##### 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 July 31, 2005
 o
    
    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
(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 þ




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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
    
    
    10Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    16Item 4.
    
    Controls and Procedures
    
    
    16PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    17Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    17Item 6.
    
    Exhibits
    
    
    17Signatures
    
    
    18Certification of CEO Pursuant to Rule 13a-14(a)Certification of EVP & CFO Pursuant to Rule 13a-14(a)Certification of CEO Pursuant to Section 906Certification of EVP & CFO Pursuant to Section 906
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PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 MITCHAM INDUSTRIES, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands except share data)
 January 31,
    
    
    July 31,2005
    
    
    2005(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    13,138
    
    
    $
    13,807Accounts receivable, net of allowance for
doubtful accounts of $723 and $988
    
    
    6,021
    
    
    
    4,841Current portion of notes receivable, net of
allowance for doubtful
notes of $286 and $338
    
    
    1,192
    
    
    
    844Inventories
    
    
    
    
    
    
    1,155Prepaid expenses and other current assets
    
    
    705
    
    
    
    535Current assets of discontinued operations
    
    
    393
    
    
    
    315Total current assets
    
    
    21,449
    
    
    
    21,497Seismic equipment lease pool, property and equipment
    
    
    74,792
    
    
    
    74,780Accumulated depreciation of seismic equipment lease
pool, property and equipment
    
    
    (55,067
    )
    
    
    (57,116
    )Goodwill
    
    
    
    
    
    
    5,304Long-term assets of discontinued operations
    
    
    216
    
    
    
    73Other assets
    
    
    5
    
    
    
    19Total assets
    
    $
    41,395
    
    
    $
    44,557LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    4,893
    
    
    $
    1,692Current maturities  long-term debt
    
    
    918
    
    
    
    Deferred revenue
    
    
    652
    
    
    
    293Income taxes payable
    
    
    284
    
    
    
    215Wages payable
    
    
    299
    
    
    
    693Accrued expenses and other current liabilities
    
    
    458
    
    
    
    980Current liabilities of discontinued operations
    
    
    14
    
    
    
    14Total current liabilities
    
    
    7,518
    
    
    
    3,887Long-term debt
    
    
    
    
    
    
    3,000Total liabilities
    
    
    7,518
    
    
    
    6,887Commitments 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 10,000,432 shares
issued, respectively
    
    
    99
    
    
    
    100Additional paid-in capital
    
    
    62,702
    
    
    
    62,975Treasury stock, at cost (915,000 shares)
    
    
    (4,686
    )
    
    
    (4,686
    )Deferred compensation
    
    
    (94
    )
    
    
    (29
    )Accumulated deficit
    
    
    (26,282
    )
    
    
    (22,901
    )Accumulated other comprehensive income
    
    
    2,138
    
    
    
    2,211Total shareholders equity
    
    
    33,877
    
    
    
    37,670Total liabilities and shareholders equity
    
    $
    41,395
    
    
    $
    44,557
 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 share and per share data)
(Unaudited)
 Three Months Ended
    
    
    Six Months EndedJuly 31,
    
    
    July 31,2004
    
    
    2005
    
    
    2004
    
    
    2005Revenues:Equipment leasing
    
    $
    3,378
    
    
    $
    4,796
    
    
    $
    8,779
    
    
    $
    10,992Equipment sales
    
    
    3,015
    
    
    
    2,206
    
    
    
    5,820
    
    
    
    3,648Total revenues
    
    
    6,393
    
    
    
    7,002
    
    
    
    14,599
    
    
    
    14,640Costs and expenses:Direct costs  seismic leasing
    
    
    211
    
    
    
    609
    
    
    
    900
    
    
    
    1,206Cost of equipment sales
    
    
    1,263
    
    
    
    1,072
    
    
    
    2,814
    
    
    
    1,764General and administrative
    
    
    2,111
    
    
    
    2,233
    
    
    
    3,948
    
    
    
    4,107Provision for doubtful accounts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    79Depreciation and amortization
    
    
    2,706
    
    
    
    2,155
    
    
    
    5,413
    
    
    
    4,332Total costs and expenses
    
    
    6,291
    
    
    
    6,069
    
    
    
    13,075
    
    
    
    11,488Operating income
    
    
    102
    
    
    
    933
    
    
    
    1,524
    
    
    
    3,152Other income (expense)  net
    
    
    (27
    )
    
    
    112
    
    
    
    (79
    )
    
    
    197Income from continuing operations before income
taxes
    
    
    75
    
    
    
    1,045
    
    
    
    1,445
    
    
    
    3,349Provision (benefit) for income taxes
    
    
    
    
    
    
    (194
    )
    
    
    
    
    
    
    (32
    )Income from continuing operations
    
    
    75
    
    
    
    1,239
    
    
    
    1,445
    
    
    
    3,381Income from discontinued operations, net of income
taxes of $0
    
    
    80
    
    
    
    
    
    
    
    80
    
    
    
    Net income
    
    $
    155
    
    
    $
    1,239
    
    
    $
    1,525
    
    
    $
    3,381Income per common share from continuing operationsBasic
    
    $
    0.01
    
    
    $
    0.14
    
    
    $
    0.16
    
    
    $
    0.38Diluted
    
    $
    0.01
    
    
    $
    0.13
    
    
    $
    0.17
    
    
    $
    0.35Income per common share from discontinued operationsBasic
    
    $
    0.01
    
    
    $
    
    
    
    $
    0.01
    
    
    $
    Diluted
    
    $
    0.01
    
    
    $
    
    
    
    $
    0.01
    
    
    $
    Net Income per common shareBasic
    
    $
    0.02
    
    
    $
    0.14
    
    
    $
    0.17
    
    
    $
    0.38Diluted
    
    $
    0.02
    
    
    $
    0.13
    
    
    $
    0.17
    
    
    $
    0.35Shares used in computing net income per common
share:Basic
    
    
    8,791,000
    
    
    
    9,052,000
    
    
    
    8,795,000
    
    
    
    9,014,000Dilutive effect of common stock equivalents
    
    
    369,000
    
    
    
    642,000
    
    
    
    372,000
    
    
    
    630,000Diluted
    
    
    9,160,000
    
    
    
    9,694,000
    
    
    
    9,167,000
    
    
    
    9,644,000
 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)
 Six Months EndedJuly 31,2004
    
    
    2005Cash flows from operating activities:Income from continuing operations
    
    $
    1,445
    
    
    $
    3,381Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    5,413
    
    
    
    4,332Stock-based compensation
    
    
    
    
    
    
    65Provision for doubtful accounts, net of charge offs
    
    
    
    
    
    
    79Net book value of seismic equipment sold
    
    
    1,474
    
    
    
    44Changes in:Trade accounts receivable
    
    
    212
    
    
    
    2,074Prepaid expenses and other assets
    
    
    660
    
    
    
    361Income taxes payable
    
    
    
    
    
    
    (232
    )Accounts payable, accrued expenses and other
current liabilities
    
    
    (698
    )
    
    
    (4,143
    )Net cash provided by operating activities
    
    
    8,506
    
    
    
    5,961Cash flows from investing activities:Purchases of seismic equipment held for lease
    
    
    (1,118
    )
    
    
    (1,899
    )Purchases of property and equipment
    
    
    (131
    )
    
    
    (457
    )Acquisition of Seamap, net of cash acquired
    
    
    
    
    
    
    (2,474
    )Seamap acquisition costs
    
    
    
    
    
    
    (39
    )Net cash used in investing activities
    
    
    (1,249
    )
    
    
    (4,869
    )Cash flows from financing activities:Proceeds from issuance of common stock upon exercise of options
    
    
    
    
    
    
    274Payments on borrowings
    
    
    (2,391
    )
    
    
    (918
    )Net cash used in financing activities
    
    
    (2,391
    )
    
    
    (644
    )Net increase in cash and cash equivalents-continuing operations
    
    
    4,866
    
    
    
    448Net increase (decrease) in cash and cash equivalents-discontinued
operations
    
    
    (91
    )
    
    
    221Cash and cash equivalents, beginning of period
    
    
    6,834
    
    
    
    13,138Cash and cash equivalents, end of period
    
    $
    11,609
    
    
    $
    13,807
 The accompanying notes are an integral part of these condensed consolidated financial statements.
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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 July 31,
2005; the results of operations for the three and six months ended July 31, 2005 and 2004;
and the cash flows for the six months ended July 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, 2006.2.
    
    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 10. All intercompany transactions
and balances have been eliminated in consolidation.3.
    
    InventoriesInventories are stated at the lower of cost (first-in, first-out) or market. Inventories
consist of the following:
 July 31,2004
    
    
    2005Raw materials
    
    $
    
    
    
    $
    210Finished goods
    
    
    
    
    
    
    945Total inventories
    
    $
    
    
    
    $
    1,155
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4.
    
    Earnings Per ShareFor the three and six months ended July 31, 2004 and 2005, the following table sets forth
the number of dilutive shares that may be issued pursuant to options currently outstanding,
which number was used in the per share calculations.
 Three Months Ended July 31
    
    
    Six Months Ended July 31,2004
    
    
    2005
    
    
    2004
    
    
    2005Stock options
    
    
    369,000
    
    
    
    632,000
    
    
    
    372,000
    
    
    
    621,000Warrants
    
    
    
    
    
    
    10,000
    
    
    
    
    
    
    
    9,000Total dilutive securities
    
    
    369,000
    
    
    
    642,000
    
    
    
    372,000
    
    
    
    630,000
 5.
    
    Comprehensive IncomeSFAS 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:
 Three Months Ended July 31,
    
    
    Six Months Ended July 31,2004
    
    
    2005
    
    
    2004
    
    
    2005Net income
    
    $
    155
    
    
    $
    1,239
    
    
    $
    1,525
    
    
    $
    3,381Change in foreign currency
translation adjustment
    
    
    354
    
    
    
    269
    
    
    
    (191
    )
    
    
    73Comprehensive income (loss)
    
    $
    509
    
    
    $
    1,508
    
    
    $
    1,334
    
    
    $
    3,454
 6.
    
    Supplemental Statements of Cash Flows InformationSupplemental disclosures of cash flow information for the six months ended July 31, 2004
and 2005 are as follows:
 Six Months Ended July 31,2004
    
    
    2005Interest paid
    
    $
    113
    
    
    $
    30Seismic equipment acquired in
exchange for cancellation of accounts
receivable
    
    $
    671
    
    
    $
    
 7.
    
    ReclassificationsCertain 2004 amounts have been reclassified to conform to the 2005 presentation. Such
reclassifications had no effect on net income or loss.
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8.
    
    Stock OptionsThe Company accounts for its stock-based compensation plans under Accounting Principles
Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees. The pro forma
information below is based on provisions of Statement of Financial Accounting Standard
(FAS) No. 123, Accounting for Stock-Based Compensation, as amended by FAS 148, Accounting
for Stock-Based Compensation-Transition and Disclosure, issued in December 2002.
 Three Months Ended
    
    
    Six Months EndedJuly 31,
    
    
    July 31,2004
    
    
    2005
    
    
    2004
    
    
    2005Pro forma impact of fair value method (FAS 148)Reported income from continuing operations
    
    $
    75
    
    
    $
    1,239
    
    
    $
    1,445
    
    
    $
    3,381Less: fair value impact of employee stock
compensation
    
    
    (66
    )
    
    
    (266
    )
    
    
    (138
    )
    
    
    (484
    )Pro forma income from continuing operations
    
    $
    9
    
    
    $
    973
    
    
    $
    1,307
    
    
    $
    2,897Reported net income
    
    $
    155
    
    
    $
    1,239
    
    
    $
    1,525
    
    
    $
    3,381Less: fair value impact of employee stock
compensation
    
    
    (66
    )
    
    
    (266
    )
    
    
    (138
    )
    
    
    (484
    )Pro forma net income
    
    $
    89
    
    
    $
    973
    
    
    $
    1,387
    
    
    $
    2,897Income per common shareReported continuing operations income per share:Basic
    
    $
    0.01
    
    
    $
    0.14
    
    
    $
    0.16
    
    
    $
    0.38Diluted
    
    $
    0.01
    
    
    $
    0.13
    
    
    $
    0.17
    
    
    $
    0.35Pro forma continuing operations income per share:Basic
    
    $
    
    
    
    $
    0.11
    
    
    $
    0.15
    
    
    $
    0.32Diluted
    
    $
    
    
    
    $
    0.10
    
    
    $
    0.14
    
    
    $
    0.30Reported net income per share:Basic
    
    $
    0.02
    
    
    $
    0.14
    
    
    $
    0.17
    
    
    $
    0.38Diluted
    
    $
    0.02
    
    
    $
    0.13
    
    
    $
    0.17
    
    
    $
    0.35Pro forma net income per share:Basic
    
    $
    0.01
    
    
    $
    0.11
    
    
    $
    0.16
    
    
    $
    0.32Diluted
    
    $
    0.01
    
    
    $
    0.10
    
    
    $
    0.15
    
    
    $
    0.30Weighted 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
    
    
    63-65
    %
    
    
    63-69
    %
    
    
    63-65
    %
    
    
    63-69
    %Expected dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
 9.
    
    AcquisitionsOn July 12, 2005, the Company acquired 100% of the stock of Seamap International Holdings Pte, Ltd.,
(Seamap). Seamap is engaged in the manufacture and sale of state-of-the-art seismic and
offshore telemetry systems. The consolidated financial statements for and as of the
six-month period ended July 31, 2005 include the assets and liabilities and the operating
results for the period from acquisition date through July 31, 2005. Pursuant to SFAS 141,
Business Combinations(SFAS 141), 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.The purchase involves 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
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cash at closing and $3.0 million issued in promissory notes payable to the former
shareholders of Seamap. The terms of the purchase and sale agreement provide for two
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 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 cash 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
    
    
    5,304Acquisition costs
    
    
    39Total purchase price
    
    $
    6,549
 Pro Forma Results of OperationsThe following pro forma results of operations for the three and six months ended July 31,
2005 and the three and six months ended July 31, 2004 assumes the acquisition occurred at
the beginning of the fiscal year February 1, 2004 and reflects the full results of
operations for the three month and six 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 (in thousands except per share amounts).
 Three Months Ended July 31,
    
    
    Six Months Ended July 31,2004
    
    
    2005
    
    
    2004
    
    
    2005Revenues
    
    $
    8,205
    
    
    $
    8,139
    
    
    $
    17,738
    
    
    $
    19,687Income from operations
    
    $
    864
    
    
    $
    982
    
    
    $
    2,556
    
    
    $
    4,239Net Income
    
    $
    597
    
    
    $
    1,216
    
    
    $
    2,092
    
    
    $
    4,045Earnings per shareBasic
    
    $
    0.07
    
    
    $
    0.13
    
    
    $
    0.24
    
    
    $
    0.45Diluted
    
    $
    0.07
    
    
    $
    0.13
    
    
    $
    0.23
    
    
    $
    0.42
 At the time of the acquisition, Seamap had over $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.10.
    
    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. 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.
 Three Months Ended July 31,
    
    
    Six Months Ended July 31,2004
    
    
    2005
    
    
    2004
    
    
    2005Revenues
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Pretax income (loss)
    
    $
    80
    
    
    $
    
    
    
    $
    80
    
    
    $
    
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A summary of DSIs assets and liabilities is reflected as follows:
 January 31,
    
    
    July 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
    
    
    $
    14
 11.
    
    Segment ReportingWe have two reportable segments: the Seamap segment and the Mitcham segment.The 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
Huntsville, 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. The Company does not currently allocate overhead to its
segments. Since its acquisition, there have been no inter-segment
transactions.Financial information for the three and six months ended July 31 by business segment is set forth below net of any allocations (in thousands):
 Three
Months Ended July 31, 2005
    
    

Six
Months Ended July 31, 2005Seamap
    
    
    Mitcham
    
    
    Total
    
    
    Seamap
    
    
    Mitcham
    
    
    TotalRevenues
    
    $
    473
    
    
    $
    6,529
    
    
    $
    7,002
    
    
    $
    473
    
    
    $
    14,167
    
    
    $
    14,640Net Income
    
    $
    59
    
    
    $
    1,180
    
    
    $
    1,239
    
    
    $
    59
    
    
    $
    3,322
    
    
    $
    3,381Total Assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    8,544
    
    
    $
    36,013
    
    
    $
    44,557
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
   10




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Results of Operations
 For the three months ended July 31, 2005 and 2004
    11




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Revenues
   Costs and Expenses
  .
   12




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




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14




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Critical Accounting Policies
   Revenue Recognition
 Leases
  Equipment Sales
  Allowance for Doubtful Accounts
  Long-Lived Assets
  15




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




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PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
 (a)
    
    The Company held its Annual Meeting of Shareholders on July 20, 2005. Shareholders of
record at the close of business on May 23, 2005 were entitled to vote.(b)
    
    Shareholders elected each of the five directors nominated for the board of directors:
 Name of Nominee
    
    For
    
    
    WithheldBilly F. Mitcham, Jr.
    
    
    8,428,679
    
    
    
    30,535R. Dean Lewis
    
    
    8,351,813
    
    
    
    107,401John F. Schwalbe
    
    
    8,352,248
    
    
    
    106,966Robert P. Capps
    
    
    8,427,279
    
    
    
    31,935Peter H. Blum
    
    
    8,357,513
    
    
    
    101,701
 (c)
    
    The Shareholders ratified the appointment of Hein & Associates LLP as the Companys
independent auditors:
 For
    
    Against
    
    Abstaining8,433,119
    
    19,685
    
    6,410
 
 Item 6. Exhibits
             17




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SIGNATURES
  MITCHAM INDUSTRIES, INC.Date: September 14, 2005
    /s/ Michael A. PughMichael A. PughExecutive Vice President-Finance and Chief Financial Officer
(Authorized Officer and Principal Accounting Officer) 18




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ExhibitNumber
    
    
    
    Description2.1
    
    -
    
    Stock Purchase Agreement, effective as of July 1, 2005, among Mitcham Industries, Inc.
and Mark Welker, Tomoko Welker, Chew Kok Lee Pinnington, Michael Pinnington, Timothy
Pinnington and Phillip Bull (incorporated by reference to Exhibit 10.1 of the Companys Form
8-K filed with the SEC on July 15, 2005).3.1
    
    -
    
    Amended and Restated Articles of Incorporation of Mitcham Industries, Inc.
(incorporated by reference to Exhibit 3.1 of the Companys Registration Statement on Form
S-8 (File No. 333-67208), filed with the SEC on August 9, 2001).3.2
    
    -
    
    Second Amended and Restated Bylaws of Mitcham Industries, Inc. (incorporated by
reference to Exhibit 3.2 of the Companys Annual Report on Form 10-K for the fiscal year
ended January 31, 2004, filed with the SEC on May 28, 2004).10.1
    
    -
    
    Loan Agreement, dated as of June 27, 2005 between Mitcham Industries, Inc. and First
Victoria National Bank (incorporated by reference to Exhibit 10.1 the Companys Form 8-K
filed with the SEC on July 1, 2005).10.2
    
    -
    
    Security Agreement, dated June 27, 2005, between Mitcham Industries, Inc. and First
Victoria National Bank (incorporated by reference to Exhibit 10.2 the Companys Form 8-K
filed with the SEC on July 1, 2005).10.3
    
    -
    
    Lease and Rental Assignment, dated June 27, 2005, with First Victoria National Bank
(incorporated by reference to Exhibit 10.3 the Companys Form 8-K filed with the SEC on July 1, 2005).10.4
    
    -
    
    Promissory Note dated June 27, 2005 (incorporated by reference to Exhibit 10.4 the
Companys Form 8-K filed with the SEC on July 1, 2005).31.1
    
    -
    
    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.