##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 
 (Mark One)þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended October 31, 2005o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 Commission file number 000-25142
 
 MITCHAM INDUSTRIES, INC.
  Texas
    
    76-0210849(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 8141 SH 75 South
P.O. Box 1175
Huntsville, Texas 77342
 (936) 291-2277
 
 þ o
 o þ
 o þ
 9,259,376 December 7, 2005




---



##### 



MITCHAM INDUSTRIES, INC.
INDEX
 PART I. FINANCIAL INFORMATIONItem 1.
    
    Financial StatementsCondensed Consolidated Balance Sheets
    
    
    3Condensed Consolidated Statements of Operations
    
    
    4Condensed Consolidated Statements of Cash Flows
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    11Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    16Item 4.
    
    Controls and Procedures
    
    
    16PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    17Item 6.
    
    Exhibits
    
    
    17Signatures
    
    
    18Certification of Billy F. Mitcham, Jr.Certification of Michael A. PughCertification of Billy F. Mitcham, Jr.Certification of Michael A. Pugh
  2




---



##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 
 MITCHAM INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands except share data)
 January 31,
    
    
    October 31,2005
    
    
    2005(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    13,138
    
    
    $
    15,196Accounts receivable, net of allowance for
doubtful accounts of $723 and $1,210
    
    
    6,021
    
    
    
    7,099Current portion of notes receivable, net of
allowance for doubtful
notes of $286 and $198
    
    
    1,192
    
    
    
    584Inventories
    
    
    
    
    
    
    1,679Prepaid expenses and other current assets
    
    
    705
    
    
    
    530Current assets of discontinued operations
    
    
    393
    
    
    
    388Total current assets
    
    
    21,449
    
    
    
    25,476Seismic equipment lease pool, property and equipment
    
    
    74,792
    
    
    
    77,338Accumulated depreciation of seismic equipment lease
pool, property and equipment
    
    
    (55,067
    )
    
    
    (59,961
    )Goodwill
    
    
    
    
    
    
    5,324Long-term assets of discontinued operations
    
    
    216
    
    
    
    Other assets
    
    
    5
    
    
    
    15Total assets
    
    $
    41,395
    
    
    $
    48,192LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    4,893
    
    
    $
    1,272Current maturities  long-term debt
    
    
    918
    
    
    
    Deferred revenue
    
    
    652
    
    
    
    644Income taxes payable
    
    
    284
    
    
    
    151Wages payable
    
    
    299
    
    
    
    163Accrued expenses and other current liabilities
    
    
    458
    
    
    
    1,391Current liabilities of discontinued operations
    
    
    14
    
    
    
    5Total current liabilities
    
    
    7,518
    
    
    
    3,626Long-term debt
    
    
    
    
    
    
    3,000Total liabilities
    
    
    7,518
    
    
    
    6,626Commitments and contingenciesShareholders equity:Preferred stock, $1.00 par value; 1,000,000
shares authorized; none issued and outstanding
    
    
    
    
    
    
    Common stock, $.01 par value; 20,000,000 shares
authorized; 9,893,732 and 10,112,062 shares
issued, respectively
    
    
    99
    
    
    
    101Additional paid-in capital
    
    
    62,702
    
    
    
    63,582Treasury stock, at cost (915,000 shares)
    
    
    (4,686
    )
    
    
    (4,686
    )Deferred compensation
    
    
    (94
    )
    
    
    (12
    )Accumulated deficit
    
    
    (26,282
    )
    
    
    (20,048
    )Accumulated other comprehensive income
    
    
    2,138
    
    
    
    2,629Total shareholders equity
    
    
    33,877
    
    
    
    41,566Total liabilities and shareholders equity
    
    $
    41,395
    
    
    $
    48,192
 3




---



##### Table of Contents



MITCHAM INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)
 Three Months Ended
    
    
    Nine Months EndedOctober 31,
    
    
    October 31,2004
    
    
    2005
    
    
    2004
    
    
    2005Revenues:Equipment leasing
    
    $
    3,948
    
    
    $
    6,676
    
    
    $
    12,727
    
    
    $
    17,668Equipment sales
    
    
    790
    
    
    
    3,139
    
    
    
    6,610
    
    
    
    6,787Total revenues
    
    
    4,738
    
    
    
    9,815
    
    
    
    19,337
    
    
    
    24,455Costs and expenses:Direct costs  seismic leasing
    
    
    450
    
    
    
    968
    
    
    
    1,350
    
    
    
    2,174Cost of equipment sales
    
    
    557
    
    
    
    1,308
    
    
    
    3,371
    
    
    
    3,072General and administrative
    
    
    1,471
    
    
    
    2,381
    
    
    
    5,419
    
    
    
    6,488Provision for doubtful accounts
    
    
    122
    
    
    
    82
    
    
    
    122
    
    
    
    161Depreciation and amortization
    
    
    2,700
    
    
    
    2,253
    
    
    
    8,113
    
    
    
    6,585Total costs and expenses
    
    
    5,300
    
    
    
    6,992
    
    
    
    18,375
    
    
    
    18,480Operating income (loss)
    
    
    (562
    )
    
    
    2,823
    
    
    
    962
    
    
    
    5,975Other income (expense)  net
    
    
    46
    
    
    
    123
    
    
    
    80
    
    
    
    349Interest expense
    
    
    (43
    )
    
    
    (39
    )
    
    
    (156
    )
    
    
    (68
    )Income (loss) from continuing operations before
income taxes
    
    
    (559
    )
    
    
    2,907
    
    
    
    886
    
    
    
    6,256Provision for income taxes
    
    
    264
    
    
    
    57
    
    
    
    264
    
    
    
    25Income (loss) from continuing operations
    
    
    (823
    )
    
    
    2,850
    
    
    
    622
    
    
    
    6,231Income from discontinued operations, net of income
taxes of $0
    
    
    
    
    
    
    
    
    
    
    80
    
    
    
    Net income (loss)
    
    $
    (823
    )
    
    $
    2,850
    
    
    $
    702
    
    
    $
    6,231Income (loss) per common share from continuing
operationsBasic
    
    $
    (0.09
    )
    
    $
    0.31
    
    
    $
    0.07
    
    
    $
    0.69Diluted
    
    $
    (0.09
    )
    
    $
    0.29
    
    
    $
    0.07
    
    
    $
    0.64Income per common share from discontinued operationsBasic
    
    $
    
    
    
    $
    
    
    
    $
    0.01
    
    
    $
    Diluted
    
    $
    
    
    
    $
    
    
    
    $
    0.01
    
    
    $
    Net income (loss) per common shareBasic
    
    $
    (0.09
    )
    
    $
    0.31
    
    
    $
    0.08
    
    
    $
    0.69Diluted
    
    $
    (0.09
    )
    
    $
    0.29
    
    
    $
    0.08
    
    
    $
    0.64Shares used in computing net income per common
share:Basic
    
    
    8,880,000
    
    
    
    9,152,000
    
    
    
    8,824,000
    
    
    
    9,061,000Dilutive effect of common stock equivalents
    
    
    
    
    
    
    750,000
    
    
    
    411,000
    
    
    
    684,000Diluted
    
    
    8,880,000
    
    
    
    9,902,000
    
    
    
    9,235,000
    
    
    
    9,745,000
 4




---



##### Table of Contents



MITCHAM INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Nine Months EndedOctober 31,2004
    
    
    2005Cash flows from operating activities:Income from continuing operations
    
    $
    622
    
    
    $
    6,231Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    8,113
    
    
    
    6,585Stock-based compensation
    
    
    
    
    
    
    82Provision for doubtful accounts, net of charge offs
    
    
    148
    
    
    
    162Net book value of seismic equipment sold
    
    
    1,770
    
    
    
    109Changes in:Trade accounts receivable
    
    
    358
    
    
    
    (58
    )Inventories
    
    
    
    
    
    
    (792
    )Prepaid expenses and other assets
    
    
    
    
    
    
    367Income taxes payable
    
    
    
    
    
    
    (133
    )Accounts payable, accrued expenses and other
current liabilities
    
    
    (639
    )
    
    
    (4,494
    )Net cash provided by operating activities
    
    
    10,372
    
    
    
    8,059Cash flows from investing activities:Purchases of seismic equipment held for lease
    
    
    (1,687
    )
    
    
    (3,274
    )Purchases of property and equipment
    
    
    (284
    )
    
    
    (374
    )Acquisition of Seamap, net of cash acquired
    
    
    
    
    
    
    (2,473
    )Seamap acquisition costs
    
    
    
    
    
    
    (56
    )Net cash used in investing activities
    
    
    (1,971
    )
    
    
    (6,177
    )Cash flows from financing activities:Proceeds from issuance of common stock upon exercise of options
    
    
    703
    
    
    
    882Payments on borrowings
    
    
    (2,940
    )
    
    
    (918
    )Net cash used in financing activities
    
    
    (2,237
    )
    
    
    (36
    )Net increase in cash and cash equivalents-continuing operations
    
    
    6,164
    
    
    
    1,846Net increase (decrease) in cash and cash equivalents-discontinued
operations
    
    
    (69
    )
    
    
    212Cash and cash equivalents, beginning of period
    
    
    6,834
    
    
    
    13,138Cash and cash equivalents, end of period
    
    $
    12,929
    
    
    $
    15,196Supplemental cash flow information:Interest paid
    
    $
    156
    
    
    $
    70Seismic equipment acquired in exchange for cancellation
of accounts receivable
    
    $
    685
    
    
    $
    Noncash transactions:Seamap shareholder notes payable
    
    $
    
    
    
    $
    3,000
 5




---



##### Table of Contents



MITCHAM INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 1.
    
    Basis of PresentationThe condensed consolidated financial statements of Mitcham Industries, Inc. (Mitcham or
the Company) have been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that the disclosures
are adequate to make the information presented not misleading. These condensed consolidated
financial statements should be read in conjunction with the financial statements and the
notes thereto included in the Companys latest Annual Report on Form 10-K for the year ended
January 31, 2005. In the opinion of the Company, all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the financial position as of October 31,
2005; the results of operations for the three and nine months ended October 31, 2005 and
2004; and the cash flows for the nine months ended October 31, 2005 and 2004, have been
included. The foregoing interim results are not necessarily indicative of the results of the
operations to be expected for the full fiscal year ending January 31, 2006.Certain 2004 amounts have been reclassified to conform to the 2005 presentation. Such
reclassifications had no effect on net income or loss.2.
    
    OrganizationMitcham Industries, Inc., a Texas corporation, was incorporated in 1987. The Company and
Mitcham Canada Ltd., its wholly owned Canadian subsidiary, provide full-service equipment
leasing, sales and service to the seismic industry worldwide, primarily in North and South
America. The Company, through its wholly owned Australian subsidiary, Seismic Asia Pacific
Pty Ltd. (SAP), provides seismic, oceanographic and hydrographic leasing and sales
worldwide, primarily in Asia and Australia. The Company, through its wholly owned
subsidiary, Seamap International Holdings Pte, Ltd., (Seamap), designs, develops and
markets a broad range of proprietary products for the seismic, hydrographic and offshore
industries with product sales and support facilities based in Huntsville, Texas, Singapore
and the United Kingdom. Through its wholly owned U.S. subsidiary, Drilling Services, Inc.
(DSI), the Company provided seismic survey program design, quality control, permit
acquisition, geographical surveying and shot hole drilling, all commonly referred to as
front-end services. In August 2003, the Company sold the operating assets of DSI. The
operating results and assets and liabilities of DSI are classified as discontinued
operations and all prior period statements have been reclassified accordingly. See Note 9.
All intercompany transactions and balances have been eliminated in consolidation.3.
    
    AcquisitionsOn July 12, 2005, the Company acquired 100% of the stock of Seamap. Seamap is engaged in the
manufacture and sale of state-of-the-art seismic and offshore telemetry systems. As a
result of this acquisition, Seamaps proprietary products will expand Mitchams market and
diversify its customer base and will be a complement to Mitchams growing marine rental and
sales business. Mitcham will have a broader range of product offerings and the addition of
strategic facilities in support of Mitchams expanding global operations. The consolidated
financial statements for and as of the nine-month period ended October 31, 2005 include the
assets and liabilities and the operating results for the period from acquisition date
through October 31, 2005. Pursuant to Statement of Financial Accounting Standard (SFAS)
No. 141, Business Combinations, Mitcham applied purchase accounting to the transaction,
resulting in the initial recognition of additional property and equipment of $150,000.
Mitcham recognized goodwill of approximately $5.3 million from the transaction. None of the
goodwill recognized is deductible for tax purposes. The allocation of the purchase price may
change as time progresses and more information is obtained about the assets acquired.
 6




---



##### Table of Contents



The purchase included all the net assets of Seamap, which are located in Huntsville, Texas,
Singapore and in the United Kingdom. Seamap was purchased for a total of $6.5 million,
consisting of $3.5 million paid in cash at closing and $3.0 million issued in promissory
notes payable to the former shareholders of Seamap (see Note 5). The terms of the purchase
and sale agreement provide for two additional earn-out payments of $1.0 million if Seamap
achieves certain annual revenue thresholds of $8.0 million and $10.0 million over a
five-year period ending April 30, 2010. Mitcham believes that the purchase price of Seamap
will be economically recovered from future cash flow of Seamap.The following is a summary of the preliminary allocations of the aggregate purchase price to
the estimated fair values of the assets acquired and liabilities assumed at the respective
date of acquisition (in thousands):
 Current assets
    
    $
    2,635Equipment
    
    
    150Current liabilities
    
    
    (1,579
    )Goodwill
    
    
    5,324Acquisition costs
    
    
    59Total purchase price
    
    $
    6,589
 At the time of the acquisition, Seamap had approximately $150,000 of fixed assets. These
assets consisted primarily of vehicles, computer and workshop equipment and will remain in
use in the same manner as prior to the acquisition.Pro Forma Results of OperationsThe following pro forma results of operations for the three and nine months ended October
31, 2005 and the three and nine months ended October 31, 2004 assumes the acquisition
occurred on February 1, 2004, and reflects the full results of operations for the
three-month and nine-month periods presented. The pro forma results have been prepared for
comparative purposes only and do not purport to indicate the results of operations which
would actually have occurred had the combinations been in effect on the dates indicated, or
which may occur in the future.
 Three Months Ended October 31,
    
    
    Nine Months Ended October 31,2004
    
    
    2005
    
    
    2004
    
    
    2005(in thousands except per share amounts)Revenues
    
    $
    6,483
    
    
    $
    9,815
    
    
    $
    24,220
    
    
    $
    29,494Income from
continuing
operations
    
    $
    54
    
    
    $
    2,850
    
    
    $
    2,471
    
    
    $
    7,015Net Income
    
    $
    54
    
    
    $
    2,850
    
    
    $
    2,551
    
    
    $
    7,015Earnings per share:Basic
    
    $
    0.01
    
    
    $
    0.31
    
    
    $
    0.29
    
    
    $
    0.77Diluted
    
    $
    0.01
    
    
    $
    0.29
    
    
    $
    0.28
    
    
    $
    0.72
 4.
    
    InventoriesInventories are stated at the lower of cost (first-in, first-out) or market. Inventories
consist of the following (in thousands):
 October 31,2004
    
    
    2005Raw materials
    
    $
    
    
    
    $
    698Finished goods
    
    
    
    
    
    
    981Total inventories
    
    $
    
    
    
    $
    1,679
 7




---



##### Table of Contents



5.
    
    DebtOn March 30, 2004, we obtained a $4.0 million revolving loan agreement and credit line with
First Victoria National Bank. The line provided us with funds to purchase equipment and was
secured by the equipment purchased and any leases on that equipment. Interest was payable
monthly at prime plus 1/2%. Principal was due on each note 25% after six months, 25% after
nine months and the remaining 50% after a year from the date of each note. The revolving
loan and credit line expired on June 30, 2005.On June 27, 2005, we obtained a $12.5 million revolving loan agreement and credit line with
First Victoria National Bank. This line replaced and increased the expiring credit line of
$4.0 million with First Victoria National Bank. The new facility has a two-year term and
bears interest at the prime rate. The credit line allows us to borrow funds to purchase
equipment and is secured by the equipment purchased and any leases on that equipment.
Interest on any outstanding principle balance is payable monthly, while the principal is due
at the end of the two-year term. The revolving loan agreement also contains certain
financial covenants that require, among other things, that we maintain a debt to
shareholders equity ratio of a maximum of 1.3 to 1.0, maintain a current assets to current
liabilities ratio of a minimum of 1.25 to 1.0, and not incur or maintain any indebtedness or
obligations or guarantee the debts or obligations of others in a total aggregate amount
which exceeds $1.0 million without the prior written approval of First Victoria National
Bank, except for indebtedness incurred as a result of the Seamap acquisition and other
specific exceptions. We have not borrowed any funds available under this credit line.In connection with the Seamap acquisition, the Company issued $3.0 million in promissory
notes payable to the shareholders of Seamap. The notes are three-year, 5% notes with no
principal or interest due in the first 12 months. Interest on the full amount of the
principal is due on the first anniversary of the notes in the amount of $150,000. No
further interest or principal payments are due until the second anniversary of the notes.
At that time, interest on the full amount of the notes and 50% or $1.5 million of the
principal amount of $3.0 million is due. On the third anniversary of the notes, interest on
the unpaid principal and the remainder of the principal is due. The terms of the purchase
and sale agreement provide for additional earn-out payments of $1.0 million, each subject to
Seamap achieving certain annual revenue thresholds of $8.0 million and $10.0 million over a
five-year period.6.
    
    Comprehensive IncomeSFAS No. 130, Reporting Comprehensive Income,establishes standards for the reporting and
display of comprehensive income and its components in a full set of general-purpose
financial statements. Comprehensive income generally represents all changes in
shareholders equity (deficit) during the period, except those resulting from investments
by, or distributions to, shareholders. The Company has comprehensive income related to
changes in foreign currency to U.S. dollar exchange rates, which is recorded as follows (in
thousands):
 Three Months Ended October 31,
    
    
    Nine Months Ended October 31,2004
    
    
    2005
    
    
    2004
    
    
    2005Net income (loss)
    
    $
    (823
    )
    
    $
    2,850
    
    
    $
    702
    
    
    $
    6,231Change in foreign
currency
translation
adjustment
    
    
    776
    
    
    
    418
    
    
    
    585
    
    
    
    491Comprehensive
income (loss)
    
    $
    (47
    )
    
    $
    3,268
    
    
    $
    1,287
    
    
    $
    6,722
 7.
    
    Earnings Per ShareFor the three and nine months ended October 31, 2004 and 2005, the following table sets
forth the number of dilutive shares that may be issued pursuant to stock options currently
outstanding, which number was used in the per share calculations.
 Three Months Ended October 31,
    
    
    Nine Months Ended October 31,2004
    
    
    2005
    
    
    2004
    
    
    2005Stock options
    
    
    
    
    
    
    737,000
    
    
    
    411,000
    
    
    
    673,000Warrants
    
    
    
    
    
    
    13,000
    
    
    
    
    
    
    
    11,000
    
    
    
    750,000
    
    
    
    411,000
    
    
    
    684,000
 8




---



##### Table of Contents



8.
    
    Stock OptionsThe Company accounts for its stock-based compensation plans under Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees. The pro forma information
below is based on provisions of SFAS No. 123, Accounting for Stock-Based Compensation, as
amended by SFAS 148, Accounting for Stock-Based Compensation-Transition and Disclosure,
issued in December 2002 (in thousands except per share amounts).
 Three Months Ended October 31,
    
    
    Nine Months Ended October 31,2004
    
    
    2005
    
    
    2004
    
    
    2005Pro forma impact of fair value method
(FAS 148)Reported income (loss) from
continuing operations
    
    $
    (823
    )
    
    $
    2,850
    
    
    $
    622
    
    
    $
    6,231Less: fair value impact of employee
stock compensation
    
    
    (110
    )
    
    
    (346
    )
    
    
    (248
    )
    
    
    (830
    )Pro forma income (loss) from
continuing operations
    
    $
    (933
    )
    
    $
    2,504
    
    
    $
    374
    
    
    $
    5,401Reported net income (loss)
    
    $
    (823
    )
    
    $
    2,850
    
    
    $
    702
    
    
    $
    6,231Less: fair value impact of employee
stock compensation
    
    
    (110
    )
    
    
    (346
    )
    
    
    (248
    )
    
    
    (830
    )Pro forma net income (loss)
    
    $
    (933
    )
    
    $
    2,504
    
    
    $
    454
    
    
    $
    5,401Income per common shareReported continuing operations income
(loss) per share:Basic
    
    $
    (0.09
    )
    
    $
    0.31
    
    
    $
    0.07
    
    
    $
    0.69Diluted
    
    $
    (0.09
    )
    
    $
    0.29
    
    
    $
    0.07
    
    
    $
    0.64Pro forma continuing operations
income (loss) per share:Basic
    
    $
    (0.11
    )
    
    $
    0.27
    
    
    $
    0.04
    
    
    $
    0.60Diluted
    
    $
    (0.11
    )
    
    $
    0.25
    
    
    $
    0.04
    
    
    $
    0.55Reported net income (loss) per share:Basic
    
    $
    (0.09
    )
    
    $
    0.31
    
    
    $
    0.08
    
    
    $
    0.69Diluted
    
    $
    (0.09
    )
    
    $
    0.29
    
    
    $
    0.08
    
    
    $
    0.64Pro forma net income (loss) per share:Basic
    
    $
    (0.11
    )
    
    $
    0.27
    
    
    $
    0.05
    
    
    $
    0.60Diluted
    
    $
    (0.11
    )
    
    $
    0.25
    
    
    $
    0.05
    
    
    $
    0.55Weighted average Black-Scholes fair
value assumptionsRisk free interest rate
    
    
    3-5
    %
    
    
    3-5
    %
    
    
    3-5
    %
    
    
    3-5
    %Expected life
    
    
    3-8 yrs.
    
    
    
    8 yrs.
    
    
    
    3-8 yrs.
    
    
    
    8 yrs.Expected volatility
    
    
    65-68
    %
    
    
    63-69
    %
    
    
    65-68
    %
    
    
    63-69
    %Expected dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
 9.
    
    Discontinued OperationsOn August 1, 2003, the Company sold the operating assets of DSI, which comprised all of the
operating assets of the Companys front-end services segment. The Companys decision to
sell DSI resulted from the over-capacity in that market segment. Proceeds from the sale
were $250,000 cash and an $800,000 note receivable due over three years. Additionally, the
buyer assumed $143,000 of capitalized lease obligations.
 9




---



##### Table of Contents



Effective with the October 31, 2003 financial statements, the operating results of DSI are
presented as discontinued operations and all prior period statements have been reclassified
accordingly. A summary of DSIs revenues and pretax income (loss) is reflected as follows
(in thousands):
 Three Months Ended October 31,
    
    
    Nine Months Ended October 31,2004
    
    
    2005
    
    
    2004
    
    
    2005Revenues
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Pretax income (loss)
    
    $
    
    
    
    $
    
    
    
    $
    80
    
    
    $
    
 A summary of DSIs assets and liabilities is reflected as follows (in thousands):
 January 31,
    
    
    October 31,2005
    
    
    2005Accounts and notes receivable of discontinued
operations
    
    $
    498
    
    
    $
    376Other current assets of discontinued operations
    
    $
    111
    
    
    $
    12Accounts payable and accrued liabilities of
discontinued operations
    
    $
    14
    
    
    $
    5
 10.
    
    Segment ReportingThe Seamap Segment designs, develops and markets a broad range of proprietary products for
the seismic, hydrographic and offshore industries with product sales and support facilities
based in Huntsville, Texas, Singapore and the United Kingdom. Seamaps primary products
include a next generation marine seismic source synchronizer and hydrophone acquisition
system, a passive acoustic tracking system for cetacean monitoring and acoustic energy
assessment, seabed recording instrumentation utilized in electromagnetic sounding technology
for oil and gas exploration, and a ruggedized real-time GPS tracking system.The Mitcham Segment offers for lease or sale, new and experienced seismic equipment to the
oil and gas industry, seismic contractors, environmental agencies, government agencies and
universities. Mitcham is headquartered in Huntsville, Texas, with sales and services offices
in Calgary, Canada, Brisbane, Australia and associates throughout Europe, South America and
Asia.Financial information by business segment is set forth below net of any allocations (in
thousands):
 Three Months Ended October 31, 2005
    
    
    Nine Months Ended October 31, 2005Seamap
    
    
    Mitcham
    
    
    Total
    
    
    Seamap
    
    
    Mitcham
    
    
    TotalRevenues
    
    $
    1,656
    
    
    $
    8,159
    
    
    $
    9,815
    
    
    $
    2,129
    
    
    $
    22,326
    
    
    $
    24,455Net Income
    
    $
    49
    
    
    $
    2,801
    
    
    $
    2,850
    
    
    $
    108
    
    
    $
    6,123
    
    
    $
    6,231October 31, 2005Total Assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    8,304
    
    
    $
    39,888
    
    
    $
    48,192
 10




---



##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
      Results of Operations
 For the three months ended October 31, 2005 and 2004
  11




---



##### Table of Contents



Revenues
   Costs and Expenses
  .
   12




---



##### Table of Contents



Results of Operations
 For the nine months ended October 31, 2005 and 2004
 Revenues
    Costs and Expenses
     Liquidity and Capital Resources
    13




---



##### Table of Contents



14




---



##### Table of Contents



New Russian Operation
  Critical Accounting Policies and Estimates
   Revenue Recognition
 Leases
  Equipment Sales
  Allowance for Doubtful Accounts
  Long-Lived Assets
  Income Taxes
  15




---



##### Table of Contents



Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4.
    
    Controls and Procedures
  Forward-Looking Statements and Risk Factors
  16




---



##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
  
 Item 6.
    
    Exhibits
      17




---



##### Table of Contents



SIGNATURES
  MITCHAM INDUSTRIES, INC.Date:  December 13, 2005
    /s/ Michael A. PughMichael A. PughExecutive Vice President-Finance and Chief Financial
Officer

(Authorized Officer and Principal Accounting Officer) 18




---



##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    
    
    Description31.1
    
    -
    
    Certification of Billy F. Mitcham, Jr., Chief Executive Officer, pursuant to Rule
13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.31.2
    
    -
    
    Certification of Michael A. Pugh, Executive Vice President-Finance and Chief
Financial Officer, pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange
Act, as amended.32.1
    
    -
    
    Certification of Billy F. Mitcham, Jr., Chief Executive Officer, under Section 906 of
the Sarbanes-Oxley Act of 2002, U.S.C. 1350.32.2
    
    -
    
    Certification of Michael A. Pugh, Executive Vice President-Finance and Chief
Financial Officer, under Section 906 of the Sarbanes-Oxley Act of 2002, U.S.C. 1350.