<PAGE>   1

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

================================================================================

(Mark One)
(X)           QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                 FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 1999

( )           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                        COMMISSION FILE NUMBER 001-13490
         =================================================================


                            MITCHAM INDUSTRIES, INC.
                (Name of registrant as specified in its charter)


                  TEXAS                                  76-0210849
       (State or other jurisdiction of                (I.R.S. Employer
       incorporation or organization)                 Identification No.)

                             44000 HIGHWAY 75 SOUTH
                             HUNTSVILLE, TEXAS 77340
                    (Address of principal executive offices)

                                 (409) 291-2277
              (Registrant's telephone number, including area code)
         =================================================================


    Indicate by check mark whether the registrant (1) has filed all reports
required to be filed 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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 9,551,112 shares of Common
Stock, $0.01 par value, were outstanding as of December 6, 1999.


<PAGE>   2

                            MITCHAM INDUSTRIES, INC.
                                      INDEX


<TABLE>
<CAPTION>

                          PART I. FINANCIAL INFORMATION

Item 1.     Financial Statements
<S>                                                                                             <C>
                    Condensed Consolidated Balance Sheets....................................   3
                    Condensed Consolidated Statements of Operations..........................   4
                    Condensed Consolidated Statements of Cash Flows..........................   5
                    Notes to Condensed Consolidated Financial Statements.....................   6

Item 2.     Management's Discussion and Analysis of Financial Condition
            and Results of Operations........................................................   7

Item 3.     Quantitative and Qualitative Disclosures About Market Risk.......................  10

                           PART II. OTHER INFORMATION

Item 1.     Legal Proceedings................................................................  13

Item 6.     Exhibits and Reports on Form 8-K.................................................  13

            Signatures.......................................................................  14
</TABLE>




                                       2
<PAGE>   3




PART I.  FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS


                            MITCHAM INDUSTRIES, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>

                                                                               October 31,          January 31,
                                           ASSETS                                1999                  1999
                                                                              ------------         ------------
                                                                              (Unaudited)
CURRENT ASSETS:
<S>                                                                           <C>                  <C>
    Cash                                                                      $      1,966         $      2,525
    Marketable securities, at market                                                15,121               17,335
    Accounts receivable, net                                                         4,894                7,880
    Inventory                                                                        1,801                1,191
    Income tax receivable                                                            1,935                   --
    Deferred tax asset                                                                 483                  483
    Prepaid expenses and other current assets                                          294                   88
                                                                              ------------         ------------
       Total current assets                                                         26,494               29,502
    Seismic equipment lease pool, property and equipment                            69,182               65,116
    Accumulated depreciation of seismic equipment lease pool,
      property and equipment                                                       (36,465)             (31,472)
    Deferred tax asset                                                               3,382                4,028
                                                                              ------------         ------------
         Total assets                                                         $     62,593         $     67,174
                                                                              ============         ============

                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
    Accounts payable                                                          $        627         $        668
    Deferred revenue                                                                 1,120                  131
    Accrued liabilities and other current liabilities                                  262                  806
    Income taxes payable                                                                --                  817
                                                                              ------------         ------------
         Total current liabilities                                                   2,009                2,422

SHAREHOLDERS' EQUITY:
    Preferred stock, $1.00 par value; 1,000,000 shares authorized;
        none issued and outstanding                                                     --                   --
    Common stock, $0.01 par value; 20,000,000 shares authorized
        9,551,112 and 9,545,658 shares, respectively, issued and
        outstanding                                                                     95                   95
    Additional paid-in capital                                                      61,459               61,459
    Retained earnings (deficit)                                                       (159)               4,244
    Accumulated other comprehensive income                                            (811)              (1,046)
                                                                              ------------         ------------
         Total shareholders' equity                                                 60,584               64,752
                                                                              ------------         ------------
         Total liabilities and shareholders' equity                           $     62,593         $     67,174
                                                                              ============         ============
</TABLE>


         THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED
                       CONSOLIDATED FINANCIAL STATEMENTS.



                                        3


<PAGE>   4




                            MITCHAM INDUSTRIES, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                 (IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                  THREE MONTHS ENDED                NINE MONTHS ENDED
                                                                       OCTOBER 31,                     OCTOBER 31,
                                                            ------------------------------     ------------------------------
                                                                1999              1998            1999               1998
                                                            ------------      ------------     ------------      ------------
<S>                                                         <C>               <C>              <C>               <C>
REVENUES:
Short-term leasing                                          $      1,823      $      5,539     $      3,552      $     15,382
Leasing under lease/purchase agreements                                8             1,241              210             4,043
Equipment sales under lease/purchase agreements                       --               324               --             8,975
Other equipment sales                                                603             2,678              942             4,498
                                                            ------------      ------------     ------------      ------------
         Total revenues                                            2,434             9,782            4,704            32,898

COSTS AND EXPENSES:
Direct costs                                                         370               575              673             1,387
Cost of sales under lease/purchase agreements                          3               550               14             9,894
Cost of other equipment sales                                        445             2,340              555             3,527
General and administrative                                           845             1,619            2,795             3,950
Provision for doubtful accounts                                       50               203              175               811
Depreciation                                                       2,374             3,253            6,972             8,814
                                                            ------------      ------------     ------------      ------------
         Total costs and expenses                                  4,087             8,540           11,184            28,383
                                                            ------------      ------------     ------------      ------------

OPERATING INCOME (LOSS)                                           (1,653)            1,242           (6,480)            4,515

Other income - net                                                   168               263              478               894
                                                            ------------      ------------     ------------      ------------

INCOME (LOSS) BEFORE INCOME TAXES                                 (1,485)            1,505           (6,002)            5,409
PROVISION (BENEFIT) FOR INCOME TAXES                                (415)              517           (1,598)            1,890
                                                            ------------      ------------     ------------      ------------
NET INCOME (LOSS)                                           $     (1,070)     $        988     $     (4,404)     $      3,519
                                                            ============      ============     ============      ============

Earnings (loss) per common share
     Basic                                                  $      (0.11)     $        .10     $      (0.46)     $        .37
     Diluted                                                $      (0.11)     $        .10     $      (0.46)     $        .36
                                                            ============      ============     ============      ============

Shares used in computing earnings per common share
     Basic                                                     9,551,000         9,516,000        9,550,000         9,486,000
     Dilutive effect of common stock equivalents                      --            94,000               --           196,000
                                                            ------------      ------------     ------------      ------------
     Diluted                                                   9,551,000         9,610,000        9,550,000         9,682,000
                                                            ============      ============     ============      ============
</TABLE>


         THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED
                       CONSOLIDATED FINANCIAL STATEMENTS.




                                       4
<PAGE>   5






                            MITCHAM INDUSTRIES, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                                NINE MONTHS ENDED
                                                                                  OCTOBER 31,
                                                                         -----------------------------
                                                                            1999               1998
                                                                         ----------         ----------
<S>                                                                      <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)                                                        $   (4,404)        $    3,519
Adjustments to reconcile net income (loss) to net
     cash flows provided by operating activities:
         Depreciation                                                         6,972              8,814
         Provision for doubtful accounts, net of charge offs                   (465)               274
         Deferred income taxes                                                   --                108
         Inventory                                                              (26)            (1,072)
         Trade accounts receivable                                            3,451              1,904
         Federal income taxes                                                (2,107)              (477)
         Accounts payable                                                       (40)            (6,765)
         Other assets                                                          (206)               146
         Accrued and other liabilities                                          486             (4,838)
                                                                         ----------         ----------
              Net cash provided by operating activities                       3,661              1,613

CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchases of seismic equipment held for lease                           (6,823)           (30,176)
     Purchases of property and equipment                                       (188)              (334)
     Sale of marketable securities                                            2,214             13,976
     Disposal of lease pool equipment                                           577             11,593
     Disposal of property and equipment                                          --                 12
                                                                         ----------         ----------
         Net cash used in investing activities                               (4,220)            (4,929)

CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds from issuance of common stock upon exercise of
       warrants and options                                                      --                134
                                                                         ----------         ----------
         Net cash provided by financing activities                               --                134

NET DECREASE IN CASH                                                           (559)            (3,182)
CASH, BEGINNING OF PERIOD                                                     2,525              7,498
                                                                         ----------         ----------
CASH, END OF PERIOD                                                      $    1,966         $    4,316
                                                                         ==========         ==========

SUPPLEMENTAL CASH FLOW INFORMATION:
     Cash paid for:
         Interest                                                        $       28         $       28
         Income taxes                                                    $      500         $    2,050
                                                                         ==========         ==========
     Equipment purchases in accounts payable                             $       --         $    1,136
                                                                         ==========         ==========
</TABLE>


         THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED
                       CONSOLIDATED FINANCIAL STATEMENTS.




                                       5
<PAGE>   6

                            MITCHAM INDUSTRIES, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.       BASIS OF PRESENTATION

         The condensed consolidated financial statements of Mitcham Industries,
         Inc. ("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 generally
         accepted accounting principles 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 to Shareholders and the
         Annual Report on Form 10-K for the year ended January 31, 1999. 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, 1999; the results of operations for the
         three and nine months ended October 31, 1999 and 1998; and cash flows
         for the nine months ended October 31, 1999 and 1998 have been included.
         The foregoing interim results are not necessarily indicative of the
         results of the operations for the full fiscal year ending January 31,
         2000.

2.       COMMITMENTS AND CONTINGENCIES

         Supplier Agreements
         Effective June 30, 1998, the Company and Input/Output, Inc. ("I/O")
         entered into a new Preferred Supplier Agreement (the "I/O Agreement"),
         replacing the parties' Exclusive Lease Referral Agreement, under which
         the Company had completely fulfilled its obligation. Under the I/O
         Agreement, the Company agreed to purchase a minimum of between $90 and
         $100 million of I/O products (after discounts) in stated increments
         over a five-year term. In addition, I/O agreed to refer rental
         inquiries from customers worldwide to the Company during the term of
         the agreement, and to not lease products covered by the I/O Agreement,
         except in limited circumstances. In a related transaction, I/O sold to
         the Company for $15 million a substantial portion of its subsidiary's
         equipment lease pool, some of which was subject to existing short-term
         lease agreements.

         On April 26, 1999, the Company and I/O agreed to terminate the I/O
         Agreement, thereby releasing the Company from its obligation to make
         future minimum purchases. As a result of the termination, I/O is no
         longer obligated to refer rental inquiries to the Company and is free
         to enter the short-term leasing business.

         Legal Proceedings
         On or about April 23, 1998, several class action lawsuits were filed
         against the Company and its chief executive officer and then chief
         financial officer in the U.S. District Court for the Southern District
         of Texas, Houston Division. The first-filed complaint, styled Stanley
         Moskowitz v. Mitcham Industries, Inc., Billy F. Mitcham, Jr. and
         Roberto Rios, alleged violations of Section 10(b), Rule 10b-5 and 20(a)
         of the Securities Exchange Act of 1934 and Sections 11 and 12(a)(2) of
         the Securities Act of 1933. On or about September 21, 1998, the
         complaints were consolidated into one action. On November 4, 1998, the
         plaintiffs filed a consolidated amended complaint ("CAC"), which seeks
         class action status on behalf of those who purchased the Company's
         common stock from June 4, 1997 through March 26, 1998, and damages in
         an unspecified amount plus costs and attorney's fees. The CAC alleges
         that the Company made materially false and misleading statements and
         omissions in public filings and announcements concerning its business
         and its allowance for doubtful accounts. On or about January 15, 1999,
         the Company filed a motion to dismiss the CAC. On September 29, 1999,
         the Court granted in part and denied in part the Company's motion to
         dismiss. The Court granted plaintiffs leave to amend on certain claims,
         and the Company awaits an amended complaint on those claims.



                                       6
<PAGE>   7

         The Company is also involved in claims and legal actions arising in the
         ordinary course of business. In the opinion of management, the ultimate
         disposition of these matters will not have a material adverse effect on
         the Company's financial position, results of operations or liquidity.


3.       RECLASSIFICATIONS

         Certain 1998 amounts have been reclassified to conform to 1999
         presentation.


4.       COMPREHENSIVE INCOME

         Comprehensive income includes the following (in thousands):


<TABLE>
<CAPTION>

                                                              THREE MONTHS ENDED                NINE MONTHS ENDED
                                                                 OCTOBER 31,                       OCTOBER 31,
                                                            1999             1998             1999             1998
                                                          --------         --------         --------         --------
<S>                                                         <C>                 <C>           <C>               <C>
Net income (loss)                                           (1,070)             988           (4,404)           3,519
Other comprehensive income:
   Foreign currency translation adjustment                     205             (465)             235             (415)
Total comprehensive income (loss)                             (865)             523           (4,169)           3,104
</TABLE>


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

OVERVIEW

         The Company's sales are directly related to the level of worldwide oil
and gas exploration activities and the profitability and cash flows of oil and
gas companies and seismic contractors, which in turn are affected by
expectations regarding the supply and demand for oil and natural gas, energy
prices and finding and development costs. The Company believes that during the
latter half of 1998, the exploration and production companies anticipated an
extended period of low oil and gas prices and began to reduce their intended
levels of expenditures for seismic data. Consolidation within the oil industry
has also delayed seismic data acquisition projects.

           The Company's financial results reflect continued low levels of
industry capital spending and resulting reduced demand for the Company's seismic
equipment. However, if the recent increase in commodity prices can be sustained,
it is expected that exploration budgets in 2000 will increase. Declines in oil
prices, or expectations that the recent improvement in oil prices will not hold,
could cause the Company's customers to further reduce their spending and further
adversely affect the Company's results of operations and financial condition.

         The Company leases and sells seismic data acquisition equipment
primarily to seismic data acquisition companies and oil and gas companies
conducting land and transition zone seismic surveys worldwide. The Company
provides short-term leasing of seismic equipment to meet a customer's
requirements and offers maintenance and support during the lease term. The
majority of leases at October 31, 1999 were for a term of one year or less.
Seismic equipment held for lease is carried at cost, net of accumulated
depreciation.

SEASONALITY

         Historically, seismic equipment leasing has been somewhat susceptible
to weather patterns in certain geographic regions. There is some seasonality to
the Company's expected lease revenues from customers operating in Canada, where
a significant percentage of seismic survey activity occurs in the winter months,
from October through March. During the months in which the weather is warmer,
certain areas are not accessible to trucks, earth vibrators and other equipment
because of the unstable terrain. This seasonal leasing activity by the Company's



                                       7
<PAGE>   8

Canadian customers has historically resulted in increased lease revenues in the
Company's first and fourth fiscal quarters. However, due to the continued
reduced demand for the Company's services both in Canada and worldwide, the
effect of the seasonal upturn will not be as significant as in prior years.

RESULTS OF OPERATIONS

For the three months ended October 31, 1999 and 1998

         For the quarter ended October 31, 1999, total revenues decreased 75% to
$2.4 million from $9.8 million in the corresponding period of the prior year.
This decline reflects a significant decrease in all categories of revenues
compared to total revenues for the same period of the prior year as a result of
decreased capital expenditure budgets throughout the oil and gas industry.
During the quarter, the Company recorded no revenues from the exercise of the
purchase option of lease/purchase contracts.

         Equipment sales and leasing revenues under lease/purchase agreements
during the quarter ended October 31, 1999 were not significant due to the severe
downturn in business activity. During the quarter ended October 31, 1999, other
equipment sales generated a gross margin of 26% as compared to 13% for the same
period in 1998. Gross margins on equipment sales may vary significantly between
periods due to the mix of new versus older equipment being sold.

         General and administrative expenses decreased $774,000 from the
corresponding prior year period primarily due to a decrease in accounting and
legal expenses, consulting fees, convention, travel and entertainment expenses
partially offset by an increase in insurance, compensation and investor
relations expenses.

         Depreciation expense for the quarter ended October 31, 1999 decreased
$879,000, or 27%, to $2.4 million from $3.3 million for the same period last
year. The decrease is primarily the result of the lease pool asset impairment
recorded in fiscal 1999.

         The Company recorded a net loss for the quarter ended October 31, 1999
in the amount of $1,070,000 compared to net income of $988,000 for the same
period of the previous year.

For the nine months ended October 31, 1999 and 1998

         For the nine months ended October 31, 1999, total revenues decreased
86% to $4.7 million from $32.9 million in the corresponding period of the prior
year. This decline reflects a significant decrease in all categories of revenues
compared to total revenues for the same period of the prior year, as a result of
decreased capital expenditure budgets throughout the oil and gas industry,
coupled with a decrease in customers exercising the purchase option of
lease/purchase contracts.

         Equipment sales and leasing revenues under lease/purchase agreements
during the nine months ended October 31, 1999 generated an aggregate gross
margin of 93% compared to 24% for the corresponding period of the prior year.
This increase in gross margin is because the Company had no equipment sales
under lease/purchase agreements during the nine months ended October 31, 1999 as
compared to $9.0 million in the same period of the prior year. The Company
accounts for the lease portion and the sales portion of lease/purchase
agreements separately, but believes the two aspects of the transaction must be
considered together to reflect its economic substance. Under the Company's
lease/purchase transactions, the lease generates a revenue stream before the
customer exercises its purchase option, a percentage of which the customer may
use to reduce the purchase price. Because the lease revenues that offset the
purchase price are not included in equipment sales under lease/purchase
agreements, management assesses the profitability of these transactions by
combining lease and sales revenues.

         During the nine months ended October 31, 1999, other equipment sales
generated a gross margin of 41% as compared to 22% for the same period in 1998.
Gross margins on equipment sales may vary significantly between periods due to
the mix of new versus older equipment being sold.



                                       8
<PAGE>   9

         General and administrative expenses decreased $1,155,000 from the
corresponding prior year period primarily due to a decrease in advertising,
convention, accounting and legal, compensation, travel and entertainment and
consulting expenses, partially offset by an increase in insurance and investor
relations expenses as well as expense related to a Texas sales tax audit.

         Depreciation expense for the nine months ended October 31, 1999
decreased $1.8 million, or 21%, to $7.0 million from $8.8 million for the same
period last year. The decrease is primarily the result of the $15.1 million
lease pool asset impairment charge recorded in fiscal 1999. The Company's
seismic equipment lease pool increased $1.0 million, on a cost basis, to $67.5
million at October 31, 1999, from $66.5 million at October 31, 1998.

         The Company recorded a net loss for the nine months ended October 31,
1999 in the amount of $4,404,000 compared to net income of $3,519,000 for the
same period of the previous year.

LIQUIDITY AND CAPITAL RESOURCES

         As of October 31, 1999, the Company had net working capital of
approximately $24.5 million as compared to net working capital of $27.1 million
at January 31, 1999. Historically, the Company's principal liquidity
requirements and uses of cash have been for capital expenditures and working
capital and our principal sources of cash have been cash flows from operations
and issuances of equity securities. Net cash provided by operating activities
for the nine months ended October 31, 1999 was $3.7 million, as compared to $1.6
million for the nine months ended October 31, 1998.

         At October 31, 1999, the Company had trade accounts receivable of $3.6
million that were more than 90 days past due. As of October 31, 1999, the
Company's allowance for doubtful accounts was approximately $1.2 million, which
management believes is sufficient to cover any losses in its trade accounts
receivable, including any losses in its international customers' trade accounts.

         On December 8, 1999 the Company's revolving line of credit expired. In
light of the fact that the Company's working capital balances significantly
exceed its expected needs for future capital expenditures, the Company did not
pursue negotiations to renew or extend the line of credit.

         Capital expenditures for the nine months ended October 31, 1999 totaled
approximately $7.0 million compared to capital expenditures of $30.5 million for
the corresponding period in the prior year. During the quarter ended October 31,
1999, the Company spent approximately $4.5 million to purchase additional lease
pool equipment as part of a two-year lease it secured during the second fiscal
quarter. Management believes that cash on hand and cash provided by future
operations will be sufficient to fund its anticipated capital and liquidity
needs over the next twelve months.

YEAR 2000 COMPLIANCE

         The Year 2000 problem is the result of computer programs being written
using two digits rather than four to define the applicable year. Any programs
that have time-sensitive software may recognize a date using "00" as the year
1900 rather than the year 2000. This could result in a major system failure or
miscalculations. As a result, many companies may be forced to upgrade or
completely replace existing hardware and software in order to be Year 2000
compliant.

State of Readiness
         During 1998, the Company began evaluating its internal operating
systems and software ("IT") and embedded manufacturing control technology
("Non-IT") in the equipment that it leases and sells. In its evaluation, vendors
of the software and hardware the Company uses in its business have represented
that such software and hardware are either Year 2000 compliant or compatible.
Further testing of the operating systems and software has proven them to all be
Year 2000 compliant. To assess risk associated with possible non-compliance of
customers' and equipment suppliers' failure to be Year 2000 compliant, the
Company prepared and mailed Year 2000 compliance questionnaires to its
significant customers and equipment suppliers. Completed questionnaires the



                                       9
<PAGE>   10

Company has received to date indicate there are no known Year 2000 compliance
issues that would negatively affect the Company's operations and business.

Costs to Address Year 2000 Issues
         The Company has utilized internal resources in assessing the Year 2000
issue and has not employed outside consultants to assist. There have been no
material expenditures related to identifying, assessing or remediating Year 2000
compliance issues, nor does the Company expect to incur any material
expenditures related to this issue. The Company has identified lease pool
equipment requiring approximately $15,000 of expenditures to become Year 2000
compatible.

Risks
         Though the Company has a number of suppliers, two suppliers provide the
vast majority of the Company's seismic equipment. In addition, the Company
derives a large percentage of its revenues from a relatively small number of
customers. Under a "most likely worst-case Year 2000 scenario," if one of the
Company's significant suppliers or customers experienced a material business
interruption or, if the Company lost a significant supplier or customer due to
Year 2000 non-compliance issues, it could have a material adverse impact on the
Company's operations, results of operations or financial position.

Contingency Plan
         The Company has not developed a contingency plan related to Year 2000
compliance since no significant issues have been specifically identified. If a
Year 2000 compliance issue arises, the Company will put forth its best efforts
to remedy the issue and minimize its impact.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Company operates internationally, giving rise to exposure to market
risks from changes in foreign exchange rates to the extent that transactions are
not denominated in U.S. dollars. The Company typically denominates the majority
of its lease and sales contracts in U.S. dollars to mitigate the exposure to
fluctuations in foreign currencies, but some of its transactions with Canadian
customers are denominated in Canadian dollars. The Company does not engage in
currency hedging activities.

FORWARD-LOOKING STATEMENTS AND RISK FACTORS

         Certain information contained in this Quarterly Report on Form 10-Q
(including statements contained in Part I, Item 2. "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and in Part II,
Item 1. "Legal Proceedings"), as well as other written and oral statements
made or incorporated by reference from time to time by the Company and its
representatives in other reports, filings with the Securities and Exchange
Commission, press releases, conferences, or otherwise, may be deemed to be
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934. This information includes, without limitation, statements
concerning the Company's future financial position and results of operations;
planned capital expenditures; business strategy and other plans for future
operations; the future mix of revenues and business; commitments and contingent
liabilities; Year 2000 issues; and future demand for the Company's services and
predicted improvement in energy industry and seismic service industry
conditions. Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to have been correct. When used in this report, the
words "anticipate," "believe," "estimate," "expect," "may," and similar
expressions, as they relate to the Company and its management, identify
forward-looking statements. The actual results of future events described in
such forward-looking statements could differ materially from the results
described in the forward-looking statements due to the risks and uncertainties
set forth below and within this Quarterly Report on Form 10-Q generally.

CONTINUING DOWNTURN OF OIL AND GAS INDUSTRY AND REDUCED DEMAND FOR SERVICES

         Demand for the Company's services depends on the level of spending by
oil and gas companies for exploration, production and development activities, as
well as on the number of crews conducting land and



                                       10
<PAGE>   11

transition zone seismic data acquisition worldwide, and especially in North
America. The continuing downturn in the energy services sector has resulted in a
sharp decline in demand for the Company's services. Recent increases in the
price of oil have not yet countered decreased demand. As such, the seismic
equipment sector may lag other sectors of the energy services industry in its
turnaround. Any future fluctuations in the price of oil and gas in response to
relatively minor changes in the supply and demand for oil and gas will continue
to have a major effect on exploration, production and development activities and
thus, on the demand for the Company's services.

LOSS OF SIGNIFICANT CUSTOMERS WILL ADVERSELY AFFECT THE COMPANY

         The Company typically leases and sells significant amounts of seismic
equipment to a relatively small number of customers, the composition of which
changes from year to year as leases are initiated and concluded and as
customers' equipment needs vary. Therefore, at any one time, a large portion of
the Company's revenues may be derived from a limited number of customers. In the
fiscal years ended January 31, 1997, 1998 and 1999, the single largest customer
accounted for approximately 15%, 20% and 36%, respectively, of the Company's
total revenues. Because the Company's customer base is relatively small, the
loss of one or more customers for any reason could adversely affect the
Company's results of operations.

SIGNIFICANT DEFAULTS OF PAST-DUE CUSTOMER ACCOUNTS WOULD ADVERSELY AFFECT THE
COMPANY'S RESULTS OF OPERATIONS

         The Company has over $3.6 million of past-due customer accounts
receivable with an allowance of $1.2 million to cover losses in those accounts.
Significant payment defaults by those customers would have a material adverse
effect on the Company's financial position and results of operations.

DEPENDENCE ON ADDITIONAL LEASE CONTRACTS

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

DEPENDENCE ON KEY PERSONNEL

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

TECHNOLOGICAL OBSOLESCENCE

         The Company has a substantial capital investment in seismic data
acquisition equipment. The development by manufacturers of seismic equipment of
newer technology systems or component parts that have significant competitive
advantages over seismic systems and component parts now in use could have an
adverse effect on the Company's ability to profitably lease and sell its
existing seismic equipment.

         During the fiscal year ended January 31, 1999, the Company recorded a
pretax asset impairment charge of $15.1 million. Included in this charge is a
$900,000 lower of cost or market adjustment related to certain seismic equipment
assets classified as inventory. The non-cash asset impairment charge was
recorded in accordance with



                                       11
<PAGE>   12

SFAS No. 121, which requires that long-lived assets and certain identifiable
intangibles held and used by the Company be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. The severity as well as the duration of the current oil
and gas industry downturn is such an event. The Company's review of its
long-lived assets indicated that the carrying value of certain of the Company's
seismic equipment lease pool and inventory assets was more than the estimated
undiscounted future net cash flows. As such, under SFAS No. 121, the Company
wrote down those assets to their estimated fair market value based on discounted
cash flows using an effective rate of 8.0%. Undiscounted future net cash flows
were calculated based on individual types of seismic equipment using projected
future utilization and lease rates over the estimated remaining useful lives of
the assets. The Company's seismic equipment assets have been historically
depreciated over 3-10 years. The impairment was recorded based on certain
estimates and projections as stipulated in SFAS No. 121. There can be no
assurance that the Company will not record asset impairment charges under SFAS
No. 121 in the future.

VULNERABILITY TO WEATHER CONDITIONS AND SEASONAL RESULTS

         The first and fourth quarters of the Company's fiscal year have
historically accounted for a greater portion of the Company's revenues than do
the second and third quarters of its fiscal year. This seasonality in revenues
is primarily due to the increased seismic survey activity in Canada from October
through March, which affects the Company due to its significant Canadian
operations. This seasonal pattern may cause the Company's results of operations
to vary significantly from quarter to quarter. However, due to the significant
decrease in world oil prices in 1998, demand for the Company's services both in
Canada and worldwide declined dramatically in the fourth quarter of fiscal 1999
and has remained at historically low levels throughout the third quarter of
fiscal 2000. Accordingly, period-to-period comparisons are not necessarily
meaningful and should not be relied on as indicative of future results.

DEPENDENCE ON KEY SUPPLIERS

         The Company has and continues to rely on purchase agreements with the
Sercel subsidiaries of Compagnie Generale de Geophysique and Pelton Company,
Inc. To a lesser extent, the Company also relies on its suppliers for lease
referrals. The termination of these agreements for any reason could materially
adversely affect the Company's business. While the Company does not anticipate
any difficulty in obtaining seismic equipment from its suppliers based on past
experience, any such occurrence could have a material adverse effect on the
Company's business, financial condition and results of operations.

COMPETITION

         Competition in the leasing of seismic equipment is fragmented, and the
Company is aware of several companies that engage in seismic equipment leasing.
The Company believes that its competitors, in general, do not have as extensive
a seismic equipment lease pool as does the Company. The Company also believes
that its competitors do not have similar exclusive lease referral agreements
with suppliers. Competition exists to a lesser extent from seismic data
acquisition contractors that may lease equipment that is temporarily idle.

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

VOLATILE STOCK PRICES AND NO PAYMENT OF DIVIDENDS

         Due to current energy industry conditions, energy and energy service
company stock prices, including the Company's stock price, have been extremely
volatile. Such stock price volatility could adversely affect the Company's
business operations by, among other things, impeding its ability to attract and
retain qualified personnel and to obtain additional financing if such financing
is ever needed. The Company has historically not paid



                                       12
<PAGE>   13

dividends on its common stock and does not anticipate paying dividends in the
foreseeable future.

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

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

LIMITATION ON DIRECTORS' LIABILITY

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


                           PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         On or about April 23, 1998, several class action lawsuits were filed
against the Company and its chief executive officer and then chief financial
officer in the U.S. District Court for the Southern District of Texas, Houston
Division. The first-filed complaint, styled Stanley Moskowitz V. Mitcham
Industries, Inc., Billy F. Mitcham, Jr. and Roberto Rios, alleged violations of
Section 10(b), Rule 10b-5 and 20(a) of the Securities Exchange Act of 1934 and
Sections 11 and 12(a)(2) of the Securities Act of 1933. On or about September
21, 1998, the complaints were consolidated into one action. On November 4, 1998,
the plaintiffs filed a consolidated amended complaint ("CAC"), which seeks class
action status on behalf of those who purchased the Company's common stock from
June 4, 1997 through March 26, 1998, and damages in an unspecified amount plus
costs and attorney's fees. The CAC alleges that the Company made materially
false and misleading statements and omissions in public filings and
announcements concerning its business and its allowance for doubtful accounts.
On or about January 15, 1999, the Company filed a motion to dismiss the CAC. On
September 29, 1999, the Court granted in part and denied in part the Company's
motion to dismiss. The Court granted plaintiffs leave to amend on certain
claims, and the Company awaits an amended complaint on those claims

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

    (a) REPORTS ON FORM 8-K
        None.

    (b) EXHIBITS

        11   -  Statement Re Computation of Earnings Per Share
        27   -  Financial Data Schedule



                                       13
<PAGE>   14




                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                   MITCHAM INDUSTRIES, INC.




Date:  December 8, 1999            /s/ P. BLAKE DUPUIS
                                  ----------------------------------------------
                                   P. BLAKE DUPUIS,
                                   CHIEF FINANCIAL OFFICER
                                   (AUTHORIZED OFFICER AND PRINCIPAL
                                   ACCOUNTING OFFICER)






                                       14





<PAGE>   15
                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>

EXHIBIT
NO.                DESCRIPTION
-------            -----------

<S>       <C>      <C>
11        -        Statement Re Computation of Earnings Per Share

27        -        Financial Data Schedule
</TABLE>