##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
 For the quarterly period ended October 31, 2007
 or
 o
    
    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: 000-25142
 MITCHAM INDUSTRIES, INC.
  Texas
(State or other jurisdiction of 
incorporation or organization)
    
    76-0210849
(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
 o þ




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##### 



MITCHAM INDUSTRIES, INC.
Table of Contents
 PART I. FINANCIAL INFORMATIONItem 1.
    
    Financial StatementsCondensed Consolidated Balance Sheets as of October 31, 2007 and January 31, 2007
    
    
    1Condensed Consolidated Statements of Operations for the Three and Nine Months Ended October 31, 2007 and 2006
    
    
    2Condensed Consolidated Statements of Cash Flows for the Nine Months Ended October 31, 2007 and 2006
    
    
    3Notes to Condensed Consolidated Financial Statements
    
    
    4Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    10Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    18Item 4.
    
    Controls and Procedures
    
    
    18PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    19Item 1A.
    
    Risk Factors
    
    
    19Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    19Item 3.
    
    Defaults Upon Senior Securities
    
    
    19Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    19Item 5.
    
    Other Information
    
    
    19Item 6.
    
    Exhibits
    
    
    19Signatures
    
    
    21Certification of CEO Pursuant to Rule 13a-14(a) and Rule 15d-14(a)Certification of CFO Pursuant to Rule 13a-14(a) and Rule 15d-14(a)Certification of CEO & CFO Pursuant to Section 1350
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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 MITCHAM INDUSTRIES, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (in thousands, except per share data)
 October 31,
    
    
    January 31,2007
    
    
    2007(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    16,305
    
    
    $
    12,582Accounts receivable, net
    
    
    14,186
    
    
    
    11,823Current portion of notes receivable, net
    
    
    1,547
    
    
    
    1,787Inventories
    
    
    6,157
    
    
    
    7,308Deferred tax asset
    
    
    944
    
    
    
    483Prepaid expenses and other current assets
    
    
    1,482
    
    
    
    2,003Total current assets
    
    
    40,621
    
    
    
    35,986Seismic equipment lease pool and property and equipment, net
    
    
    43,450
    
    
    
    35,432Goodwill
    
    
    4,358
    
    
    
    3,358Intangible assets, net
    
    
    1,784
    
    
    
    2,127Deferred tax asset
    
    
    
    
    
    
    5,094Long-term portion of notes receivable and other assets
    
    
    21
    
    
    
    1,305Total assets
    
    $
    90,234
    
    
    $
    83,302LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    8,462
    
    
    $
    16,343Current maturities  long-term debt
    
    
    1,500
    
    
    
    1,500Income taxes payable
    
    
    362
    
    
    
    328Deferred revenue
    
    
    1,594
    
    
    
    948Accrued expenses and other current liabilities
    
    
    4,327
    
    
    
    3,177Total current liabilities
    
    
    16,245
    
    
    
    22,296Non-current deferred tax liability
    
    
    728
    
    
    
    Non-current income taxes payable
    
    
    804
    
    
    
    Long-term debt
    
    
    
    
    
    
    1,500Total liabilities
    
    
    17,777
    
    
    
    23,796Shareholders equity:Preferred stock, $1.00 par value; 1,000 shares
authorized; none issued and outstanding
    
    
    
    
    
    
    Common stock $.01 par value; 20,000 shares authorized;
10,702 and 10,601 shares issued at October 31 and
January 31, 2007, respectively
    
    
    107
    
    
    
    106Additional paid-in capital
    
    
    70,596
    
    
    
    67,385Treasury stock, at cost; 921 and 919 shares at October 31
and January 31, 2007, respectively
    
    
    (4,805
    )
    
    
    (4,781
    )Accumulated deficit
    
    
    (2,685
    )
    
    
    (6,142
    )Accumulated other comprehensive income
    
    
    9,244
    
    
    
    2,938Total shareholders equity
    
    
    72,457
    
    
    
    59,506Total liabilities and shareholders equity
    
    $
    90,234
    
    
    $
    83,302
 The accompanying notes are an integral part of these condensed consolidated financial statements.
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MITCHAM INDUSTRIES, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (in thousands, except per share data)
(unaudited)
 For the Three Months
    
    
    For the Nine MonthsEnded
    
    
    EndedOctober 31,
    
    
    October 31,2007
    
    
    2006
    
    
    2007
    
    
    2006Revenues:Equipment leasing
    
    $
    8,402
    
    
    $
    6,161
    
    
    $
    24,732
    
    
    $
    18,141Lease pool equipment sales
    
    
    1,661
    
    
    
    842
    
    
    
    3,153
    
    
    
    3,991Seamap equipment sales
    
    
    5,144
    
    
    
    2,601
    
    
    
    20,807
    
    
    
    8,593Other equipment sales
    
    
    1,998
    
    
    
    3,137
    
    
    
    6,926
    
    
    
    7,090Total revenues
    
    
    17,205
    
    
    
    12,741
    
    
    
    55,618
    
    
    
    37,815Cost of sales:Direct costs  equipment leasing
    
    
    475
    
    
    
    433
    
    
    
    1,296
    
    
    
    1,809Direct costs  lease pool depreciation
    
    
    2,567
    
    
    
    1,956
    
    
    
    7,413
    
    
    
    5,507Cost of equipment sales
    
    
    4,887
    
    
    
    4,442
    
    
    
    20,956
    
    
    
    12,160Total cost of sales
    
    
    7,929
    
    
    
    6,831
    
    
    
    29,665
    
    
    
    19,476Gross profit
    
    
    9,276
    
    
    
    5,910
    
    
    
    25,953
    
    
    
    18,339Operating expenses:General and administrative
    
    
    5,045
    
    
    
    3,330
    
    
    
    12,685
    
    
    
    10,693Depreciation and amortization
    
    
    389
    
    
    
    337
    
    
    
    1,110
    
    
    
    944Total operating expenses
    
    
    5,434
    
    
    
    3,667
    
    
    
    13,795
    
    
    
    11,637Operating income
    
    
    3,842
    
    
    
    2,243
    
    
    
    12,158
    
    
    
    6,702Other income (expense)Interest, net
    
    
    178
    
    
    
    284
    
    
    
    319
    
    
    
    617Other, net
    
    
    (6
    )
    
    
    12
    
    
    
    (3
    )
    
    
    47Total other income
    
    
    172
    
    
    
    296
    
    
    
    316
    
    
    
    664Income before income taxes
    
    
    4,014
    
    
    
    2,539
    
    
    
    12,474
    
    
    
    7,366(Provision for) benefit from income taxes
    
    
    (1,583
    )
    
    
    1,324
    
    
    
    (4,382
    )
    
    
    1,189Net income
    
    $
    2,431
    
    
    $
    3,863
    
    
    $
    8,092
    
    
    $
    8,555Net income per common share:Basic
    
    $
    0.25
    
    
    $
    0.40
    
    
    $
    0.84
    
    
    $
    0.89Diluted
    
    $
    0.24
    
    
    $
    0.38
    
    
    $
    0.79
    
    
    $
    0.84Shares used in computing net income
per common share:Basic
    
    
    9,733
    
    
    
    9,609
    
    
    
    9,682
    
    
    
    9,584Diluted
    
    
    10,333
    
    
    
    10,069
    
    
    
    10,257
    
    
    
    10,157
 The accompanying notes are an integral part of these condensed consolidated financial statements.
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MITCHAM INDUSTRIES, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in thousands)
(unaudited)
 For the Nine Months EndedOctober 31,2007
    
    
    2006Cash flows from operating activities:Net income
    
    $
    8,092
    
    
    $
    8,555Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    8,523
    
    
    
    6,451Stock-based compensation
    
    
    1,628
    
    
    
    1,197Provision for doubtful accounts
    
    
    165
    
    
    
    Provision for inventory obsolescence
    
    
    316
    
    
    
    9Gross profit from sale of lease pool equipment
    
    
    (2,193
    )
    
    
    (2,115
    )Excess tax benefit from exercise of non-qualified stock options
    
    
    (1,219
    )
    
    
    (497
    )Deferred tax provision (benefit)
    
    
    1,981
    
    
    
    (2,009
    )Changes in:Accounts receivable
    
    
    (1,429
    )
    
    
    (4,727
    )Notes receivable
    
    
    1,535
    
    
    
    (154
    )Inventories
    
    
    1,317
    
    
    
    (4,734
    )Income taxes payable
    
    
    1,252
    
    
    
    730Accounts payable, accrued expenses, other current liabilities
and deferred revenue
    
    
    (430
    )
    
    
    4,562Prepaid expenses and other current assets
    
    
    850
    
    
    
    (745
    )Net cash provided by operating activities
    
    
    20,388
    
    
    
    6,523Cash flows from investing activities:Purchases of seismic equipment held for lease
    
    
    (19,199
    )
    
    
    (10,177
    )Sales and maturities of short-term investments
    
    
    
    
    
    
    2,550Purchases of property and equipment
    
    
    (434
    )
    
    
    (1,585
    )Additional payments related to subsidiary acquisition
    
    
    (1,000
    )
    
    
    (1,000
    )Sale of used lease pool equipment
    
    
    3,153
    
    
    
    3,991Net cash used in investing activities
    
    
    (17,480
    )
    
    
    (6,221
    )Cash flows from financing activities:Proceeds from borrowings
    
    
    4,500
    
    
    
    Payments on borrowings
    
    
    (6,000
    )
    
    
    Proceeds from issuance of common stock upon exercise of warrants
and stock options, net of stock surrendered
    
    
    341
    
    
    
    783Excess tax benefit from exercise of non-qualified stock options
    
    
    1,219
    
    
    
    497Net cash provided by financing activities
    
    
    60
    
    
    
    1,280Effect of changes in foreign exchange rates on cash and cash equivalents
    
    
    755
    
    
    
    165Net increase in cash and cash equivalents
    
    
    3,723
    
    
    
    1,747Cash and cash equivalents, beginning of period
    
    
    12,582
    
    
    
    16,438Cash and cash equivalents, end of period
    
    $
    16,305
    
    
    $
    18,185Supplemental cash flow information:Interest paid
    
    $
    248
    
    
    $
    154Income taxes paid
    
    $
    811
    
    
    $
    139Purchases of seismic equipment held for lease in accounts payable
at end of period
    
    $
    6,485
    
    
    
    
 The accompanying notes are an integral part of these condensed consolidated financial statements.
 3




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##### Table of Contents



Mitcham Industries, Inc.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands, except per share amounts)
(unaudited)
 1. Basis of Presentation
   2. Organization
  3. New Accounting Pronouncements
 Accounting for Uncertainty in Income Taxes Accounting for Income Taxes
 Income Taxes
 Fair Value Measurements
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The Fair Value Option for Financial Assets and
Financial Liabilities
 3. Balance Sheet
 October31,
    
    
    January 31,2007
    
    
    2007Accounts receivable:Accounts receivable
    
    $
    15,402
    
    
    $
    13,035Allowance for doubtful accounts
    
    
    (1,216
    )
    
    
    (1,212
    )Total accounts receivable, net
    
    $
    14,186
    
    
    $
    11,823Notes receivable:Notes receivable
    
    $
    1,561
    
    
    $
    3,077Allowance for doubtful accounts
    
    
    
    
    
    
    1,561
    
    
    
    3,077Less current portion of notes receivable
    
    
    (1,547
    )
    
    
    (1,787
    )Long-term portion of notes receivable
    
    $
    14
    
    
    $
    1,290Inventories:Raw materials
    
    $
    3,432
    
    
    $
    3,996Finished goods
    
    
    748
    
    
    
    2,023Work in progress
    
    
    2,774
    
    
    
    1,6866,954
    
    
    
    7,705Less allowance for obsolescence
    
    
    (797
    )
    
    
    (397
    )Total inventories, net
    
    $
    6,157
    
    
    $
    7,308Seismic equipment lease pool and property and
equipment:Seismic equipment lease pool
    
    $
    107,480
    
    
    $
    88,301Land and buildings
    
    
    366
    
    
    
    366Furniture and fixtures
    
    
    4,972
    
    
    
    4,347Autos and trucks
    
    
    541
    
    
    
    382113,359
    
    
    
    93,396Accumulated depreciation and amortization
    
    
    (69,909
    )
    
    
    (57,964
    )Total seismic equipment lease pool and
property and equipment, net
    
    $
    43,450
    
    
    $
    35,432
 5




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##### Table of Contents



4. Goodwill and Other Intangible Assets
 Weighted
    
    
    October 31, 2007
    
    
    January 31, 2007Average
    
    
    Gross
    
    
    
    
    
    
    Net
    
    
    Gross
    
    
    
    
    
    
    NetLife at
    
    
    Carrying
    
    
    Accumulated
    
    
    Carrying
    
    
    Carrying
    
    
    Accumulated
    
    
    Carrying10/31/07
    
    
    Amount
    
    
    Amortization
    
    
    Amount
    
    
    Amount
    
    
    Amortization
    
    
    AmountGoodwill
    
    
    
    
    
    $
    4,358
    
    
    
    
    
    
    $
    4,358
    
    
    $
    3,358
    
    
    
    
    
    
    $
    3,358Proprietary rights
    
    
    12.7
    
    
    $
    1,850
    
    
    $
    (288
    )
    
    $
    1,562
    
    
    $
    1,850
    
    
    $
    (195
    )
    
    $
    1,655Covenants
not-to-compete
    
    
    0.7
    
    
    
    1,000
    
    
    
    (778
    )
    
    
    222
    
    
    
    1,000
    
    
    
    (528
    )
    
    
    472Amortizable intangible assets
    
    
    
    
    
    $
    2,850
    
    
    $
    (1,066
    )
    
    $
    1,784
    
    
    $
    2,850
    
    
    $
    (723
    )
    
    $
    2,127
   For fiscal year ended January 31,:2008
    
    $
    1142009
    
    
    2622010
    
    
    1232011
    
    
    1232012 and thereafter
    
    
    1,162Total
    
    $
    1,784
 5. Long-Term Debt and Notes Payable
   6




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6. Shareholders Equity
  7. Comprehensive Income
  Three Months Ended
    
    
    Nine Months EndedOctober 31,
    
    
    October 31,2007
    
    
    2006
    
    
    2007
    
    
    2006Net income
    
    $
    2,431
    
    
    $
    3,863
    
    
    $
    8,092
    
    
    $
    8,555Gain from foreign
currency
translation
adjustment
    
    
    2,752
    
    
    
    350
    
    
    
    6,306
    
    
    
    718Comprehensive income
    
    $
    5,183
    
    
    $
    4,213
    
    
    $
    14,398
    
    
    $
    9,273
 8. Income Taxes
      9. Earnings per Share
  7




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Three Months Ended
    
    Nine Months EndedOctober 31,
    
    October 31,2007
    
    2006
    
    2007
    
    2006Basic weighted average common shares outstanding
    
    
    9,733
    
    
    
    9,609
    
    
    
    9,682
    
    
    
    9,584Stock options
    
    
    575
    
    
    
    431
    
    
    
    543
    
    
    
    545Unvested restricted stock
    
    
    25
    
    
    
    15
    
    
    
    22
    
    
    
    12Warrants
    
    
    
    
    
    
    14
    
    
    
    10
    
    
    
    16Total weighted average common share equivalents
    
    
    600
    
    
    
    460
    
    
    
    575
    
    
    
    573Diluted weighted average common shares
outstanding
    
    
    10,333
    
    
    
    10,069
    
    
    
    10,257
    
    
    
    10,157
 10. Stock-Based Compensation
  11. Segment Reporting
 Disclosures about
Segments of an Enterprise and Related Information.
    As of October 31, 2007Fixed assets,
    
    
    Intangiblenet
    
    
    assets, net
    
    
    GoodwillEquipment Leasing
    
    $
    42,818
    
    
    $
    
    
    
    $
    Seamap
    
    
    1,187
    
    
    
    1,784
    
    
    
    4,358Eliminations
    
    
    (555
    )
    
    
    
    
    
    
    Consolidated
    
    $
    43,450
    
    
    $
    1,784
    
    
    $
    4,358
 8




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##### Table of Contents



Revenues
    
    
    Operating income (loss)
    
    
    Income (loss) before taxes2007
    
    
    2006
    
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Equipment Leasing
    
    $
    12,061
    
    
    $
    10,140
    
    
    $
    3,590
    
    
    $
    2,932
    
    
    $
    3,816
    
    
    $
    3,261Seamap
    
    
    5,313
    
    
    
    2,741
    
    
    
    471
    
    
    
    (521
    )
    
    
    426
    
    
    
    (554
    )Eliminations
    
    
    (169
    )
    
    
    (140
    )
    
    
    (219
    )
    
    
    (168
    )
    
    
    (228
    )
    
    
    (168
    )Consolidated
    
    $
    17,205
    
    
    $
    12,741
    
    
    $
    3,842
    
    
    $
    2,243
    
    
    $
    4,014
    
    
    $
    2,539
  Revenues
    
    
    Operating income (loss)
    
    
    Income (loss) before taxes2007
    
    
    2006
    
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Equipment Leasing
    
    $
    34,811
    
    
    $
    29,222
    
    
    $
    10,726
    
    
    $
    8,079
    
    
    $
    11,234
    
    
    $
    8,767Seamap
    
    
    21,431
    
    
    
    8,816
    
    
    
    1,484
    
    
    
    (1,154
    )
    
    
    1,301
    
    
    
    (1,178
    )Eliminations
    
    
    (624
    )
    
    
    (223
    )
    
    
    (52
    )
    
    
    (223
    )
    
    
    (61
    )
    
    
    (223
    )Consolidated
    
    $
    55,618
    
    
    $
    37,815
    
    
    $
    12,158
    
    
    $
    6,702
    
    
    $
    12,474
    
    
    $
    7,366
  9




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Cautionary Statement about Forward-Looking Statements
  
    
    our future financial position and results of operations;
    
    planned capital expenditures;
    
    our business strategy and other plans for future operations;
    
    the future mix of revenues and business;
    
    future demand for our services; and
    
    general conditions in the energy industry and seismic service industry.
  Overview
    For the Three Months Ended
    
    
    For the Nine Months EndedOctober 31,
    
    
    October 31,2007
    
    
    2006
    
    
    2007
    
    
    2006(in thousands)
    
    
    (in thousands)Revenues:Equipment Leasing
    
    $
    12,061
    
    
    $
    10,140
    
    
    $
    34,811
    
    
    $
    29,222Seamap
    
    
    5,313
    
    
    
    2,741
    
    
    
    21,431
    
    
    
    8,816Inter-segment sales
    
    
    (169
    )
    
    
    (140
    )
    
    
    (624
    )
    
    
    (223
    )Total revenues
    
    
    17,205
    
    
    
    12,741
    
    
    
    55,618
    
    
    
    37,815Cost of sales:Equipment Leasing
    
    
    4,655
    
    
    
    4,628
    
    
    
    14,914
    
    
    
    13,858Seamap
    
    
    3,215
    
    
    
    2,175
    
    
    
    15,314
    
    
    
    5,618Inter-segment costs
    
    
    59
    
    
    
    28
    
    
    
    (563
    )
    
    
    Total cost of sales
    
    
    7,929
    
    
    
    6,831
    
    
    
    29,665
    
    
    
    19,476Gross profit
    
    
    9,276
    
    
    
    5,910
    
    
    
    25,953
    
    
    
    18,339Operating expenses:General and administrative
    
    
    5,045
    
    
    
    3,330
    
    
    
    12,685
    
    
    
    10,693Depreciation and amortization
    
    
    389
    
    
    
    337
    
    
    
    1,110
    
    
    
    944Total operating expenses
    
    
    5,434
    
    
    
    3,667
    
    
    
    13,795
    
    
    
    11,637
 10




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##### Table of Contents



For the Three Months Ended
    
    
    For the Nine Months EndedOctober 31,
    
    
    October 31,2007
    
    
    2006
    
    
    2007
    
    
    2006(in thousands)
    
    
    (in thousands)Operating income
    
    $
    3,842
    
    
    $
    2,243
    
    
    $
    12,158
    
    
    $
    6,702EBITDA(1)
    
    $
    6,792
    
    
    $
    4,548
    
    
    $
    20,678
    
    
    $
    13,200Adjusted EBITDA(1)
    
    $
    7,435
    
    
    $
    4,952
    
    
    $
    22,306
    
    
    $
    14,397Reconciliation of Net Income
to EBITDA and Adjusted EBITDANet income
    
    $
    2,431
    
    
    $
    3,863
    
    
    $
    8,092
    
    
    $
    8,555Interest income, net
    
    
    (178
    )
    
    
    (284
    )
    
    
    (319
    )
    
    
    (617
    )Depreciation and amortization
    
    
    2,956
    
    
    
    2,293
    
    
    
    8,523
    
    
    
    6,451Provision for (benefit from)
income taxes
    
    
    1,583
    
    
    
    (1,324
    )
    
    
    4,382
    
    
    
    (1,189
    )EBITDA (1)
    
    
    6,792
    
    
    
    4,548
    
    
    
    20,678
    
    
    
    13,200Stock-based compensation
    
    
    643
    
    
    
    404
    
    
    
    1,628
    
    
    
    1,197Adjusted EBITDA (1)
    
    $
    7,435
    
    
    $
    4,952
    
    
    $
    22,306
    
    
    $
    14,397
 
 (1)
    
    EBITDA is defined as earnings (loss) before (a) interest income, net of interest
expense, (b) provision for (or benefit from) income taxes and (c) depreciation and
amortization. Adjusted EBITDA excludes stock-based compensation. We consider EBITDA and
Adjusted EBITDA to be important indicators for the performance of our business, but not
measures of performance calculated in accordance with accounting principles generally accepted
in the United States of America (GAAP). We have included these non-GAAP financial measures
because they provide management with important information for assessing our performance and
as indicators of our ability to make capital expenditures and finance working capital
requirements. EBITDA and Adjusted EBITDA are not measures of financial performance under GAAP
and should not be considered in isolation or as alternatives to cash flow from operating
activities or as alternatives to net income as indicators of operating performance or any
other measures of performance derived in accordance with GAAP. Other companies in our industry
may calculate EBITDA or Adjusted EBITDA differently than we do, and EBITDA and Adjusted EBITDA
may not be comparable with similarly titled measures reported by other companies.     11




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##### Table of Contents



Results of Operations
  Revenues and Direct Costs
 Equipment Leasing
  Three Months Ended
    
    
    Nine Months EndedOctober 31,
    
    
    October 31,2007
    
    
    2006
    
    
    2007
    
    
    2006(in thousands)
    
    
    (in thousands)Equipment leasing
    
    $
    8,402
    
    
    $
    6,161
    
    
    $
    24,732
    
    
    $
    18,141Lease pool equipment sales
    
    
    1,661
    
    
    
    842
    
    
    
    3,153
    
    
    
    3,991New seismic equipment sales
    
    
    760
    
    
    
    2,570
    
    
    
    4,207
    
    
    
    4,284SAP equipment sales
    
    
    1,238
    
    
    
    567
    
    
    
    2,719
    
    
    
    2,806$
    12,061
    
    
    $
    10,140
    
    
    $
    34,811
    
    
    $
    29,222
  12




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##### Table of Contents



13




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##### Table of Contents



Seamap
   Operating Costs
  Interest and Other Income, net
  Provision for Income Taxes
 Accounting for Uncertainty in Income Taxes
 14




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##### Table of Contents



Liquidity and Capital Resources
        15




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##### Table of Contents



Critical Accounting Policies
   Revenue Recognition
 Leases
  Equipment Sales
  Allowance for Doubtful Accounts
  Long-Lived Assets
    16




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##### Table of Contents



Accounting for
the Impairment or Disposal of Long-Lived Assets
 Income Taxes
  Accounting for Income Taxes
 
    
    taxable income projections in future years;
    
    whether the carryforward period is so brief that it would limit realization of tax
benefits;
    
    future sales and operating cost projections that will produce more than enough taxable
income to realize the deferred tax asset based on existing sales prices and cost
structures; and
    
    our earnings history exclusive of the loss that created the future deductible amount
coupled with evidence indicating that the loss is an aberration rather than a continuing
condition.
  
    
    the current level of worldwide oil and gas exploration activities resulting from
historically high prices for oil and natural gas;
    
    increasing world demand for oil;
    
    our recent history of profitable operations in various jurisdictions;
    
    our anticipated positive income in various jurisdictions; and
    
    our existing customer relationships.
  
    
    the risk of the world oil supply increasing, thereby depressing the price of oil and
natural gas;
    
    the risk of decreased global demand for oil; and
    
    the potential for increased competition in the seismic equipment leasing and sales
business.
   17




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##### Table of Contents



Stock-Based Compensation
 Share-Based Payment
 New Accounting Pronouncements
 Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities
 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Market Risk
  Foreign Currency Risk
   
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  18




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##### Table of Contents



Changes in Internal Control over Financial Reporting
  
 PART II
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    (a)
    
    (b)
    
    (c)
    
    (d)Total number of
    
    Maximumshares
    
    number ofpurchased as
    
    shares that mayTotal
    
    Average
    
    part of publicly
    
    yet benumber of
    
    price
    
    announced
    
    purchasedshares
    
    paid per
    
    plans or
    
    under the plansPeriod
    
    purchased
    
    share
    
    programs
    
    or programsAugust 1  31, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    September 1  30, 2007
    
    
    1,677
    
    
    $
    13.87
    
    
    
    
    
    
    
    October 1  31, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    1,677
    
    
    $
    13.87
    
    
    
    
    
    
    
    
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
 Exhibits
  19




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##### Table of Contents



SEC File orExhibit
    
    
    
    
    
    Registration
    
    ExhibitNumber
    
    Document Description
    
    Report or Registration Statement
    
    Number
    
    Reference3.1
    
    Amended and
Restated Articles
of Incorporation of
Mitcham Industries,
Inc.
    
    Incorporated by reference to
Mitcham Industries, Inc.s
Registration Statement on Form
S-8, filed with the SEC on
August 9, 2001.
    
    333-67208
    
    
    3.13.2
    
    Second Amended and
Restated Bylaws of
Mitcham Industries,
Inc.
    
    Incorporated by reference to
Mitcham Industries, Inc.s
Annual Report on Form 10-K for
the fiscal year ended January
31, 2004, filed with the SEC on
May 28, 2004.
    
    000-25142
    
    
    3.210.1
    
    Form of Performance
Award for the
Mitcham Industries,
Inc. Stock Awards
Plan
    
    Incorporated by reference to
Mitcham Industries, Inc.s
Current Report of Form 8-K
filed on October 24, 2007.
    
    000-25142
    
    
    10.110.2
    
    Form of Phantom
Share Agreement for
the Mitcham
Industries, Inc.
Stock Awards Plan
    
    Incorporated by reference to
Mitcham Industries, Inc.s
Current Report of Form 8-K
filed on October 24, 2007.
    
    000-25142
    
    
    10.231.1
    
    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 amended31.2
    
    Certification of
Robert P. Capps,
Chief Financial
Officer, pursuant
to Rule 13a-14(a)
and Rule 15d-14(a)
of the Securities
Exchange Act, as
amended32.1
    
    Certification of
Billy F. Mitcham,
Jr., Chief
Executive Officer,
and Robert P.
Capps, Chief
Financial Officer,
under Section 906
of the Sarbanes
Oxley Act of 2002,
18 U.S.C. § 1350
 20




---



##### Table of Contents



SIGNATURES
  MITCHAM INDUSTRIES, INC.Date:  December 4, 2007
    /s/ Robert P. CappsRobert P. CappsExecutive Vice President-Finance and Chief Financial Officer


(Duly Authorized Officer and Chief Accounting Officer) 21




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##### Table of Contents



SEC File orExhibit
    
    
    
    
    
    Registration
    
    ExhibitNumber
    
    Document Description
    
    Report or Registration Statement
    
    Number
    
    Reference3.1
    
    Amended and
Restated Articles
of Incorporation of
Mitcham Industries,
Inc.
    
    Incorporated by reference to
Mitcham Industries, Inc.s
Registration Statement on Form
S-8, filed with the SEC on
August 9, 2001.
    
    333-67208
    
    
    3.13.2
    
    Second Amended and
Restated Bylaws of
Mitcham Industries,
Inc.
    
    Incorporated by reference to
Mitcham Industries, Inc.s
Annual Report on Form 10-K for
the fiscal year ended January
31, 2004, filed with the SEC on
May 28, 2004.
    
    000-25142
    
    
    3.210.1
    
    Form of Performance
Award for the
Mitcham Industries,
Inc. Stock Awards
Plan
    
    Incorporated by reference to
Mitcham Industries, Inc.s
Current Report of Form 8-K
filed on October 24, 2007.
    
    000-25142
    
    
    10.110.2
    
    Form of Phantom
Share Agreement for
the Mitcham
Industries, Inc.
Stock Awards Plan
    
    Incorporated by reference to
Mitcham Industries, Inc.s
Current Report of Form 8-K
filed on October 24, 2007.
    
    000-25142
    
    
    10.231.1
    
    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 amended31.2
    
    Certification of
Robert P. Capps,
Chief Financial
Officer, pursuant
to Rule 13a-14(a)
and Rule 15d-14(a)
of the Securities
Exchange Act, as
amended32.1
    
    Certification of
Billy F. Mitcham,
Jr., Chief
Executive Officer,
and Robert P.
Capps, Chief
Financial Officer,
under Section 906
of the Sarbanes
Oxley Act of 2002,
18 U.S.C. § 1350