<PAGE>   1
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                       SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON, 20549
                        _____________________________

                                   FORM 10-K

  X    Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange 
----       Act of 1934 For the fiscal year ended December 31, 1996.
                                       or
       Transition Report Pursuant to Section 13 or 15(d) of the Securities 
----       Exchange Act of 1934 For the Transition Period from __________ 
           to __________.


                        Commission file number 000-18816

                            GRANT GEOPHYSICAL, INC.
             (Exact name of registrant as specified in its charter)


<TABLE>
<S>                                                                        <C>
                DELAWARE                                                         84-0766570
    (State or other jurisdiction of                                 (I.R.S. Employer Identification No.)
     incorporation or organization)             

             16850 PARK ROW
             HOUSTON, TEXAS                                                        77084
(Address of principal executive offices)                                         (Zip Code)
</TABLE>

      Registrant's telephone number, including area code:  (281) 398-9503

          SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

                                      None

          SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:


<TABLE>
<S>                                                          <C>
                                                                     NAME OF EACH EXCHANGE
         TITLE OF EACH CLASS                                          ON WHICH REGISTERED
         -------------------                                          -------------------

Common Stock, par value $.002 per share  . . . . . . .       National Daily Quotation Service
$2.4375 Convertible Exchangeable
    Preferred Stock, par value $.01 per share  . . . .       National Daily Quotation Service
</TABLE>

    Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.  Yes  X     No 
                                        ----  ----
    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements, incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.  {   }

   As of April 11, 1997, the aggregate market value of Common Stock held by
nonaffiliates of the registrant, based on the closing price of such stock on the
National Daily Quotation Service - Pink Sheets on such date was approximately
$821,000. Shares of Common Stock held by each officer and director and by each
person who owns 5% or more of the outstanding Common Stock have been excluded in
that such persons may be deemed to be affiliates. This determination of
affiliate status is not necessarily conclusive to determination for other
purposes.  As of April 11, 1997, 21,845,660 shares of Common Stock of Grant
Geophysical, Inc. were outstanding.

================================================================================
<PAGE>   2
                            GRANT GEOPHYSICAL, INC.

                           ANNUAL REPORT ON FORM 10-K
                      FOR THE YEAR ENDED DECEMBER 31, 1996

                               TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I
                                                                                                    Page
                                                                                                    ----
<S>                                                                                                  <C>
     Item  1. Business  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          3

     Item  2. Properties  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          8

     Item  3. Legal Proceedings and Regulatory Matters  . . . . . . . . . . . . . . . . . . .          8

     Item  4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . .         10

PART II

     Item  5. Market For Registrant's Common Stock and Related
              Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         11

     Item  6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . .         12

     Item  7. Management's Discussion and Analysis of Financial
              Condition and Results of Operations

                 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         13
                 Results of Operations  . . . . . . . . . . . . . . . . . . . . . . . . . . .         15
                 Financing Condition, Liquidity and Capital Resources . . . . . . . . . . . .         18
                 Other  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         19

     Item  8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . .         19

     Item  9. Changes in and Disagreements With Accountants on
              Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . .         19

PART III

     Item 10. Directors and Executive Officers of the Registrant  . . . . . . . . . . . . . .         20
     Item 11. Executive Officer Compensation  . . . . . . . . . . . . . . . . . . . . . . . .         24
     Item 12. Security Ownership of Certain Beneficial Owners and Management  . . . . . . . .         30
     Item 13. Certain Relationships and Related Transactions  . . . . . . . . . . . . . . . .         31

PART IV

     Item 14. Exhibits, Financial Statement Schedule and
              Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         33

SIGNATURE PAGE        . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           34

INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE  . . . . . . . . . . . . . . .        F-1
</TABLE>





                                       2
<PAGE>   3
     Investors are cautioned that certain statements in this Form 10-K Annual
Report are forward looking and involve risk and uncertainties.  Words such as
"expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates,"
and variations of such words and similar expressions are intended to identify
such forward looking statements.  These statements are based on current
expectations and projections about the geophysical industry and assumptions
made by management and are not guarantees of future performance.  Therefore,
actual events and results may differ materially from those expressed or
forecasted in the forward looking statements due to factors such as weather
conditions, outcome of negotiations and approval of reorganization plans,
demand for seismic data acquisition services in general and specifically for
the Company's services, and other factors identified in the Company's filings
with the Securities and Exchange Commission, including the Company's Form 10-K
Annual Report.  The Company undertakes no obligation to update any forward
looking statements made in this Form 10-K Annual Report.

                                     PART I

ITEM 1.  BUSINESS

                                  THE COMPANY

     Grant Geophysical, Inc. ("Grant") was incorporated in Delaware on June 27,
1978, and is the successor to several companies as a result of mergers.  The
merged companies include Norpac Geophysical Company, Seiscom Delta, Inc.,
United Geophysical Company, and Tensor Incorporated.  As a result of these
transactions Grant has formerly been known as Grant- Norpac, Inc. and, later,
Grant Tensor Geophysical Corp.  In 1993, after selling substantially all of its
seismic data processing assets, Grant resumed the name Grant Geophysical, Inc.

     Grant has several wholly-owned subsidiaries incorporated in the United
States and certain foreign jurisdictions (the "Subsidiaries").  Grant and
certain of the Subsidiaries have branch operations in a number of foreign
jurisdictions (the "Branches").  Grant, the Subsidiaries and the Branches are
collectively referred to as the "Company".

     On December 6, 1996 (the "Petition Date"), Grant filed a voluntary
petition for relief with the United States Bankruptcy Court for the District of
Delaware (the "Court") under chapter 11 of the United States Bankruptcy Code
(the "Bankruptcy Code").

     The bankruptcy filing was precipitated by several factors, including rapid
expansion in the United States and Latin American markets, costs related to the
development of a proprietary data recording system and poor operational results.
These factors impaired Grant's ability to service its indebtedness, fund
essential capital spending and provide working capital for operations. Grant
explored several alternatives to improve its capital structure and increase
liquidity.  Discussions were conducted with prospective lenders and investors,
including certain creditors and stockholders of Grant. However, these
discussions were not successful in procuring additional capital to adequately
fund ongoing operations.  By late 1996, it became apparent that the only
feasible recourse was to commence a reorganization under bankruptcy court
protection.  As of the date of this report none of the Subsidiaries or Branches
have filed for relief under the Bankruptcy Code or similar foreign laws.  See
Item 7, "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Overview" and Note 1 of Notes to Consolidated Financial
Statements.

     Generally, under chapter 11, all actions to enforce or collect pre-petition
claims against a debtor are stayed.  Debtors may operate their businesses and
manage their assets in the ordinary course as debtors-in-possession, but must
obtain Court approval for transactions outside the ordinary course of business.
All liabilities of Grant outstanding at December 6, 1996, have been reclassified
from their respective current and non-current liability categories to "Pre-
petition liabilities subject to chapter 11 case."

     This Form 10-K was prepared based on the status of Grant's chapter 11 case
on April 14, 1997.  The case is ongoing.  On March 14, 1997, Grant entered into
a term sheet ("Term Sheet") with Elliott Associates L.P. ("Elliott") pursuant to
which Elliott may make certain capital investments in connection with a plan of





                                       3
<PAGE>   4
reorganization for Grant.  This Term Sheet is subject to a number of material
conditions including, but not limited to, execution of a mutually agreeable
definitive agreement and the Court's approval of certain break-up fees and
bidding procedures.  The Court approved the proposed break-up fees and bidding
procedures on April 9, 1997. However, there can be no assurance that the
transactions described in the Term Sheet will be consummated as described, or
at all.  The Court has ordered that all parties wishing to file a proof of
claim must do so by May 7, 1997 or be barred from participating in a
distribution of the bankruptcy estate.  Accordingly, Grant's consolidated
financial statements give no effect to any adjustments which might be required
as a result of the reorganization proceedings.


BUSINESS

     The Company is engaged primarily in the gathering of seismic data used by
oil and gas companies in determining whether subsurface geological conditions
appear favorable for the accumulation of oil and gas reserves.

     The following table sets forth the Company's revenues from continuing
operations by geographic area:


                          REVENUES BY GEOGRAPHIC AREA
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                           YEAR ENDED DECEMBER 31,                         
                                       -----------------------------------------------------------------
                                             1996                       1995                  1994        
                                      ------------------         ------------------    -----------------
<S>                                   <C>         <C>              <C>       <C>        <C>        <C>
United States . . . . . . . . . .     $ 42,074     40%             $47,849    52%       $27,791     38%
Europe, Africa and
  the Middle East(1)  . . . . . .          904      1               14,994    16         24,225     33
Latin America . . . . . . . . . .       57,133     54               25,532    28         15,643     21
Far East  . . . . . . . . . . . .        5,412      5                3,621     4          6,032      8
                                      --------   ----              -------  ----        -------   ----
                                      $105,523    100%             $91,996   100%       $73,691    100%
                                      ========    ===              =======   ===        =======    === 
</TABLE>

__________________

(1) On December 23, 1996, Grant entered into a letter of intent to sell its
    Nigerian subsidiary.  The Court approved the sale on March 24, 1997, and the
    sale is expected to be consummated by April 30, 1997.  This subsidiary
    contributed substantially all of Grant's revenues from Europe, Africa and
    the Middle East.

See Note 5 of Notes to Consolidated Financial Statements for further
information regarding the Company's operations including operating
profit/(loss) and identifiable assets by geographic area.

EXPLORATION SEISMOLOGY

     The principles of seismology have been used in the exploration for oil and
gas reserves since about 1929.  Exploration seismology encompasses the
generation and recording of reflected seismic energy which is computer
processed to produce representations of the earth's subsurface.  These
processed seismic data are used by geoscientists to identify geological
conditions favorable for the accumulation of oil and gas reserves and to
optimize and monitor field production operations.

     The principal components of a seismic system are the energy source device
and the recording system.  The energy source device generates an impact or
vibration at or near the earth's surface which produces sonic waves. These
sonic waves travel downward through the earth's subsurface and are partially
reflected back to the surface as they pass through the subsurface rock layers.
The energy source devices typically used by the Company in its seismic data
acquisition are explosives, vibroseis, a mechanical device used to generate
input signals at desired frequencies, and airguns.





                                       4
<PAGE>   5
     The reflected sonic waves are detected by highly sensitive devices called
geophones, which convert the seismic reflections to electrical signals.  These
electrical signals represent the time required for the waves to travel from the
earth's surface to the subsurface interfaces and be reflected back to the
surface.  A reflection seismograph converts the electrical signals to digital
information ("seismic data") at remote recording locations and transmits the
seismic data by telemetric means to a central recording station where the
seismic data are stored on computer magnetic tapes.  More sophisticated
reflection seismographs digitally record the seismic data at the remote
recording location, thereby eliminating the need for real-time transmission of
the data to a central recording unit.  Once recorded, the seismic data are sent
to data processing centers where they are enhanced to illuminate the desired
reflected signals.  The processed seismic data are then arranged for input to
imaging devices that produce representations of the survey site's subsurface.

     The Company has experienced an increase in demand during the last several
years among its customers for three-dimensional ("3-D") seismic surveys.
Three-dimensional seismic surveys produce seismic data that allow the user to
view subsurface conditions with a much higher degree of resolution than those
produced using earlier two-dimensional ("2-D") seismic surveys.  In known
producing areas, 3-D seismic data aids its users in more precisely positioning
step-out and development wells.  Unlike  2-D seismic surveys (which typically
use between 240 and 480 remote recording locations), 3-D surveys require much
larger recording systems (1,000 to 3,000 or more recording channels arranged in
patterns at numerous locations).

CONTRACT LAND SEISMIC DATA ACQUISITION

     As of April 14, 1997, the Company was operating or mobilizing 12 land
seismic crews and 2 shallow water transition zone crews, 7 of which were in the
United States and 7 of which were in Latin America and the Far East.

     Seismic Crews.  A seismic crew typically consists of a manager; permitting
agents who secure permission to enter landowners' properties; surveyors who
mark the locations for geophone and source placement; general laborers who
place and move the geophones and connecting cables; and either, (i) if
explosives are used as the energy source, a drill crew to drill holes and
shooters to detonate the explosives, or (ii) if vibroseis is used as the energy
source, drivers to operate the vibroseis trucks; and an observer who operates
the seismograph and controls the recording of the seismic data.  A fully
staffed seismic crew in the United States typically utilizes 25 to 55
personnel.  International seismic crews normally require a significantly larger
number of general laborers and support personnel because the survey sites are
often in remote locations.  For example, a desert seismic crew may require 10
to 15 expatriate personnel plus 100 to 150 local personnel, while a seismic
crew operating in marsh or swamp conditions or in a remote jungle region with
limited access to roads may require a crew of 600 to 2,500 persons, all of whom
must be provided with food and shelter at the survey site.

     The Company also operates shallow water transition zone seismic crews
using a radio telemetry recording system.  Typically, the transition zone is a
unique area of operation in that the area to be surveyed lies either in shallow
water or in marshy grasslands where conventional land or marine seismic crew
cannot operate efficiently. This type of seismic crew utilizes an airgun barge
to create the energy source, a vessel to house the crew and various utility
boats to position the recording system.  A crew of this sort will typically
utilize approximately 90 to 115 personnel.

     Contracts.  The Company's seismic data acquisition activities are
conducted under contracts with oil and gas exploration and production companies
which retain exclusive ownership of the acquired seismic data.  Contracts,
which are usually awarded on a competitive bid basis, are either "turnkey,"
which provide for a fixed fee to be paid to the Company for each unit of data
acquired, or "term," which provide for a fixed monthly fee during the term of
the project.  The majority of the Company's contracts are on a turnkey basis.

     Contracts awarded for land and transition zone seismic data acquisition
outside the United States are generally denominated partially in U.S. dollars
and partially in the local currency of the country in which the seismic survey
is conducted.  The portion of the contract denominated in local currency is
principally utilized to pay local





                                       5
<PAGE>   6
crew-related expenses.  See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Other" for a discussion of foreign
exchange gains and losses.

     Mobilization Costs. The costs of mobilizing seismic crews varies from
location to location.  Typically, the costs tend to be higher in the foreign
locations.  When possible the Company charges a mobilization fee which may be
collected in advance or over the term of the contract.

     Capital Expenditures.  The capital expenditures necessary to equip a new
seismic crew are primarily related to the type and quantity of energy source
devices, recording systems and logistical support equipment to be utilized in a
seismic survey.  If the seismic crew is in a remote location, the Company may
also provide facilities to house members of the seismic crew.  On multi-year
contracts, the Company endeavors to recover its investment over the term of the
work.  The Company's capital expenditures in any given year are dependent on
the mix of its business and customer demand for certain types of geophysical
equipment.

United States Operations

     The demand for contract land seismic data acquisition in the United States
has declined substantially since activity levels peaked in 1981.  Beginning in
1993, however, there was an increase in bid activity relating to 3D projects.
These projects are generally a combination of new exploration, and exploitation
of existing fields. Grant believes the utilization of 3D seismic data
acquisition techniques in the United States will continue to be an important
tool used in the discovery and development of oil and gas fields because of the
value these techniques provide in assessing the production potential in known
producing areas; however, Grant cannot predict the level of future demand for
its services.

International Operations

     The Company has been active in Latin America since 1940, and, in
particular, has had continuous operations in Brazil since that date.  During
1996 and 1995, the Company also had seismic crews operating in Ecuador,
Colombia, Bolivia and Peru.  Within the last four years, the Company has also
conducted seismic operations in Venezuela and Argentina.

     The Company's first operations in the Far East and Australia region were
conducted in 1962.  The Company's Far East activity in 1996 consisted of one
crew in Bangladesh.

     The Company's operations in Europe, Africa and the Middle East were
centered in Nigeria during 1995 and 1994 and Abu Dhabi in 1994.  During 1996
there was no significant activity in either Nigeria or any of the Middle East
countries or Emirates.  On December 23, 1996, Grant entered into a letter of
intent to sell the stock of United Geophysical (Nigeria) Ltd., its subsidiary
in Nigeria.  The sale was approved by the  Court on March 24, 1997 and is
expected to be consummated by April 30, 1997.  Within the last five years, the
Company also has operated crews in Yemen and Qatar.  Although the Company does
not have a crew operating in the Middle East at the present time, management
currently plans to continue evaluating job opportunities as they develop
throughout the region and to market the Company's services where appropriate.
The Company is not currently active in Europe.

     For information relating to the Company's total revenues, operating
profit/(loss) and identifiable assets attributable to its geographic area, see
Note 5 of Notes to Consolidated Financial Statements.

CUSTOMERS

     The Company's major customers are multi-national oil and gas companies,
foreign national oil companies and independent oil and gas companies.  Revenues
from a U.S. based international oil company were approximately $20,233,000
(19%) and $12,683,000 (14%) for the years ended December 31, 1996 and 1995,
respectively.  In fiscal 1995, revenues from two affiliated nationalized oil
companies totaled approximately $10,048,000 (11%). Due to the contractual
nature of the Company's operations, it is anticipated that significant portions
of future





                                       6
<PAGE>   7
consolidated revenues may continue to be attributable to a few customers,
although it is likely that the identity of such customers may change from
period to period.  See Note 5 of Notes to Consolidated Financial Statements.

COMPETITION

     The acquisition of seismic data for the oil and gas industry is highly
competitive worldwide.  Although precise comparative figures are not available,
the Company believes that its principal competitors have financial, operating
and other resources in excess of those available to the Company.

     The Company's principal competitors in its United States operations are
Western Atlas, Inc., Veritas DGC, Inc., Geco-Prakla, a subsidiary of
Schlumberger Limited and several other regional operators.  Competition for
available seismic surveys is based primarily on price and availability.  Other
competitive factors, including performance, technology, and dependability, may
affect the decision to award a contract to the Company or one of its
competitors.

     The Company competes in Latin America with Western Atlas, Compagnie
General de Geophysique, Inc. ("CGG"), Geco-Prakla, as well as several local
companies; and in the Far East with CGG, Geco-Prakla, ELNUSA, a state owned
seismic company, and Western Atlas.  Contracts awarded in the international
market are also based primarily on price and crew availability, with
consideration given to technology and contractor expertise in the area of the
project.  The Company believes that its lengthy operating history and presence
in the international markets enhance its ability to compete for such contracts.

BACKLOG

     The Company's total backlog of land and transition zone seismic data
acquisition contracts in the United States as of December 31, 1996 and December
31, 1995 was approximately $12,530,000 and $27,385,000, respectively.  The
Company expects to complete substantially all of the December 31, 1996 United
States backlog by December 31, 1997.  The total backlog of land and transition
zone seismic data acquisition contracts with respect to the Company's
international operations as of December 31, 1996 and December 31, 1995 was
approximately $58,918,000 and $46,219,000, respectively.  Approximately
$11,869,000 of the backlog at December 31, 1995 was carried over to backlog at
December 31, 1996.  The Company expects to complete $2,850,000 of the
international backlog in 1998.

     Certain of the Company's international contracts contain provisions
providing for the reimbursement of mobilization and other costs in the event of
the cancellation of the contract by the customer.  The majority of the
Company's international contracts and virtually all of its United States
contracts are terminable by the customer upon relatively short notice and
possibly without penalty.  Consequently, the Company's backlog as of any
particular date is not indicative of the Company's likely operating results for
any succeeding fiscal period; and there can be no assurance that the amount of
backlog ultimately will be realized.

TECHNOLOGICAL INNOVATION

     Until November of 1996, Grant maintained an engineering group aimed
primarily at the development of a proprietary data recording system.  In
November 1996, Grant determined that it could not adequately fund ongoing
development of this system, and as a result, substantially all of the personnel
associated with the effort were terminated.  In 1994, 1995 and 1996, Grant's
expenditures related to the system development project were approximately
$177,000, $2,559,000, and $3,614,000, respectively.  All of such costs incurred
in 1994 and 1995 were capitalized while all the costs incurred in 1996 were
expensed in the fourth quarter.  In connection with the decision to terminate
development, Grant wrote off a total of $5,802,000, representing all of its
capitalized costs.

     In addition to the system development effort outlined above, the Company
maintains a staff of geoscientists and engineers to develop new and enhance
existing data recording techniques, to support its field operations and to





                                       7
<PAGE>   8
consult with clients on the parameters of upcoming seismic projects.  The costs
of all such personnel and activities are expensed as incurred.

     As a matter of policy, the Company rarely applies for patents on
internally developed technology.  This policy is based upon the belief that
most proprietary technology, even where regarded as patentable, can be more
effectively protected by maintaining confidentiality than through disclosure
and a patent enforcement program.

     Certain of the equipment, processes and techniques used by the Company are
subject to the patent rights of others, and the Company holds non-exclusive
licenses with respect to a number of such patents.  While the Company regards
as beneficial its access to others' technology through licensing, it is
believed that substantially all presently licensed technology could be replaced
without significant disruption to the business should the need arise.

EMPLOYEES

     As of April 14, 1997, the Company employed approximately 2,000 persons, of
whom 1,500 were in foreign locations and 500 were in the United States.  None
of the Company's United States employees are covered by collective bargaining
agreements, although certain of its foreign employees are covered by labor
agreements.  The Company considers its employee relations to be satisfactory.

INFLATION AND SEASONALITY

    Inflation in the United States has not had a material effect on the Company
in recent years. Revenues and earnings vary from quarter to quarter, depending
on the timing of seismic crew start-ups, isolated weather conditions and other
factors.  The Company's operating results for any particular quarter may not be
indicative of the results for any future quarter or any year.

ITEM 2.  PROPERTIES

     The Company's primary physical properties are seismic equipment.  In
addition, Grant owns a 30,000 square foot building and storage yard in Houston,
Texas which serves as its corporate headquarters, warehouse and staging
facility.  Grant also owns its office and repair facility located on a two acre
tract in New Iberia, Louisiana.  Further, the Company leases operations
offices, sales offices and warehouses in the United States and foreign
countries.  During 1996, the Company paid rentals in the aggregate amount of
approximately $650,000 with respect to real estate leases. See Item 3. Legal
Proceedings for a description of the status of these leases under Chapter 11
proceedings.

ITEM 3.  LEGAL PROCEEDINGS AND REGULATORY MATTERS

     On December 6, 1996, Grant filed a voluntary petition for relief under the
Bankruptcy Code with the Court under Case No. 96-01936-HSB.  Since the Petition
Date, Grant has operated its business and managed its property as debtor-in-
possession, under the authority of sections 1107(a) and 1108 of the Bankruptcy
Code.

     The Court generally has jurisdiction over all of Grant's property, as
defined in section 541 of the Bankruptcy Code, held on the Petition Date or
acquired thereafter. Under sections 1107 and 1108 of the Bankruptcy Code and by
order of the Court, Grant is operating its business and managing its assets in
the ordinary course of business as debtor-in-possession. Grant may not, however,
engage in transactions outside the ordinary course of business without prior
approval of the Court. Pursuant to section 362(a) of the Bankruptcy Code and
subject to the exceptions contained in section 362(b) thereof, the commencement
of a bankruptcy proceeding operates as an automatic stay applicable to all
persons and other entities, generally prohibiting absent Court approval (i) the
commencement or continuation of any judicial, administrative or other proceeding
against Grant, (ii) any act to obtain possession of property of, or property
from, Grant, and (iii) any act to create, perfect or enforce any lien against
property of Grant. While the automatic stay applies to all of Grant's property
wherever located, Grant operates in several foreign jurisdictions, some of which
may not give effect to the automatic stay.





                                       8
<PAGE>   9
     Grant's bankruptcy proceeding is discussed below. For information
concerning the effect of the bankruptcy on Grant's business, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Note 1 of Notes to Consolidated Financial Statements.

     Management's objective in the bankruptcy proceeding is to achieve the
highest possible recoveries for all of Grant's creditors and shareholders.  At
December 31, 1996, liabilities of the Company exceeded its assets by
$34,213,000. It is impossible at this time to determine the actual recovery,
if any, that different classes of creditors and shareholders will realize upon
final confirmation of a plan of reorganization. Until confirmation of a plan
of reorganization for Grant which determines the amount and manner of payment
or other disposition of outstanding claims and litigation and the treatment of
Grant's debt and of its equity interests, the value of Grant's debt and of its
equity securities will continue to be uncertain. It is probable that there
will be a significant reduction in the amount of unsecured indebtedness of
Grant and there is a significant likelihood of cancellation of Grant's Common
and Preferred Stock. As a result, such securities should be considered highly
speculative investments with a very high degree of risk to any investor.

     On February 4, 1997, the Court entered a Final Financing Order authorizing
Grant to enter into an agreement to obtain secured post-petition financing with
Foothill Capital Corporation (the "Lender") under which agreement the Lender
continued to advance funds to Grant for its operations. The Lender agreed to
make revolving advances not to exceed $12,500,000 through June 30, 1997. The
advances are not to exceed a borrowing base equal to a percentage of certain
trade accounts receivable and an overadvance amount. The maximum permitted
overadvance was $6,000,000 through March 30, 1997. The Final Financing Order
was amended by the Court on April 9, 1997 to approve an agreement between Grant
and the Lender increasing the overadvance amount to a constant $7,000,000 and
extending the maturity date to September 30, 1997.  See Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operation."

     Pursuant to Section 1102(a) of the Bankruptcy Code, shortly after the
Petition Date the Court appointed a committee ("Creditors' Committee") to
represent Grant's unsecured creditors. The Creditors' Committee currently
consists of the following members: BGP International, Inc.; Wells Fargo Bank
(Texas) National Association; Mitcham Industries, Inc.; NCS International;
Input/Output, Inc.; Conccesiones & Catering Industrial S.A.; Halifax Fund,
L.P.; and Westgate International, L.P.

     The powers and duties of the Creditors' Committee include, among other
things, (i) consulting with Grant concerning the administration of the case;
(ii) participating in the formulation of a plan of reorganization; (iii)
investigating the acts, conduct, assets, liabilities and financial condition of
Grant, the operation of Grant's business and the desirability of the continuance
of such business and any other matters relevant to the case or the formulation
of a plan of reorganization; (iv) requesting the appointment of a trustee or
examiner, and (v) performing such other services as are in the interests of
Grant's unsecured creditors. The Creditors' Committee has the right to review
and object to certain business transactions and to retain counsel and other
approved professionals at the expense of Grant. The Creditors' Committee is
charged with the responsibility of protecting the interests of its
constituencies and assuring that the assets of Grant estate are preserved.

     Pursuant to the Bankruptcy Code, under certain circumstances secured
lenders and equipment lessors may be entitled to adequate protection of their
interests in collateral pending confirmation of a plan of reorganization. Since
the Petition Date, Grant has conducted negotiations with most of its secured
lenders and equipment lessors in an effort to restructure the pre-petition
obligations.  Agreements have been reached with Input/Output, Inc., OYO
Geospace, General Electric Credit Corporation, NYNEX Credit Company, Macha
Equipment, Winthrop Business Credit, Forum Financial and Leica.  Each of these
agreements is subject to approval by the Court.  Based on these agreements,
Grant is making payments of adequate protection in varying amounts.

     All leases of real and personal property held by Grant at the Petition
Date are subject to acceptance or rejection in chapter 11.  As of April 14,
1997, Grant had made decisions to accept only two lease contracts, both of
which involved the financing for certain critical items of data recording
equipment.  Decisions on all remaining leases, including leases covering
Grant's office facilities, are still pending and are not expected to be made
except in connection with a plan of reorganization.





                                       9
<PAGE>   10
     The Company is a party in several lawsuits arising in the ordinary course
of the Company's business.  The majority of such lawsuits are related to minor
damage claims arising from Grant's seismic activities and are stayed pursuant
to the Bankruptcy Code.  While the Company cannot predict the outcome of these
lawsuits management does not believe that their ultimate resolution will have a
marked adverse effect on the Company.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

          Annual Meeting of Stockholders

          Grant held its annual meeting of stockholders on November 1, 1996.
          The following persons were elected to Grant's Board of Directors to
          hold office for the ensuing year.

                               George W. Tilley(1)
              For:  11,779,055       Against:  0      Abstaining:  48,421

                               Harvey D. Attra
              For:  11,782,749       Against:  0      Abstaining:  468,142

                               Orville D. Gaither, Sr.
              For:  11,782,799       Against:  0      Abstaining:  468,142


          The following persons continue their terms as Director for the 
          ensuing year:

                               J. Michael Adcock
                               Douglas K. Stewart

          The results of the voting on amendments to Grant's Amended 1989
          Long-Term Incentive Plan to (a) increase the number of shares
          available for issuance pursuant to the Plan, (b) expand the rights of
          Grant to grant shares of Restricted Stock to Former Non-Employee
          directors and (c) include the Chairman of Grant's Board of Directors
          under the definition of Employee in the Plan were as follows:

               For: 4,350,061     Against:  652,570    Abstaining: 48,421

          ____________
          (1)  Mr. Tilley's services with Grant terminated on November 4, 1996.





                                       10
<PAGE>   11
                                    PART II


ITEM 5.  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
         MATTERS

     The common stock of Grant commenced trading on the NASDAQ National Market
System of The NASDAQ Stock MarketSM under the symbol "GRNT" on September 19,
1990.  Effective January 24, 1997, Grant was delisted by NASDAQ  and began
trading on the "Pink Sheets" published by the National Daily Quotation Service.
The following table sets forth the high and low sales prices for the common
stock for the periods indicated as reported by NASDAQ.  Such prices reflect
inter-dealer prices and do not include retail mark-up, mark-down or commission,
and do not necessarily represent actual transactions.

<TABLE>
<CAPTION>
                                                                        COMMON STOCK  - NASDAQ* 
                                                                       ------------------------
                                                                         HIGH             LOW
                                                                         ----             ---
         <S>                                                          <C>                <C>
         1996*
           First Quarter  . . . . . . . . . . . . . . . . . . . .     $ 3 3/8           $ 2 1/4
           Second Quarter . . . . . . . . . . . . . . . . . . . .       4 5/8             3 1/8
           Third Quarter  . . . . . . . . . . . . . . . . . . . .       4                 1 1/4
           Fourth Quarter   . . . . . . . . . . . . . . . . . . .       1 19/32             1/64

         1995*
           First Quarter  . . . . . . . . . . . . . . . . . . . .     $ 2 7/8           $ 1 7/8
           Second Quarter . . . . . . . . . . . . . . . . . . . .       2 13/16           1 7/8
           Third Quarter  . . . . . . . . . . . . . . . . . . . .       2 5/8             1 7/8
           Fourth Quarter   . . . . . . . . . . . . . . . . . . .       2 3/4             1 7/8
</TABLE>

         *  Grant's stock was delisted by NASDAQ on January 24, 1997.

     On April 11, 1997, the closing price for the common stock of Grant, as
reported on the National Daily Quotation Service - Pink Sheets was $0.04 per
share.

     As of April 11, 1997, Grant had 21,845,660 shares of common stock
outstanding held by approximately 131 stockholders of record. The shares held
by stockholders of record include shares beneficially owned by stockholders who
have chosen to have shares held in a "nominee" or "street" name. Grant is
unable to identify accurately the number of such beneficial holders of its
common stock; however, Grant estimates such number to be approximately 2,000.

     Due to the Company's financial position at December 31, 1996, there is a
likelihood that Grant's common stock and preferred stock will be canceled
pursuant to any reorganization of Grant in the bankruptcy proceeding. As a
result, such securities should be considered highly speculative investments
with a very high degree of risk to any investor.

     Grant has not declared or paid any cash dividends on the common stock
during its three most recent fiscal years. Pursuant to the terms of Grant's
$2.4375 preferred stock, no dividends can be paid on the common stock until all
dividends accrued on the $2.4375 preferred stock have been paid. At December
6, 1996, $2.4375 preferred stock dividends in arrears totaled approximately
$23,451,000.





                                       11
<PAGE>   12

ITEM 6.  SELECTED FINANCIAL DATA

     The following table sets forth, for the periods and at the dates
indicated, selected historical consolidated financial data for the Company.
The selected historical financial data set forth below should be read in
conjunction with the consolidated financial statements and the notes thereto
included in Item 8 of this Form 10-K. See also "Management's Discussion and
Analysis of Financial Condition and Results of Operations."


<TABLE>
<CAPTION>
                                                                      YEAR ENDED DECEMBER 31,                    
                                                ------------------------------------------------------------
                                                1996           1995         1994          1993       1992    
                                                ------------------------------------------------------------
                                                        (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                           <C>           <C>          <C>          <C>           <C>
STATEMENT OF OPERATIONS DATA:
  Revenues  . . . . . . . . . . . . . . .     $  105,523    $   91,996   $   73,691   $   69,255   $   90,556
  Operating income/(loss) . . . . . . . .        (65,970)        4,999       (9,241)     (13,410)     (21,803)
  Income/(loss) from continuing 
    operations  . . . . . . . . . . . . .        (76,027)        3,162      (11,438)     (16,953)     (29,886)
  Discontinued Operations:
    Loss from operations of
      discontinued business . . . . . . .                                                 (1,284)      (8,189)
    Loss on disposal of discontinued
      business  . . . . . . . . . . . . .                                                 (6,174)      (1,248)
                                              ----------    ----------   ----------   ----------   ----------
Net income/(loss) . . . . . . . . . . . .     $  (76,027)   $    3,162   $  (11,438)  $  (24,411)  $  (39,323)
                                              ==========    ==========   ==========   ==========   ========== 

Net loss applicable to
   common stock . . . . . . . . . . . . .     $  (82,390)   $   (2,096)  $  (16,696)  $  (29,669)  $  (44,581)
                                              ==========    ==========   ==========   ==========   ========== 

  INCOME/(LOSS) PER COMMON SHARE--ASSUMING
    FULL AND NO DILUTION:
  Continuing operations . . . . . . . . .     $    (5.17)   $     0.25   $    (0.92)  $    (1.40)  $    (2.51)
                                                                                                              
  Dividend requirement on $2.4375 preferred
     stock  . . . . . . . . . . . . . . .          (0.43)        (0.42)       (0.42)       (0.43)       (0.44)
  Discontinued:
    Operations  . . . . . . . . . . . . .                                                  (0.10)       (0.69)
    Loss on Disposal  . . . . . . . . . .                                                  (0.51)       (0.10)
                                              ----------    ----------   ----------   ----------   ----------
Net loss per common share . . . . . . . .     $    (5.60)   $    (0.17)  $    (1.34)  $    (2.44)  $    (3.74)
                                              ==========    ==========   ==========   ==========   ========== 

  WEIGHTED AVERAGE COMMON SHARES
    OUTSTANDING:
    Primary . . . . . . . . . . . . . . .     14,699,824    12,535,352   12,470,704   12,145,100   11,929,074
    Fully Diluted . . . . . . . . . . . .     14,699,824    12,571,984   12,484,093   12,145,100   11,929,074

CASH FLOW DATA:
  Net cash provided by (used in)
    operating activities--continued 
    operations. . . . . . . . . . . . . .     $   (9,346)   $    2,759   $    3,170   $    2,133   $   12,647
                                                                                                             
  Net cash used in investing 
     activities . . . . . . . . . . . . .        (10,181)       (9,272)      (9,698)      (1,128)     (13,923)
  Net cash from (used in) financing
     activities . . . . . . . . . . . . .         25,667         6,929        5,260       (3,486)         574
  Capital expenditures, net . . . . . . .         10,339        13,757        9,697        6,527       15,433

RATIO:(1)
  Ratio of earnings to fixed charges and
      preferred dividends . . . . . . . .               --         --           --          --            --
</TABLE>


                                                  (Table continued on next page)





                                       12
<PAGE>   13

<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31,                           
                                                ------------------------------------------------------
                                                1996          1995         1994        1993       1992
                                                ----          ----         ----        ----       ----
                                                                 (DOLLARS IN THOUSANDS)
<S>                                          <C>          <C>            <C>        <C>        <C>
BALANCE SHEET DATA:
  Working capital . . . . . . . . . . . .    $  22,421    $    8,033     $  3,022   $  4,585   $    (243)
  Total assets  . . . . . . . . . . . . .       70,123        86,932       61,609     70,745     118,548
  Pre-petition liabilities subject to
    chapter 11 case . . . . . . . . . . .       90,244
  Notes payable, current portion of long-term
    debt and  capital lease obligations .          589        18,430       14,495      8,880      18,634
  Long-term debt and capital lease obligations,
    excluding current portion . . . . . .                      8,789        4,917      6,979      14,686
  Common stock subject to put . . . . . .                                                          1,920
  Total stockholders' equity (deficit)  .      (34,213)       29,715       26,399     37,774      60,689
</TABLE>
----------------------
(1)  Earnings consist of income from continuing operations before income taxes
     plus fixed charges.  Fixed charges consist of interest (including
     amortization of debt issuance costs) and the interest component of lease
     expense.  The ratio of earnings to fixed charges and preferred dividends is
     calculated by dividing the sum of fixed charges and pretax earnings
     required to cover preferred dividends into earnings.  Earnings for the
     years ended December 31, 1996, 1995, 1994, 1993 and 1992 were inadequate to
     cover fixed charges by approximately $81,313,000, $2,591,000, $16,610,000,
     $22,121,000 and $34,544,000, respectively.


ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

[OVERVIEW]

    On December 6, 1996, Grant filed for reorganization under chapter 11 of the
Bankruptcy Code.  Since filing the petition, Grant has continued to operate its
business in the ordinary course as debtor-in-possession.

    Since 1994, the Company has concentrated on providing contract land and
transition zone data acquisition services internationally.  This coincided with
a surge in demand for 3D seismic services, particularly within the United
States.  During the three years ending 1996, the Company's revenues from the
United States have increased 51% from $27,791,000 in 1994 to $42,074,000 in
1996.  In addition, over this same period, the Company expanded its
international operations, specifically in Latin America, with the result that
revenues from Latin America increased 265% from $15,643,000 in 1994 to
$57,133,000 in 1996.  This rapid expansion put a tremendous strain on the
Company's capital resources.  The need for working capital to fuel this growth
and the cash and debt required to purchase new capital equipment resulted in an
ongoing liquidity problem.

    In the first quarter of 1994, Grant began development of a proprietary data
recording system that became known as Citation.  This system was intended to
replace an older recording system in use in marshy areas along the Texas and
Louisiana Gulf Coast.  Management believed that an advantage of the system was
its relatively low cost to develop and manufacture when compared to the price of
comparable third party equipment. Original estimates ranged from savings of
one-third to one-half of a purchased system.  The prototype system was planned
to cost approximately $2,500,000 to $3,000,000 with deployment in early 1996.
However, software design problems and unavailability of hardware resulted in
numerous delays and cost overruns. The ultimate cost of the system was
approximately $6,000,000 and initial deployment was not achieved until July
1996, several months behind schedule. While the system was able to successfully
acquire data, the production performance was well below expectation. Development
costs associated with Citation contributed significantly to destabilizing the
Company's financial condition during 1996.

    In addition to the Citation development, several operational factors
contributed to a sudden and dramatic deterioration of the Company's financial
condition in 1996.  The most costly factor was losses incurred in Peru.  The
Company began operations in Peru in 1995 by mobilizing three crews in March,
April and May of that year.





                                       13
<PAGE>   14
Revenue and operating income for 1995 were $13,719,000 and $1,205,000,
respectively. Peruvian operations were expanded in 1996 by adding a fourth crew
and increasing the equipment complement on another. However, an inability to
accurately estimate the crews' production capabilities coupled with costs that
were significantly higher than originally estimated, resulted in material and
continuing operating losses.  During the year ended 1996, Peruvian operations
had revenues of $27,490,000 and an operating loss of $19,804,000, including a
loss accrual of $2,700,000 related to the shutdown of operations in and
withdrawal of equipment and personnel from the country. The Company's United
States operations also experienced significant losses, substantially all of
which were directly or indirectly related to the slow development and late
deployment of the Citation system.  Two shallow water transition zone projects
in particular incurred operating losses in excess of $6,000,000.  These
projects were delayed while waiting on the deployment of the Citation and were
subsequently conducted utilizing other seismic recording equipment.  As a
result, the crews experienced adverse weather due to the delays and production
was severely hampered.  These operations were ultimately suspended in November
1996.

    All of these factors:  (1) rapid expansion in the United States and Latin
American markets, (2) costly and unsuccessful deployment of a proprietary
recording system and (3) poor operational results in 1996, contributed to rapid
deterioration of the Company's financial condition.  Grant explored various
alternatives to improve its capital structure and increase its liquidity.
Discussions were conducted with prospective lenders and investors, including
certain creditors and stockholders of Grant.  However, these discussions were
not successful in procuring sufficient capital to adequately fund ongoing
operations.  By late 1996, it became apparent to Grant that the only feasible
recourse was to commence a reorganization under bankruptcy court protection.

     Since filing its voluntary petition on December 6, 1996, Grant has
continued to operate in the ordinary course of business as 
debtor-in-possession. On February 4, 1997, the Court approved a Final Financing
Order authorizing Grant to enter into an agreement to obtain secured
post-petition financing with Foothill Financial Corporation (the "Lender") under
which agreement the Lender continued to advance funds to Grant for its
operations.  The Lender agreed to make revolving advances not to exceed
$12,500,000 through June 30, 1997. The advances are not to exceed a borrowing
base equal to a percentage of certain trade accounts receivable and an
overadvance amount. The maximum permitted overadvance was $6,000,000 through
March 30, 1997.  The Final Financing Order was amended by order of the Court on
April 9, 1997 to revise the overadvance amount to a constant $7,000,000 and to
extend the maturity date to September 30, 1997. The Final Financing Order also
includes an internal cash management and reporting system containing certain
requirements that Grant operate within an approved budget and restrictions in
the movement of cash from the Company's domestic operations to most foreign
locations.  This latter restriction has not adversely affected foreign
operations.

    Grant plans to file a plan of reorganization as soon as practicable.  The
objective of the plan will be to achieve the highest possible recovery for all
parties at interest, consistent with its resources available for immediate
distribution and with anticipated cash flows.  The plan will be structured
around the investor or buyer, if any, who best provides this objective.

    The Company's indebtedness at December 31, 1996, totaled $104,336,000 and
included $90,244,000 of pre-petition liabilities subject to Grant's bankruptcy
proceeding.  Grant's stockholders' deficit at that date totaled $34,213,000.
The ultimate recovery, if any, by Grant's various parties at interest will
depend on the resolution of the bankruptcy proceeding and the terms of a plan
of reorganization.  Although no plan of reorganization has yet been filed, the
significant stockholders' deficit of Grant makes it unlikely that unsecured
creditors will realize full recovery of their claims or that shareholders will
realize any significant recovery.

    Since the Petition Date, Grant has conducted discussions with several
parties who have indicated possible interest in funding a plan of
reorganization.  On March 14, 1997, Grant announced that it had entered into a
term sheet ("Term Sheet") with Elliott to fund and jointly sponsor a plan of
reorganization. The Term Sheet calls for Elliott to invest up to $30,000,000 in
new equity capital in Grant and to provide $2,000,000 in expanded credit
facilities for the growth of the Company's international operations.  In
addition, pending confirmation of the reorganization plan, Elliott has
purchased a $2,500,000 participation in Grant's current post-petition loan
facility with the Lender.  The Term Sheet is subject to a number of material
conditions, including but not limited to, execution of a mutually agreeable
definitive agreement and the Court's approval of certain break-up fees and





                                       14
<PAGE>   15
bidding procedures.  The Court approved the break-up fee and bidding procedures
on April 9, 1997.  Pursuant to the Term Sheet, Grant and Elliott will file a
jointly proposed reorganization plan providing for specific recoveries to
Grant's secured and unsecured creditors.  Secured creditors will be paid in
full in a combination of cash and/or new promissory notes.  Unsecured creditors
would be able to select from a menu of recovery options that include cash and
stock, promissory notes or credits exchangeable for Grant services performed
after consummation of the plan.  In addition, the plan is expected to provide
for a $33,000,000 rights offering, $30,000,000 of which will be guaranteed by
Elliott.  Under the rights offering, Grant's unsecured creditors and its
preferred and common shareholders will be granted the right to purchase shares
of Grant's new common stock at the same price per share as Elliott's
investment.  The plan is expected to also provide an option for Grant's
employees to participate in the rights offering subject to any required
Securities and Exchange Commission approvals.  The shares will be offered to
employees on the same basis as those offered to creditors, shareholders and
Elliott.  If the plan is consummated, Elliott will own a minimum of 51% of
Grant's common stock.  Consummation of the plan contained in the Term Sheet  is
subject to a number of conditions including the vote of Grant's creditors and
shareholders.

    The Term Sheet, as modified by the Court's order on April 9, 1997, also
provides that the Elliott proposal is subject to any higher and better offer
which may be received by Grant.  Grant has retained Simmons & Company
International as its investment banker to assist it in soliciting other offers.
Other offers are due no later than the date set by the Court for the filing of
objections to the disclosure statement that Grant expects to file in connection
with the Elliott proposal.  Grant will evaluate all valid offers, and will
select the proposal which, in its judgment, produces the highest and best
recovery to all parties in interest.  Any valid offer must provide for the
immediate purchase of Elliott's participation in Grant's post-petition loan
facility.

RESULTS OF OPERATIONS

    Year Ended December 31, 1996 Compared to the Year Ended December 31, 1995

    The Company's revenues for the year ended December 31, 1996 increased
$13,527,000 or 15% from $91,996,000 for year ended December 31, 1995 to
$105,523,000 in the most recent year.  This was the result of significant
growth in the Company's international operations in Latin America and
Bangladesh, which was offset partially by a reduction in revenues earned in the
United States and Nigeria.

    Revenues from United States data acquisition operations decreased 12%
(5,775,000) to $42,074,000. This reduction was the result of several factors
experienced during the fourth quarter of 1996.  The filing of the chapter 11
petition on December 6, 1996 and the severe shortage of operating funds
experienced for several weeks prior to the filing caused major disruptions on
many domestic crews and resulted in lower revenues for the quarter. In
addition, the Company's Citation data acquisition recording system, which
operated for two months in the third quarter, experienced lower than
anticipated production performance.  And finally, a shallow water transition
zone crew, operating along the coast of Louisiana, was hampered by severe
weather and frequent leased equipment failures.  These factors, coupled with
the Company's inability to continue to adequately fund the crew, resulted in a
suspension of operations in  November 1996.

    Revenues from international operations increased 44% ($19,302,000) to
$63,449,000.  These increases were primarily the result of a significant
increase in seismic operations in Latin America and to a lesser extent the Far
East, that were partially offset by a reduction in revenues from Nigeria.

    Latin America revenue during 1996 increased 124% ($31,601,000) to
$57,133,000.  During this period, the Company operated one crew in Bolivia,
Brazil and Ecuador, two crews in Colombia and four crews in Peru.  In the prior
year crew activity consisted of one crew during the fourth quarter in Bolivia,
one in Brazil, one to two crews in Colombia and three crews in Peru.  The most
significant increases occurred in Colombia and Peru, where revenue increased
181% ($8,187,000) to $12,722,000 and 100% ($13,771,000) to $27,490,000,
respectively.  Due to the significant operating losses incurred in Peru during
1996, each of the  four crews previously operating there have been discontinued
and the seismic equipment moved to other Company crews.





                                       15
<PAGE>   16
    Revenue from the Far East also increased during 1996 a total of 49%
($1,791,000) to $5,412,000.  Crew activity consisted primarily of one crew in
operation for the entire year in Bangladesh.  This compares to 1995 when the
Company operated one crew in Indonesia and mobilized the Bangladesh crew in the
fourth quarter.  The Company is continuing to operate the Bangladesh crew and
is currently mobilizing a second crew, a shallow water transition zone crew,
with operations scheduled to commence in May, 1997.  The Company is also
exploring other opportunities in Indonesia and other surrounding countries.

    Revenues from Nigeria decreased 94% ($13,304,000) to $904,000.  The Company
had operated three crews during most of 1995 but completed two of these
contracts in the fourth quarter of 1995 and the other in the first quarter of
1996. Although the Company participated in the bid for new contracts, all
three crews remained idle during 1996. Due to the risks involved in operating
in Nigeria, the anticipated high cost of mobilizing a new crew and the limited
resources available to Grant at the current time, a decision to sell the
Nigerian operations was made in December 1996. The sale was approved by the
Bankruptcy court on March 24, 1997 and is expected to be consummated by April
30, 1997.

    The Company had no revenues from the Middle East during 1996. Middle East
revenues in 1995 were the result of various rental contracts for equipment and
personnel that expired in July 1995.

    Direct operating expense as a percentage of revenue increased to 129% from
75%. This increase was due to higher than anticipated operating costs,
accelerated amortization of prepaid and deferred costs associated with certain
ongoing operations and the writedown of other Company's assets as a result of a
comprehensive review of the Company's operations. The most significant cost
increases were in United States, Peru and Nigeria. In the US, on a transition
zone crew, adverse weather conditions and the repeated breakdown of a leased
recording system combined for an increase in operating costs of approximately
$7,700,000. Also affecting the US was the slow development and late deployment
of Citation. As described above, the system was originally planned to be
completed and operational by early 1996 but was delayed until the summer of
1996. As a result, several contracts that were priced and bid with the system
were performed with other, less well-suited equipment. The result was
significantly higher operating costs of approximately $3,000,000. When the
system was finally deployed  in July 1996, the production performance was well
below anticipated levels causing additional operating costs of approximately
$1,400,000. The late deployment and poor performance of the system was the cause
of a general equipment shortage during most of 1996. The shuffling of equipment
between crews resulted in inefficiencies that caused higher than anticipated
operating costs. In Peru, actual operating costs exceeded planned costs by
approximately $22,956,000. The primary cause of the increased Peruvian operating
costs was a combination of modified job parameters which were not adequately
compensated in the contract price and a general lack of effective crew
oversight. In Nigeria, certain operating costs continued despite no crew
activity during most of the year. These operating costs exceeded expectations by
$2,732,000 and were primarily related to idle assets and standby costs incurred
while pursuing new contracts.

    Other operating expenses, which consist of general and administrative
expenses at corporate headquarters and in foreign locations, increased as a
percentage of revenues to 17% from 9%. This increase is attributable almost
entirely to allowances and charges incurred at the corporate headquarters that
resulted in an increase in corporate overhead of approximately $6,806,000.
This includes an increase in the reserve for doubtful trade accounts of
approximately $5,511,000 compared to no increase in the reserve for 1995.
Other one time or unusual items include severance costs of $423,000, write off
of Citation startup support costs of $824,000 and legal fees and settlements of
$367,000.

    At December 31, 1996, the Company recorded a special charge for asset
impairment of $5,802,000. Management considered this special charge to be
necessary following an assessment of events and changes in circumstances that
clearly indicated that the carrying amount of certain assets was not
recoverable. This charge relates solely to the writedown of the carrying value
of the Citation system as previously discussed.

    Depreciation and amortization expense increased 22% to $11,500,000. This
is due to an increased level of depreciable assets. Additions to fixed assets
during 1995 and 1996 were approximately $14,931,000 and $26,038,000,
respectively.





                                       16
<PAGE>   17
    Interest expense increased 108% to $7,558,000. The increase was the result
of approximately $1,141,000 of interest paid to finance additional equipment
purchases, a $921,000 increase resulting from higher levels of domestic working
capital borrowings, new financing evidenced by subordinated convertible
debentures caused $589,000 of the increase and $950,000 was due to an increase
in the use of foreign lines of credit.

    Other income/(deductions) for 1996 consisted primarily of a $251,000 loss
on foreign exchange and a $198,000 loss on the sale of the Venezuelan and
Nigerian subsidiaries.

    The income tax provision in both periods consist of taxes owed to foreign
countries based on local tax laws. No provision for US Federal income taxes was
made in either period as Grant has net operating losses available for
carryforward.

    Year Ended December 31, 1995 Compared to Year Ended December 31, 1994

    The Company's consolidated revenues increased 25% ($18,305,000) to
$91,996,000. The revenue growth during 1995 is due to an increase in demand
for Grant's United States seismic services. This increase, however, was offset
slightly by a decrease in revenue from the Company's international operations.

    Revenues from the United States data acquisition operations increased 72%
($20,058,000) to $47,849,000. This growth was fueled by strong demand for
Grant's 3D seismic data acquisition services primarily within the Gulf Coast
Region of the United States. In addition, larger and more complex projects
performed during 1995 contributed to the revenue increase. This is evidenced
by the increase in crew months from 46 to 62 and an increase in average monthly
revenue billed of approximately $604,000 to $771,000.

    Revenues from international operations decreased 4% to $44,147,000 due to
the shutdown of Middle East operations in August 1994 and reduced activity in
the Far East and Nigeria during 1995. These decreases were offset by a
significant increase in Latin American operations during the 1995 fiscal year.
Middle East operations in 1994 consisted of one shallow water crew in Abu Dhabi
which was demobilized in August of that year. No revenues from seismic
services were generated in the Middle East during 1995. Middle East revenues
for 1995 resulted only from equipment rental contracts with local seismic
contractors. A decision to close the Abu Dhabi office was made in December
1994 and completed by mid-August 1995.

    Revenues in the Far East were down 40% in 1995 to $3,621,000 due primarily
to the decrease in demand for the Company's services in the region and the size
of awarded contracts. The Company operated two crews throughout the majority
of 1994 with one crew operating on a sizable contract. During 1995, the
Company again operated two crews; however, the contracted jobs were of a
shorter duration and were not of the same value. Bangladesh operations were
temporarily suspended due to political unrest in that country. Operations were
resumed shortly thereafter, without any significant impact.

    Nigerian revenues decreased 8% ($1,292,000) to $14,208,000 for fiscal year
1995.  At October 31, 1995, two of the Company's crews had completed all
contractual backlog. The Company continued to operate one crew  in the Niger
Delta; however, this crew completed its contractual backlog in February 1996
and was demobilized.

    Revenues from Latin America increased 63% to $25,532,000. This increase
was primarily the result of mobilizing three seismic crews into Peru during
March, April and May of 1995. These crews had operated in Bolivia and Colombia
in 1994 but were moved into Peru during the first and second quarter of 1995 to
accommodate market demand.

    Direct operating expenses as a percentage of revenue increased to 75% from
72%. The increase is a result of higher direct operating expenses in Nigeria.
Operating efficiencies achieved during 1994 were not repeated during 1995 due
to lack of available funds, equipment shortages and difficult terrain. The
overall dollar increase was the result of increased seismic activity in the
United States and Latin America.





                                       17
<PAGE>   18
    Other operating expenses, which consist of general and administrative
expenses at the corporate headquarters and in the foreign locations, decreased
as a percentage of revenues to 9% from 11%. However, the total of Other
Operating Expense increased by 9% to $8,527,000. Charges related to
termination of a proposal to reclassify Grant's preferred stock and increased
overhead costs in Peru and the United States contributed to this increase.

    Depreciation and amortization expense decreased 22% to $9,424,000. This
decrease can be attributed to a lower level of depreciable assets resulting
from the special charge for asset impairment recorded in December 1994.

    Interest expense increased 2% to $3,635,000. Demobilization activities for
two crews in Nigeria coupled with the lack of necessary, immediate funds
contributed to the increased usage of foreign lines of credit in that region
during the third and fourth quarter of 1995.

    Other income/(deductions) for 1995 consisted primarily of a $1,247,000 gain
on an insurance settlement and a gain on the sale of miscellaneous fixed assets
of $212,000.  Other income (deductions) for fiscal year 1994 was the result of
an approximately $664,000 recovery of a bad debt and a non-recurring royalty
income item of $500,000.

    The income tax provision in both periods consisted of taxes owed to foreign
countries based on local tax laws. No provision for U.S. Federal income taxes
was made in either period as Grant currently has net operating losses available
for carryforward.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

    For more than a year prior to filing for chapter 11, the Company as a whole,
and Grant in particular, experienced chronic liquidity problems. By the second
half of 1996 these problems had become severe. During this period, payments were
delayed to trade creditors, holders of Grant's secured and unsecured note
obligations and to lessors of capital equipment. In addition, dividends on
Grant's preferred stock had been omitted since December, 1992. Further, a lack
of funding created delays in the startup of certain operations and seriously
affected the efficiency of other ongoing projects. Exacerbating the crisis
during the second half of 1996 were significant and continuing cash flow losses
on certain crews operating in Peru and in the United States coupled with the
continuation of investment in the Citation system.

    In an effort to resolve the liquidity crisis, Grant sought to obtain loans
and/or equity contributions from a number of sources. In connection with its
attempt to improve its liquidity and financial condition, Grant entered into
arrangements with a variety of lenders and investors pursuant to which loans
totaling approximately $11,000,000 (of which, about $6,000,000 was unsecured
debt) were advanced and an additional $1,573,000 of preferred stock was sold.
However, this financing was not sufficient to offset the Company's continuing
need for liquidity and additional required financing was not available. As a
result, Grant was left with no alternative except to file the chapter 11 
proceeding in December 1996.

    Immediately prior to and following the chapter 11 filing, the Company took
a number of steps to substantially reduce its cash outflows. The most
significant of these were the renegotiation of certain contracts in Peru and
the subsequent withdrawal of all equipment and personnel from that country, the
cessation of certain transition zone operations in the United States and a
suspension of all work on the Citation system.

    Since filing for chapter 11, the Company's primary sources of liquidity are
its cash, cash flow from operations, advances from customers, available lines
of credit in a certain foreign location and Grant's postpetition working
capital line of credit.

    At December 31, 1996, the Company had cash of $6,772,000, substantially all
of which was held by the Company's foreign operations and represented contract
prepayments by customers. This cash balance has been used during the period
following the chapter 11 filing in support of the specific operations for which
the prepayments had been received. In addition, at December 31, 1996, Grant's
Brazilian subsidiary had unused lines of credit aggregating approximately
$150,000 which remain available for use in supporting operations in that
location. On the Petition Date, Grant and the Lender entered into a Court
approved interim financing order which





                                       18
<PAGE>   19
provided for the Lender to continue to make certain working capital advances to
Grant for its United States and certain foreign operations. On February 4,
1997, this interim financing order became final and such final order was
thereafter amended on April 9, 1997. Under the amended financing order, the
Lender has made available the loans as discussed earlier in this Management's
Discussion. As of April 14, 1997, Grant had borrowed $11,500,000 under the
amended financing and there was $1,000,000 available for borrowing.

    For the three year period ended December 31, 1996, the Company's capital
expenditures totaled approximately $51,000,000, including $26,000,000 for the
most recent year. The Company believes that its capital spending requirements
will be approximately $3,000,000 in 1997 and that such amount will be adequate
to support its operations.

    Grant believes that its available liquidity is sufficient to support its
operations and capital spending for the near term. However, the Company's
liquidity remains and is expected to remain very restricted for the foreseeable
future. Any material reduction in demand for the Company's services or any
significant operating losses would adversely affect Grant's ability to complete
any proposed plan of reorganization and would likely jeopardize the Company's
ability to continue to fund ongoing operations.

OTHER

Foreign Exchange Gains and Losses

    The Company attempts to structure the majority of its international
contracts to be billed and paid at a certain U.S. Dollar rate.  Additionally,
the Company periodically enters into local currency debt of a foreign
subsidiary to pay expenses incurred locally.  Foreign currency transaction
gains and losses resulting from these arrangements are included in Other
income/(deductions).  Presently, the Company does not use derivatives or
forward foreign exchange hedging contracts.

    The Company conducts a substantial portion of its business in currencies
other than the U.S. dollar, particularly various Latin American currencies, and
its operations are subject to fluctuations in foreign currency exchange rates.
The Company's international contracts typically require payment in both U.S.
dollars and local currencies.  The payments in local currencies are typically
indexed to inflationary tables and are used for local expenses.  The Company's
operating results were negatively impacted by foreign exchange losses of
approximately $251,000 during 1996.  Foreign exchange gains positively impacted
operating results for 1995 and 1994 by approximately $102,000 and $121,000,
respectively.

[Recent Accounting Pronouncements]

    In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, Earnings per Share (SFAS 128). SFAS
128 specifies the compilation, presentation and disclosure requirements for
earnings per share for entities with publicly held common stock or potential
common stock.  The requirements of this statement will be effective for fiscal
years beginning after December 15, 1997.  Management does not believe that the
implementation of SFAS 128 will have a material effect on its financial
statements.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Reference is made to the consolidated financial statements, the report
thereon, the notes thereto and financial statement schedule commencing on page
F-1 of this Form 10-K, which consolidated financial statements, report, notes
and schedule are incorporated herein by reference.


 ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON  ACCOUNTING AND
          FINANCIAL DISCLOSURE

     None.





                                       19
<PAGE>   20
ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

                                   DIRECTORS

     The names of the directors and certain information with respect to each
are set forth below.  The term of office of each person elected as a director
will continue until Grant's next Annual Meeting of Stockholders or until his
successor has been elected and qualified.
<TABLE>
<CAPTION>
                                                                                                   DIRECTOR
  NAME OF DIRECTOR         AGE                   PRINCIPAL OCCUPATION                                SINCE 
  ----------------         ---                   --------------------                             ---------
<S>                         <C>      <C>                                                             <C>
J. Kelly Elliott  . . . .   66       Mr. Elliott was re-elected Chairman of the Board                1996
                                     on November 20,1996.  He previously served as
                                     Chairman of the Board of Grant from June 1993
                                     through November, 1995.  Mr. Elliott has served
                                     as Chairman, President, and Chief Executive
                                     Officer of Sigma Electronics, Inc. from 1989 to
                                     present.  Currently he serves as a member of the
                                     Boards of Directors of Tescorp, Inc., Oil States
                                     Industries, Incorporated and XL Systems Inc.
                                     He is also Chairman, President and CEO of
                                     Omnicomp Graphics Corporation, Chairman of
                                     Seaboard-Arval Corporation and Consultant to
                                     the Board of Directors of Weatherford Interra.

Harvey D. Attra . . . . .   66       Served as Acting Chairman of the Board from                     1993
                                     November 4, 1996 through November 20, 1996.
                                     Special Advisor to the United States Department of
                                     Energy from 1990 through 1995.  Mr. Attra served
                                     as President/General Manager of Esso Egypt and
                                     Esso Suez, Inc. from 1985 until 1989.

Orville D. Gaither, Sr. .   69       Chairman of the Board and Chief Executive Officer               1993
                                     of Gaither Petroleum Corporation since 1991.  Mr.
                                     Gaither served as President of the Africa/Middle
                                     East Region of Amoco Production Company from
                                     1979 until 1991.  Mr. Gaither serves as a member
                                     of the Board of Directors of Energy Services Company,
                                     International.

Donald G. Russell . . . .   65       Mr. Russell rejoined Grant's Board of Directors in              1997
                                     February 1997.  He previously served on the Company's
                                     Board from July 1993 through November 1995.  He 
                                     serves as Chairman of the Board and Chief Executive
                                     Officer of Sonat Exploration Company since 1988.
</TABLE>





                                       20
<PAGE>   21

                             DIRECTORS (CONTINUED)

<TABLE>
<CAPTION>
                                                                                                  DIRECTOR
  NAME OF DIRECTOR         AGE                   PRINCIPAL OCCUPATION                               SINCE 
  ----------------         ---                   --------------------                             ---------
<S>                  <C>    <C>      <C>                                                             <C>
J. Michael Adcock(1)  . .   48       General Counsel, Ameribank Corporation.  Mr. Adcock             1994
                                     served in management positions with Hadson Corporation
                                     from 1983 to 1993, including, Chief Executive Officer,
                                     President and Chief Operating Officer and General
                                     Counsel.  He currently serves as a member of the
                                     Board of Directors of United Oklahoma Bankshares,
                                     Inc.  In October 1992, Hadson Corporation filed a
                                     Chapter 11 bankruptcy petition and plan of reorgani-
                                     zation in the Western District Court of Oklahoma.  The
                                     bankruptcy court confirmed the plan in November 1992
                                     and the plan was consummated in December 1992.

Douglas K. Stewart(1) . .   45       President of Stewart & Smith, Inc. for the last nine years.     1994
                                     Prior to founding Stewart & Smith, Mr. Stewart worked
                                     at First Boston Corporation and the Securities and
                                     Exchange Commission.
</TABLE>

____________________
(1)  Elected pursuant to the terms of Grant's $2.4375 Convertible Exchangeable
     Preferred Stock (the "$2.4375 Preferred Stock").  In the event that the
     dividends on the $2.4375 Preferred Stock are in arrears in an amount equal
     to at least six quarterly dividends, the holders of the $2.4375 Preferred
     Stock are entitled to elect two additional directors to Grant's Board of
     Directors.


                   BOARD OF DIRECTORS MEETINGS AND COMMITTEES

     The Board of Directors of Grant held a total of twenty-five meetings during
the fiscal year ended December 31, 1996.  All of Directors attended at least 75%
of all Board meetings during 1996.  Gordon W. Ringoen and William C. Macdonald 
resigned during 1996. Mr. George W. Tilley's service on the Board of Directors 
terminated on November 4, 1996.

     Through August 8, 1996, the Audit Committee of the Board of Directors
consisted of Messrs. Attra, Adcock and Macdonald. Effective August 1996, the
Audit Committee consisted of Messrs. Attra, Adcock and Gaither. Mr. Macdonald
resigned from the Audit Committee effective August 1996.  The Audit Committee
considers engagement of Grant's independent auditors, and is primarily
responsible for approving the services performed by the independent auditors
and for reviewing and evaluating the Company's accounting principles and its
system of internal accounting controls.  During the fiscal year 1996, the Audit
Committee met five times. All members of the Committee attended at least 75% of
the Committee's meetings.

     Through August 8, 1996, the Compensation Committee of the Board of
Directors consisted of Messrs. Attra, Adcock and Macdonald. Effective August
1996, the Compensation Committee consists of Messrs. Gaither, Attra and Adcock.
The Compensation Committee reviews and approves the executive compensation
policy and makes recommendations concerning the employee benefit policies. The
Compensation Committee, with all Committee members present, met four times 
during the fiscal year 1996.

     The Board of Directors has no Nominating Committee nor a committee
performing the functions of a Nominating Committee.


                                       21
<PAGE>   22
                               EXECUTIVE OFFICERS


     The names of the current and former executive officers of Grant and
certain information with respect to each are set forth below. All Executive
Officers are elected annually by the Board of Directors to serve at the
discretion of the Board of Directors or until their successors shall have been
qualified or until their resignation or removal. None of the current executive
officers of Grant, other than J. Kelly Elliott, was employed by Grant at
December 31, 1996. As such, this Form 10-K includes a section on Former
Executive Officers. The Executive Officer Compensation section which contains
information as of December 31, 1996 with respect to the Executive Officers of
Grant, contains information on Former Executive Officers. The Board of
Directors does not presently anticipate any material changes in the manner in
which Grant compensates its executive officers. The current executive officers
of Grant are:


                           CURRENT EXECUTIVE OFFICERS

<TABLE>
<CAPTION>
            NAME                      AGE                POSITION AND BACKGROUND INFORMATION
            ----                      ---                -----------------------------------
     <S>                             <C>         <C>
     J. Kelly Elliott(1)  . . . .     66         Chairman of the Board and Chief Executive Officer.

     Larry E. Lenig, Jr.  . . . .     48         President and Chief Operating Officer.  Mr. Lenig was
                                                 appointed President and Chief Operating Officer in
                                                 January 1997.  Mr. Lenig was previously engaged
                                                 in private consulting to a variety of energy and energy
                                                 services companies and financial institutions.  He
                                                 served as President Chief Operating Officer
                                                 of Digicon Inc. from 1989 until 1993.

     Michael P. Keirnan   . . . .     45         Vice President and Chief Financial Officer.  Mr. Keirnan
                                                 was appointed Vice President and Chief Financial Officer
                                                 in February 1997.  He served as Manager of Treasury
                                                 Operations of Gundle/SLT Environmental from March 1996
                                                 until February 1997. Since 1986, Mr. Keirnan has served
                                                 in many senior accounting management positions at Grant,
                                                 including Controller/Treasurer 1993 through March 1996.
</TABLE>

     -------------                  
     (1)  For information regarding Mr. Elliott, see "Directors" above.





                                       22
<PAGE>   23
                           FORMER EXECUTIVE OFFICERS


     The individuals set forth below  served as the executive officers of Grant
at various dates during 1996 and terminated their employment with Grant
during 1996 as indicated.

<TABLE>
<CAPTION>
            NAME                      AGE                POSITION AND BACKGROUND INFORMATION
            ----                      ---                -----------------------------------
     <S>                    <C>       <C>        <C>
     Thomas B. Portwood, Jr. (1)      72         Mr. Portwood was appointed President and Chief Executive Officer of
                                                 Grant on November 12, 1996.  He currently serves as a business
                                                 consultant and broker specializing in the international seismic
                                                 industry. 

     Gordon W. Ringoen(2)   . . .     58         Mr. Ringoen was appointed Chairman of the Board of Grant on January 9,
                                                 1996.  He also serves as Chairman of the Board of G. W. Ringoen and
                                                 Co., an Investment Advisor, and Chinook Concert Broadcasting.

     George W. Tilley(3)  . . . .     60         Mr. Tilley was President and Chief Executive Officer of Grant from 1993
                                                 until November 4, 1996.  He was appointed to Grant's Board of Directors
                                                 in October 1994 and served as interim Chairman of the Board from August
                                                 8, 1996 through November 4, 1996.  Mr. Tilley served as President and
                                                 Chief Executive Officer of Halliburton Geophysical Services from 1990
                                                 until 1992 and Vice President of Halliburton Geophysical Services from
                                                 1988 until 1990.

     William B. Cleveland(4)  . .     40         Chief Financial Officer, Vice President of Finance, Secretary and
                                                 Treasurer.  Mr. Cleveland served in various positions with Halliburton
                                                 Geophysical Services from 1976 through 1993, the most recent being
                                                 Manager of International Manufacturing Accounting and Special Projects
                                                 for Halliburton Energy Services.
</TABLE>
     ------------------               
     (1)  Mr. Portwood resigned from Grant effective December 4, 1996.
     (2)  Mr. Ringoen resigned from Grant effective August 8, 1996.
     (3)  Mr. Tilley's service as President and Chief Executive Officer
          terminated on November 4, 1996.
     (4)  Mr. Cleveland resigned from Grant effective December 31, 1996.


               COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

     Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires Directors and Executive Officers, and persons who own
more than 10% of a registered class of the Company's equity securities, to file
initial reports of ownership and reports of changes in ownership with the
Securities and Exchange Commission (the "SEC").  Directors, Executive Officers
and greater than 10% beneficial owners are required by SEC regulation to
furnish Grant with copies of all Section 16(a) Forms 3, 4 and 5 they file.
Based solely upon a review of such Forms 3, 4 and 5 and any amendments thereto
furnished to Grant, and written representations from certain reporting persons
that no Forms 5 were required, Grant believes that all such applicable filing
requirements were complied with by each of the Executive Officers, Directors
and greater than 10% shareholders, except for one report relating to an initial
Form 3 filing by Mr. Elliott which has now been filed.  Mr. Elliott does not 
own any securities of Grant.





                                       23
<PAGE>   24
ITEM 11.  EXECUTIVE OFFICER COMPENSATION



                          SUMMARY  COMPENSATION  TABLE

<TABLE>
<CAPTION>
                                                                                         Long-Term
                                             Annual Compensation                        Compensation    
                                -----------------------------------------------   ---------------------------
       Name and                                                    Other Annual     Awards      All Other
       Principal                                                   Compensation   Options/SARs  Compensation
        Position                 Year    Salary ($)    Bonus ($)        ($)           (#)           ($)
         (a)                     (b)         (c)          (d)          (e)(5)      (g)(6)          (I)(7)     
  -----------------             -----  ------------    ---------   ------------   -----------    ------------
   <S>                           <C>   <C>             <C>         <C>            <C>            <C>
   J. Kelly Elliott(1)  . .      1996     60,000                                                     2,700
   Chairman of the Board and     1995     60,000       45,000                         50,000         1,800
   Chief Executive Officer       1994     60,000       45,000                         25,000         1,800
                                                                                            
   Thomas B. Portwood, Jr.(2)    1996     10,000
   President and
   Chief Executive Officer

   George W. Tilley(3)  . .      1996    175,008                                     225,000         6,568
   Chief Executive Officer       1995    164,588      100,000                         50,000         4,743
                                 1994    150,000       60,000                         25,000         2,164
                                                                                            
   William B. Cleveland(4)       1996    106,973                                     125,000         1,800
   Chief Financial Officer       1995     92,650       35,000                         10,000         2,772
</TABLE>

___________________________
(1) Mr. Elliott was elected Chairman of the Board in June 1993 until November
    1995 and was elected Chairman of the Board Executive Officer December 4,
    1996.
(2) Mr. Portwood served as Chief Executive Officer from November 12, 1996
    through December 4, 1996.  Compensation for his services are included in the
    Pre-petition liabilities subject to chapter 11 case.
(3) Mr. Tilley's services as President and Chief Executive Officer terminated
    on November 4, 1996.
(4) Mr. Cleveland resigned as Chief Financial Officer on December 31, 1996.
(5) No named Executive Officer received perquisites or other personal benefits
    in any of the Company's three most recent years for which the aggregate
    amount exceeded the lesser of either $50,000 or 10% of his total annual
    salary and bonus for such year.
(6) All unexercised stock options previously awarded to Messrs. Tilley and
    Cleveland have been canceled.
(7) Amounts reflect matching contributions to Grant's Savings plan.





                   OPTION/SAR  GRANTS  IN  LAST  FISCAL  YEAR

<TABLE>
<CAPTION>
                                    Individual Grants                                                                   
                               ---------------------------                                                              
                                                                                        Potential Realizable Value at   
                                           % of Total                                       Assumed Annual Rates        
                                          Options/SARs                                   of Stock Price Appreciation    
                                           Granted to   Exercise or                          For Option Term (1)        
                          Options/SARs    Employees in  Base Price                      -----------------------------   
     NAME                  Granted (#)     Fiscal Year     ($/SH)      Expiration Date       5%($)          10% ($)     
     (a)                      (b)             (c)           (d)              (e)              (f)             (g)       
   -------                -----------     -----------   -----------    ---------------      --------        -------     
 <S>                       <C>              <C>              <C>        <C>               <C>            <C>            
 George W. Tilley(1)        100,000           25%          2.69           1/9/2006              0               0       
                            125,000           32%          2.22          8/15/2006              0               0       
                                                                                                                        
 William B. Cleveland(1)     50,000           13%          2.69           1/9/2006              0               0       
                             75,000           19%          2.22          8/15/2006              0               0       
</TABLE>

 (1)  All unexercised stock options previously awarded to  Messrs. Tilley and
      Cleveland have been canceled.





                                       24
<PAGE>   25
BOARD OF DIRECTORS COMPENSATION

     Effective January 1, 1994, employee and non-employee Directors of Grant,
including the Chairman of the Board, began participating in Grant's Amended
1989 Long-Term Incentive Plan which allows issuance of restricted stock of
Grant in lieu of part or all of the Directors' fees. The shares of restricted
stock will be automatically issued on the first day of each calendar quarter
following a calendar quarter of service. The fair market value of the
restricted stock will be the closing price of the Common Stock on the last
trading day of the preceding calendar quarter. During 1996, Directors of Grant
were granted 40,055 shares, with a then current market value of $127,000, of
restricted stock of Grant. Effective January 1, 1997, the compensation for
non-employee directors was changed to $1,000 per month. Employee directors are
not separately compensated for service on the Board.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     The Compensation Committee consisted of Messrs. Attra, Adcock and
Macdonald. Effective August 1996, after the resignation of Mr. Macdonald, Mr.
Gaither joined the Compensation Committee. The Committee serves the role of
setting the executive compensation philosophy and establishing compensation
levels for executive officers.

     Grant had no interlocking relationships during 1996 with respect to its
Compensation Committee, the members of its Board of Directors or its Executive
Officers.

EMPLOYMENT CONTRACTS

     In January 1997, Grant entered into a one-year agreement with Larry E.
Lenig, Jr. to serve as President and Chief Operating Officer, which provides
for a minimum base salary of $120,000, incentive compensation equal to $5,000
monthly until Grant's plan of reorganization is confirmed by the Court, and,
upon confirmation of a plan of reorganization, an additional one-time
compensation, not to exceed $300,000, based on the "Transaction Value," as
defined in the employment agreement.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

     Overall Compensation Philosophy and Objectives

     The primary objective of Grant's executive compensation program is to
attract and retain outstanding executive talent, while concurrently motivating
these individuals to maximize stockholder value. Grant strives to accomplish
this goal by basing total compensation philosophy on the following fundamental
directives:

     #    Hire, retain, develop, and reward highly talented and
          performance-oriented executives;

     #    Emphasize pay for performance by placing a significant portion of
          executive compensation "at risk".

     #    Encourage employee stock ownership to further align the long-term
          interests of the executives with the long-term interests of the
          stockholders; and

     #    Integrate short- and long-term operating, financial, and strategic
          objectives by establishing compensation plans which reward executives
          for maintaining an appropriate balance.

     The next section describes Grant's programs by element of compensation and
discusses how each component relates to Grant's overall compensation
philosophy. All plans mentioned pertain to the executive officer group.





                                       25
<PAGE>   26
     In reviewing this information, reference is often made to the use of
competitive market data as a criteria for establishing targeted compensation
levels. It should be noted that the market data are based on general industry
norms (i.e., market median) for companies our size. Grant did not consider
market data for the peer comparison shown in the performance graph since talent
is recruited from a broader market.

    Base Salary

       The objective of Grant's base salary program is to provide base pay to
executives which approximates competitive market levels. Periodic reviews of
our executive pay levels are made to assure consistency with the external
market.

     In determining appropriate salary levels by individual position, Grant
looks not only at external pay practices, but also at individual performance,
level of corporate responsibility, and job experience. Accordingly, base salary
levels by individual incumbent may vary from the indicated market levels once
adjusted for these additional factors.

     The base salary program serves as an effective tool to attract and retain
top quality senior management. By considering factors such as individual
performance in determining annual increases, the base salary program also
serves to motivate executives toward exemplary performance standards.

     Annual Incentives

     Annual Incentive (bonus) opportunities are made available to the executive
officer group and as rewards for noteworthy performance at corporate, business
unit, and individual levels. Grant's 1996 Management Incentive Plan (the
"Management Incentive Plan") was focused on accomplishing short-term to
intermediate-term financial and operating goals. The Management Incentive Plan
was also designed to emphasize a philosophy of delivering compensation for
exceptional levels of performance.

     In order to gauge performance, the Compensation Committee must establish
and approve the criterion and specific financial targets to be used in the
Management Incentive Plan each year. In 1996, the Management Incentive Plan
incorporated both earnings per share and cash flow relative to budget as the
measures for setting incentive objectives at the corporate level. Net income
applicable to Common Stock is used to gauge performance at the business unit
level. Individual performance was also assessed using discretionary measures
to evaluate each participant's contribution to the overall success of the
Company.

     Target award opportunities varied by individual position and were
expressed as a percent of base salary. The amount a particular executive could
earn was directly dependent on the individual's position, responsibility, and
ability to impact the Company's financial success. In order for any individual
to be eligible for award opportunities under the Management Incentive Plan, the
Company was required to achieve a threshold (minimum) cash flow performance
level which, if attained, served as a "trigger" to activate the plan. In 1996,
the Company did not reach this required level of performance and, hence, no
bonuses were awarded under the Management Incentive Plan.

     Long-Term Incentives

     Grant maintains the Amended 1989 Long-Term Incentive Plan (the "Incentive
Plan") which is designed to focus executive efforts on long-term goals and to
maximize total return to stockholders. Long-term incentive vehicles include
stock options, stock appreciation rights and restricted stock.

         Stock options.  Stock options align the interests of employees and
stockholders by providing value to the executive through stock price
appreciation only. To foster a long-term perspective, options granted under
the Incentive Plan are not fully exercisable until four years from the date of
grant, and awards cannot be made at an option price less than fair market value
on the date of grant. All options have a ten year term before expiration.





                                       26
<PAGE>   27
         Stock option awards are made on a periodic basis at the discretion of
the Compensation Committee. Stock option grant sizes, as well as appropriate
overall levels of shares reserved for such plans, are established by regularly
examining competitive market practices. The exact number of shares actually
granted to a particular participant is also based on the Grant's financial
success, its future business plans, and the individual's position and level of
responsibility.

         During 1996, the Compensation Committee granted stock options to the
following executive officers:  Messrs. Tilley and Cleveland were awarded options
to acquire 225,000 and 125,000 shares of common stock, respectively. These and
all other unexercised stock options awarded to Messrs. Tilley and Cleveland have
been canceled.

         Under the provisions of the Incentive Plan, the Compensation Committee
maintains the ability to grant stock appreciation rights ("SARs"). SARs are
similar to stock options in the sense that they provide value to the executive
equivalent to the amount the stock price appreciates from the date of grant.
Recent changes in federal regulations regarding insider trading and new rules
allowing for broker-financed cashless option exercises have significantly
reduced the usage of SARs. The Company made no SAR grants in 1996.

         Restricted stock. Restricted stock awards support the overall
compensation philosophy by delivering increased pay for enhanced performance,
aligning management interests with stockholder interests through ownership of
stock, and encouraging retention of quality executives during the restriction
period. Restricted stock represents common stock of Grant subject to
restrictions on transfer of ownership. Under the Incentive Plan, restricted
stock may be granted periodically as determined by the Compensation Committee.
No restricted stock awards were made to employees in 1995; however, restricted
stock awards were made to Grant's employee and non-employee Directors, including
the Chairman of the Board, in lieu of the Directors' fees.

         Benefits and Perquisites

         In addition to base salary, annual incentives and long-term incentives,
Grant provides executive benefits and perquisites to key members of senior
management. These include principally monthly automobile allowances and club
memberships. These elements of pay are not intended to be tied to performance,
rather, they serve as part of a competitive total compensation plan.

            1996 Chief Executive Officer ("CEO") Pay. As previously described,
        several factors are considered in developing an executive compensation
        package. For the CEO, these factors include competitive pay practices,
        performance level, experience, achievement of strategic goals, and
        financial success of the Company. Specific actions taken by the
        Compensation Committee regarding the CEO's compensation are summarized
        below.

        o   Base Salary. Mr. Tilley's base salary for the fiscal year 1996 was
            approximately $175,000.

        o   Severance Pay. Upon his termination from Grant, on November 4,
            1996, Mr. Tilley asserted that certain severance compensation was
            payable to him. Grant disputes that any severance is payable to
            Mr. Tilley. No severance has been paid to Mr. Tilley and any such
            compensation, if ordered by the Court to be paid, would be a
            pre-petition unsecured liability subject to the chapter 11 case.

        o   Annual Incentives. Mr. Tilley did not receive an annual incentive
            award in 1996.

        o   Long-Term Incentives. Mr. Tilley was awarded stock options to
            acquire 225,000 shares of Common Stock during 1996. Upon his
            termination from Grant, these and all other unexercised options
            were canceled. Awards are made periodically at the discretion of
            the Compensation Committee. Size and frequency of awards is
            determined by competitive practice, financial success, future
            business plans and individual level of responsibility as determined
            subjectively by the Compensation Committee.





                                       27
<PAGE>   28
       o    $1 Million Pay Deductibility Cap. In 1993, the U.S. Treasury
            Department issued regulations that prevent publicly traded
            companies from receiving a tax deduction on compensation paid to
            executive officers in excess of $1 million. At this time, Grant's
            executive officer compensation levels do not exceed the $1 million
            pay limit and will most likely not be affected by the regulations
            in the near future. Nonetheless, the Compensation Committee of the
            Board of Directors plans to review the final regulations and, if
            appropriate, take necessary actions in the future to avoid losing
            any tax deductions related to compensation.

Conclusion

     The preceding report has been compiled and presented over the names of the
Compensation Committee of the Board of Directors of Grant.

                         Compensation Committee Members

                                Harvey D. Attra
                               J. Michael Adcock
                            Orville D. Gaither, Sr.




Performance Graph





                                       28
<PAGE>   29
   PERFORMANCE GRAPH

           The performance graph shown below indicates the shareholder return
    on $100 invested in Grant's Common Stock from December 1991.  The
    performance of Grant's Common Stock is compared with shareholder returns
    based on (i) the Standard & Poor's 500 Stock Index and (ii) an industry
    peer group index(1).  All shareholder returns are calculated assuming the
    reinvestment of dividend payments.

                       COMPARISON OF CUMULATIVE TOTAL RETURN
                      OF COMPANY, PEER GROUP AND BROAD MARKET

------------------------------FISCAL YEAR ENDING--------------------------------
COMPANY                  1991      1992     1993    1994    1995    1996

GRANT GEOPHYSICAL         100      36.49    14.87   25.68   27.03     .97
PEER GROUP                100     109.45   151.06  247.71  528.73  423.49
BROAD MARKET              100     107.64   118.50  120.06  165.18  203.11

-----------------------
(1)   The industry peer group, reflected for all years in the performance graph
above, consists of the following companies:

      Dawson Geophysical Company
      Veritas DGC, Inc.
      Input/Output, Inc.
      Seitel, Inc.
      Universal Seismic Associates, Inc.





                                       29
<PAGE>   30
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth certain information concerning the number
of shares of common stock owned beneficially as of April 11, 1997 by: (i) each
person known to Grant to own more than 5% of any class of Grant's voting
securities; (ii) each Director and Executive Officers of Grant; and (iii) all
Directors and Officers as a group, including persons deemed to share voting and
investment power.

<TABLE>
<CAPTION>
                                                       AMOUNT AND
                                                       NATURE OF
     NAME AND ADDRESS                                  BENEFICIAL          PERCENT
   OF BENEFICIAL OWNER                                OWNERSHIP(1)         OF TOTAL
   -------------------                                ---------            --------
<S>                                                  <C>                     <C>
J. Michael Adcock(2)  . . . . . . . . . . . . . .       12,494               *
   128 N. Broadway
   Shawnee, Oklahoma 74801

Harvey D. Attra . . . . . . . . . . . . . . . . .       18,487               *
   17 Lords Highway
   Weston, Connecticut 06883

J. Kelly Elliott  . . . . . . . . . . . . . . . .                            *
   Grant Geophysical, Inc.
   16850 Park Row
   Houston, Texas 77084

Orville D. Gaither, Sr. . . . . . . . . . . . . .       32,260               *
   Gaither Petroleum Corporation
   1136 North Kirkwood
   Houston, Texas 77043

Larry E. Lenig, Jr. . . . . . . . . . . . . . . .                            *
   Grant Geophysical, Inc.
   16850 Park Row
   Houston, Texas 77084

Michael P. Keirnan  . . . . . . . . . . . . . . .                            *
   Grant Geophysical, Inc.
   16850 Park Row
   Houston, Texas 77084

Donald G. Russell . . . . . . . . . . . . . . . .                            *
   Sonat Exploration Co.
   4 Greenway Plaza
   Houston, Texas 77046

Douglas K. Stewart  . . . . . . . . . . . . . . .       12,194               *
   c/o Stewart & Smith, Inc.
   1225 23rd St., N.W.
   Ground Floor
   Washington, D.C. 20037

Elliott Associates, L.P.(3) . . . . . . . . . . .    1,141,271               5.0%
   712 Fifth Avenue, 36th Floor
   New York, New York 10019

Liverpool Limited Partners(3) . . . . . . . . . .      772,740               3.5%
   Cedar House
   41 Cedar Avenue
   Hamilton H.M. 12
   Bermuda

U.S. Bancorp (4)  . . . . . . . . . . . . . . . .    1,251,200               5.7%
   111 S.W. Fifth Avenue
   Portland, Oregon 97204

All Directors and Officers as a Group (8 persons)       75,435               *
</TABLE>
-------------------------
*Less than one percent.





                                       30
<PAGE>   31
(1)  Unless otherwise indicated, all shares of common stock are held directly
     with sole voting and investment powers. Amounts indicated do not include
     shares subject to options that are not exercisable within 60 days after
     March 25, 1997. There is a significant likelihood that any plan of
     reorganization will cancellation of Grant's common and preferred stock.

(2)  Includes (a) 300 shares of Common stock owned by his wife and (b) 273
     shares of Common stock obtainable upon conversion of 100 shares of $2.4375
     Preferred stock owned by his wife.

(3)  The information shown above was obtained from the Schedule 13D (Amendment
     No. 11) dated August 30, 1996, as filed by Elliott Associates, L.P.
     ("Elliott") with the Securities and Exchange Commission (the "Commission").
     According to the 13D, Elliott has sole voting and dispositive powers with
     respect to 1,141,271 shares of Common stock which represents the number of
     shares of Common stock obtainable upon conversion of 415,564 shares of
     $2.4375 Preferred stock. Does not include 772,740 shares of Common stock
     obtainable upon conversion of 282,050 shares of $2.4375 Preferred stock
     beneficially owned by an affiliate of Elliott, Liverpool Limited Partners
     ("Liverpool").

(4)  The information shown above was obtained from the Schedule 13G dated
     February 15, 1996, as filed with the Commission by U.S. Bancorp ("Bancorp")
     and Qualivest Capital Management, Inc. ("Qualivest"). Bancorp is a Parent
     Holding Company of Qualivest.  According to the 13G, Bancorp has the sole
     voting power with respect to 746,400 shares of Common stock, sole
     dispositive power with respect to 1,163,200 shares of Common stock and
     shared power to dispose of 25,000 shares of Common stock.  Qualivest is the
     beneficial owner of 383,200 shares of Common stock as a result of acting as
     investment advisor to Qualivest Funds.  The Trust Group of Bancorp holds
     868,000 shares of Common stock.

CHANGE IN CONTROL

    On March 14, 1997, Grant entered into a term sheet (the "Term Sheet") with
Elliott to fund and jointly sponsor a plan of reorganization. The letter of
intent calls for Elliott to invest up to $30,000,000 in new equity capital in
the Company and to provide $2,000,000 in expanded credit facilities. In
addition, pending confirmation of a reorganization plan, Elliott has purchased a
participation of $2,500,000 in loans made by Grant's existing working capital
lender. The letter of intent is subject to the negotiation and execution of
definitive agreements and to the approval by the Bankruptcy Court. A motion to
approve the Term Sheet was approved by the Court April 9, 1997. Pursuant to the
plan as presently proposed to be filed, secured creditors will be paid in full
in a combination of cash and/or new promissory notes. Unsecured creditors would
be able to select from a menu of recovery options that include cash and stock,
promissory notes or credits exchangeable for the Company's services performed
after consummation of the plan. In addition, the plan is expected to provide for
a $33,000,000 rights offering, $30,000,000 of which will be guaranteed by
Elliott. Under the rights offering, Grant's unsecured creditors and its
preferred and common shareholders are expected to be granted the right to
purchase shares of Grant's new common stock at the same price per share as
Elliott's investment. The plan is expected to provide an option for the
Company's employees to participate in the rights offering subject to any
required Securities and Exchange Commission approvals. The shares will be
offered to employees on the same basis as those offered to creditors,
shareholders and Elliott. If the plan is consummated, Elliott will own a minimum
of 51% of Grant's common stock. Consummation of the plan contained in the Term
Sheet is subject to a number of conditions including the vote of Grant's
creditors and shareholders.

    The Term Sheet, as modified by the Court's order on April 9, 1997, also
provides that the Elliott proposal is subject to any higher and better offer
which may be received by Grant.  Grant has retained Simmons & Company
International as its investment banker to assist it in soliciting other offers.
Other offers are due no later than the date set by the Court for the filing of
objections to the disclosure statement that Grant expects to file in connection
with the Elliott proposal.  Grant will evaluate all valid offers, and will
select the proposal which, in its judgment, produces the highest and best
recovery to all parties in interest.  Any valid offer must provide for the
immediate purchase of Elliott's participation in Grant's post-petition loan
facility.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    During 1996, Grant entered into an exclusive agreement with Macdonald &
King, Incorporated, a financial services firm, for the purpose of assisting
Grant in securing additional sources of financing including equipment financing
and short-and long-term financing. Mr. William C. Macdonald, a former
director of Grant, is the Chairman of the Board and sole shareholder of
Macdonald & King, Incorporated.





                                       31
<PAGE>   32
    On April 17, 1995, Grant negotiated a $1,000,000 short-term credit facility
with Elliott, a holder of more than 5% of Grant's preferred stock.  In June
1995, the loan was increased to $1,750,000 and the expiration date was extended
to February 20, 1996.  The loan was repaid by Grant on the expiration date.

    On March 20, 1996, Grant issued 143,000 shares of the Company's preferred
stock to Westgate International, L.P.  ("Westgate"), an affiliate of Elliott,
for an aggregate purchase price of $1,573,000.  Westgate subsequently sold all
of its shares of Grant's preferred stock to Liverpool.

    In November 1996, Grant entered into an agreement with Westgate and Elliott
under which an aggregate of $3,149,000 was borrowed for working capital 
purposes.  The borrowings are in the form of unsecured promissory notes and 
are outstanding at December 31, 1996 and are classified in pre-petition 
liabilities subject to chapter 11 case.

CHANGE IN CONTROL

    On March 14, 1997, Grant entered into a term sheet (the "Term Sheet") with
Elliott to fund and jointly sponsor a plan of reorganization. The letter of
intent calls for Elliott to invest up to $30,000,000 in new equity capital in
the Company and to provide $2,000,000 in expanded credit facilities.  In
addition, pending confirmation of a reorganization plan, Elliott has purchased a
participation of $2,500,000 in loans made by Grant's existing working capital
lender. The letter of intent is subject to the negotiation and execution of
definitive agreements and to the approval by the Bankruptcy Court.  A motion to
approve the Term Sheet was approved by the Court April 9, 1997.  Pursuant to the
plan as presently proposed to be filed, secured creditors will be paid in full
in a combination of cash and/or new promissory notes.  Unsecured creditors would
be able to select from a menu of recovery options that include cash and stock,
promissory notes or credits exchangeable for the Company's services performed
after consummation of the plan.  In addition, the plan is expected to provide
for a $33,000,000 rights offering, $30,000,000 of which will be guaranteed by
Elliott.  Under the rights offering, Grant's unsecured creditors and its
preferred and common shareholders are expected to be granted the right to
purchase shares of Grant's new common stock at the same price per share as
Elliott's investment.  The plan is expected to provide an option for the
Company's employees to participate in the rights offering subject to any
required Securities and Exchange Commission approvals.  The shares will be
offered to employees on the same basis as those offered to creditors,
shareholders and Elliott.  If the plan is consummated, Elliott will own a
minimum of 51% of Grant's common stock.  Consummation of the plan contained in
the Term Sheet is subject to a number of conditions including the vote of
Grant's creditors and shareholders.

    The Term Sheet, as modified by the Court's order on April 9, 1997, also
provides that the Elliott proposal is subject to any higher and better offer
which may be received by Grant.  Grant has retained Simmons & Company
International as its investment banker to assist it in soliciting other offers.
Other offers are due no later than the date set by the Court for the filing of
objections to the disclosure statement that Grant expects to file in connection
with the Elliott proposal.  Grant will evaluate all valid offers, and will
select the proposal which, in its judgment, produces the highest and best
recovery to all parties in interest.  Any valid offer must provide for the
immediate purchase of Elliott's participation in Grant's post-petition loan
facility.




                                       32
<PAGE>   33
                                    PART IV


ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K

          (a)(1) AND (2)   LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULE.

               See "Index to Financial Statements and Financial Statement
Schedule" set forth on Page F-1.

          (a)(3)           LIST OF EXHIBITS.

               See page E-1 following the Financial Statements and Financial
               Statement Schedule for an Index to the Exhibits hereto.

          (b)              REPORTS ON FORM 8-K.

              No reports on Form 8-K were filed during the quarter ended 
              December 31, 1996.

          (C)              EXHIBITS.

              See page E-1 following the Financial Statements and Financial
              Statement Schedule for an Index to the Exhibits hereto.

          (D)              FINANCIAL STATEMENT SCHEDULE.

               The Consolidated Financial Statement Schedule is set forth
               beginning on page S-1.





                                       33
<PAGE>   34
                                   SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf of the undersigned, thereunto duly authorized.


                               GRANT GEOPHYSICAL, INC.
                                    (Registrant)

                             By: Larry E. Lenig, Jr.             
                                ---------------------------------
                                 Larry E. Lenig, Jr.
                              (President, Chief Operating Officer)


    PURSUANT TO THE REQUIREMENTS OF THE SECURITIES AND EXCHANGE ACT OF 1934,
THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.


<TABLE>
<CAPTION>
         SIGNATURE                                TITLE                                DATE
         ---------                                -----                                ----
 <S>                                      <C>                                    <C>
    Larry E. Lenig, Jr.                   President,                             April 14, 1997
-------------------------------------     Chief Operating Officer                              
   (Larry E. Lenig, Jr.)                  (Principal Executive Officer)
                                                                       

    Michael P. Keirnan                    Vice President,                        April 14, 1997
-------------------------------------     Chief Financial Officer                              
   (Michael P. Keirnan)                   (Principal Financial and 
                                          Accounting Officer)      
                                                                   

     J. Kelly Elliott                     Chairman of the Board,                 April 14, 1997
-------------------------------------     Chief Executive Officer                              
    (J. Kelly Elliott)                                           

      Harvey D. Attra                     Director                               April 14, 1997
-------------------------------------                                                          
     (Harvey D. Attra)

 Orville D.  Gaither, Sr.                 Director                               April 14, 1997
-------------------------------------                                                          
   (Orville D. Gaither)

     Donald G. Russell                    Director                               April 14, 1997
-------------------------------------                                                          
    (Donald G. Russell)

     J. Michael Adcock                    Director                               April 14, 1997
-------------------------------------                                                          
     (Michael Adcock)

    Douglas K. Stewart                    Director                               April 14, 1997
-------------------------------------                                                          
   (Douglas K. Stewart)
</TABLE>





                                       34
<PAGE>   35
         INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE


<TABLE>
<CAPTION>
                                                                                   Page
                                                                                   ----
<S>                                                                                <C>
CONSOLIDATED FINANCIAL STATEMENTS OF GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
Independent Auditors' Report ....................................................  F-2
Consolidated Balance Sheets as of December 31, 1996 and 1995 ....................  F-3
Consolidated Statements of Operations for the Years Ended
 December 31, 1996, 1995, and 1994 ..............................................  F-5
Consolidated Statements of Stockholders' Equity (Deficit) for the Years
 Ended December 31, 1996, 1995, and 1994 ........................................  F-6
Consolidated Statements of Cash Flows for the Years Ended
 December 31, 1996, 1995, and 1994 ..............................................  F-8
Notes to Consolidated Financial Statements ......................................  F-10

SUPPLEMENTARY FINANCIAL INFORMATION (UNAUDITED) .................................  F-27

CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
Schedule II --  Valuation and Qualifying Accounts ...............................  S-1
</TABLE>


All other schedules are omitted as the required information is inapplicable or
the information is presented in the
financial statements or notes thereto.


                                      F-1
<PAGE>   36


                          INDEPENDENT AUDITORS' REPORT

The Board of Directors
Grant Geophysical, Inc.:

We have audited the accompanying consolidated balance sheets of Grant
Geophysical, Inc. (a debtor-in-possession as of December 31, 1996) and
subsidiaries as of December 31, 1996 and 1995, and the related consolidated
statements of operations, stockholders' equity (deficit), and cash flows for
each of the years in the three-year period ended December 31, 1996. In
connection with our audit of the consolidated financial statements, we have
also audited the financial statement schedule as listed in the accompanying
index. These consolidated financial statements and the financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial statements and
financial statement schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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 our audits provide a reasonable basis for
our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial positions of Grant Geophysical,
Inc. and subsidiaries as of December 31, 1996 and 1995, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1996, in conformity with generally accepted
accounting principles. Also in our opinion, the related financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.

The accompanying consolidated financial statements and financial statement
schedule have been prepared assuming that Grant Geophysical, Inc. will continue
as a going concern which contemplates among other things, the realization of
assets and liquidation of liabilities in the ordinary course of business. As
discussed in Note 1 to the consolidated financial statements, Grant
Geophysical, Inc. (the Petitioning Company) filed a voluntary petition for
reorganization under Chapter 11 of the United States Bankruptcy Code on
December 6, 1996. The Chapter 11 case of the Petitioning Company is
administered by the United States Bankruptcy Court for the District of
Delaware. The Petitioning Company is operating the business as
debtor-in-possession which requires certain of its actions to be approved by
the Court. Continuation of the Petitioning Company as a going concern and
realization of its assets and liquidation of its liabilities is dependent upon,
among other things, the confirmation of a plan of reorganization (which may,
among other things, result in significant adjustments and reclassifications in
the amount reflected as assets, liabilities and stockholders' equity (deficit)
in the accompanying financial statements) and, the Petitioning Company's
ability to generate sufficient cash from operations and obtain financing
sources to meet its obligations. These matters raise substantial doubt about
the Petitioning Company's ability to continue as a going concern. The
consolidated financial statements and financial statement schedule do not
include any adjustments relating to the recoverability and classification of
reported asset amounts or the amounts and classification of liabilities that
might result from any plans or other actions arising from this uncertainty and
the reorganization proceedings.                                 

Houston, Texas
April 4, 1997
                                                          KPMG PEAT MARWICK LLP

                                      F-2
<PAGE>   37
                    GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
                             (DEBTOR IN POSSESSION)
                          CONSOLIDATED BALANCE SHEETS
                             (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
                                                               DECEMBER 31,   DECEMBER 31,
                                                                   1996           1995
                                                               ------------   ------------
<S>                                                            <C>            <C>         
                      ASSETS

Current assets:
Cash and cash equivalents ..................................   $      6,772   $      1,047
Restricted cash ............................................                           100
Accounts receivable:
 Trade (net of allowance for doubtful accounts of $5,711 and
 $2,344 at December 31, 1996 and 1995, respectively) .......         19,471         37,069
 Other .....................................................            996          1,826
Inventories ................................................            503          1,417
Prepaids ...................................................          1,411          3,347
Mobilization costs .........................................          1,071          6,772
                                                               ------------   ------------
   Total current assets ....................................         30,224         51,578
                                                               ------------   ------------

Property, plant and equipment:
  Land .....................................................            231            231
  Buildings and improvements ...............................          1,397          1,692
  Plant facilities and store fixtures ......................          1,703          2,723
  Machinery and equipment ..................................         90,892         88,573
                                                               ------------   ------------
    Total property, plant and equipment ....................         94,223         93,219
  Less accumulated depreciation ............................         56,555         61,565
                                                               ------------   ------------
    Net property, plant and equipment ......................         37,668         31,654
                                                               ------------   ------------

Deferred costs .............................................                           334
Restricted cash ............................................            321            315
Other assets ...............................................          1,910          3,051
                                                               ------------   ------------
                                                               $     70,123   $     86,932
                                                               ============   ============
</TABLE>


                                                        (Continued on next page)


                                      F-3
<PAGE>   38
                    GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
                             (DEBTOR IN POSSESSION)
                          CONSOLIDATED BALANCE SHEETS
                             (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                    DECEMBER 31,    DECEMBER 31,
                                                                        1996            1995
                                                                    ------------    ------------
<S>                                                                 <C>             <C>         
     LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
  Accounts payable ..............................................   $      3,975    $     19,241
  Accrued expenses ..............................................          3,051           5,643
  Foreign income taxes payable ..................................            188             231
  Notes payable, current portion of long-term debt and capital
    lease obligations ...........................................            589          18,430
                                                                    ------------    ------------
      Total current liabilities .................................          7,803          43,545
                                                                    ------------    ------------

Pre-petition liabilities subject to chapter 11 case .............         90,244
Long-term debt and capital lease obligations,
  excluding current portion .....................................                          8,789
Unearned revenue ................................................          6,031           4,074
Other liabilities and deferred credits ..........................            258             809
Commitments and contingencies ...................................

Stockholders' equity (deficit):
  $2.4375 Convertible exchangeable preferred stock,
    $.01 par value.  Authorized 2,300,000 shares;
    issued and outstanding 2,300,000 and 2,157,000 shares
    at December 31, 1996 and 1995, respectively (liquidating
    preference $25 per share, aggregating $57,500,000) ..........             23              22
Series A Convertible preferred stock, $.01 par value.
  Authorized 75,000 shares; none outstanding ....................
Junior preferred stock, $100 par value. Authorized
  15,000 shares; issued and outstanding 14,904 shares ...........          1,490           1,490
Serial preferred stock, $100 par value. Authorized
  250,000 shares; none issued ...................................
Common stock, $.002 par value. Authorized 40,000,000
  shares; issued and outstanding 20,641,765 and 12,234,151
  shares at December 31, 1996 and 1995, respectively ............             41              24
Additional paid-in capital ......................................        124,203         112,122
Accumulated deficit .............................................       (159,970)        (83,943)
                                                                    ------------    ------------
    Total stockholders' equity (deficit) ........................        (34,213)         29,715
                                                                    ------------    ------------

                                                                    $     70,123    $     86,932
                                                                    ============    ============
</TABLE>


          See accompanying notes to consolidated financial statements.


                                      F-4
<PAGE>   39
                   GRANT GEOPHYSICAL , INC. AND SUBSIDIARIES
                             (DEBTOR IN POSSESSION)
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


<TABLE>
<CAPTION>
                                                       YEAR ENDED DECEMBER 31,
                                              --------------------------------------------
                                                  1996            1995            1994
                                              ------------    ------------    ------------
<S>                                           <C>             <C>             <C>         
Revenues ..................................   $    105,523    $     91,996    $     73,691

Expenses:
  Direct operating expenses ...............        136,326          69,046          53,132
  Other operating expenses ................         17,865           8,527           7,810
  Depreciation and amortization ...........         11,500           9,424          12,079
  Special charge for asset impairment .....          5,802                           9,911
                                              ------------    ------------    ------------
    Total costs and expenses ..............        171,493          86,997          82,932
                                              ------------    ------------    ------------

  Operating income/(loss) .................        (65,970)          4,999          (9,241)
                                              ------------    ------------    ------------

Other income (deductions):
  Interest expense ........................         (7,558)         (3,635)         (3,561)
  Reorganization costs ....................           (412)
  Interest income .........................             36             113             177
  Other ...................................           (502)          2,076           1,380
                                              ------------    ------------    ------------
    Total other deductions ................         (8,436)         (1,446)         (2,004)
                                              ------------    ------------    ------------

  Income/(loss) before income taxes .......        (74,406)          3,553         (11,245)

Income tax expense ........................          1,621             391             193
                                              ------------    ------------    ------------

  Net income/(loss) .......................   $    (76,027)   $      3,162    $    (11,438)
                                              ------------    ------------    ------------

  Net loss applicable to common stock .....   $    (82,390)   $     (2,096)   $    (16,696)
                                              ============    ============    ============

INCOME/(LOSS) PER COMMON SHARE--
 ASSUMING NO AND FULL DILUTION:
Net income/(loss) .........................   $      (5.17)   $       0.25    $      (0.92)
Dividend requirement on $2.4375
  preferred stock .........................          (0.43)          (0.42)          (0.42)
                                              ------------    ------------    ------------

Net loss per common share .................   $      (5.60)   $      (0.17)   $      (1.34)
                                              ============    ============    ============

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
  Primary .................................     14,699,824      12,535,352      12,470,704
  Fully Diluted ...........................     14,699,824      12,571,984      12,484,093
</TABLE>


     See accompanying notes to consolidated financial statements.


                                      F-5
<PAGE>   40
                    GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
                             (DEBTOR IN POSSESSION)
           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                             (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
                                            $2.4375
                                          CONVERTIBLE    SERIES A
                                          EXCHANGEABLE  CONVERTIBLE   JUNIOR            ADDITIONAL                     TOTAL
                                           PREFERRED     PREFERRED   PREFERRED  COMMON    PAID-IN    ACCUMULATED   STOCKHOLDERS'
                                             STOCK         STOCK       STOCK    STOCK     CAPITAL      DEFICIT    EQUITY (DEFICIT)
                                          ------------  -----------  ---------  ------  -----------  -----------  ----------------
<S>                                       <C>           <C>          <C>        <C>     <C>          <C>          <C>

Balances at December 31, 1993 ..........  $         22  $            $   1,490  $   24  $   111,905  $  (75,667)  $         37,774
 Net loss ..............................                                                                (11,438)          (11,438)
 Restricted common stock
   issued under the Incentive
   Stock Option Plan ...................                                                         62                             62
 Proceeds from sale of 11,500
   shares under the Incentive
   Stock Option Plan ...................                                                          1                              1
                                          ------------  -----------  ---------  ------  -----------  -----------  ----------------

Balances at December 31, 1994 ..........            22                   1,490      24      111,968      (87,105)           26,399
 Net income ............................                                                                   3,162             3,162
 Restricted common stock
   issued under the Incentive
   Stock Option Plan ...................                                                         86                             86
 Proceeds from sale of 15,000
   shares under the Incentive
   Stock Option Plan ...................                                                         11                             11
 Restricted common stock
   issued under the Employee
   Retirement Savings Plan .............                                                         57                             57
                                          ------------  -----------  ---------  ------  -----------  -----------  ----------------

Balances at December 31, 1995 ..........            22                   1,490      24      112,122     (83,943)            29,715
 Net loss ..............................                                                                (76,027)          (76,027)
 Common stock issued in
  connection with obtaining
  equipment and short- and
  long-term financing ..................                                                        389                            389
 Issuance of 143,000 shares of $2.4375
  Convertible exchangeable preferred
  stock, net of non-cash issuance costs
  of $171,000 ..........................             1                                        1,372                          1,373
 Issuance of 70,000 shares of
  Series A convertible preferred
  stock ................................                          1                           6,999                          7,000
 Conversion of convertible debentures ..                                             7        2,767                          2,774
 Conversion of Series A convertible
  preferred stock ......................                        (1)                  9          (8)
 Proceeds from the exercise of
  200,000 warrants .....................                                             1          150                            151
 Restricted common stock
  issued under the Incentive
  Stock Option Plan ....................                                                        129                            129
</TABLE>


                                                        (Continued on next page)


                                      F-6
<PAGE>   41
                    GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
                             (DEBTOR IN POSSESSION)
           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                             (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
                                    $2.4375
                                  CONVERTIBLE    SERIES A
                                  EXCHANGEABLE  CONVERTIBLE   JUNIOR            ADDITIONAL                    TOTAL
                                   PREFERRED     PREFERRED   PREFERRED  COMMON   PAID-IN    ACCUMULATED   STOCKHOLDERS'
                                     STOCK         STOCK       STOCK    STOCK    CAPITAL      DEFICIT    EQUITY (DEFICIT)
                                  ------------  -----------  ---------  ------  ----------  -----------  ----------------
<S>                               <C>           <C>          <C>        <C>     <C>         <C>          <C>

 Proceeds from sale of 125,000
  shares under the Incentive
  Stock Option Plan ............                                                       145                            145
 Restricted common stock
  issued under the Employee
  Retirement Savings Plan ......                                                       138                            138
                                  ------------  -----------  ---------  ------  ----------  -----------  ----------------

Balances at December 31, 1996 ..  $         23  $            $   1,490  $   41  $  124,203  $ (159,970)  $        (34,213)
                                  ============  ===========  =========  ======  ==========  ===========  ================
</TABLE>


          See accompanying notes to consolidated financial statements.


                                      F-7
<PAGE>   42
                  GRANT GEOPHYSICAL,  INC. AND SUBSIDIARIES
                            (DEBTOR IN POSSESSION)
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                         YEAR ENDED DECEMBER 31,
                                                                    --------------------------------
                                                                      1996        1995        1994
                                                                    --------    --------    --------
<S>                                                                 <C>         <C>         <C>      
Cash flows from operating activities:
 Net income/(loss) before dividend requirement ..................   $(76,027)   $  3,162    $(11,438)
 Adjustments to reconcile net income/(loss) to
  net cash provided by (used in) operating activities:
  Special charge for asset impairment ...........................      5,802                   9,911
  Provision for doubtful accounts ...............................      5,511                      14
  Depreciation and amortization expense .........................     11,500       9,424      12,079
  Deferred costs amortization ...................................     29,528      12,550       5,824
  Loss on sale of subsidiaries ..................................        198
  Gain on the sale of fixed assets ..............................        (25)       (212)        (10)
  Gain on insurance claim .......................................                 (1,247)
  Exchange loss (gain) ..........................................        251        (102)       (121)
  Other non-cash items ..........................................        328         191          61
Changes in assets and liabilities, excluding
 effects of divestitures:
(Increase) decrease in:
 Accounts receivable ............................................     13,346     (14,828)     (4,046)
 Inventories ....................................................        914          27
 Prepaids .......................................................      1,228      (1,701)     (1,747)
 Mobilization costs .............................................    (24,969)    (18,439)     (5,242)
 Other assets ...................................................      1,846        (521)       (589)
Increase (decrease) in:
 Accounts payable ...............................................      9,328      10,637       1,659
 Accrued expenses ...............................................      5,059       1,046        (619)
 Foreign income taxes payable ...................................        390         122          (2)
 Other liabilities and deferred credits .........................      7,973       2,650      (2,564)
Change in pre-petition liabilities subject to
 chapter 11 case:
  Accrued expenses ..............................................       (125)
  Other liabilities and deferred credits ........................     (1,402)
                                                                    --------    --------    --------
     Total cash provided by (used in) operating activities ......     (9,346)      2,759       3,170
                                                                    --------    --------    --------
</TABLE>


                                                        (Continued on next page)


                                      F-8
<PAGE>   43
                   GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
                            (DEBTOR IN POSSESSION)
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                    YEAR ENDED DECEMBER 31,
                                                             -----------------------------------
                                                                1996         1995         1994
                                                             ---------    ---------    ---------
<S>                                                          <C>          <C>          <C>      
Cash flows from (used in) investing activities:
 Capital expenditures, net ...............................     (10,339)     (13,757)      (9,697)
 Proceeds from the sale of assets ........................          25          255           13
 Proceeds from the sale of subsidiaries/businesses .......          39                       880
 Insurance proceeds from arson damage, net
  of losses incurred .....................................                    1,351
 Restricted cash .........................................          94        2,879         (894)
                                                             ---------    ---------    ---------
     Net cash used in investing activities ...............     (10,181)      (9,272)      (9,698)
                                                             ---------    ---------    ---------

Cash flows from (used in) financing activities:
 Proceeds from the exercise of stock options
  and warrants ...........................................         296           11            2
 Proceeds from issuance of $2.4375 preferred stock,
   net of issuance costs .................................       1,544
 Proceeds from issuance of Series A preferred stock ......       7,000
 Borrowings made during the period .......................     122,354       89,950       77,754
 Repayment on borrowings during the period ...............    (105,757)     (83,032)     (72,496)
 Pre-petition liabilities subject to chapter 11 case:
   Borrowings under credit facility ......................       3,612
   Repayment on borrowings ...............................      (3,382)
                                                             ---------    ---------    ---------
     Net cash from financing activities ..................      25,667        6,929        5,260
                                                             ---------    ---------    ---------

Effect of exchange rate changes on cash ..................        (415)        (173)        (720)
                                                             ---------    ---------    ---------

 Net increase (decrease) in cash and cash
  equivalents ............................................       5,725          243       (1,988)
Cash and cash equivalents at beginning of period .........       1,047          804        2,792
                                                             ---------    ---------    ---------

Cash and cash equivalents at end of period ...............   $   6,772    $   1,047    $     804
                                                             =========    =========    =========
</TABLE>


    SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES.
                                 SEE NOTE 17.

          See accompanying notes to consolidated financial statements.


                                      F-9
<PAGE>   44
                    GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
                             (DEBTOR IN POSSESSION)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1996, 1995 AND 1994

(1) BASIS OF PRESENTATION

     Grant Geophysical, Inc. ("Grant") was incorporated in Delaware on June 27,
1978. Grant has several wholly-owned subsidiaries incorporated in the United
States and certain foreign jurisdictions (the "Subsidiaries"). Grant and
certain of the Subsidiaries have established branch operations in various
foreign jurisdictions (the "Branches"). Grant, the Subsidiaries and the
Branches are collectively referred to as the "Company". The Company provides
the petroleum industry with seismic data acquisition. The Company operates or
has operated seismic crews in areas of oil and gas exploration in the United
States, Canada, Europe, Africa, the Middle East, Latin America, the Far East
and Australia.

     On December 6, 1996 (the "Petition Date"), Grant filed a voluntary
petition in the United States Bankruptcy Court for the District of Delaware
(the "Court") for relief under chapter 11 of the United States Bankruptcy Code
("Bankruptcy Code"). The case is in its preliminary stages. Generally, upon the
commencement of a bankruptcy proceeding, all pre-petition litigation and other
acts to enforce claims against the debtor corporation are stayed. The debtor
corporation may operate its business and manage its assets in the ordinary
course as debtor-in-possession, but must obtain Court approval for transactions
outside the ordinary course of business. Based on these actions, all
liabilities of Grant outstanding at December 6, 1996 have been reclassified
from their respective current and non-current liability categories to estimated
Pre-petition liabilities subject to chapter 11 case.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Going Concern Considerations

     The accompanying financial statements of the Company have been prepared on
a going concern basis, which contemplates the realization of assets and the
liquidation of liabilities in the ordinary course of business. As described
earlier, Grant has filed for reorganization under chapter 11 of the United
States Bankruptcy Code. The consolidated financial statements do not include
any adjustments relating to the recoverability and classification of reported
asset amounts or the amounts and classification of liabilities that might
result from any plan or other actions arising from this uncertainty and the
reorganization proceedings.

     Grant intends to submit a plan of reorganization to the Court as soon as
practicable. Grant's exclusive period for filing a plan of reorganization
currently extends through August 4, 1997. Any plan submitted is likely to
provide for a material reduction in Grant's unsecured liabilities incurred
prior to December 7, 1996 and the elimination of present equity stockholders'
interests. If a liquidation of Grant were to occur, it is likely that no
distributions would be made to present equity shareholders, and no material
distributions would be available for holders of unsecured indebtedness of Grant
incurred prior to December 7, 1996. See Note 3 for a description of the effect
of the reorganization proceedings to date on certain of the Grant's
liabilities.

Principles of Consolidation

     The consolidated financial statements include the accounts of Grant and
all of its majority-owned subsidiaries. All significant intercompany accounts
and transactions are eliminated in consolidation.

Revenues

     Revenues from data acquisition are recognized based on contractual rates
set forth in the related contract. If the contract only provides a rate for the
overall service, revenue and any unearned revenue recorded is recognized based
on the percentage of the work effort completed compared with the total work
effort involved in the contract.


                                      F-10
<PAGE>   45
                   GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
                            (DEBTOR IN POSSESSION)
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Cash and Cash Equivalents

     For purposes of the consolidated statement of cash flows, the Company
considers all highly liquid debt instruments purchased with an original
maturity of three months or less to be cash equivalents. Grant held investments
in Federal agency securities of zero and $701,000 at December 31, 1996 and
1995, respectively.

Restricted Cash

     At December 31, 1996 and 1995, restricted cash included three certificates
of deposit ("CDs") totaling $321,000 and $315,000, respectively, which are 
pledged as collateral for letters of credit. These CDs are required for Grant 
to conduct business in various areas of the United States and are classified 
as long-term assets.

Inventories

     Inventories, which consist primarily of miscellaneous supplies, are stated
at lower of cost or market. Cost is determined using the specific
identification method.

Deferred Costs/Mobilization Costs

     Fees and expenses related to the mobilization and work in progress of
seismic crews are deferred and recognized over the performance of the contract.

Property, Plant and Equipment

     Property, plant and equipment are stated at cost. Plant and equipment
under capital leases are stated at the present value of future minimum lease
payments at the inception of the lease.

     Depreciation is provided principally by the straight-line method over the
estimated useful lives of the various classes of assets as follows:


<TABLE>
<CAPTION>
                                                               YEARS
                                                               -----
           <S>                                                  <C>
           Buildings and improvements ........................  5-10
           Data processing equipment .........................  3- 5
           Office equipment ..................................  5-10
           Seismic exploration and transportation equipment ..  3-10
</TABLE>


     Plant and equipment held under capital leases are amortized by the
straight-line method over the shorter of the lease term or estimated useful
life of the asset. Expenditures for maintenance and repairs are charged to
operations. Betterments and major renewals are capitalized.

Capitalized Software Costs

     Capitalized software costs consist of certain expenses incurred to
internally develop software. Capitalization of cost begins upon the
establishment of the software's technological feasibility. The establishment of
technological feasibility and the ongoing assessment of recoverability of
capitalized software development costs requires considerable judgment by
management with respect to certain external factors, including, but not limited
to anticipated future gross revenue, estimated economic life and changes in
software and hardware technologies.


                                      F-11
<PAGE>   46
                   GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
                            (DEBTOR IN POSSESSION)
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

     At December 31, 1996, in conjunction with the Company's evaluation on the
recoverability of its asset carrying values, $760,000 carrying value of
capitalized software was written down to zero. See Note 4. At December 31,
1995, the Company had capitalized approximately $717,000 of software
development costs which were included in property, plant and equipment.

Asset Impairment

     In the fourth quarter of 1995, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of." This standard requires
that long-lived assets and certain identifiable intangibles held and used by an
entity be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. At
December 31, 1996, as a result of this review, a $5,802,000 charge for asset
impairment was recorded during the fourth quarter of 1996. See Note 4. Adoption
of SFAS No. 121 did not materially affect the Company's consolidated results of
operations or financial position at December 31, 1995. During the fourth
quarter of 1994, the Company reviewed the quantity and age of its data
acquisition equipment to ensure the carrying amount of these assets were
recoverable. While still useable, rapid technological changes which had
occurred during the preceding three years and a resultant demand for new
advanced technology equipment by the Company's customers made it unlikely that
the carrying value of certain equipment prior to the write down was recoverable
from expected future cash flows. Accordingly, the Company recorded a $9,911,000
special charge for asset impairment during 1994.

     Long-lived assets and certain identifiable intangibles are written down to
their current fair value whenever events or changes in circumstances indicate
that the carrying amount of these assets are not recoverable. These events or
changes in circumstances may include but are not limited to a significant
change in the extent in which an asset is used, a significant decrease in the
market value of the asset, or a projection or forecast that demonstrates
continuing losses associated with an asset. If an impairment is determined, the
asset is written down to its current fair value and a loss is recognized.

Use of Estimates

     The preparation of financial statements in conformity with Generally
Accepted Accounting Principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Reorganization Costs

     Reorganization costs consist of professional fees and similar types of
expenditures directly related to the chapter 11 proceeding, and are expensed as
incurred. As of December 31, 1996, Grant had incurred approximately $412,000 of
reorganization costs.

Foreign Exchange Gains and Losses

     In an effort to mitigate foreign exchange rate fluctuations, the Company
attempts to structure the majority of its international contracts to be billed
and paid at a certain U.S. Dollar rate. Additionally, the Company periodically
enters into debt denominated in the same currency as its international
contracts to pay expenses incurred locally. Foreign currency transaction gains
and losses resulting from these arrangements are included in Other
income/deductions. Presently, the Company does not use derivatives or forward
foreign exchange hedging contracts.


                                      F-12
<PAGE>   47
                   GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
                            (DEBTOR IN POSSESSION)
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Income Taxes

     The Financial Accounting Standards Board issued SFAS No. 109, "Accounting
for Income Taxes." Under the asset and liability method of Statement 109,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under Statement 109, the
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.

Post Employment Benefits

     The Company adopted SFAS No. 112 effective January 1, 1994. SFAS No. 112
requires companies to account for benefits to former or inactive employees
after employment but before retirement on the accrual basis of accounting.
Post-employment benefits include every form of benefit provided to former or
inactive employees, their beneficiaries and covered dependents. Benefits
include, but are not limited to, salary continuation, supplemental unemployment
benefits, severance benefits, disability-related benefits (including workers'
compensation), job training and counseling, and continuation of benefits such
as health care benefits and life insurance coverage. Adoption of SFAS No. 112
did not materially affect the Company's consolidated results of operations or
financial position.

Income (Loss) Per Common Share

     Income (loss) per common share is computed based upon the weighted average
number of common shares outstanding during each period. For purposes of this
calculation, outstanding stock options and warrants are considered common stock
equivalents. Fully diluted income (loss) per common share is determined based
upon the weighted average number of common shares, calculated using the ending
market price of common shares for the period if that market price is higher
than the average market price used in computing primary earnings per share. The
income/loss is decreased/increased by undeclared, unpaid cumulative preferred
stock dividends in calculating net income/loss attributable to the common
shareholder.

Stock Based Compensation

     In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation" which establishes a fair value
method for accounting for stock-based compensation plans either through
recognition or disclosure. Grant has elected to continue to follow the 
intrinsic value method of accounting prescribed by Accounting Principles 
Board Opinion No. 25 "Accounting for Stock Issued to Employees", where 
compensation costs are not recognized in connection with Grant's stock option 
plans.

     However, had Grant adopted SFAS No. 123 for options granted after January
1, 1995, the Company's net income (loss) and net income (loss) per common share
for the years ended December 31, 1996 and 1995 would have been increased as
follows (in thousands, except per share amounts):


<TABLE>
<CAPTION>
                                        1996                 1995
                                --------------------  -------------------
                                   AS                    AS
                                REPORTED   PROFORMA   REPORTED   PROFORMA
                                ---------  ---------  --------   --------
  <S>                           <C>        <C>        <C>        <C>
                                                                 
  Net income (loss) ..........  $(82,390)  $(82,612)  $(2,096)   $(2,215)
  Net loss per common share ..    $(5.60)    $(5.62)   $(0.17)    $(0.18)
</TABLE>

    For purposes of determining compensation costs using the provisions of SFAS
123, the fair value of option grants were determined using the Black-Scholes
option-valuation model. The key input variables used in valuing the options
were: risk-free interest rate of 8.5%; dividend yield of zero; stock price
volatility of 70%; expected option lives of four years.

                                      F-13
<PAGE>   48
                   GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
                            (DEBTOR IN POSSESSION)
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Reclassifications

     Certain amounts previously reported have been reclassified in order to
ensure comparability between the periods reported.

Recent Accounting Pronouncements

     In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards 128, Earnings per Share (SFAS 128). SFAS
128 specifies the compilation, presentation and disclosure requirements for
earnings per share for entities with publicly held common stock or potential
common stock. The requirements of this statement will be effective for fiscal
years beginning after December 15, 1997. Management does not believe that the
implementation of SFAS 128 will have a material effect on its financial
statements.

(3) PRE-PETITION LIABILITIES SUBJECT TO CHAPTER 11 CASE

     As a result of Grant's Chapter 11 reorganization proceedings, all
pre-petition liabilities of Grant outstanding at December 31, 1996 have been
classified as pre-petition liabilities subject to chapter 11 case. The terms
and amounts due are subject to the outcome of the reorganization proceedings.
Grant's secured and unsecured debt is as follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                          DECEMBER 31, 1996
                                                     ---------------------------
                                                            PRE-PETITION
                                                              ACCRUED
                                                     AMOUNT   INTEREST    TOTAL
                                                     -------  --------   -------
<S>                                                  <C>       <C>       <C>    
SECURED DEBT:
  Revolving line of credit, 12.7%-14.7%(A) .......   $11,774   $         $11,774
  Equipment notes payable, 7.3%-12.0%(A) .........    16,594       557    17,151
  Other notes payable, 10.7%-15.0%(A) ............     5,560       302     5,862
  Capital lease obligations, 9.0%-27.0%(A) .......     8,971       198     9,169
 Other claims ....................................     1,662               1,662
                                                     -------   -------   -------
                                                      44,561     1,057    45,618
                                                     =======   =======   =======

UNSECURED DEBT:
 Convertible debentures, 8%(A) ...................       350                 350
 Other notes payable, 6%-22%(A) ..................    11,266       158    11,424
 Capital lease obligations, 12%-37%(A) ...........       687        37       724
 Trade accounts payable ..........................    23,718              23,718
 Accrued expenses ................................     2,956               2,956
 Other liabilities and deferred credits ..........     5,454               5,454
                                                     -------   -------   -------
                                                      44,431       195   $44,626
                                                     -------   -------   -------
               TOTAL .............................   $88,992   $ 1,252   $90,244
                                                     =======   =======   =======
</TABLE>


---------------
(A) Represents contractual stated interest rates.

     On February 4, 1997, the Court approved a Financing Order that authorized
Grant to enter into an agreement to obtain secured post-petition financing with
its primary working capital lender (the "Lender") under which agreement the
Lender continued to advance funds to Grant for its operations. The Financing
Order was amended

                                      F-14


<PAGE>   49
                   GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
                            (DEBTOR IN POSSESSION)
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

by order of the Court on April 9, 1997. Pursuant to the Amended Financing
Order, the Lender agreed to make revolving advances not to exceed $12,500,000.
The advances are not to exceed a borrowing base equal to a percentage of
certain trade accounts receivable and an overadvance amount. The maximum
permitted overadvance is $7,000,000 through September 30, 1997 when the Amended
Financing Order expires. A $125,000 fee was paid to the Lender. Interest
accrues at prime plus 3.75% on the advance funds and prime plus 7.25% on the
overadvance funds.

     The Amended Financing Order also includes an approved budget, an internal
cash management and reporting system and contains certain restrictions in the
movement of cash from Grant's US operations to certain of the Company's foreign
locations.

     On August 22, 1996, Grant amended a two-year term loan agreement with a
secured lender to increase the principal amount to $5,000,000. Interest on such
debt at the rate of 13.5% has been accruing since the petition date.

     Agreements with certain lenders and lessors have been reached and are
subject to approval by the Court. Based on these agreements, Grant is making
payments of adequate protection in varying amounts.

     On March 27, 1996, Grant issued $3,000,000 of its 8% Convertible
Debentures ("Debentures") due December 31, 1999. The Debentures are
convertible, at the option of the purchaser, into shares of Grant's common
stock at a conversion price of 80% of the five day average low trading price
prior to the conversion election of the common stock, provided that such 80%
figure is increased to 100% if the Debentures are converted within 45 days of
the Closing Date. Under certain circumstances, Grant may redeem the Debentures
on or after March 27, 1997, at a rate of 120% of the par value of the
Debenture, and on or after March 27, 1999, at a rate of 100% of the par value.
As of December 31, 1996, approximately $2,650,000 of the Debentures had been
converted into 3,400,261 shares of Grant's common stock.

     Grant borrowed an aggregate of $3,149,000 from Westgate International,
L.P. ("Westgate") and Elliott Associates, L.P. ("Elliott") for working capital
purposes. This amount remained outstanding at December 31, 1996.

     Prior to the Petition Date, interest was accrued on all debt instruments
based on contractual rates. Interest has continued to accrue on all secured
equipment notes payable and capital leases based on renegotiated rates of 7% to
11.09% since December 7, 1996. All unsecured and undersecured debt have not
been entitled to accrue interest since the Petition Date. Interest expense,
based on contractual rates of debt instruments, would have been approximately
$7,667,000 for the year ended December 31, 1996.

(4) SPECIAL CHARGE FOR ASSET IMPAIRMENT

     In accordance with SFAS 121, the Company has continually performed an
evaluation of asset groups and their respective future cash flows. As a result
of this evaluation at December 31, 1996, the Company reduced the carrying value
of a proprietary data recording system which was not expected to generate
future cash flows adequate to support current carrying values. Accordingly, a
$5,802,000 charge for asset impairment was recorded during the fourth quarter
of 1996.

     During the fourth quarter of 1994, the Company reviewed the quantity and
age of its data acquisition equipment to ensure the carrying amount of these
assets were recoverable. While still useable, rapid technological changes which
had occurred during the preceding three years and a resultant demand for new
advanced technology equipment by the Company's customers made it unlikely that
the carrying value of certain equipment prior to the write down was recoverable
from expected future cash flows. Accordingly, the Company recorded a $9,911,000
special charge for asset impairment during 1994. The majority of the 1994
impairment, approximately 75%, relates to assets located in Nigeria. The
remainder is associated with equipment in the Middle East, Far East and United
States, which was deemed to be overvalued due to the decline in demand for that
equipment's technology.


                                      F-15


<PAGE>   50
                   GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
                            (DEBTOR IN POSSESSION)
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(5) SUMMARY OF OPERATIONS

     A summary of operations by geographical area follows (dollars in
thousands):


<TABLE>
<CAPTION>
                                                      YEAR ENDED DECEMBER 31,
                                                -----------------------------------
                                                   1996         1995         1994
                                                ---------    ---------    ---------
<S>                                             <C>          <C>          <C>      
    Total revenues:
      U.S. ..................................   $  42,074    $  47,849    $  27,791
      Middle East ...........................                      786        8,725
      Africa ................................         904       14,208       15,500
      Colombia ..............................      12,722        4,535        5,557
      Peru ..................................      27,490       13,719
      Other Latin America ...................      16,921        7,278       10,086
      Far East ..............................       5,412        3,621        6,032
                                                ---------    ---------    ---------
                                                $ 105,523    $  91,996    $  73,691
                                                =========    =========    =========

    Operating income/(loss):
      United States .........................     (35,920)       4,575       (1,112)
      Middle East ...........................        (144)         285       (1,182)
      Africa ................................      (4,281)       1,130       (6,164)
      Europe ................................        (922)        (821)        (617)
      Colombia ..............................         (94)        (271)        (346)
      Peru ..................................     (19,804)       1,205          106
      Other Latin America ...................      (4,744)        (714)         439
      Far East ..............................         (61)        (390)        (365)
                                                ---------    ---------    ---------
                                                $ (65,970)   $   4,999    $  (9,241)
                                                =========    =========    =========

    Foreign currency exchange gains (losses):
      Africa ................................          15          265          (80)
      Europe ................................         (16)          (8)         (26)
      Middle East ...........................                      (13)         (21)
      Colombia ..............................         (26)          99          (63)
      Peru ..................................          (2)           2           (6)
      Other Latin America ...................        (197)        (184)         324
      Far East ..............................         (25)         (59)          (7)
                                                ---------    ---------    ---------
                                                $    (251)   $     102    $     121
                                                =========    =========    =========
</TABLE>


<TABLE>
<CAPTION>
                                                         DECEMBER 31,
                                                     -------------------
                                                       1996       1995
                                                     --------   --------
<S>                                                  <C>        <C>     
     Identifiable assets:
      U.S ........................................   $ 36,956   $ 42,738
      Europe and the Middle East .................         41        567
      Africa .....................................                15,536
      Peru .......................................     10,354     11,722
      Colombia ...................................      9,233      4,507
      Brazil .....................................      7,271      2,036
      Other Latin America ........................      1,803      5,277
      Far East ...................................      2,701      2,107
      Other ......................................        136        136
                                                     --------   --------
       Total identifiable assets .................     68,495     84,626
      Corporate assets ...........................      1,628      2,306
                                                     --------   --------
                                                     $ 70,123   $ 86,932
                                                     ========   ========
</TABLE>


                                      F-16


<PAGE>   51
                   GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
                            (DEBTOR IN POSSESSION)
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

     Revenues from a U.S. based international oil company were approximately
$20,233,000 (19%) and $12,683,000 (14%) for the years ended December 31, 1996
and 1995, respectively. In fiscal 1995 and 1994, revenues from two affiliated
nationalized oil companies totaled approximately $10,048,000 (11%) and
$8,902,000 (12%), respectively.

(6) DIVESTITURES

     During the fourth quarter of 1996, Grant sold the stock of its Venezuela
subsidiary and also entered into an agreement to sell the stock of its Nigeria
subsidiary. Proceeds from these sales are approximately $380,000. Other than a
$198,000 loss recognized on these sales, these transactions did not have a
significant impact on the Company's operating results.

(7) PROPERTY, PLANT AND EQUIPMENT

     A summary of property, plant and equipment follows:

<TABLE>
<CAPTION>
                                                                 ACCUMULATED
                                                         COST   DEPRECIATION
                                                       -------- ------------
                                                      (DOLLARS IN THOUSANDS)
<S>                                                    <C>               <C>
    December 31, 1996
     Land ..........................................   $    231   $
     Buildings and improvements ....................      1,397        202
     Plant facilities and store fixtures ...........      1,703      1,041
     Machinery and equipment .......................     90,892     55,312
                                                       --------   --------
                                                       $ 94,223   $ 56,555
                                                       ========   ========
    December 31, 1995
     Land ..........................................   $    231   $
     Buildings and improvements ....................      1,692        345
     Plant facilities and store fixtures ...........      2,723      1,766
     Machinery and equipment .......................     88,573     59,454
                                                       --------   --------
                                                       $ 93,219   $ 61,565
                                                       ========   ========
</TABLE>

(8) INCOME TAXES

     The composition of the income tax expense follows (dollars in thousands):


<TABLE>
<CAPTION>
                                                YEAR ENDED DECEMBER 31,
                                               ------------------------
                                                1996     1995     1994
                                               ------   ------   ------
                                                (DOLLARS IN THOUSANDS)
<S>                                            <C>      <C>      <C>   
          Current:
            State ..........................   $        $        $
            Federal ........................
            Foreign ........................    1,621      391      193
          Deferred:
            State ..........................
            Federal ........................
            Foreign ........................
                                               ------   ------   ------
            Income tax expense .............   $1,621   $  391   $  193
                                               ======   ======   ======
</TABLE>


     At December 31, 1996, Grant had net operating losses ("NOLs") of
approximately $173,000,000 available for carryforward for U.S. Federal income
tax purposes. The NOLs, if unused, will expire between 1997 and 2011. Grant's
NOLs will decrease the income tax expense of Grant only if Grant generates
income from United States operations which would be subject to U.S. Federal
income tax.


                                      F-17
<PAGE>   52
                   GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
                            (DEBTOR IN POSSESSION)
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

     The portion of NOLs, which existed prior to July 1991 and expire between
1997 and 2006 are subject to annual utilization limitations imposed by the
Internal Revenue Bankruptcy Code under section 382. Based on the ownership
changes to date, the NOLs would be limited by a minimum of $23,000,000. In
addition, there is a significant probability that any plan of reorganization
which may be confirmed by the Court will result in a "change of ownership" of
Grant. In such event, the future utilization of Grant's U.S. NOL's would be
further restricted.

     The total income tax expense is different from the amount computed by
applying the U.S. Federal income tax rate to income before income taxes. The
reasons for these differences were as follows (dollars in thousands):


<TABLE>
<CAPTION>
                                                      YEAR ENDED DECEMBER 31,
                                                 -------------------------------
                                                   1996        1995       1994
                                                 --------    --------   --------
<S>                                              <C>         <C>        <C>      
U.S. Federal income tax expense (benefit)
 at statutory rate ...........................   $(25,298)   $  1,208   $ (3,823)
Increases (reductions) in taxes from:
Foreign income tax rate more (less) than
 U.S. rate on foreign income .................      4,712         110      1,987
Losses of the U.S. return group from
 which no benefit is expected ................     22,207                  2,029
Utilization of prior year losses for which
  no benefit was recognized ..................                   (927)
                                                 --------    --------   --------
Income tax expense recorded ..................   $  1,621    $    391   $    193
                                                 ========    ========   ========
</TABLE>


     The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below (dollars in thousands):

<TABLE>
<CAPTION>
                                                                                 DECEMBER 31,
                                                                            --------------------
                                                                              1996        1995
                                                                            --------    --------
<S>                                                                         <C>         <C>     
Deferred tax asset:
  Plant and equipment, principally due to differences in depreciation ...   $  3,841    $  1,890
  Allowance for doubtful accounts and other accruals.....................      3,042
  Net operating loss carryforwards ......................................     58,795      36,519
  Less valuation allowance ..............................................    (65,678)    (38,409)
                                                                            --------    --------
  Net deferred tax asset ................................................   $           $
                                                                            --------    --------
</TABLE>


     The valuation allowance for deferred tax assets as of January 1, 1995 was
$39,039,000. The net change in the total valuation allowance for the years
ended December 31, 1996 and 1995 was an increase of $27,269,000 and a decrease
of $630,000, respectively.


                                      F-18
<PAGE>   53
                   GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
                            (DEBTOR IN POSSESSION)
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(9)  NOTES PAYABLE, LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

     A summary of notes payable, long-term debt, and capital lease obligations
was as follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                              -------------------
                                                                1996       1995
                                                              --------   --------
<S>                                                           <C>        <C>     
Revolving lines of credit:
  15.0%, due February 20, 1996 ............................   $          $  1,750
  11.0%, due February 17, 1997 ............................        (B)      8,045
Equipment notes payable -- 6.93%-12%, due 1996-1999 .......        (B)      5,178
Other notes payable -- 10.0% to 34.0%, due 1996-2005 ......        589      6,579
Capital lease obligations -- 10.0% to 28.0%,
  due 1996-2000 ...........................................        (B)      5,667
                                                              --------   --------
                                                                   589     27,219
Less current portion ......................................        589     18,430
                                                              --------   --------
  Notes payable, long-term debt and capital
  lease obligations, excluding current portion ............   $    (B)   $  8,789
                                                              ========   ========
</TABLE>


     At December 31, 1996, other notes payable consisted of a revolving line of
credit maintained by a foreign subsidiary.

---------------
     (B) Certain balances have been reclassified to Pre-petition liabilities
subject to chapter 11 case (see Note 3).

(10) LEASES

     The future minimum rental payments under the Company's various capital and
noncancelable operating leases at December 31, 1996 were as follows:


<TABLE>
<CAPTION>
                                     MINIMUM RENTALS
                                      OF NON-FILING    MINIMUM RENTALS
                                      SUBSIDIARIES        OF GRANT*
                                     ---------------   ---------------

                                        OPERATING         OPERATING      CAPITAL
                                         LEASES            LEASES*       LEASES*
                                        ---------         ---------      -------
                                          (DOLLARS IN THOUSANDS)
<C>                                       <C>               <C>          <C>
1997 ................................     $163              $  634       $ 3,358
1998 ................................                          460         2,707
1999 ................................                          225         2,210
2000 ................................                           55         2,722
2001 ................................                                      1,321
                                          ----              ------       -------
                                                             1,374        12,318
Less amount representing interest ...                                      2,660
                                          ----              ------       -------
  Present value of future minimum
   lease payments ...................     $163              $1,374       $ 9,658
                                          ====              ======       =======
</TABLE>


*    Substantially all of the minimum rentals of Grant shown are subject to
     affirmation or rejection pursuant to provisions of the Bankruptcy Code.


                                      F-19
<PAGE>   54
                    GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
                             (DEBTOR IN POSSESSION)
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

     The total rental expenses for each of the periods was as follows (dollars
in thousands):


<TABLE>
<CAPTION>
                            YEAR ENDED DECEMBER 31,
                       ----------------------------------
                        1996          1995          1994
                        ----          ----          ----
<S>                    <C>           <C>           <C>   
                       $2,089        $1,880        $2,758
</TABLE>


(11) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

     The following methods and assumptions were used to estimate the fair value
of each class of financial instruments.

     Cash and short-term financial instruments

     The carrying amount approximates fair value due to the short maturity of
these instruments.

     Long-term notes receivable

     The fair value has been estimated using the expected future cash flows
discounted at market interest rates which approximate its carrying value.

     Long-term debt

     At December 31, 1996, liabilities exceeded the Company's assets; thus,
long-term debt claims against Grant may be settled at less than 100 percent of
their value. However, until confirmation of a plan of reorganization, the
manner of payment or other disposition of these claims will continue to be
uncertain.

     For December 31, 1995, the fair value of the Company's long-term debt has
been estimated based on quoted market prices for the same or similar issues, or
on the current rates offered to the Company for debt of the same remaining
maturities.

(12) EMPLOYEE BENEFIT PLANS

     Incentive Stock Option Plan

     On November 1, 1996, the Amended 1989 Long-Term Incentive Plan (the
"Plan") was amended to increase the shares of common stock reserved to cover
the granting of options to purchase shares of Common Stock ("Options"), issuing
of shares of Common Stock which are subject to vesting requirements or other
restrictions ("Restricted Stock") and issuing of Stock Appreciation Rights
("SAR") to employees to 2,803,930 shares.

     Options are awarded at an option price determined by the Board of
Directors, which shall not be less than 100% of fair market value or 110% of
fair market value for employees already owning more than 10% of the voting
power of all classes of stock. The options may be exercised either by the
purchase of shares at the option price or as stock appreciation rights by which
the employee receives cash or stock equivalent in value of the difference
between the option price and the market value of the stock at the exercise
date. These options expire ten


                                      F-20
<PAGE>   55
                    GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
                             (DEBTOR IN POSSESSION)
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

years from the date of grant and are exercisable as defined by the stock option
plan. No stock appreciation rights have been granted. Transactions for Options
under the plan are summarized as follows:

<TABLE>
<CAPTION>
                                                                      OPTION
                                                    SHARES            PRICE
                                                   --------      -------------
<S>                                                  <C>         <C>          
Outstanding, December 31, 1993:
                                                     14,500      $        0.10
                                                    212,000        0.938-1.125
                                                    108,750               7.00
                                                   -------- 
                                                    335,250
    Granted ................................         70,000        1.313-2.500
    Exercised ..............................        (11,500)              0.10
                                                   --------      -------------

Outstanding, December 31, 1994:
                                                      3,000      $        0.10
                                                    262,000        0.938-1.313
                                                     20,000               2.50
                                                    108,750               7.00
                                                   -------- 
                                                    393,750
    Granted ................................        150,000               2.31
    Exercised ..............................        (15,000)        0.10-0.938
                                                   --------      -------------

Outstanding, December 31, 1995:
                                                    250,000         $0.938-131
                                                    170,000         2.310-2.50
                                                    108,750               7.00
                                                   -------- 
                                                    528,750
    Granted ................................        784,000        2.219-2.688
    Exercised ..............................       (125,000)       1.125-1.313
    Canceled ...............................       (125,000)       0.938-1.313
    Canceled ...............................       (700,000)       2.219-2.688
    Canceled ...............................        (45,000)              7.00
                                                   --------      -------------

Outstanding, December 31, 1996 .............        254,000       $2.219-2.688
Outstanding, December 31, 1996 .............         63,750               7.00
                                                                 =============

Exercisable, December 31, 1996 .............         56,000      $       2.310
Exercisable, December 31, 1996 .............         63,750               7.00
                                                                 =============
</TABLE>


     Additionally, a Plan amendment was approved, effective January 1, 1996, by
the stockholders which allows current and former non-employee directors of
Grant to participate in the Plan solely for the purpose of receiving Restricted
Stock of Grant in lieu of part or all of the directors' fees. The shares of
Restricted Stock will be automatically issued on the first day of each calendar
quarter following a calendar quarter of service. The fair market value of the
Restricted Stock will be the closing price of the common stock on the last
trading day of the preceding calendar quarter. In 1996, 1995 and 1994, 40,055,
41,711, and 28,108 shares of Restricted Stock were issued. The charges to
income totaled $127,000, $103,000, and $62,000 in 1996, 1995 and 1994,
respectively.

     At December 31, 1996, 1,974,306 shares are available for future grants. It
is likely that all options to acquire Grant's common stock and all stock
appreciation rights will be canceled in connection with any plan of
reorganization for Grant.


                                      F-21
<PAGE>   56
                    GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
                             (DEBTOR IN POSSESSION)
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

     Employee Retirement Savings Plan

     Grant has established a defined contribution plan covering substantially
all U.S. employees whereby participants may elect to contribute between 1% and
12% of their annual salary. Participants may not make contributions in excess
of $9,240 per year (as adjusted annually by the cost of living adjustment
factor). Under this plan, Grant may contribute, on a discretionary basis,
one-half of the participant's contribution percentage up to 6% (limited to 3%
of any employee's annual salary). Beginning in August 1995, Grant's
contribution could be made in the form Grant common stock. Contributions made
by Grant for the years ended December 31, 1996, 1995, and 1994 were 58,395
shares of Grant stock with a market value of $138,000; $154,000, which included
24,466 shares of Grant common stock with a market value of $56,838, and a cash
contribution of $93,000, respectively. At December 31, 1996 and 1995, the plan
held 82,861 and 24,466 shares of Grant common stock.

     Other Postretirement Benefits

     Grant sponsors a defined contribution postretirement plan which provides
medical coverage for eligible retirees and their dependents (as defined in the
plan). The Company adopted SFAS 106 - "Employers' Accounting for Postretirement
Benefits Other Than Pensions" requiring companies to account for these. The
following sets forth the plan's funded status reconciled with the amount shown
in the consolidated statement of operations on an accrual basis rather than a
pay-as-you-go (cash) basis as follows:

<TABLE>
<CAPTION>
                                                             DECEMBER 31,
                                                        -----------------------
                                                         1996     1995     1994
                                                        -----    -----    -----
                                                         (dollars in thousands)
<S>                                                     <C>      <C>      <C>   
Accumulated postretirement benefit obligation:
  Retirees and dependents ...........................   $ (17)   $ (16)   $ (18)
  Fully eligible active plan participants ...........     (42)     (27)     (11)
  Other active plan participants ....................    (308)    (211)    (138)
                                                        -----    -----    -----
                                                         (367)    (254)    (167)
  Unrecognized net loss (gain) ......................      17      (19)     (65)
  Unrecognized transition obligation ................     118      126      133
                                                        -----    -----    -----
    Accrued postretirement benefit cost .............   $(232)   $(147)   $ (99)
                                                        =====    =====    =====
</TABLE>

     Net periodic postretirement benefit cost included the following
components:


<TABLE>
<CAPTION>
                                                                      YEAR ENDED DECEMBER 31,
                                                                      -----------------------
                                                                       1996    1995    1994
                                                                       ----    ----    ----
                                                                      (dollars in thousands)
<S>                                                                    <C>     <C>     <C> 
 Service cost - benefits attributed to service during the period ...   $ 66    $ 41    $ 32
 Interest cost on accumulated postretirement benefit obligation ....     21      13      12
 Amortization of transition obligation over 20 years ...............      7       7       7
 Amortization of gain ..............................................             (2)     (1)
 Other amortizations ...............................................                     11
                                                                       ----    ----    ----
      Net periodic postretirement benefit cost .....................   $ 94    $ 59    $ 61
                                                                       ====    ====    ====
</TABLE>


     For measurement purposes, a 7.25% annual rate of increase in the per
capita cost of medical benefits was assumed for 1996 with a 10% and 12% assumed
annual rate for 1995 and 1994, respectively; the rate was assumed to decrease
gradually to 5% for 2001 and remain at that level thereafter. The medical cost
trend rate assumption


                                      F-22
<PAGE>   57
                    GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
                             (DEBTOR IN POSSESSION)
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

has a significant effect on the amounts reported. To illustrate, increasing the
assumed medical cost trend rates by 1% point in each year would increase the
accumulated postretirement benefit obligations as of December 31, 1996, 1995
and 1994 by approximately $56,000, $43,000 and $22,000, respectively, and the
aggregate of the service and interest cost components of net periodic
postretirement benefit cost for the years ended December 31, 1996, 1995 and
1994 by $15,000, $10,000 and $7,000, respectively.

     The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.25% for December 31, 1996, and 1995. A
rate of 8.5% was used for 1994.

(13) STOCKHOLDERS' EQUITY (DEFICIT)

$2.4375 Convertible Exchangeable Preferred Stock

     Grant has authorized 2,300,000 shares of $2.4375 convertible exchangeable
preferred stock ($0.01 par value, $25.00 liquidation preference) of which
2,157,000 was outstanding through March 20, 1996. The remaining 143,000 shares
were issued on March 20, 1996. The purchaser of the remaining shares is
entitled to all unpaid, undeclared dividends in arrears through March 31, 1996,
totaling $1,220,000. The $2.4375 preferred stock bears annual cumulative
dividends of $2.4375 per share accruing from July 26, 1991, payable quarterly
on each March 31, June 30, September 30 and December 31, commencing September
30, 1991. It is convertible at any time at the option of the holder, unless
previously redeemed, into common stock ($.002 par value) of Grant at the
initial conversion rate of 2.739726 shares of common stock for each share of
$2.4375 preferred stock. It is exchangeable, at the option of Grant, in whole
but not in part, on any dividend payment date commencing September 30, 1993,
for Grant's 9 3/4% Convertible Subordinated Debentures (the "subordinated
debentures") due 2016, at the rate of $25.00 principal amount of subordinated
debentures for each share of $2.4375 preferred stocks provided that all
accumulated and unpaid dividends through the date of exchange have been paid.

Series A Convertible Preferred Stock

     Grant has authorized 75,000 shares of Series A Convertible Preferred
Stock, $0.01 par value. A total of 70,000 shares were issued in May 1996, all
of which have been converted into 4,428,404 shares of Grant Common Stock by
December 31, 1996.

Junior Preferred Stock

     Grant has authorized 15,000 shares and has issued and outstanding 14,904
shares of nonvoting, redeemable junior preferred stock with a $100 par value
("Junior Preferred"). The shares are redeemable at any time by Grant upon
30-day written notice to holders of such shares. No dividends have been
declared or paid on the Junior Preferred stock.

Serial Preferred Stock

     Grant has authorized 250,000 shares of Serial Preferred Stock, $100 par
value, none of which were issued and outstanding.

Dividends in Arrears

     The quarterly dividend payments for the periods of 1993 through December
6, 1996 and one quarterly dividend payment for 1992 on the $2.4375 preferred
stock were deferred by Grant's Board of Directors.

     As of December 31, 1996 and 1995, preferred dividends in arrears on the
$2.4375 preferred stock amounted to approximately $23,451,000 and $17,088,000,
respectively.  The December 31, 1996 amount relates to the total of 2,300,000
shares now outstanding.


                                      F-23
<PAGE>   58
                    GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
                             (DEBTOR IN POSSESSION)
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Common Stock

     The changes in common stock were as follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                             COMMON STOCK
                                                       -----------------------
                                                         SHARES       AMOUNT
                                                       ----------   ----------
<S>                                                    <C>          <C>       
Balance, December 31, 1993 .........................   12,113,366   $       24
   Restricted common stock issued (note 12) ........       28,108
   Stock options exercised .........................       11,500
                                                       ----------   ----------

Balance, December 31, 1994 .........................   12,152,974           24
   Restricted common stock issued (note 12) ........       41,711
   Restricted common stock issued under the
     Employee Retirement Savings  Plan (note 12) ...       24,466
   Stock options exercised .........................       15,000
                                                       ----------   ----------

Balance, December 31, 1995 .........................   12,234,151           24
   Warrants exercised ..............................      200,000            1
   Conversion of debentures ........................    3,400,261            7
   Conversion of Series A Preferred Stock ..........    4,428,404            9
   Payment in connection with equipment
    and short- and long-term financing .............      155,499
   Restricted common stock issued (note 12) ........       40,055
   Restricted common stock issued under the
     Employee Retirement Savings  Plan (note 12) ...       58,395
   Stock options exercised .........................      125,000
                                                       ----------   ----------

Balance, December 31, 1996 .........................   20,641,765   $       41
                                                       ==========   ==========
</TABLE>


(14) CONTINGENCIES

     The Company is involved in various claims and legal actions arising in the
ordinary course of business.

     The Court generally has jurisdiction over all of Grant's property, as
defined in section 541 of the Bankruptcy Code, held on the Petition Date or
acquired thereafter. Under sections 1107 and 1108 of the Bankruptcy Code and by
order of the Court, Grant is operating its business and managing its assets in
the ordinary course of business as debtor-in-possession. Grant may not,
however, engage in transactions outside the ordinary course of business without
prior approval of the Court. Pursuant to section 362(a) of the Bankruptcy Code
and subject to the exceptions contained in section 362(b) thereof, the
commencement of a bankruptcy proceeding operates as an automatic stay
applicable to all persons and other entities, generally prohibiting absent
Court approval (i) the commencement or continuation of any judicial,
administrative or other proceeding against Grant, (ii) any act to obtain
possession of property of, or property from, Grant, and (iii) any act to
create, perfect or enforce any lien against property of Grant. While the
automatic stay applies to all of Grant's property wherever located, Grant
operates in several foreign jurisdictions, some of which may not give effect to
the automatic stay.


                                      F-24
<PAGE>   59
                    GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
                             (DEBTOR IN POSSESSION)
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

     The Company is subjected to review by various taxing authorities for the
purpose of verifying compliance with numerous local tax laws and regulations. As
a result of one of these reviews, the Company was notified that, during 1995, it
had neglected to collect a certain tax from several clients and remit those
collections to the local government. The total amount of the potential
assessment, including penalties and interest, is approximately $6,000,000. The
Company believes the tax authority's claim is without merit and, as such, has
made no provision for payment. The Company intends to vigorously protest
enforcement of the claim within the local legal system. However, there can be no
assurances that the outcome of those protests will be favorable.

(15) RELATED PARTY TRANSACTIONS

     During 1996, Grant entered into an exclusive agreement with Macdonald &
King, Incorporated, a financial services firm, for the purpose of assisting
Grant in securing additional sources of financing including equipment financing
and short and long-term financing. Mr. William C. Macdonald, a former director
of Grant, is the Chairman of the Board and sole shareholder of Macdonald &
King, Incorporated. Pursuant to the terms of the agreement, Grant issued
155,499 shares of Grant Common Stock with a market value of approximately
$388,748 to Macdonald & King, Incorporated in connection with financing
obtained by Grant prior to Mr. Macdonald's resignation from Grant's Board of
Directors effective August 8, 1996.

     On March 20, 1996, Grant issued 143,000 shares of Grant's $2.4375
Preferred Stock to Westgate, an affiliate of Elliott, a holder of more than 5%
of Grant's $2.4375 Preferred Stock, for an aggregate purchase price of
$1,573,000. Westgate subsequently sold its shares of $2.4375 Preferred Stock to
Liverpool Limited Partners, who is also an affiliate of Elliott.

     In November 1996, Grant borrowed an aggregate of $3,149,000 from Westgate
and Elliott for working capital purposes. The borrowings are in the form of
unsecured promissory notes and remain outstanding at December 31, 1996, and are
classified in pre-petition liabilities subject to the chapter 11 case.

(16) OTHER INCOME (DEDUCTIONS)

     Other Income (Deductions) consisted of the following:

<TABLE>
<CAPTION>
                                                      YEAR ENDED DECEMBER 31,
                                                  -----------------------------
                                                    1996       1995       1994
                                                  -------    -------    -------
                                                      (DOLLARS IN THOUSANDS)
<S>                                               <C>        <C>        <C>    
Gain on the sale of fixed assets ..............   $    25    $   212    $    10
Net gain/(loss) on foreign exchange ...........      (251)       102        121
Loss on sale of subsidiaries ..................      (198)
Foreign credit insurance ......................        (8)       (73)      (137)
Recovery of bad debts .........................                             664
Gain on insurance settlement ..................                1,247
Nonrecurring royalty income ...................                             500
Miscellaneous .................................       (70)       588        222
                                                  -------    -------    -------
   Total ......................................   $  (502)   $ 2,076    $ 1,380
                                                  =======    =======    =======
</TABLE>


                                      F-25
<PAGE>   60
                    GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
                             (DEBTOR IN POSSESSION)
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(17) SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES


<TABLE>
<CAPTION>
                                                       YEAR ENDED DECEMBER 31,
                                                     ---------------------------
                                                      1996      1995      1994
                                                     -------   -------   -------
                                                        (dollars in thousands)
<S>                                                  <C>       <C>       <C>    
CASH PAID FOR INTEREST AND TAXES WAS AS FOLLOWS:
 Taxes, net of refunds ...........................   $ 3,496   $   968   $ 1,044
 Interest, net of amounts capitalized ............     6,106     3,524     3,704

NONCASH INVESTING AND FINANCING ACTIVITIES:
  Property, plant and equipment debt additions ...    19,718     8,106     5,899
  Property, plant and equipment debt payments ....     4,258     6,942     7,133
  Debenture conversion ...........................     2,774
  Fair value of divestitures, net of cash held ...       493
  Receivables acquired in connection with
  divestitures ...................................       255
</TABLE>


(18) SUBSEQUENT EVENTS (UNAUDITED)

     Since the Petition Date, Grant has conducted discussions with several
parties who have indicated possible interest in funding a plan of
reorganization. On March 14, 1997, Grant announced that it had entered into a
term sheet ("Term Sheet") with Elliott to fund and jointly sponsor a plan of
reorganization. The Term Sheet calls for Elliott to invest up to $30,000,000 in
new equity capital in Grant and to provide $2,000,000 in expanded credit
facilities for the growth of the Company's international operations. In
addition, pending confirmation of the reorganization plan, Elliott purchased a
$2,500,000 participation in Grant's current post-petition loan facility with
its Lender. The Term Sheet is subject to a number of material conditions,
including but not limited to, execution of a mutually agreeable definitive
agreement and the Court's approval of certain break-up fees and bidding
procedures. The Court approved the break-up fee and bidding procedures on April
9, 1997. Pursuant to the Term Sheet, Grant and Elliott will file a jointly
proposed reorganization plan providing for specific recoveries to Grant's
secured and unsecured creditors. Secured creditors will be paid in full in a
combination of cash and/or new promissory notes. Unsecured creditors would be
able to select from a menu of recovery options that include cash and stock,
promissory notes or credits exchangeable for Grant services performed after
consummation of the plan. In addition, the plan is expected to provide for a
$33,000,000 rights offering, $30,000,000 of which will be guaranteed by
Elliott. Under the rights offering, Grant's unsecured creditors and its
preferred and common shareholders will be granted the right to purchase shares
of Grant's new common stock at the same price per share as Elliott's
investment. The plan is expected to also provide an option for Grant's
employees to participate in the rights offering subject to any required
Securities and Exchange Commission approvals. The shares will be offered to
employees on the same basis as those offered to creditors, shareholders and
Elliott. If the plan is consummated, Elliott will own a minimum of 51% of
Grant's common stock. Consummation of the plan contained in the Term Sheet is
subject to a number of conditions including the vote of Grant's creditors and
shareholders.

     The Term Sheet, as modified by the Court's order on April 9, 1997
approving certain break-up fees and bidding procedures, also provides that the
Elliott proposal is subject to any higher and better offer which may be
received by Grant. Grant has retained Simmons & Company International as its
investment banker to assist it in soliciting other offers. Other offers are due
no later than the date set by the Court for the filing of objections to the
disclosure statement the Grant expects to file in connection with the Elliott
proposal. Grant will evaluate all valid offers, and will select the proposal
which, in its judgment, produces the highest and best recovery to all parties
in interest. Any valid offer must provide for the purchase of Elliott's
participation in Grant's post-petition loan facility.


                                      F-26
<PAGE>   61
                    GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
                             (DEBTOR IN POSSESSION)
                      SUPPLEMENTARY FINANCIAL INFORMATION
                                  (UNAUDITED)
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

     Quarterly financial information is summarized as follows:


<TABLE>
<CAPTION>
                                                      1ST             2ND          3RD          4TH
                                                    QUARTER         QUARTER     QUARTER(2)   QUARTER(3)  YEAR ENDED
                                                   ---------       ---------    ---------    ---------   ---------- 
<S>                                                <C>             <C>          <C>          <C>          <C>      
1996
Revenues .......................................   $  27,808       $  26,951    $  26,166    $  24,598    $ 105,523
Operating income/(loss) ........................       1,060             955      (21,518)     (46,467)     (65,970)
Net loss .......................................        (572)           (621)     (23,655)     (51,179)     (76,027)
Net loss applicable to common stock ............      (3,106)(1)      (2,023)     (25,056)     (52,205)     (82,390)

LOSS PER COMMON SHARE--ASSUMING
 NO AND FULL DILUTION:
Net loss per common share ......................   $   (0.25)      $   (0.15)   $   (1.72)   $   (2.70)   $   (5.60)
                                                   =========       =========    =========    =========    =========

1995
Revenues .......................................   $  18,406       $  20,712    $  24,763    $  28,115    $  91,996
Operating income ...............................         296           2,037        1,484        1,182        4,999
Net income .....................................          40           1,083        1,713          326        3,162
Net income/(loss) applicable to common stock ...      (1,275)           (231)         398         (988)      (2,096)

INCOME/(LOSS) PER COMMON SHARE--ASSUMING
 NO AND FULL DILUTION:
Net income/(loss) per common share .............   $   (0.10)      $   (0.01)   $    0.03    $   (0.08)   $   (0.17)
                                                   =========       =========    =========    =========    =========
</TABLE>


____________
(1)  Includes $1,220 cumulative adjustment for the prior unpaid, undeclared
     dividends associated with the issuance of 143,000 shares of Grant's
     $2.4375 Preferred Stock.
(2)  Includes $8,374 recognition of anticipated contract losses.
(3)  Includes $5,802 special charge for asset impairment (see Note 4 of Notes
     to the Consolidated Financial Statements), $5,511 reserve for accounts
     receivable determined to be uncollectible, $2,700 demobilization charge
     for closed operations, $1,206 related to future estimated contract losses
     and $412 of reorganization costs.


                                      F-27
<PAGE>   62
                                                                    SCHEDULE II

                    GRANT GEOPHYSICAL, INC. AND SUBSIDIARIES
                             (DEBTOR IN POSSESSION)
                       VALUATION AND QUALIFYING ACCOUNTS
                             (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
                                     BALANCE AT  CHARGED TO                                BALANCE
                                     BEGINNING    COSTS AND                                 AT END
         CLASSIFICATION              OF PERIOD    EXPENSES       DEDUCTIONS      OTHER     OF PERIOD
         --------------               --------    --------       ----------    --------    -------- 
<S>                                   <C>         <C>            <C>           <C>         <C>      
 Year ended December 31, 1996
 Allowance for doubtful accounts
  receivable ......................   $ (2,344)   $ (5,511)      $  1,529(1)   $    615    $ (5,711)

 Year ended December 31, 1995
 Allowance for doubtful accounts
  receivable ......................     (3,841)                     1,257(1)        240      (2,344)

 Year ended December 31, 1994
 Allowance for doubtful accounts
  receivable ......................     (3,955)        (14)            39            89      (3,841)
</TABLE>


--------------
(1)  Principally write off of uncollectible/disputed amounts.


                                      S-1
<PAGE>   63
                                 EXHIBIT INDEX

Exhibits not filed herewith have been previously filed with the Securities and
Exchange Commission and are incorporated by reference herein from the document
indicated.


<TABLE>
<CAPTION>
EXHIBIT NO.
-----------
<S>            <C>
   3.01      - By-laws of Grant, as amended (filed as Schedule 3.02 to
               Grant's 1995 Form 10-K, File No. 000-18816).

   3.02      - Fourth Restated Certificate of Incorporation of Grant, as
               amended (filed as Exhibit 3.01 to Grant's Form 10-Q for the
               quarter ended June 30, 1996, File No. 000-18816).

   4.01      - Specimen of Common Stock Certificate (filed as Exhibit 4.01 to
               Grant's Registration Statement on Form S-1; Reg. No. 33-36291).

   4.02      - Copies of instruments relating to long-term debt in authorized
               amounts that do not exceed 10% of the consolidated assets of the
               Company and its subsidiaries have not been filed and will be
               furnished to the Commission upon request.

   4.03      - Form of Certificate for $2.4375 Convertible Exchangeable
               Preferred Stock (filed as an Exhibit 4.03 to Grant's
               Registration Statement on Form S-1; Reg. No. 33-43899.)

   4.04      - Form of Indenture between Grant and The Bank of New York, as
               Trustee, relating to Grant's 9-3/4% Convertible Subordinated
               Debentures due 2016 (filed as Exhibit 4.05 to Grant's
               Registration Statement on Form S-1; Reg. No. 33-41316).

   4.05      - Form of 9-3/4% Convertible Subordinated Debenture due 2016
               (incorporated by reference to pages 12 to 19 of Exhibit 4.05 to
               Grant's Registration Statement on Form S-1; Reg. No. 33-41316).

  10.01      - Amended 1989 Long-Term Incentive Plan of Grant (filed as
               Exhibit 10.08 to Grant's 1994 Form 10-K; File No. 000-18816).

  10.02      - Employee Retirement Savings Plan of Grant (filed as Exhibit
               10.03 to Grant's Registration Statement on Form S-1; Reg. No.
               33-36291).

  10.03      - Stock Registration Rights Agreement, dated August 10, 1989
               (filed as Exhibit 10.16 to Grant's Registration Statement on
               Form S-1; Reg. No. 33-36291).

  10.04      - Management Incentive Plan (filed as Exhibit 10.27 to Grant's
               Registration Statement on Form S-1; Reg. No. 33-36291).

  10.05      - Loan and Security Agreement dated as of February 17, 1993, by
               and between Grant and Foothill Capital Corporation (filed as
               Exhibit 10.11 to Grant's 1992 Form 10-K; File No. 000-18816).

  10.06      - Amended and Restated Purchase and Sale Agreement dated July 6,
               1993, by and among Grant, Grant Geophysical, Inc., U.K. and
               Petroleum Geo-Services A/S (filed as Exhibit 2.1 to Grant's Form
               8-K dated July 20, 1993; File No. 000-18816).

  10.07      - Loan and Security Agreement dated as of April 26, 1993, by and
               between Grant and Foothill Capital Corporation (filed as Exhibit
               10.11 to Grant's 1993 Form 10K; File No. 000-18816).

  10.08      - Loan Agreement dated July 28, 1994, by and between Grant and
               Elliott Associates, L.P. (filed as Exhibit 10.08 to Grant's 1994
               Form 10-K; File No. 000-18816)

  10.09      - Loan and Security Agreement dated February 20, 1996 between
               Grant and its subordinated lender (filed as Exhibit 10.01 to
               Grant's 10-Q for the quarter ended March 31, 1996, File No.
               000-18816).

  10.10      - Second Amendment to Term Loan Agreement Dated February 20,
               1996 By and Between Grant and Its Subordinated Lender (filed as
               Exhibit 10.01 to Grant's Form 10-Q for the quarter ended
               September 30, 1996, File No. 000-18816).

  10.11*     - Final Financing Order dated February 4, 1997 By and Between
               Grant and Foothill Capital Corporation, including attachments
               thereto.

  10.12*     - Amended Final Financing Order dated April 9, 1997 By and
               Between Grant and Foothill Capital Corporation, including
               attachments thereto.

  10.13*     - Bankruptcy Voluntary Petition dated December 5, 1996 by Grant
               Geophysical, Inc.
</TABLE>


                                      E-1


<PAGE>   64
                           EXHIBIT INDEX (CONTINUED)


<TABLE>
<S>            <C>
  10.14*     - Employment Contract dated January 28, 1997 By and Between
               Grant and Larry E. Lenig, Jr.

  10.15*     - Letter of Intent dated March 14, 1997 By and Between Grant and
               Elliott Associates L.P.

  10.16*     - Sale of United Geophysical (Nigeria) Ltd. Proposal dated
               December 23, 1996 By and Between Grant and Orbier Ltd. or Its
               Assignee.

  10.17*     - Promissory Note of Grant dated October 31, 1996, payable to
               the order of Westgate International, L.P. in the original
               principal amount of $550,000.

  10.18*     - Promissory Note of Grant dated November 1, 1996, payable to
               the order of Elliott Associates, L.P. in the original principal
               amount of $325,000.

  10.19*     - Promissory Note of Grant dated November 5, 1996, payable to
               the order of Elliott Associates, L.P. in the original principal
               amount of $840,000.

  10.20*     - Promissory Note of Grant dated November 5, 1996, payable to
               the order of Westgate International, L.P. in the original
               principal amount of $560,000.

  10.21*     - Promissory Note of Grant Dated November 7, 1996, payable to
               the order of Elliott Associates, L.P. in the original principal
               amount of $489,000.

  10.22*     - Promissory Note of Grant dated November 8, 1996, payable to
               the order of Westgate International, L.P. in the original
               principal amount of $385,000.

  11.01*     - Computation of Income (Loss) Per Common and Common Equivalent
               Share.

  12.01*     - Computation of Ratios of Earnings to Fixed Charges and
               Preferred Dividends and Computation of Deficiency of Earnings
               Available to Cover Fixed Charges and Preferred Dividends.

  18.01      - Letter from independent certified public accountants regarding
               preferability of change in accounting principle (filed as
               Exhibit 18.01 to Grant's 10-Q for the quarter ended March 31,
               1991; File No. 000-18816).

  21.01*     - Subsidiaries of Grant.

  23.01*     - Consent of KPMG Peat Marwick, independent certified public
               accountant, to incorporation by reference of 1996 financial 
               statements contained in this Report on Form 10-K into the 
               Company's Registration Statement on Form S-8.

  27*        - Financial Data Schedule
</TABLE>

--------------
* Filed herewith


                                      E-2