the "Securities Act"). There are also outstanding under the
Company's 1994 Stock Option Plan and 1994 Non-Employee Director Stock Option
Plan (collectively, the "Stock Option Plans") options to purchase 293,750 shares
of Common Stock, of which 250,250 are currently exercisable. The Company has
registered under the Securities Act the shares issuable upon the exercise of
such options and such shares are eligible for resale in the public market,
except that any such shares issued to affiliates are subject to the volume
limitations and other restrictions of Rule 144. In addition, there are
outstanding warrants to purchase 246,723 shares of Common Stock, of which
warrants to purchase 196,723 shares are currently exercisable. In connection
with this Offering, the Company has agreed to sell warrants to the
Representatives to purchase from the Company up to 200,000 shares of Common
Stock, exercisable in whole or in part at any time during the two-year period
commencing one year after the effective date of the Registration Statement of
which this Prospectus is a part. See "Dilution," "Shares Eligible for Future
Sale" and "Underwriting."

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<PAGE> 9

DILUTION

Purchasers of Common Stock in this Offering will experience immediate and
substantial dilution of $3.79 in net tangible book value per share as of October
31, 1996. See "Dilution."

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 lenders prohibits the payment of dividends. See "Dividend Policy."

POSSIBLE ADVERSE EFFECT OF ISSUANCE OF PREFERRED STOCK WITHOUT SHAREHOLDER
APPROVAL

The Company's Articles of Incorporation, as amended, authorize the issuance
of 1,000,000 shares of "blank check" preferred stock, par value $1.00 per share
("Preferred Stock"), with such designations, rights and preferences as may be
determined from time to time by the Board of Directors. No shares of Preferred
Stock will be outstanding as of the consummation of this Offering. However,
because the Board of Directors is empowered 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 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 -- Preferred Stock."

LIMITATION ON DIRECTOR LIABILITY

The Company's Articles of Incorporation, as amended, 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.

9
<PAGE> 10

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,500,000 shares of
Common Stock being offered hereby (assuming a public offering price of $8 5/8
per share and after deducting underwriting discounts and commissions and
estimated expenses of the Offering) are estimated to be approximately $19.6
million ($22.5 million if the Underwriters' over-allotment option is exercised
in full). Approximately (i) $12.0 million of the net proceeds will be used to
purchase additional 3-D seismic data acquisition equipment, including the $2.35
million remaining minimum purchase requirement under the I/O Agreement through
May 31, 1998, (ii) $4.4 million will be used to pay outstanding debt to
commercial lenders, (iii) $1.0 million will be used for expenses related to the
opening of the Company's Calgary, Alberta, Canada office, and (iv) $250,000 will
be used to improve computer and inventory tracking systems. The remainder of the
net proceeds will be used for other general corporate purposes.

Of the $4.4 million that will be used to pay debt to commercial lenders,
approximately $1.0 million will be used to pay the Company's revolving line of
credit (the "Working Capital Revolver") with Bank One, Texas, N.A. ("Bank One")
and $3.4 million will be used to pay its loan (the "Term Loan") with Banc One
Leasing Corporation ("Banc One Leasing"). Approximately $1.0 million of the Term
Loan was advanced in January 1996 primarily to pay amounts due to I/O for 3-D
channel boxes acquired in the 1996 fiscal year. In March 1996, an additional
approximately $3.1 million of the Term Loan was advanced to the Company, of
which approximately $1.5 million was used to pay all amounts outstanding under a
previous equipment loan and line of credit and to pay amounts due to I/O for
seismic equipment acquired in February and March 1996. Amounts may be advanced
under the Term Loan solely for equipment purchases and are payable in monthly
installments of principal and interest through January 31, 2000 and bear
interest at 9.5%. Amounts borrowed under the Working Capital Revolver bear
interest at a floating rate of interest equal to Banc One's base rate of
interest ("Base Rate") plus 0.5%, payable quarterly, and the outstanding
principal balance is due January 31, 1998. Both the Working Capital Revolver and
the Term Loan are secured by an assignment of the Company's accounts receivable,
inventory, leases and equipment, including its lease pool equipment.

10
<PAGE> 11

PRICE RANGE OF COMMON STOCK

The Common Stock is traded on the Nasdaq National Market under the symbol
"MIND." Prior to December 19, 1994, there was no public market for the Common
Stock. 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, 1995:
Fourth Quarter (commencing December 19, 1994)............. $3 1/4 $2 5/8
Fiscal Year Ended January 31, 1996:
First Quarter............................................. $3 1/8 $2 5/16
Second Quarter............................................ 4 15/32 2 5/16
Third Quarter............................................. 4 3/4 3 5/8
Fourth Quarter............................................ 5 5/8 3 3/4
Fiscal Year Ended January 31, 1997:
First Quarter............................................. $8 $5 1/8
Second Quarter............................................ 8 5 3/4
Third Quarter............................................. 6 1/2 5 3/8
Fourth Quarter............................................ 9 7/8 5 7/8
</TABLE>

On January 31, 1997, the last reported sale price for the Common Stock on
the Nasdaq National Market was $8 5/8. As of January 31, 1997, there were 49
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 loan agreements with Bank One and
Banc One Leasing prohibit the payment of dividends without their prior consent.
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 of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."

11
<PAGE> 12

CAPITALIZATION

The following table sets forth the capitalization of the Company at October
31, 1996 and as adjusted to reflect the sale and issuance by the Company of
2,500,000 shares of Common Stock at an assumed offering price of $8 5/8 per
share, and the application of the net estimated 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 Financial Statements and notes thereto that are
included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
AT OCTOBER 31, 1996
----------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt, less current portion........................ $ 2,910 $ --
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; 4,378,650 shares issued and outstanding and
6,878,650 shares as adjusted(1)(2)..................... 44 69
Additional paid-in capital................................ 8,398 27,942
Retained earnings......................................... 5,294 5,294
------- -------
Total shareholders' equity........................ 13,736 33,305
------- -------
Total capitalization.............................. $16,646 $33,305
======= =======
</TABLE>

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

(2) The number of shares issued and outstanding after completion of the Offering
does not reflect the exercise of a warrant for 8,380 shares of Common Stock
to be sold in the Offering by one of the Selling Shareholders. See
"Principal and Selling Shareholders."

12
<PAGE> 13

DILUTION

The Company's net tangible book value as of October 31, 1996 was
approximately $13.7 million, or $3.14 per share. Net tangible book value per
share is equal to the total tangible assets of the Company minus total
liabilities divided by the number of shares of Common Stock outstanding. After
giving effect to the sale of the 2,500,000 shares of Common Stock offered by the
Company hereby and the receipt of net proceeds of such sale (assuming a public
offering price of $8 5/8 per share and after deducting underwriting discounts
and commissions and estimated expenses payable by the Company), the net tangible
book value of the Company at October 31, 1996 on a pro forma basis would have
been approximately $33.3 million, or $4.84 per share, representing an immediate
dilution in pro forma net tangible book value of $3.79 per share, or 43.9%, to
new investors. The following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed public offering price per share..................... $8.63
-----
Net tangible book value per share as of October 31, 1996,
before this Offering................................... $3.14
Increase in net tangible book value per share attributable
to new investors....................................... 1.70
-----
Pro forma net tangible book value per share as of October
31, 1996, giving effect to this Offering(1)............... 4.84
-----
Dilution in net tangible book value to new investors........ $3.79
=====
</TABLE>

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

(1) Does not reflect the exercise of a warrant for 8,380 shares of Common Stock
to be sold in the Offering by one of the Selling Shareholders. See
"Principal and Selling Shareholders."

If the Underwriters' over-allotment is exercised in full, the pro forma net
tangible book value per share of Common Stock after this Offering would be $5.00
per share, which would result in dilution to new investors of $3.63 per share,
or 42.0%.

13
<PAGE> 14

SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
FISCAL YEAR ENDED JANUARY 31, OCTOBER 31,
----------------------------------------------- ---------------
1992 1993 1994 1995 1996 1995 1996
----------- ------ ------ ------ ------ ------ ------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED STATEMENTS OF OPERATIONS DATA:
Revenues:
Leases of seismic equipment........ $ 602 $1,266 $1,601 $2,424 $5,157 $3,431 $5,356
Sales of seismic equipment......... 1,510 1,156 2,926 2,860 2,135 1,643 2,007
------ ------ ------ ------ ------ ------ ------
Total......................... 2,112 2,422 4,527 5,284 7,292 5,074 7,363
Expenses:
Seismic equipment subleases........ 335 915 896 245 251 222 111
Sales of seismic equipment......... 1,002 796 1,772 2,027 1,085 1,000 1,261
General and administrative......... 651 655 655 924 1,344 990 1,199
Depreciation....................... 17 29 62 363 1,331 825 1,951
Provision for doubtful accounts.... -- -- 38 35 627 372 418
------ ------ ------ ------ ------ ------ ------
Total expenses................ 2,005 2,395 3,423 3,594 4,638 3,409 4,940
------ ------ ------ ------ ------ ------ ------
Other income (expense)............... (44) 15 4 (149) 17 20 49
------ ------ ------ ------ ------ ------ ------
Income before income taxes........... 63 42 1,108 1,541 2,671 1,685 2,472
Provision for income taxes........... 19 7 405 541 958 605 854
------ ------ ------ ------ ------ ------ ------
Net income........................... $ 44 $ 35 $ 703 $1,000 $1,713 $1,080 $1,618
====== ====== ====== ====== ====== ====== ======
SELECTED PER SHARE DATA:
Net income(1)........................ $ 0.03 $ 0.03 $ 0.51 $ 0.66 $ 0.52 $ 0.34 $ 0.37
====== ====== ====== ====== ====== ====== ======
Weighted average common shares
outstanding(2)..................... 1,380 1,380 1,380 1,514 3,306 3,170 4,431
SELECTED CASH FLOW AND OTHER DATA:
EBITDA(3)............................ $ 74 $ 75 $1,186 $2,113 $4,023 $2,516 $4,593
Capital expenditures................. $ -- $ 28 $ 900 $4,496 $5,765 $4,099 $8,890
</TABLE>

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

(1) There was no dilutive effect to earnings per share for the fiscal years
ended January 31, 1992, 1993, 1994 and 1995 and for the nine months ended
October 31, 1995. Fully diluted earnings per share was $0.50 for the fiscal
year ended January 31, 1996 and $0.36 for the nine months ended October 31,
1996.

(2) The fully diluted weighted average common shares outstanding was 3,403,000
at January 31, 1996 and 4,489,000 at October 31, 1996.

(3) EBITDA is income before interest, taxes, depreciation and amortization.
EBITDA is a financial measure commonly used in the Company's industry and
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.

(4) Long-term debt includes long-term debt net of current maturities and capital
lease obligations net of current portion.

(5) As adjusted to reflect receipt by the Company of estimated net proceeds from
the issuance of 2,500,000 shares of Common Stock and the application of such
proceeds. See "Use of Proceeds" and "Capitalization."

14
<PAGE> 15

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, 1994, 1995 and 1996, and
October 31, 1996, and results of operations and cash flows for each of the three
years in the period ended January 31, 1996 and the unaudited nine month periods
ended October 31, 1995 and 1996. The Company's 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 data acquisition equipment to
companies engaged in the oil and gas industry. The Company provides short-term
leasing of peripheral seismic equipment to meet a customer's requirements, as
well as offering maintenance and support during the lease term. The Company
leases its seismic equipment primarily to seismic data acquisition companies and
major oil and gas exploration companies conducting land-based seismic surveys in
North and South America. The Company also sells and services new and used
seismic data acquisition systems and peripheral equipment to companies engaged
in oil and gas exploration.

All leases at October 31, 1996 were for a term of one year or less. Seismic
equipment held for lease consists primarily of 3-D channel boxes, and is carried
at cost, net of accumulated depreciation.

The following table sets forth, for the periods indicated, the percentages
that certain items in the Company's financial statements bear to total revenues,
and the percentage changes in the dollar amounts of such items from the
comparable prior period:

<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL REVENUES PERCENTAGE CHANGE
----------------------------------------- -------------------------------------
FISCAL YEAR ENDED NINE MONTHS FISCAL YEAR FISCAL YEAR NINE MONTHS
JANUARY 31, ENDED OCTOBER 31, ENDED ENDED ENDED
----------------------- ----------------- JANUARY 31, JANUARY 31, OCTOBER 31,
1994 1995 1996 1995 1996 1995 1996 1996
----- ----- ----- ------- ------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Leases of seismic equipment... 35.4% 45.9% 70.7% 67.6% 72.7% 51.4% 112.7% 56.1%
Sales of seismic equipment.... 64.6% 54.1% 29.3% 32.4% 27.3% (2.3)% (25.3)% 22.2%
Total revenues......... 100.0% 100.0% 100.0% 100.0% 100.0% 16.7% 38.0% 45.1%
COSTS AND EXPENSES:
Seismic equipment subleases... 19.8% 4.6% 3.4% 4.4% 1.5% (72.7)% 2.4% (50.0)%
Sales of seismic equipment.... 39.1% 38.4% 14.9% 19.7% 17.1% 14.4% (46.5)% 26.1%
General and administrative.... 14.5% 17.5% 18.4% 19.5% 16.3% 41.1% 45.5% 21.1%
Depreciation.................. 1.4% 6.9% 18.3% 16.3% 26.5% 485.5% 266.7% 136.5%
Provision for doubtful
accounts.................... 0.8% 0.7% 8.6% 7.3% 5.7% (7.9)% 1,691.4% 12.4%
Total costs and
expenses............. 75.6% 68.0% 63.6% 67.2% 67.1% 5.0% 29.0% 44.9%
</TABLE>

For the years ended January 31, 1994, 1995 and 1996, revenues from foreign
customers totalled $1.4 million, $1.8 million and $3.8 million, respectively.
All of the Company's transactions with foreign customers are denominated in
United States dollars. Therefore, the Company is not subject to material gains
or losses resulting from currency fluctuations and has not engaged in currency
hedging activities.

SEASONALITY

There is some seasonality to the Company's expected lease revenues from
customers operating in Canada. Historically, seismic equipment leasing has been
somewhat susceptible to weather patterns in certain geographic regions. For
example, in Canada, 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 equipment because of the muddy terrain. See
"Business -- Business and Operations" and " -- Seismic Equipment Leasing." This
increased leasing activity

15
<PAGE> 16

by the Company's Canadian customers has historically resulted in increased lease
revenues in the Company's first and fourth fiscal quarters.

RESULTS OF OPERATIONS

Nine Months Ended October 31, 1996 Compared with Nine Months Ended October 31,
1995

Revenues of $7,363,000 for the nine months ended October 31, 1996
represented an increase of 45.1% over revenues of $5,074,000 for the same prior
year period. Leasing services generated revenues of $5,356,000 for the nine
months ended October 31, 1996, an increase of $1,925,000, or 56.1%, as compared
to $3,431,000 for the same prior year period. This increase reflected additions
of lease fleet equipment throughout fiscal 1996 and the first three fiscal
quarters of fiscal 1997 to meet lease demand. For the nine months ended October
31, 1996, the Company maintained a unitization rate on its 3-D channel boxes of
approximately 81%. Seismic equipment sales for the nine months ended October 31,
1996 were $2,007,000, an increase of $364,000, or 22.2%, as compared to
$1,643,000 for the same prior year period.

While the Company's leasing revenues increased by $1,925,000 for the nine
months ended October 31, 1996 as compared to the same prior year period,
sublease costs decreased by $111,000 and depreciation, which related primarily
to equipment available for lease, increased by $1,126,000 due to increase in the
lease fleet, resulting in an increase in net leasing revenues of $910,000.

Gross margins on seismic equipment sales were 37.2% and 39.1% for the nine
months ended October 31, 1996 and 1995, respectively. Margins on sales of used
equipment vary based upon the size of the transaction, the availability of the
product sold and the means by which the equipment was acquired. Higher dollar
transactions tend to yield lower margins than do lower dollar transactions,
while readily available equipment yields lower margins than equipment that is
difficult to locate. In addition, the Company's costs on a specific piece of
equipment may differ substantially based upon whether it was acquired through a
bulk purchase or a discrete search.

General and administrative expenses increased 21.1%, or $209,000, for the
nine months ended October 31, 1996 as compared to the same period in 1995 and
were 16.3% and 19.5% of total revenues for the nine months ended October 31,
1996 and 1995, respectively. This decrease in general and administrative
expenses as a percent of total expenses 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
$372,000 in the fiscal 1996 period to $418,000 in the fiscal 1997 period. The
increase was a result of additional provisions for the allowance account. As of
October 31, 1996, the Company's allowance for doubtful accounts receivable
amounted to $615,000, which was an amount management believed was sufficient to
cover any potential losses in trade accounts receivable as of that date.

Net income for the nine months ended October 31, 1996 increased by
$538,000, as compared to the same 1995 period. The increase resulted primarily
from the increase in net leasing revenues offset by increases in general and
administrative and the provision for bad debt expense.

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

Revenues for fiscal 1996 of $7,292,000 represented an increase of 38.0%
over fiscal 1995 revenues of $5,284,000. Leasing services generated revenues of
$5,157,000 for fiscal 1996, an increase of $2,733,000, or 112.7%, as compared to
fiscal 1995. The majority of this increase was attributable to additions of
lease fleet equipment throughout fiscal 1996 to meet lease demand. The Company's
utilization rate in fiscal 1996 on its 3-D channel boxes was approximately 90%.
Seismic equipment sales for the year ended January 31, 1996 were $2,135,000, a
decrease of $725,000, or 25.3%, from fiscal 1995.

While the Company's leasing revenues increased by $2,733,000 during fiscal
1996 as compared to fiscal 1995, sublease costs increased by only $6,000 and
depreciation, which related primarily to equipment available

16
<PAGE> 17

for lease, increased by $968,000 due to the increase in the lease fleet,
resulting in an increase in net leasing revenues of $1,759,000.

Gross margins on seismic equipment sales were 49.2% and 29.1% for fiscal
1996 and 1995, respectively. The margin for fiscal year 1996 was significantly
higher because of a few high-margin transactions.

General and administrative expenses increased 45.5%, or $420,000, in fiscal
1996 as compared to fiscal 1995 and were 18.4% and 17.5% 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 the
Company being a public company. The Company's provision for doubtful accounts
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 was ultimately settled for $272,000 less than the amount
due from such customer, 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. As of January 31, 1996,
the Company's allowance for doubtful accounts receivable amounted to $347,000,
which is an amount management believed was sufficient to cover any potential
losses in trade accounts receivable as of that date.

Net income increased in fiscal 1996 by $713,000, as compared to fiscal
1995. The increase resulted primarily from the increase in net leasing revenues.

Fiscal Year Ended January 31, 1995 Compared with Fiscal Year Ended January 31,
1994

Revenues for fiscal 1995 of $5,284,000 represented an increase of 16.7%
over fiscal 1994 revenues of $4,527,000. Leasing services generated revenues of
$2,424,000 for fiscal 1995, an increase of $823,000, or 51.4%, as compared to
fiscal 1994. The majority of this increase was attributable to additions of
lease fleet equipment throughout fiscal 1995 to meet lease demand. The Company's
utilization rate on the I/O equipment during fiscal 1995 was approximately 90%.
Seismic equipment sales for the year ended January 31, 1995 were $2,860,000, a
decrease of $66,000, or 2.3%, from fiscal 1994.

The Company's leasing revenues increased by $823,000 during fiscal 1995 as
compared to fiscal 1994, while sublease costs decreased by $651,000 and
depreciation, which related primarily to equipment available for lease,
increased by $301,000, resulting in an increase in net leasing revenues of
$1,173,000.

Gross margins on seismic equipment sales were 29.1% and 39.4% for fiscal
1995 and 1994, respectively. The Company purchases used seismic equipment for
resale when management determines that such equipment is available at
advantageous prices. Gross margins on the Company's equipment sales fluctuate
from year to year and have historically ranged from 20% to 50%. The margins for
fiscal 1995 and 1994 are consistent with historical margins on seismic equipment
sales.

General and administrative expenses increased 41.1%, or $269,000, in fiscal
1995 as compared to fiscal 1994 and were 17.5% and 14.5% of total revenues for
fiscal 1995 and 1994, respectively. The increase was due primarily to personnel,
legal and accounting expenses. Personnel costs increased as a result of the
Company adding a chief financial officer during the year. Net interest increased
$193,000 to $209,000 in fiscal 1995 due to various equipment and bridge loans
outstanding during fiscal 1995. Legal and accounting costs increased in fiscal
1995 due to legal and accounting costs associated with the Company's initial
public offering consummated in January 1995.

Net income increased in fiscal 1995 by $297,000, as compared to fiscal
1994. The increase resulted primarily from the increase in leasing revenues
combined with a $651,000 decrease in seismic equipment sublease expense, a
$301,000 increase in depreciation, and lower margins on seismic equipment sales.

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities for the nine months ended October
31, 1996, increased by $749,000, or 40.2%, as compared to the same 1995 period.
At October 31, 1996, of the Company's customers with trade receivables more than
90 days past due, four customers had an aggregate of $983,000 more than

17
<PAGE> 18

90 days past due. The Company has historically had an average collection period
of between 60 to 90 days for its trade accounts receivable. Grant Geophysical,
Inc. ("Grant") filed for bankruptcy protection during December 1996. Revenues
derived from Grant amount to 18.5% of total revenues for the eleven-month period
ended December 31, 1996. As of that date, amounts due from Grant totalled
$1,013,000. During December 1996, the Company increased its allowance for trade
accounts receivable from $615,000 at October 31, 1996 to $1,500,000 at December
31, 1996, which amount was intended to fully reserve all amounts due from Grant
and provide for any potential loss associated with the Company's remaining trade
accounts receivable.

As of October 31, 1996, the outstanding principal balance of the Term Loan
was approximately $3.6 million and there were no amounts outstanding under the
Working Capital Revolver. Approximately $1.0 of the Term Loan was advanced to
the Company at January 31, 1996 and was used primarily to pay amounts due to I/O
for 3-D channel boxes. In March 1996, an additional approximately $3.1 million
of the Term Loan was advanced and an aggregate of approximately $1.5 million was
used to pay all amounts outstanding under a previous term loan and revolving
credit line and to pay amounts due to I/O for 3-D channel boxes. Approximately
$4.4 million of the net proceeds of this Offering will be used to pay the $1.0
million and $3.4 million currently outstanding balances of the Working Capital
Revolver and the Term Loan, respectively.

In January 1997, the Company established a second revolving line of credit
with Bank One of 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 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 and the principal
amount of the Second Term Loan are payable in ratable monthly installments over
a two-year period through and including December 1998.

As of December 31, 1996, capital expenditures for the 1997 fiscal year
totalled $11.3 million and the Company has budgeted capital expenditures of
approximately $16.0 million for the 1998 fiscal year, including approximately
$12.0 million of 3-D seismic data acquisition equipment to be purchased with the
net proceeds of this Offering. The Company believes that the net proceeds of
this Offering, cash provided by operations and funds available from its
commercial lenders will be sufficient to fund its operations and budgeted
capital expenditures for the 1998 fiscal year.

18
<PAGE> 19

BUSINESS

Mitcham Industries, Inc. leases and sells seismic data acquisition
equipment to companies engaged in the oil and gas industry. The Company believes
it is the leading independent lessor of land-based 3-D seismic data acquisition
equipment, including channel boxes and other peripheral equipment. Seismic data
acquisition equipment is used in the identification and graphic definition of
subsurface geologic structures and formations that potentially contain oil and
gas. Channel boxes are remote data acquisition units that collect and transmit
seismic data. The Company has exclusive lease referral and supply agreements
with the two principal manufacturers of land-based 3-D seismic equipment, I/O
and SERCEL. From January 1, 1994 through December 31, 1996, the Company's lease
fleet of 3-D channel boxes increased from 85 to approximately 2,000 (or from 510
channels to approximately 12,000 channels). EBITDA of approximately $4.0 million
for the fiscal year ended January 31, 1996 represented an increase of 90.4% over
the fiscal year ended January 31, 1995, and EBITDA of approximately $4.6 million
for the nine months ended October 31, 1996 represented an increase of 82.6% over
the same prior year period.

Demand for channel boxes has increased significantly in recent years
primarily due to the increasing use of 3-D seismic surveys. Current 3-D seismic
techniques use a greater number of channels and channel boxes than 2-D surveys,
thereby providing higher resolution data for a better representation of the
earth's subsurface. Additionally, oil and gas companies are contracting for 3-D
surveys over larger geographical areas and often specify an increase in the
concentration of channel boxes as a means of increasing data resolution.
Consequently, seismic survey companies frequently use more than twice the number
of channels for surveys than they typically own. The Company believes that many
companies providing land-based seismic surveys will meet this additional
requirement by leasing channel boxes and supporting peripheral equipment on a
short-term basis rather than making the substantial capital expenditures
necessary to purchase such equipment.

In September 1996, the Company entered into two agreements with SERCEL. One
agreement provides that until December 31, 1999, the Company will be SERCEL's
exclusive worldwide leasing agent and that SERCEL must refer to the Company all
requests it receives to lease its 3-D data acquisition equipment and peripheral
equipment. This agreement also provides that the Company must purchase, at
favorable rates, up to $10.2 million of 3-D data acquisition equipment and other
field equipment from SERCEL. Through December 31, 1996, the Company has met $4.5
million of this requirement. The second agreement provides that until September
19, 1999, subject to earlier termination after September 20, 1997, the Company
will be SERCEL's exclusive sales agent in Canada. See "-- I/O Agreement" and
"-- SERCEL Agreements."

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<PAGE> 20

BUSINESS STRATEGY

- Enlarge and diversify its lease pool of seismic equipment. As demanded by
customers, the Company will continue to increase its lease pool of
channel boxes and peripheral seismic equipment, such as seismic
vibrators, vibrator control electronics and geophones. The Company
believes that the availability of a larger and more complete pool of 3-D
seismic equipment for lease will encourage seismic survey companies to
increasingly lease, rather than purchase, such equipment. The Company is
also evaluating the feasibility of a lease pool of marine seismic
equipment.

SEISMIC TECHNOLOGY

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 data acquisition system generally consists of (i) a
central electronics unit that records and stores digital data ("CEU"), (ii)
channel boxes, (iii) geophones, or seismic sensors and (iv) other peripheral, or
accessory, equipment. Other peripheral equipment includes earth vibrators that
create the necessary acoustic wave being analyzed and geophysical cables that
transmit digital seismic data from the channel boxes to the CEU.

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, and
2-D seismic surveys typically require 120 recording channels. 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 with a minimum of 480 recording channels. Because of the 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.

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<PAGE> 21

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 the major oil and gas exploration companies are increasingly
requiring 3-D seismic surveys in their exploration 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, the additional
required channel boxes are in great demand.

While most working 3-D systems currently use from 600 to 800 channels,
management believes that the typical request for proposal from oil and gas
exploration companies now specifies a minimum of 1,000 to 1,200 channels. The
Company believes that many seismic service companies meet this requirement for
additional equipment by leasing, rather than purchasing, the additional required
channel boxes.

BUSINESS AND OPERATIONS

Seismic Equipment Leasing. The Company typically purchases new and used
seismic equipment for lease to its customers. After the termination of the
initial lease, the Company enters into additional short-term leases with its
customers engaged in seismic data acquisition. The Company's equipment leasing
services generally include the lease of the various components of seismic data
acquisition systems to meet a customer's job specifications. Such specifications
may vary as to the number of channel boxes, geophones, geophysical cables and
other peripheral equipment items.

The Company is pursuing a strategy of growth in its seismic equipment
leasing business, as potential for growth in new and used seismic equipment
sales is not believed to be significant. The Company currently has in its lease
fleet a total of approximately 2,000 3-D channel boxes, or a total of
approximately 12,000 channels (each channel being capable of electronically
converting seismic data from analog to digital and transmitting the digital
data), and various peripheral equipment such as geophones, earth vibrators and
geophysical cables. The Company's utilization rate on its 3-D channel boxes in
the first nine months of fiscal 1997 was in excess of 80%.

Since the Company's customers lease its seismic equipment to meet shortages
of a varying number of channels for specific surveys, the Company does not lease
all of the channel boxes and other peripheral equipment required for seismic
surveys. Rather, the Company is in the business of satisfying shortages of such
equipment on a short-term basis. 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 seismic 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 to answer questions of its lease customers.

The Company's monthly lease rates for its 3-D channel boxes have ranged
from 6% to 8% of the purchase price. Lease payments are due and payable on the
first day of each month of the lease term. The Company typically requires its
lessees to provide a deposit in the amount of one month's lease payment as
security for the cost of any repairs in excess of normal wear and tear that may
be required after the termination of lease term. The lessee must also obtain and
keep in force a minimum of $1.0 million general liability and casualty insurance
on the leased equipment during the term of the lease, and, before equipment is
delivered, provide certification to the Company that the Company has been named
an additional insured and loss payee on such policy. 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 lessor, 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, about one-half of the Company's
total revenues are attributable to Canadian operations, with the remainder
related to United States business. Management believes that the United States

21
<PAGE> 22

and Canada will continue to be the focal points of the Company's seismic
equipment leasing operations for the foreseeable future.

Historically, seismic equipment leasing has been somewhat susceptible to
weather patterns in certain geographic regions. For example, in Canada, 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 and other
equipment because of the muddy 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 lease pool of equipment to meet
seasonal demands. Equipment leased in Canada during the winter months may be
moved to the United States in the warmer months.

Seismic Equipment Sales. The Company's equipment sales business serves a
diverse base of industry, governmental, university and research customers. The
Company typically buys equipment for resale: (i) at disposal prices,
speculatively; and (ii) in response to specific customer orders. On occasion,
the Company will also hold equipment of third parties and sell such equipment on
consignment.

In large part, the Company's international operations (excluding Canada)
have been restricted to the sale of used equipment. Over the past three years,
its primary international markets have been Europe, Australia and China. In the
near future, the Company believes that these markets will continue to comprise a
majority of the Company's international sales.

I/O AGREEMENT

Under the I/O Agreement, the Company is the exclusive third-party recipient
of requests from I/O customers and others to lease channel boxes and certain
peripheral equipment in North and South America through May 31, 2000 and may
acquire 3-D channel boxes 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 3-D 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 3-D 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 December 31, 1996, the Company had purchased I/O equipment
totalling $4.8 million under the I/O Agreement, thereby exceeding its purchase
requirements through May 1997.

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 3-D
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 referred to 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 3-D 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
channel boxes purchased from I/O which are new are

22
<PAGE> 23

covered by a warranty which covers, with certain exceptions, defects in
workmanship for six months and defects in materials and parts for 12 months. The
channel boxes, if acquired from I/O's existing lease fleet and therefore used
previously, will be refurbished by I/O and carry 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 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.

SERCEL AGREEMENTS

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 agent throughout the
world 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. 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 must purchase
an aggregate of $10.2 million of SERCEL data acquisition and other field
equipment on or before December 31, 1999 in six installments of $1.7 million as
follows: (i) by June 30, 1997, and (ii) from July 1, 1997 to December 31, 1997
and each succeeding six-month period thereafter through December 31, 1999.
However, SERCEL may not terminate the agreement if the Company fails to purchase
the minimum requirement in a period ending before June 30, 1998, unless in the
succeeding period the Company does not make aggregate purchases equal to any
shortfall for the previous period, plus the minimum purchase requirement for the
succeeding period. As of December 31, 1996, the Company had purchased SERCEL
equipment totalling $4.5 million, thereby exceeding its purchase requirements
through December 31, 1997.

As with the I/O 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, (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.

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., a wholly-owned
subsidiary of SERCEL, under which the Company is SERCEL's designated sales agent
in Canada for its data acquisition and other field equipment through September
19, 1999, subject

23
<PAGE> 24

to earlier termination after September 20, 1997 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 by
the Company in Canada.

In connection with the SERCEL Sales Agreement and the SERCEL Lease
Agreement, in November 1996, 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
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 3-D 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.

PELTON AGREEMENT

In May 1996, the Company entered into an exclusive lease referral agreement
(the "Pelton Agreement") with Pelton Company, Inc. 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 (i)
the Company has the exclusive referral rights with respect to Pelton's vibrator
control electronics throughout the world, through December 31, 1997, subject to
cancellation by either party thereafter upon three months prior written notice
and (ii) there are no minimum purchase requirements.

The Pelton Agreement is subject to termination upon the occurrence of (i)
the Company's failure to comply with the terms of the Pelton 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 Pelton after having received notice that payment is due, (iv)
the Company's insolvency or bankruptcy, (v) the Company's transfer of the
agreement by merger, consolidation, or liquidation, (vi) the Company's
assignment, or attempted assignment, of the rights under the agreement, (vii)
Billy F. Mitcham no longer owning at least 250,000 shares of Common Stock of the
Company, or (viii) any competitor of Pelton owning, directly or indirectly, more
than 5% of the Company's outstanding capital stock on a fully-diluted basis.

CUSTOMERS; SALES AND MARKETING

The Company's major lease customers are seismic data acquisition companies
and major and independent oil and gas exploration 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, 1996, the Company had 23 lease customers with active leases of
various lengths. Customers of the Company's used and new seismic equipment sales
and service business (in addition to the aforementioned lease customers, some of
whom purchase significant amounts of equipment) include 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
placed advertisements of its affiliation with each of I/O, SERCEL and Pelton in
several major geophysical trade journals. The Company also maintains a web site
at http://www.mitchamindustries.com on which it lists its seismic equipment for
sale and lease.

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<PAGE> 25

The Company works with a network of representatives in several
international markets, including the United Kingdom, Canada 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. The Company is
aware of numerous companies that own seismic equipment that lease such
equipment; however, the Company believes those companies do not lease seismic
equipment of several manufacturers or have as extensive a lease pool as does the
Company. The Company also believes those companies do not have exclusive lease
referral agreements with suppliers similar to the Company's. 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 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 of 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 the major oil and gas exploration 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 the 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 (geophones,
cables and seismic cameras), Mark Products (geophones and cables), Mertz, Inc.
(seismic vibrators) and George E. Failing Co. (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, 1996, the Company employed 13 people, none of whom is
covered by a collective bargaining agreement. Nine employees are involved in
sales, management and administration and four 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. See "Certain

25
<PAGE> 26

Transactions and Relationships." 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.

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<PAGE> 27

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) WITH THE COMPANY
---- --- ----------------------------
<S> <C> <C>
Billy F. Mitcham, 49 Chairman of the Board of Directors, President and Chief
Jr. ................. Executive Officer
Paul C. Mitcham........ 32 Vice-President -- Operations and Director
Roberto Rios........... 38 Vice-President -- Finance, Secretary, Treasurer and
Director
William J. Sheppard.... 49 Vice-President -- International Operations and Director
Gordon M. Greve........ 61 Director
Randal Dean Lewis...... 53 Director
John F. Schwalbe....... 52 Director
</TABLE>

Billy F. Mitcham, Jr. has been Chairman of the Board of Directors,
President and Chief Executive Officer of the Company since 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., an
unrelated equipment leasing company. From 1975 to 1979, Mr. Mitcham served in
various capacities with Halliburton Services, primarily in oilfield services.

Paul C. Mitcham is Vice President -- Operations and a director of the
Company. He is the brother of Billy F. Mitcham, Jr. Mr. Mitcham 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.

Roberto Rios was elected Vice-President -- Finance, Secretary and Treasurer
and a director of the Company in September 1994. From 1990 until joining the
Company in September 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 to 1989,
he held several senior-level 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.

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

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

Randal Dean Lewis was elected a director of the Company in November 1994.
Mr. Lewis is the interim Dean of the Business School at Sam Houston State
University and he has served in this capacity since October 1995. From 1987 to
October 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 November 1994.
Mr. Schwalbe has been a Certified Public Accountant in private practice since
1978, with primary emphasis on tax planning, consultation, and compliance.

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<PAGE> 28

The Bylaws of the Company authorize the Board of Directors to fix the
number of directors of the Company. The Board of Directors is currently
comprised of seven members. Each director and each executive officer of the
Company serves until the earliest to occur of (i) his death, resignation or
removal; or (ii) the election of his successor. No family relationships exist
among the officers and directors of the Company except among Messrs. Mitcham.
See "Certain Transactions and Relationships."

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

None of the Company's executive officers or directors serve on the board of
directors or the compensation committee of any other entity. None of the members
of the Compensation Committee are, or were formerly, officers or employees of
the Company.

BOARD COMMITTEES

The Board of Directors has established an Audit Committee and a
Compensation Committee. The Audit Committee is comprised of Messrs. Schwalbe,
Lewis and Greve. Its functions are to: (i) recommend the appointment of
independent public accountants; (ii) review the scope of the audit by the
independent public accountants; (iii) review the independence of the independent
public accountants; (iv) consider the adequacy of the system of internal
controls and review any proposed corrective actions; (v) review and monitor the
Company's policies regarding business ethics and conflicts of interest; and (vi)
discuss with management and the independent public accountants the Company's
draft of annual financial statement and key accounting and/or reporting matters.
The Compensation Committee, also comprised of Messrs. Schwalbe, Lewis and Greve,
is responsible for (i) reviewing the Company's general compensation strategy;
(ii) establishing the salaries and bonuses of the Company's executive officers;
and (iii) reviewing and administering the Company's 1994 Stock Option Plan.

BOARD COMPENSATION

The Company pays directors who are not employees of the Company $500 for
every meeting attended and reimburses their expenses incurred in attending board
and committee meetings. In addition, the Director Plan provides that each
nonemployee director will receive an option to purchase 1,000 shares of Common
Stock upon becoming a director and on the date of each annual meeting of
shareholders at which he is re-elected as a director. See " -- Stock Option
Plans."

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<PAGE> 29

EXECUTIVE COMPENSATION

The following table sets forth all compensation paid by the Company for the
fiscal years ended January 31, 1994, 1995 and 1996 to Billy F. Mitcham, Jr., the
Chairman of the Board, Chief Executive Officer and President of the Company. No
other executive officer of the Company received compensation that exceeded
$100,000 during any of those fiscal years.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------------- -------------
FISCAL YEAR SECURITIES
ENDED UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION JANUARY 31 SALARY BONUS OTHER STOCK OPTIONS COMPENSATION
--------------------------- ----------- -------- ------- ----- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Billy F. Mitcham, Jr. ........... 1996 $100,000 $40,685 -- 9,000 --
Chairman of the Board, 1995 72,000(1) -- -- 116,000 --
President and Chief 1994 72,000 25,000 -- --
Executive Officer
</TABLE>

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

(1) Mr. Mitcham, Jr. opted to receive a lower salary in the fiscal year ended
January 31, 1995 than he was entitled to under the terms of his Employment
Agreement, described below. Though not specifically stated in the Employment
Agreement, Mr. Mitcham, Jr. felt the intent of the parties was that the
increased salary would not be effective until the consummation of the
Company's initial public offering, which occurred in January 1995. The
$28,000 of his salary that he opted not to receive was not deferred and will
not be paid in a future year. As of February 1, 1995, Mr. Mitcham, Jr. began
receiving his full salary.

Option Grants. The following table sets forth the individual grants of
stock options made by the Company during the fiscal year ended January 31, 1996
to Billy F. Mitcham, Jr. The Company does not grant any stock appreciation
rights.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
% OF TOTAL POTENTIAL REALIZABLE VALUE
NUMBER OF OPTIONS AT ASSUMED ANNUAL RATES
SECURITIES GRANTED TO OF STOCK PRICE APPRECIATION
UNDERLYING EMPLOYEES EXERCISE FOR OPTION TERM(2)
OPTIONS IN 1996 OR BASE EXPIRATION ----------------------------
NAME GRANTED (#) FISCAL YEAR PRICE ($/SH) DATE 0% 5% 10%
---- ----------- ----------- ------------ ------------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Billy F. Mitcham, Jr...... 9,000(1) 14.3% $3.29(1) Dec. 4, 2005 $3.87 $5.36 $8.53
</TABLE>

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

(1) Nonqualified stock option granted on December 4, 1995 under the 1994 Stock
Option Plan. The option may be exercised to purchase the total number of
shares on December 4, 1996. The option price was set at 85% of the fair
market value of the Company's Common Stock. The fair market value of a share
of the Company's Common Stock is the closing price at which the Common Stock
was sold on the date of grant. To the extent the option is not vested on the
optionee's retirement, death or disability, it is forfeited.

(2) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission and do not
represent the Company's estimate or projection of the Company's future
Common Stock prices. These amounts represent certain assumed rates of
appreciation only. Actual gains, if any, on stock option exercises are
dependent on the future performance of the Common Stock and overall stock
market conditions. The amounts reflected in this table may not necessarily
be achieved.

29
<PAGE> 30

Option Exercises and Year-End Option Grants. The following table sets forth
the year-end values of unexercised options held by Billy F. Mitcham, Jr. at
January 31, 1996. Billy F. Mitcham, Jr. did not exercise any stock options in
the 1996 fiscal year.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING OPTIONS AT IN-THE-MONEY OPTIONS
JANUARY 31, 1996 (#) AT JANUARY 31, 1996(1)
------------------------- -------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------------------- -------------------------
<S> <C> <C>
Billy F. Mitcham, Jr................... 116,000/9,000 $58,000/$11,160
</TABLE>

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

(1) Represents the difference between the closing price of the Company's Common
Stock on January 31, 1996 ($5.50) and the exercise price of the options,
multiplied by number of shares represented by such options.

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 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."

STOCK OPTION PLANS

The Company has adopted the Mitcham Industries, Inc. 1994 Stock Option Plan
(the "Stock Option Plan"). Options to purchase a maximum of 350,000 shares of
Common Stock may be issued under the Stock Option Plan to officers, employee
directors, key employees and consultants of the Company. As December 31, 1996,
options to purchase an aggregate of 285,750 shares of Common Stock are issued
and outstanding under the Stock Option Plan with a weighted average exercise
price of $4.74 per share. 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. Pursuant to the Stock Option Plan, the Compensation Committee will
determine the persons to whom options are granted, the number of shares of
Common Stock subject to options, the period during which the options vest and
may be exercised, and the option price. The Stock Option Plan places
restrictions on the grant of options under any plan of the Company to persons
who are, at the time of the grant, members of the Compensation Committee. With
respect to incentive stock options, no option may be granted more than 10 years
after the effective date of the Stock Option Plan or exercised more than 10
years after the date of grant (five years if the optionee owns more than 10% of
the Common Stock of the Company). 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 on 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.

The Company has also adopted the Mitcham Industries, Inc. 1994 Non-Employee
Director Stock Option Plan (the "Non-Employee Director Plan"). Options to
purchase a maximum of 50,000 shares of Common

30
<PAGE> 31

Stock may be issued under the Non-Employee Director Plan to non-employee
directors of the Company. The Non-Employee Director Plan provides for the grant
of options that do not qualify as "incentive stock options" under the Code.
Pursuant to the Non-Employee Director Plan, options to purchase 1,000 shares of
Common Stock are granted to each person who is not an employee of the Company
upon his election for the first time as a director of the Company and an option
to purchase an additional 1,000 shares of Common Stock will automatically be
granted each year thereafter that such director is re-elected. Options granted
under the Non-Employee Director Plan must be granted at an exercise price of not
less than 100% of the fair market value of the Common Stock on the date of grant
and vest in full one year after their grant. Options granted under the
Non-Employee Director Plan expire 10 years after the date of grant. As of
December 31, 1996, 8,000 options were issued and outstanding under the
Non-Employee Director Plan with a weighted average exercise price of $4.65 per
share.

CERTAIN TRANSACTIONS AND RELATIONSHIPS

Prior to September 1995, the Company leased its facilities located at 44000
Highway 75 South in Huntsville, Texas, consisting of 19,000 square feet, from
Mitcham Properties, Inc., a Texas corporation of which Billy F. Mitcham, Jr. is
the sole shareholder, for $4,000 per month (or approximately $.21 per square
foot), exclusive of the cost of utilities, taxes and insurance. An unrelated
third party rented from Mitcham Properties, Inc. a portion of the facilities
adjacent to the Company's facilities, consisting of 6,000 square feet for $606
per month (or approximately $.10 per square foot), exclusive of the cost of
utilities, taxes and insurance. Therefore, Mitcham Properties, Inc. was leasing
to the Company at approximately twice the cost per square foot being paid by an
unrelated third party for adjacent facilities. The difference in lease terms
amounts to approximately $25,000 of additional lease expense to the Company
annually. In September 1995, the Company purchased the facilities from Mitcham
Properties, Inc. for $325,000; $276,000 of such amount was financed with bank
financing and the remaining amount was paid from cash flows. The bank's
appraisal report reflects an estimated fair value of $325,000 for the
facilities.

In fiscal 1995 and 1996, the Company purchased equipment from corporations
and partnerships which are owned or controlled by Billy F. Mitcham, Jr., the
Company's Chairman, President and Chief Executive Officer. Such purchases
totalled $11,000 and $28,000 in the years ended January 31, 1995 and 1996,
respectively. The Company does not anticipate making any further such purchases.

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 445,740
shares of Common Stock, or 10.0%, of the Company's outstanding Common Stock. Mr.
Mitcham, Jr. has voting control of an aggregate of 1,154,370 shares, or 25.8%,
of the Company's outstanding Common Stock, as of December 31, 1996. The Voting
Agreement will terminate on the earlier of the agreement of the parties or the
expiration of 25 years. See "Principal and Selling Shareholders."

Since April 1994, the Company has engaged Billy F. Mitcham, Sr. as a
consultant 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 also engaged in the leasing and sale of
peripheral seismic equipment. Mr. Mitcham, Sr. has served as an industry expert
and consultant for the Company since 1987 and was engaged on terms similar to
those in his present consulting agreement during that time, though not pursuant
to a written agreement. 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 the 1996 fiscal year. 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,

31
<PAGE> 32

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.

PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth certain information with respect to
beneficial ownership of Common Stock as of December 31, 1996 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. Alamo Atlas Group, Inc.
will exercise a warrant for 8,380 shares of Common Stock to be sold in the
Offering. The only percentage for shares owned after the Offering that gives
effect to the exercise of this warrant is the percentage for Alamo Atlas Group.

<TABLE>
<CAPTION>
SHARES OWNED SHARES OWNED
BEFORE OFFERING NUMBER OF AFTER OFFERING
NAMES AND ADDRESS OF -------------------- SHARES --------------------
BENEFICIAL OWNERS(1) NUMBER PERCENT OFFERED NUMBER PERCENT
-------------------- --------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
Billy F. Mitcham, Jr. ................... 1,373,062(2) 29.3% 300,000 1,073,062 14.9%
Billy F. Mitcham, Sr. ................... 298,290(3) 6.6% 50,000 248,290 3.5%
Paul C. Mitcham.......................... 149,180(4) 3.3% 25,000 124,180 1.8%
Alamo Atlas Group, Inc. ................. 148,597(5) 3.3% 125,000 23,597 *
16420 Park Ten Place, Suite 300
Houston, Texas 77084-5051
Roberto Rios............................. 33,772(6) * -- 33,772 *
William J. Sheppard...................... 33,772(6) * -- 33,772 *
Gordon M. Greve.......................... 2,000 * -- 2,000 *
14855 Memorial Drive #1014
Houston, Texas 77079
Randal Dean Lewis........................ 3,000 * -- 3,000 *
College of Business Administration
P.O. Box 2056
Sam Houston State University
Huntsville, Texas 77341
John F. Schwalbe......................... 3,000 * -- 3,000 *
10700 Richmond Avenue #219
Houston, Texas 77042
All executive officers and directors as a
group
(7 persons).............................. 1,448,606 30.6% -- 1,070,606 14.8%
</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 445,740 shares of Common Stock owned by Billy F.
Mitcham, Sr. (252,540 shares), Paul C. Mitcham (118,680 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 218,692 shares of Common Stock, as
follows: Billy F. Mitcham, Jr. (125,000 shares), Billy F. Mitcham, Sr.
(45,750 shares), Paul C. Mitcham (30,500 shares), and the two trusts (17,442
shares). See "Certain Transactions and Relationships."

(3) Includes shares underlying a currently exercisable option to purchase 45,750
shares of Common Stock.

(4) Includes shares underlying currently exercisable options to purchase 30,500
shares.

(5) Includes shares underlying a currently exercisable warrant to purchase
31,977 shares.

(6) Includes shares underlying currently exercisable options to purchase 21,000
shares and a currently exercisable warrant to purchase 2,422 shares.

32
<PAGE> 33

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 December 31, 1996 there were outstanding
4,474,880 shares of Common Stock, no shares of Preferred Stock, options to
purchase up to 293,750 shares of Common Stock, and warrants to purchase up to
246,723 shares of Common Stock. Upon completion of this Offering, there will be
6,974,880 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
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

There are currently outstanding warrants issued in connection with the
Company's initial public offering of units ("Units") in January 1995, entitling
the holders to purchase 17,000 Units, each Unit consisting of two shares of
Common Stock and a warrant to purchase one share of Common Stock (an "Underlying
Warrant"). The warrants are exercisable through and including December 19, 1999,
at an exercise price of $7.97 per Unit. The Underlying Warrants are exercisable
through and including December 19, 1997 at an exercise price of $4.20 per share
of Common Stock.

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 Units issuable
upon exercise a number of Units, 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 Underlying Warrants
will have the same dilutive effect on the interests of the Company's
shareholders as will a cash exercise.

There are also outstanding currently exercisable warrants to acquire up to
60,723 shares of Common Stock held by seven holders, at $3.87 per share, May 9,
1999; currently exercisable warrants to acquire 35,000 shares of Common Stock at
$3.50 per share, exercisable to purchase 17,500 shares through July 17, 2000 and
the remaining 17,500 shares through January 17, 2001; currently exercisable
warrants to acquire 50,000 shares of Common Stock at $6.43 per share,
exercisable through August 22, 2000; and warrants to acquire 50,000

33
<PAGE> 34

shares of Common Stock at $9.28 per share, exercisable beginning December 31,
1997 through December 31, 2001.

The Company will issue warrants to the Representatives ("Representatives'
Warrants") to purchase 200,000 shares of Common Stock in connection with the
Offering, with an exercise price equal to 120% of the price of the Common Stock
to the public in the offering. The Representatives' Warrants will be exercisable
for a two-year period beginning one year after the effective date of the
Registration Statement of which this Prospectus is a part. See "Underwriting."

OPTIONS

As of December 31, 1996, options to purchase an aggregate of 293,750 shares
of Common Stock had been granted pursuant to the Plans, 250,250 of which are
currently exercisable. See "Management -- Stock Option Plans."

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,
divided 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.

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 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.

34
<PAGE> 35

SHARES ELIGIBLE FOR FUTURE SALE

As of December 31, 1996, there were 4,474,880 shares of Common Stock
outstanding. In addition, the Company has reserved for issuance 400,000 shares
upon the exercise of options granted under the Stock Option Plans, 246,723
shares for issuance upon exercise of outstanding warrants and up to 200,000
shares for issuance upon exercise of the Representatives' Warrants. Of the
6,974,880 shares of Common Stock to be outstanding after the completion of this
Offering, approximately 5,594,880 shares will be freely tradable without
restriction or further registration under the Securities Act, unless held by
"affiliates" of the Company, as that term is defined in Rule 144 under the
Securities Act (whose sales would be subject to certain volume limitations and
other restrictions described below.) The remaining 1,380,000 shares of Common
Stock are "restricted securities" as defined in Rule 144 promulgated under the
Securities Act, and may only be sold in the public market if such shares are
registered under the Securities Act or sold in accordance with Rule 144 or
another exemption from registration under the Securities Act. The number of
shares issued and outstanding after completion of the Offering does not reflect
the exercise of a warrant for 8,380 shares of Common Stock to be sold in the
Offering by one of the Selling Shareholders. See "Principal and Selling
Shareholders."

In general, under Rule 144 as currently in effect, a person who has
beneficially owned his or her Common Stock for at least two years, including
persons who may be deemed "affiliates" of the Company, is entitled to sell
within any three-month period a number of shares that does not exceed the
greater of 1% of the then-outstanding shares of Common Stock (approximately
69,750 shares immediately after this Offering) or the average weekly trading
volume of such shares in the over-the-counter market during the four calendar
weeks preceding the date on which notice of the proposed sale is filed with the
Commission. A person who is not deemed an "affiliate" of the Company and who has
beneficially owned his or her shares of Common Stock for at least three years
would be entitled to sell such shares under Rule 144 without regard to the
volume limitations described above. Sales under Rule 144 are also subject to
certain manner of sale provisions, notice requirements, and the availability of
current public information about the Company. A person who has not been an
"affiliate" of the Company for the 90 days preceding a sale and who has
beneficially owned restricted securities for at least three years will be
entitled to sell such shares in the public market without restriction.
Restricted securities properly sold in reliance upon Rule 144 are thereafter
freely tradeable without restrictions or registration under the Securities Act,
unless thereafter held by an "affiliate" of the Company.

The Company has filed a registration statement under the Securities Act
covering 400,000 shares of Common Stock reserved for issuance under the Stock
Option Plans. Accordingly, shares issued under such registration statement upon
the exercise of options will be available for sale in the open market subject to
the agreements not to sell described below. See "Management -- Stock Option
Plans."

The Company is unable to estimate the amount, timing or nature of future
sales of outstanding Common Stock. Of the 880,000 restricted shares that will be
outstanding upon completion of this Offering, executive officers and directors,
holding an aggregate of 800,070 shares, have agreed that for a period of 180
days from the date of this Prospectus, they will not offer for sale, sell,
solicit an offer to buy, contract to sell, distribute, grant any option for the
sale of or otherwise transfer of dispose of, directly or indirectly, any shares
of Common Stock or any securities convertible into, exercisable for or
exchangeable for any shares of Common Stock without the prior written consent of
Rodman & Renshaw, Inc. on behalf of the Underwriters. All of the remaining
79,930 restricted shares are eligible for sale under Rule 144. See
"Underwriting."

In connection with this Offering, the Company has agreed to sell warrants
to the Representatives to purchase from the Company up to 200,000 shares of
Common Stock, exercisable in whole or in part at any time during the two-year
period commencing one year after the effective date of the Registration
Statement of which this Prospectus is a part.

35
<PAGE> 36

UNDERWRITING

The Underwriters named below, for whom Rodman & Renshaw, Inc. and Simmons &
Company International are acting as representatives (the "Representatives"),
have severally agreed to purchase from the Company the respective number of
shares of Common Stock set forth opposite their names:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
--------------------------------------------------------------------------- ---------
<S> <C>
Rodman & Renshaw, Inc......................................................
Simmons & Company International............................................

---------
Total.................................................................... 3,000,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to approval of certain legal matters by
counsel and to various other considerations. The nature of the Underwriters'
obligations is such that they are committed to purchase and pay for all of the
above shares of Common Stock if any are purchased.

The Underwriters, through the Representatives, have advised the Company
that they propose to offer the Common Stock initially at the public offering
price set forth on the cover page of this Prospectus; that the Underwriters may
allow to selected dealers a concession of $ per share; and that such
dealers may reallow a concession of $ per share to certain other
dealers. After the public offering, the offering price and other selling terms
may be changed by the Underwriters. The Common Stock is included for quotation
on the Nasdaq National Market.

The Company and the Selling Shareholders have granted to the Underwriters a
30-day over-allotment option to purchase up to 375,000 and 75,000 additional
shares of Common Stock, respectively, exercisable at the public offering price
less the underwriting discount. If the Underwriters exercise such over-allotment
option, then each of the Underwriters will have a firm commitment, subject to
certain conditions, to purchase approximately the same percentage thereof as the
number of shares of Common Stock to be purchased by it as shown in the above
table bears to the 3,000,000 shares of Common Stock offered by the Company and
the Selling Shareholders hereby. The Underwriters may exercise such option only
to cover over-allotments made in connection with the sale of the shares of
Common Stock offered hereby.

The Company and the officers and directors of the Company have agreed that
they will not sell or dispose of any shares of Common Stock of the Company for a
period of 180 days after the later of the date on which the Registration
Statement is declared effective by the Commission or the first date on which the
shares are bona fide offered to the public, without the prior written consent of
Rodman & Renshaw, Inc.

In connection with the Offering made hereby, the Company has agreed to sell
to the Representatives, for nominal consideration, Representatives' Warrants to
purchase from the Company up to 200,000 shares of Common Stock. The
Representatives' Warrants are exercisable, in whole or in part, at an exercise
price of 120% of the price to public at any time during the two-year period
commencing one year after the effective date of the Registration Statement of
which this Prospectus is a part. The Representatives' Warrants contain
provisions providing for adjustment of the exercise price and the number and
type of securities issuable upon exercise of the Representatives' Warrants
should any one or more of certain specified events occur. The

36
<PAGE> 37

Representatives' Warrants grant to the holders thereof certain rights of
registration for the securities issuable upon exercise of the Representatives'
Warrants.

The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, losses and expenses, including
liabilities under the Securities Act of 1933, as amended (the "Securities Act"),
or to contribute to payments that the Underwriters may be required to make in
respect thereof. The Company has agreed to pay to the Representatives a
non-accountable expense allowance of 1.0% of the gross proceeds derived from the
sale of Common Stock (including the sale of any Common Stock subject to the
Underwriters' over-allotment option).

In connection with the Offering, certain Underwriters and selling group
members (if any) or their respective affiliates who are qualified registered
market makers on the Nasdaq National Market may engage in passive market making
transactions in the Common Stock on the Nasdaq National Market in accordance
with Rule 10b-6A under the Securities Exchange Act of 1934 (the "Exchange Act"),
during a specified period before commencement of offers or sales of the Common
Stock. The passive market making transactions must comply with applicable volume
and price limits and be identified as such. In general, a passive market maker
may 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 passive market
maker's bid, however such bid must then be lowered when certain purchase limits
are exceeded.

LEGAL MATTERS

The validity of the issuance of shares of Common Stock offered hereby will
be passed upon for the Company by Norton, Jacobs, Kuhn & McTopy, L.L.P.,
Houston, Texas. Certain legal matters in connection with the sale of such
securities will be passed upon for the Underwriters by Vinson & Elkins L.L.P.,
Houston, Texas. Members of Norton, Jacobs, Kuhn & McTopy, L.L.P. own an
aggregate of 38,681 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 103,230 shares of Common Stock. Carl L. Norton and Sabrina A.
McTopy are partners in Norton, Jacobs, Kuhn & McTopy, L.L.P.

EXPERTS

The financial statements of the Company as of January 31, 1994, 1995 and
1996 and for each of the years in the three-year period ended January 31, 1996
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 Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 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

37
<PAGE> 38

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.

38
<PAGE> 39

GLOSSARY OF TERMS

Certain words and terms commonly used in the seismic business which are
used throughout this Prospectus are defined below.

Acoustic wave. A sonic wave travelling through the earth's subsurface
induced by a release of energy, normally dynamite or vibroseis.

CEU. Central Electronics unit that records and stores seismic data.

Channel. A set of geophones recording acoustic waves reflected from
formations below the earth's surface.

Channel box. A remote data acquisition unit that collects seismic data
from a multi-conductor geophysical cable attached to the geophones and transmits
the data to the CEU.

Data acquisition system. The electronic field instruments and associated
equipment required for seismic acquisition.

Geophones. Electro-magnetic coils placed on the earth's surface to receive
the acoustic waves reflected by subsurface geological layers.

Seismic processing system. The computer hardware and software required to
convert seismic records to seismic cross-sections.

2-D seismic. Seismic data representing a vertical plane of subsurface
information.

3-D seismic. Seismic data representing a cube of subsurface information
that can be sliced into numerous planes offering a different view of the target.

39
<PAGE> 40

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditor's Report.......................................................... F-2
Balance Sheets as of January 31, 1995 and 1996 and October 31, 1996 (unaudited)....... F-3
Statements of Income for the Years Ended January 31, 1994, 1995 and 1996 and the Nine
Months Ended October 31, 1995 (unaudited) and 1996 (unaudited)...................... F-4
Statements of Changes in Stockholders' Equity for the Years Ended January 31, 1994,
1995 and 1996 and the Nine Months Ended October 31, 1996 (unaudited)................ F-5
Statements of Cash Flows for the Years Ended January 31, 1994, 1995 and 1996 and the
Nine Months Ended October 31, 1995 (unaudited) and 1996 (unaudited)................. F-6
Notes to Financial Statements......................................................... F-7
</TABLE>

F-1
<PAGE> 41

INDEPENDENT AUDITOR'S REPORT

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

We have audited the accompanying balance sheets of Mitcham Industries, Inc. as
of January 31, 1995 and 1996, and the related statements of income, changes in
stockholders' equity and cash flows for each of the years in the three year
period ended January 31, 1996. 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. as of
January 31, 1995 and 1996, and the results of its operations and its cash flows
for each of the years in the three year period ended January 31, 1996, in
conformity with generally accepted accounting principles.

HEIN + ASSOCIATES LLP

Certified Public Accountants

Houston, Texas
February 23, 1996

F-2
<PAGE> 42

MITCHAM INDUSTRIES, INC.

BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
JANUARY 31,
-------------------------- OCTOBER 31,
1995 1996 1996
---------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash................................................ $ 874,000 $ 637,000 $ 3,330,000
Accounts receivable, net of allowance for doubtful
accounts of $90,000, $347,000 and $615,000 at
January 31, 1995 and 1996 and October 31, 1996,
respectively..................................... 1,792,000 2,277,000 3,288,000
Installment notes receivable, trade................. 289,000 193,000 72,000
Inventory........................................... 84,000 206,000 630,000
Prepaid expenses and other current assets........... 69,000 274,000 103,000
---------- ----------- -----------
Total current assets........................ 3,108,000 3,587,000 7,423,000
Seismic equipment lease pool, net of accumulated
depreciation..................................... 4,979,000 8,115,000 15,247,000
Property and equipment, net of accumulated
depreciation..................................... 73,000 472,000 530,000
Other assets........................................ 39,000 65,000 52,000
---------- ----------- -----------
Total assets................................ $8,199,000 $12,239,000 $23,252,000
========= ========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Notes payable to bank............................... $ 256,000 $ 400,000 $ --
Current installments of long-term debt.............. 167,000 447,000 938,000
Obligation under capital lease...................... 6,000 -- --
Accounts payable.................................... 614,000 491,000 3,370,000
Income taxes payable................................ 28,000 311,000 --
Deferred income taxes payable....................... 505,000 544,000 916,000
Accrued liabilities and other current liabilities... 80,000 474,000 737,000
---------- ----------- -----------
Total current liabilities................... 1,656,000 2,667,000 5,961,000
---------- ----------- -----------
Long-term debt:
Long-term debt, net of current installments......... 234,000 1,155,000 2,910,000
Capital lease obligations, net of current portion... 27,000 18,000 --
Deferred income taxes................................. 106,000 351,000 645,000
---------- ----------- -----------
Total liabilities........................... 2,023,000 4,191,000 9,516,000
Stockholders' 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; 3,170,000, 3,221,000 and 4,378,650
shares, respectively, issued and outstanding..... 32,000 32,000 44,000
Additional paid-in capital.......................... 4,181,000 4,340,000 8,398,000
Retained earnings................................... 1,963,000 3,676,000 5,294,000
---------- ----------- -----------
Total stockholders' equity.................. 6,176,000 8,048,000 13,736,000
---------- ----------- -----------
Total liabilities and stockholders' equity............ $8,199,000 $12,239,000 $23,252,000
========= ========== ==========
</TABLE>

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

F-3
<PAGE> 43

MITCHAM INDUSTRIES, INC.

STATEMENTS OF INCOME

<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED JANUARY 31, ENDED OCTOBER 31,
------------------------------------ -----------------------
1994 1995 1996 1995 1996
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Leases of seismic equipment........ $1,601,000 $2,424,000 $5,157,000 $3,431,000 $5,356,000
Sales of seismic equipment......... 2,926,000 2,860,000 2,135,000 1,643,000 2,007,000
---------- ---------- ---------- ---------- ----------
Total revenues............. 4,527,000 5,284,000 7,292,000 5,074,000 7,363,000
---------- ---------- ---------- ---------- ----------
Costs and expenses:
Seismic equipment subleases........ 896,000 245,000 251,000 222,000 111,000
Sales of seismic equipment......... 1,772,000 2,027,000 1,085,000 1,000,000 1,261,000
General and administrative......... 655,000 924,000 1,344,000 990,000 1,199,000
Provision for doubtful accounts.... 38,000 35,000 627,000 372,000 418,000
Depreciation....................... 62,000 363,000 1,331,000 825,000 1,951,000
---------- ---------- ---------- ---------- ----------
Total costs and expenses... 3,423,000 3,594,000 4,638,000 3,409,000 4,940,000
---------- ---------- ---------- ---------- ----------
Other income (expense):
Interest, net...................... (16,000) (209,000) (21,000) (6,000) (170,000)
Other, net......................... 20,000 60,000 38,000 26,000 219,000
---------- ---------- ---------- ---------- ----------
Total other income
(expense)................ 4,000 (149,000) 17,000 20,000 49,000
---------- ---------- ---------- ---------- ----------
Income before income taxes........... 1,108,000 1,541,000 2,671,000 1,685,000 2,472,000
Provision for income taxes........... 405,000 541,000 958,000 605,000 854,000
---------- ---------- ---------- ---------- ----------
Net income........................... $ 703,000 $1,000,000 $1,713,000 $1,080,000 $1,618,000
========== ========== ========== ========== ==========
Earnings per common and common
equivalent share:
Primary............................ $ 0.51 $ 0.66 $ 0.52 $ 0.34 $ 0.37
Assuming full dilution............. $ 0.51 $ 0.66 $ 0.50 $ 0.34 $ 0.36
========== ========== ========== ========== ==========
Shares used in computing earnings per
common and common equivalent share:
Primary............................ 1,380,000 1,514,000 3,306,000 3,170,000 4,431,000
Assuming full dilution............. 1,380,000 1,514,000 3,403,000 3,170,000 4,489,000
========== ========== ========== ========== ==========
</TABLE>

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

F-4
<PAGE> 44

MITCHAM INDUSTRIES, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
--------- ------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Balances, February 1, 1993............. 1,380,000 $14,000 $ -- $ 260,000 $ 274,000
Net income........................... -- -- -- 703,000 703,000
--------- ------- ---------- ---------- -----------
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
(unaudited)....................... 1,158,000 12,000 4,058,000 -- 4,070,000
Net income (unaudited)............... -- -- -- 1,618,000 1,618,000
--------- ------- ---------- ---------- -----------
Balances, October 31, 1996
(unaudited).......................... 4,379,000 $44,000 $8,398,000 $5,294,000 $13,736,000
========= ======= ========== ========== ===========
</TABLE>

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

F-5
<PAGE> 45

MITCHAM INDUSTRIES, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED JANUARY 31, ENDED OCTOBER 31,
--------------------------------------- --------------------------
1994 1995 1996 1995 1996
--------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income.............................. $ 703,000 $ 1,000,000 $ 1,713,000 $ 1,080,000 $ 1,618,000
Adjustments to reconcile net income to
net cash provided by operating
activities:
Trade accounts receivable, net........ (318,000) (1,404,000) (742,000) (316,000) (1,158,000)
Accounts payable and other current
liabilities......................... 428,000 71,000 554,000 20,000 (193,000)
Depreciation.......................... 62,000 363,000 1,331,000 825,000 1,951,000
Provision for doubtful accounts, net
of chargeoffs....................... -- (3,000) 257,000 -- 268,000
Loss on disposal of assets............ -- 12,000 -- -- --
Deferred income taxes................. 94,000 467,000 284,000 109,000 666,000
Other, net............................ (23,000) (46,000) (171,000) 145,000 (540,000)
--------- ----------- ----------- ----------- -----------
Net cash provided by operating
activities..................... 946,000 460,000 3,226,000 1,863,000 2,612,000
--------- ----------- ----------- ----------- -----------
Cash flows from investing activities:
Purchases of seismic equipment held for
lease................................. (875,000) (1,938,000) (5,321,000) (2,547,000) (5,750,000)
Purchases of property and equipment..... (7,000) (22,000) (444,000) (377,000) (131,000)
Proceeds from sale of property and
equipment............................. -- -- 846,000 797,000 --
--------- ----------- ----------- ----------- -----------
Net cash used in investing
activities..................... (882,000) (1,960,000) (4,919,000) (2,127,000) (5,881,000)
--------- ----------- ----------- ----------- -----------
Cash flows from financing activities:
Proceeds from short-term borrowings..... 709,000 1,413,000 400,000 400,000 --
Payments on short-term borrowings....... (146,000) (4,242,000) (256,000) (256,000) (400,000)
Proceeds from long-term debt............ 500,000 1,372,000 326,000 3,126,000
Payments on long-term debt and
capitalized lease obligations......... (6,000) (97,000) (182,000) (134,000) (834,000)
Capitalized stock issuance costs and
deferred financing charges............ (109,000) (25,000) -- (36,000) --
Proceeds from issuance of common stock,
net of offering expenses.............. -- 4,186,000 122,000 -- 4,070,000
--------- ----------- ----------- ----------- -----------
Net cash provided by financing
activities..................... 448,000 1,735,000 1,456,000 300,000 5,962,000
--------- ----------- ----------- ----------- -----------
Net increase (decrease) in cash........... 512,000 235,000 (237,000) 36,000 2,693,000
Cash, beginning of period................. 127,000 639,000 874,000 874,000 637,000
--------- ----------- ----------- ----------- -----------
Cash, end of period....................... $ 639,000 $ 874,000 $ 637,000 $ 910,000 $ 3,330,000
========= =========== =========== =========== ===========
Supplemental cash flow information:
Cash paid for:
Interest.............................. $ 17,000 $ 196,000 $ 78,000 $ 79,000 $ 289,000
Taxes................................. $ 8,000 $ 800 -- $ 300,000 $ 515,000
========= =========== =========== =========== ===========
Equipment acquired under capital
lease................................. $ 18,000 $ 36,000 -- -- --
Equipment purchases in accounts
payable............................... $ -- -- $ -- $ 1,175 $ 3,009
Equipment purchased with vendor
financing............................. -- $ 2,500,000 -- -- --
========= =========== =========== =========== ===========
</TABLE>

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

F-6
<PAGE> 46

MITCHAM INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS
(INFORMATION SUBSEQUENT TO JANUARY 31, 1996 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 provides full-service
equipment leasing to the seismic industry primarily in North and South America.
The Company also sells and services new and used seismic data acquisition
equipment on a worldwide basis.

Description of leasing arrangements -- The Company leases various types of
seismic equipment to seismic data acquisition companies. All leases at October
31, 1996 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.

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 range from three to seven years.

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 FASB 109 under
which 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.

Cash equivalents -- For purposes of presenting cash flows, the Company
considers all highly liquid investments with remaining maturities of 90 days or
less on the purchase date 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 affect the amounts
reported in these financial statements and accompanying notes. Actual results
could differ from these estimates.

Industry Concentration -- The Company's lease revenues are derived from
seismic equipment leased to seismic companies providing 3-D 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 the 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

F-7
<PAGE> 47

MITCHAM INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION SUBSEQUENT TO JANUARY 31, 1996 IS UNAUDITED)

financial performance of the companies in this industry not improve, the Company
could be exposed to additional credit risk and subjected to declining demand for
its leased products.

New Accounting Pronouncements -- The Financial Accounting Standards Board
issued FASB 121 entitled "Impairment of Long-Lived Assets". FASB 121, which
became effective beginning February 1, 1996, provides that in the event that
facts and circumstance indicate that the cost of 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 assets carrying amount to determine if a
writedown to market value or discounted cash flow is required. FASB 121 did not
have a material impact on the 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.

Unaudited Interim Information -- The accompanying financial information as
of October 31, 1996 and for the nine month periods ended October 31, 1995 and
1996 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,
1995 1996 1996
-------- -------- -----------
<S> <C> <C> <C>
Land................................ $ -- $ 25,000 $ 25,000
Building and improvements........... -- 346,000 331,000
Furniture and fixtures.............. 80,000 153,000 234,000
Autos and trucks.................... 37,000 37,000 86,000
-------- --------- ----------
117,000 561,000 676,000
Less accumulated depreciation....... (44,000) (89,000) (146,000)
-------- --------- ----------
$ 73,000 $472,000 $ 530,000
======== ========= ==========
</TABLE>

3. NOTES PAYABLE TO BANK

The Company has a $1,000,000 line of credit pursuant to a loan agreement.
Borrowings under this line of credit bear interest at the prime rate plus .5%
(totaling 9% at January 31, 1996). $400,000 was outstanding under this line at
January 31, 1996. The line of credit is collateralized by accounts receivable,
inventory and lease pool equipment.

On January 31, 1996, the Company executed a new line of credit with a bank
to replace the aforementioned line of credit. The Company may borrow up to
$1,000,000 under the new line of credit which will bear interest at prime plus
.5% (9% at January 31, 1996). Advances under the line of credit will be
collateralized by accounts receivable and inventory. Borrowings under the line
will be limited to 80% of eligible accounts receivable and 50% of eligible
inventory.

F-8
<PAGE> 48

MITCHAM INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION SUBSEQUENT TO JANUARY 31, 1996 IS UNAUDITED)

The Company had a demand note payable to a bank with interest at 1.5% over
its base lending rate (total of 11% at January 31, 1995). If no demand is made,
the note is due in monthly installments of $28,475 plus interest, through
October 1995. The note is collateralized by lease fleet equipment and
assignments of leases. The Company was required to maintain compensating
balances with the bank of approximately $97,000. At January 31, 1995, $256,000
was outstanding under the note. This note expired during fiscal 1996.

4. LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
JANUARY 31,
----------------------- OCTOBER 31,
1995 1996 1996
--------- ---------- -----------
<S> <C> <C> <C>
Note payable to 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............................................ $ 401,000 $ 234,000 $ --
Note payable to bank, due in monthly installments of
$2,803 including interest at 9%, due September 1998,
collateralized by land and a building................ -- 274,000 266,000
Note payable to 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 bank under $4,206,000 term loan
facility, due in monthly installments of $26,270,
including interest at 9.5%, through January 2000,
collateralized primarily by lease pool equipment and
an assignment of leases.............................. -- 1,046,000 3,582,000
--------- ---------- ----------
401,000 1,602,000 3,848,000
Less current maturities................................ (167,000) (447,000) (938,000)
--------- ---------- ----------
$ 234,000 $1,155,000 $2,910,000
========= ========== ==========
</TABLE>

Aggregate maturities of long-term debt at January 31, 1996 are as follows:

<TABLE>
<CAPTION>
YEAR ENDING JANUARY 31,
- -----------------------
<S> <C> <C>
1997............................................................ $ 447,000
1998............................................................ 350,000
1999............................................................ 525,000
2000............................................................ 271,000
2001............................................................ 9,000
----------
$1,602,000
==========
</TABLE>

The term loan facility includes various financial covenants, the most
significant of which require the Company to maintain its tangible net worth at
90% of tangible net worth at October 31, 1995, and to increase quarterly by 50%
of net income for each quarter thereafter, maintain a ratio of total liabilities
to tangible net worth of not more than 1.25 to 1.0, and to maintain a ratio of
cash flow from operations, as defined, to current maturities of long-term debt
of not less than 1.25 to 1.0.

F-9
<PAGE> 49

MITCHAM INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION SUBSEQUENT TO JANUARY 31, 1996 IS UNAUDITED)

In January 1997, the Company established a second revolving line of credit
of 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 base 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 and the principal amount of the Second Term Loan are payable
in ratable monthly installments over a two-year period through and including
December 1998.

5. LEASES

The Company leases and subleases seismic equipment to customers under
operating leases with non-cancellable 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, 1996.

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 $896,000, $245,000 and $251,000 for the years ended January
31, 1994, 1995 and 1996, respectively and $222,000 and $111,000 for the nine
months ended October 31, 1995 and 1996, respectively.

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

<TABLE>
<CAPTION>
JANUARY 31,
------------------------- OCTOBER 31,
1995 1996 1996
---------- ----------- -----------
<S> <C> <C> <C>
Remote signal conditioners (channel boxes)
and other equipment........................ $5,395,000 $ 9,580,000 $18,589,000
Less: accumulated depreciation............... (416,000) (1,465,000) (3,342,000)
---------- ----------- -----------
$4,979,000 $ 8,115,000 $15,247,000
========== =========== ===========
</TABLE>

F-10
<PAGE> 50

MITCHAM INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION SUBSEQUENT TO JANUARY 31, 1996 IS UNAUDITED)

6. INCOME TAXES

The components of income tax expense are as follows:

<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
-----------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal....................................... $ 301,000 $ 71,000 $ 698,000
State......................................... 10,000 3,000 (24,000)
--------- --------- ---------
311,000 74,000 674,000
Deferred........................................ 94,000 467,000 284,000
--------- --------- ---------
$ 405,000 $ 541,000 $ 958,000
========= ========= =========
</TABLE>

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

<TABLE>
<CAPTION>
JANUARY 31,
----------------------
1995 1996
--------- ---------
<S> <C> <C>
Deferred Tax asset -- allowance for doubtful
accounts.................................................. $ 31,000 $ 123,000
Deferred tax liabilities:
Conversion from accrual to cash method of accounting...... (536,000) (667,000)
Depreciation.............................................. (106,000) (351,000)
--------- ---------
Deferred tax liability, net............................... $(611,000) $(895,000)
========= =========
</TABLE>

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.

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

<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
--------------------------------------
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Federal income tax expense at 34%.............. $ 377,000 $ 524,000 $ 913,000
State income taxes and nondeductible
expenses..................................... 29,000 17,000 45,000
Other, net..................................... (1,000) -- --
---------- ---------- ----------
$ 405,000 $ 541,000 $ 958,000
========== ========== ==========
</TABLE>

7. RELATED PARTY TRANSACTIONS

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

<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
-------------------------------
1994 1995 1996
-------- ------- --------
<S> <C> <C> <C>
Office and warehouse rent expense................... $ 48,000 $48,000 $ 32,000
Equipment lease expense and purchases............... $270,000 $11,000 $ 28,000
Seismic equipment sales............................. $ 8,000 $ -- $ --
Purchase of office and warehouse.................... $ -- $ -- $325,000
======== ======= ========
</TABLE>

F-11
<PAGE> 51

MITCHAM INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION SUBSEQUENT TO JANUARY 31, 1996 IS UNAUDITED)

See Note 11 for discussion of the employment agreement with the Company's
President.

In September 1994, the Company entered into an equipment lease whereby the
lessors acquired $250,000 of channel boxes from the Company and leased them back
to the Company. In October 1994, the Company exercised its right to purchase the
equipment for $250,000. The Company's legal counsel was one of the lessors in
this transaction and provided $50,000 of the consideration for the acquisition
of the equipment by the lessors.

8. EXPORT SALES AND MAJOR CUSTOMERS

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

<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
--------------------------------------
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Canada......................................... $ 876,000 $ 346,000 $1,022,000
Columbia....................................... -- -- 949,000
China.......................................... -- 885,000 943,000
Europe......................................... 293,000 339,000 699,000
Other.......................................... 240,000 222,000 213,000
---------- ---------- ----------
Totals............................... $1,409,000 $1,792,000 $3,826,000
========== ========== ==========
</TABLE>

One customer represented 36%, 16% and 18% of the Company's total revenues
for the years ended January 31, 1994, 1995 and 1996, respectively. No other
customer exceeded 10% of revenues for fiscal 1994, 1995 and 1996.

9. CONCENTRATIONS OF CREDIT RISK

As of January 31, 1995 and 1996, and October 31, 1996, amounts due from
customers which exceeded 10 percent of accounts receivable, amounted to an
aggregate of $1,298,000 (four customers) $1,138,000 (three customers) and
$1,663,000 (three customers), respectively.

One of the Company's significant customers filed for bankruptcy protection
during December 1996. Revenues derived from this customer amount to 18.5% of
total revenues for the eleven-month period ended December 31, 1996. As of that
date, amounts due from this customer totalled approximately $1.0 million. During
December 1996, the Company increased its allowance for trade accounts receivable
from $615,000 at October 31, 1996 to $1.5 million at December 31, 1996, 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.

The Company maintains deposits with banks which exceed the 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.

10. STOCKHOLDERS' EQUITY

The Company has 1,000,000 shares of preferred stock authorized, none of
which are outstanding as of October 31, 1996. 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 4,378,650 are issued and outstanding as of October 31, 1996. In connection
with the Company's initial public offering, 1,790,000 shares of the Company's
common stock were issued during fiscal 1995. Proceeds of the offering amounted
to $4,185,000, net of offering costs of $1,283,000. Warrants to acquire 895,000
shares of

F-12
<PAGE> 52

MITCHAM INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION SUBSEQUENT TO JANUARY 31, 1996 IS UNAUDITED)

the Company's commons stock at $3.50 per share were issued in connection with
this offering. 892,750 of these warrants had been exercised as of October 31,
1996.

The Company issued warrants to various stockholders 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 was increased to 63,953 and
$3.87, respectively, during fiscal 1996 as a result of the anti-dilution
provisions of the warrants.

In connection with bridge financing during 1994, the Company issued
warrants to the bridge note holders to purchase 200,000 shares of its common
stock for $3.75 per share. The exercise price of the warrants was later
decreased to $3.50 per share in connection with the Company's sale and leaseback
of channel boxes and subsequent exercise of an option to purchase such channel
boxes. The warrants were exercisable beginning December 29, 1994, and unless
exercised, automatically expire five years from the date of their issuance. All
these warrants have been exercised as of October 31, 1996.

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 and are unexercised at October 31, 1996.

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 were issued 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 options and warrants, are
subject to certain demand and piggy-back registration rights. As of October 31,
1996, 68,000 of these warrants had been exercised.

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 remote signal conditioners 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. The agreement, which expired December 1996, was
contingent upon the Company purchasing a minimum of $10,000,000 of I/O remote
signal conditioners as follows: $1,000,000 on or before June 30, 1994;
$2,500,000 on or before August 31, 1994; an additional $2,500,000 through
February 22, 1996; and a further $4,000,000 through December 31, 1996. In the
event the Company had not made the required amount of purchases, it would have
lost its exclusivity as recipient of lease requests for I/O channel boxes.

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, 1998, 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 (or an aggregate additional $10.25 million after the $3.0 million
Renewal purchase is made). As of October 31, 1996, the Company believes it has
fulfilled the terms of the agreement, including the minimum purchase
commitments.

F-13
<PAGE> 53

MITCHAM INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION SUBSEQUENT TO JANUARY 31, 1996 IS UNAUDITED)

In September 1996, the Company entered into two agreements with SERCEL,
S.A. ("SERCEL") a designer and manufacturer of land/shallow water seismic data
acquisition systems and related equipment. One agreement, the Exclusive
Equipment Lease Agreement provides that until December 31, 1999, the Company
will be SERCEL's short-term leasing agency 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; and the Company
will acquire up to $10.2 million of SERCEL's 3-D data acquisition equipment and
other field equipment from SERCEL at favorable prices, $800,000 of which will
consist of SERCEL's existing lease pool of primarily 3-D channel boxes. The
second agreement, the Commercial Representation Agreement, provides that until
September 19, 1999, 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, 1996,
the Company believes it has fulfilled the terms of the agreement, including the
minimum purchase commitments.

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 (as
defined); 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 or is convicted of or indicted for any felony
criminal offense or any crime 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 agreement:

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 300,000 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.

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). 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

F-14
<PAGE> 54

MITCHAM INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION SUBSEQUENT TO JANUARY 31, 1996 IS UNAUDITED)

is in the service of the Company. As of October 31, 1996, options to purchase an
aggregate of 285,750 shares of common stock are issued and outstanding under the
Stock Option Plan, 183,250 of which are exercisable at a price of $5.00 per
share, 62,000 of which are exercisable at $3.29 per share, 39,500 of which are
exercisable at $5.75 and 1,000 of which are exercisable at $6.00 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 are to
have an exercise price at least equal to the fair market value of the Company's
common 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, 1996, 8,000 options have been granted under this
Plan.

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. SECONDARY PUBLIC OFFERING

The Company is preparing to register with the Securities and Exchange
Commission 2,500,000 shares of its common stock. The Company has granted an
option to the underwriters to purchase up to 375,000 shares on the same terms to
satisfy over-allotments in the sale of the 2,500,000 shares.

F-15
<PAGE> 55

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

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

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Cautionary Statement Regarding
Forward-Looking Statements.......... 6
Risk Factors.......................... 6
Use of Proceeds....................... 10
Price Range of Common Stock........... 11
Dividend Policy....................... 11
Capitalization........................ 12
Dilution.............................. 13
Selected Financial Data............... 14
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 15
Business.............................. 19
Management............................ 27
Certain Transactions and
Relationships....................... 31
Principal and Selling Shareholders.... 32
Description of Capital Stock and Other
Securities.......................... 33
Shares Eligible for Future Sale....... 35
Underwriting.......................... 36
Legal Matters......................... 37
Experts............................... 37
Available Information................. 37
Glossary of Terms..................... 39
Index to Financial Statements......... F-1
</TABLE>

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

[Mitcham Industries Logo]

3,000,000 SHARES

COMMON STOCK

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

PROSPECTUS
---------------------
RODMAN & RENSHAW, INC.

SIMMONS & COMPANY
INTERNATIONAL
, 1997

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