<PAGE>

                                             




                       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 September 30, 1996

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

             For the transition period from __________ to __________

                           Commission File No. 0-27564

                              3-D Geophysical, Inc.

            (Exact name of Registrant as a specified in its charter)

          Delaware                                          13-3841601
         (State or other jurisdiction of incorporation or organization)
                      (I.R.S. Employer Identification No.)

                        7076 South Alton Way, Building H
                            Englewood, Colorado 80112

                (Address/Zip Code of principal executive office)

       Registrant's telephone number, including area code: (303) 290-0214


Indicate by check mark whether the Registrant (1) has filed all reports required
by  Section  13 or 15(d)  of the  Securities  Exchange  Act of 1934  during  the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports),  and (2) has been subject to such filing requirements for
the past 90 days.


                             Yes    X           No_____

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock as the latest practicable date.


The total number of shares of the  Registrant's  Common  Stock,  $.01 par value,
outstanding on November 7, 1996 was 7,600,000.




<PAGE>



                              3-D GEOPHYSICAL, INC.
                FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1996



PART I.        Financial Information                                 Page

    Item 1      Financial Statements

      Condensed Consolidated Balance Sheets
      December 31, 1995 and September 30, 1996                        3-4

      Condensed Consolidated Statements of Operations
      Three Months Ended  September 30, 1995 and September
      30, 1996                                                          5
      Nine Months Ended September 30, 1995 and September 30,
      1996

      Condensed Consolidated Statements of Cash Flows
      Nine Months Ended September 30, 1995 and September 30,            6
      1996

      Notes to Condensed Consolidated Financial Statements           7-11

    Item 2      Management's Discussion and Analysis of
    Financial Condition and Results of Operations                   12-16

PART II.   Other Information


    Item 1      Legal Proceedings                                      17

    Item 2      Changes in Securities                                  17

    Item 3      Defaults Upon Senior Securities                        17

    Item 4      Submission of Matters to a Vote of Security            17
    Holders

    Item 5      Other Information                                      17

    Item 6      Exhibits and Reports on Form 8-K                       17

Financial Data Schedule                                                18
Signatures                                                             19




<PAGE>
                                       3







                     3-D GEOPHYSICAL, INC. and SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (in thousands)
   
                                   (Unaudited)
    


                                                          December     September
                                                           31,1995      30,1996
                                                          ---------    ---------

ASSETS
Current assets:

   Cash and cash equivalents .........................      $   609      $ 1,206
   Accounts receivable billed, net of the
      allowance for doubtful accounts of $0
      and $49 as of December 31, 1995 and                    
      September 30, 1996..............................        1,786       13,349
        Accounts receivable, unbilled ................         --          4,129
        Other receivables ............................          158          259
   Deferred income tax assets ........................         --             68
   Prepaid expenses and other ........................          239        1,912
                                                            -------      -------
            Total current assets .....................      $ 2,792      $20,923

Property and equipment, net of accumulated
      depreciation of $1,744 and $4,181 as
      of December 31, 1995 and        
      September 30, 1996..............................        1,746       26,931
Goodwill, net of accumulated amortization of
      $0 and $260 as of December 31, 1995          
      and September 30, 1996..........................         --          5,850

Other assets..........................................            9          691
                                                            -------      -------
Total assets .........................................      $ 4,547      $54,395
                                                            =======      =======



                   The accompanying notes are an integral part
                         of these condensed consolidated
                              financial statements.




<PAGE>
                                       4






                     3-D GEOPHYSICAL, INC. and SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (in thousands)
   
                                   (Unaudited)
    


                                                       December      September
                                                       31, 1995       30, 1996
                                                      ----------     ----------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Current maturities of long-term debt and              
      capital leases................................     $    182      $  6,517
   Accounts payable ................................        1,004         9,035
   Accrued liabilities .............................        1,003         1,536
   Deferred revenue ................................         --             418
   Income taxes payable ............................         --             568
                                                         --------      --------
            Total current liabilities ..............     $  2,189      $ 18,074

Long-term debt and capital leases, net of                   
   current maturities...............................         --           8,682
Deferred income taxes ..............................          530           653

Stockholders' equity:
   Common stock-predecessor ........................          321          --
   Common stock, $.01 par value, 25,000,000
      shares authorized, 7,600,000 shares                   
      issued and outstanding........................         --              76
   Preferred stock, $.01 par value,
      1,000,000 shares authorized, none          
      issued and outstanding........................         --            --
   Additional paid in capital ......................         --          28,173
   Retained earnings ...............................        4,363         1,934
   Cumulative foreign currency translation                 
      adjustment....................................       (2,856)       (3,197)
                                                         --------      --------
Total stockholders' equity .........................     $  1,828      $ 26,986

            Total liabilities and     
            stockholders' equity....................     $  4,547      $ 54,395
                                                         ========      ========



                   The accompanying notes are an integral part
                         of these condensed consolidated
                              financial statements.



<PAGE>
                                       5




                     3-D GEOPHYSICAL, INC. and SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (in thousands, except per share amounts)
   
                                   (Unaudited)
    

                                       For the Three      For the Nine Months
                                       Months Ended              Ended
                                       September 30,          September 30,
                                      1995       1996        1995        1996
                                    --------   --------    --------    --------

Net Sales ......................    $ 2,310    $ 16,612    $  7,157    $ 36,151

Expenses
   Cost of data acquisition ....        919      12,111       3,759      26,563
   Depreciation and
      amortization .............         88       1,139         531       2,788
   General and  administrative
      expenses .................        287       1,322         833       3,907
                                   --------    --------    -------    --------
                                      1,294      14,572       5,123      33,258

Operating income ...............      1,016       2,040       2,034       2,893

Other income (expense)
   Miscellaneous ...............        (64)         73          38         437
   Interest expense ............        (42)       (372)       (562)       (668)
   Foreign currency
      transaction gains
            (losses) ...........        (95)        (74)        (83)          7
                                   --------    --------    --------    --------
                                       (201)       (373)       (607)       (224)

Income  before  provision for
   income taxes and         
   extraordinary item...........        815       1,667       1,427       2,669


Provision for income taxes .....        (63)        368          81         645
                                   --------    --------    --------    --------
Income before extraordinary item        878       1,299       1,346       2,024

Extraordinary item,net of
   tax expense of $36 ..........       --          --          --            57
                                   --------    --------    --------    --------
Net income .....................   $    878    $  1,299    $  1,346    $  2,081
                                   ========    ========    ========    ========

Income per share before
   extraordinary item                           .17                    .29
Extraordinary item per share,
   net of tax expense                             -                    .01
   
                                            --------               --------
Net earnings per share                          .17                    .30
                                            ========               ========

Weighted average common
   shares outstanding                      7,736,036              6,926,795



                   The accompanying notes are an integral part
                         of these condensed consolidated
                              financial statements.


<PAGE>
                                       6






                     3-D GEOPHYSICAL, INC. and SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                      
                                  (Unaudited)

                                                       For the Nine Months Ended
                                                             September 30,
                                                          1995            1996
                                                        ---------      ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash flow provided(used) by
   operating activities ............................     $  1,585      $ (2,089)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment ................         (123)      (12,270)
Cash consideration paid to acquire
   Operating Subsidiaries ..........................         --         (10,328)
Cash  received  from sale of property  and
   equipment .......................................         --             114
                                                         --------      --------
Net cash used by investing activities ..............         (123)      (22,484)

CASH FLOWS FROM FINANCING ACTIVITIES:
Cash paid in  connection  with the initial
   public offering .................................         --          (3,431)
Proceeds  from  initial  public  offering,
   net of the underwriting discounts ...............         --          32,085
Issuance of predecessor common stock ...............           28          --
Cash paid to retire indebtedness of the
   Operating Subsidiaries ..........................         --          (4,599)
Principal  payments  on notes  payable and
   capital leases ..................................         (484)       (8,317)
Cash  proceeds of  borrowings  under notes
   payable and capital leases ......................         --          12,934
Cash dividend paid to owners of
   predecessor company .............................         --          (3,510)
Net  borrowings  (payments)  under  factor
   agreements ......................................         (207)         --
                                                         --------      --------
Net  cash  provided  (used)  by  financing
   activities ......................................         (663)       25,162

Net increase (decrease) in cash ....................          799           589

Cash at beginning of period ........................          242           609
Effect of change in exchange rate on cash ..........          (53)            8
                                                         ========      ========
Cash at end of period ..............................     $    988      $  1,206
                                                         ========      ========






                   The accompanying notes are an integral part
                         of these condensed consolidated
                              financial statements.




<PAGE>
                                       7




                     3-D GEOPHYSICAL, INC. and SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1. ORGANIZATION AND BASIS OF PRESENTATION


On February 9, 1996,  3-D  Geophysical,  Inc.  (the  "Company")  consummated  an
initial public offering (the "Offering") and simultaneously acquired in separate
transactions,   in  exchange  for  cash,  notes  and  shares  of  common  stock,
Geoevaluaciones, S.A. de C.V. ("GEO"), Processos Interactivos Avanzados, S.A. de
C.V.  ("PIASA"),  certain assets and liabilities of the land seismic business of
Northern Geophysical of America, Inc.  ("Northern"),  Paragon Geophysical,  Inc.
("Paragon") and Kemp Geophysical  Corporation ("Kemp") (collectively referred to
as the "Operating Subsidiaries").

For  accounting  purposes  the  acquisitions  of GEO and PIASA were treated as a
recapitalization  of GEO and PIASA with GEO  (combined  with PIASA) deemed to be
the acquirer of the Company and considered the predecessor company. Accordingly,
the financial  statements include the historical  operating  performance of only
GEO and PIASA (the "Mexican Operations") through February 8, 1996.

The  acquisitions  of  Northern,  Paragon  and Kemp  were  treated  as  business
combinations accounted for by the purchase method of accounting as prescribed by
Accounting Principles Board Opinion No. 16 and SEC Staff Accounting Bulletin No.
48. Northern and Kemp are being valued at the fair market value of consideration
given. In connection  with the  acquisitions of Northern and Kemp, the excess of
consideration  given over the fair market value of net assets  acquired is being
amortized on a straight-line  basis over 15 years.  The acquisition of Paragon's
Common Stock in exchange for shares of the Company's  common stock was accounted
for at Paragon's  historical  costs.  The  accompanying  condensed  consolidated
financial  statements  include the accounts of  Northern,  Kemp and Paragon from
February 9, 1996,  the  effective  date of the  acquisitions.  As a result,  the
Company's statements of operations for the three and nine months ended September
30, 1996 are not  comparable to the  statements of operations  for the three and
nine months ended  September  30, 1995,  and the  Company's  balance sheet as of
September  30, 1996 is not  comparable  to its balance  sheet as of December 31,
1995.



The  consideration  paid to the former owners of Northern,  Kemp and Paragon and
the allocation of such consideration to the acquired assets is as follows:

Cash paid for the stock and assets of the   
   acquired companies                                  $ 10,328,000
Debt payable to former owner of Northern                  1,149,000
Stock issued to the former owners of Kemp at
   offering price of $7.50 per share                        294,000
Assumption of the liabilities in excess of               
   assets of Paragon                                     (1,020,000)
Liabilities assumed:
Bank overdraft                                              162,000
Accounts payable                                          4,984,000
Accrued and other current liabilities                     1,130,000
Debt assumed:
      Current                                             8,007,000
      Non-current                                         3,187,000
                                                        -----------

Amounts allocated to acquired assets                   $ 28,221,000
                                                        ===========





<PAGE>
                                       8





                     3-D GEOPHYSICAL, INC. and SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1. ORGANIZATION AND BASIS OF PRESENTATION (continued)


Allocation of the purchase price to the acquired assets:

Accounts receivable:
     Trade                                          $    6,575,000
     Other                                                 123,000
Deferred income tax assets                                 108,000
Prepaid expenses and other current assets                  209,000
Property and equipment                                  14,106,000
Goodwill                                                 6,147,000
Other assets                                               953,000
                                                      =============
                                                    $   28,221,000
                                                      =============


   
The year-end  condensed  balance  sheet data was derived from audited  financial
statements,  but does not include all disclosures required by generally accepted
accounting principles.

In  the  opinion  of  the  Company,  the  accompanying   consolidated  financial
statements  include  all  adjustments  which  are of a normal  recurring  nature
necessary to present  fairly the Company's  financial  position at September 30,
1996, the results of its operations for the three- and nine-month  periods ended
September 30, 1995 and 1996, and its cash flows for the nine month periods ended
September 30, 1995 and 1996.  All  significant  intercompany  accounts have been
eliminated.  Although the Company  believes that the disclosures are adequate to
make the information presented not misleading,  certain information and footnote
disclosures  normally  included  in  annual  financial  statements  prepared  in
accordance with generally accepted accounting  principles have been condensed or
omitted  pursuant to the rules and  regulations  of the  Securities and Exchange
Commission.  These condensed consolidated financial statements should be read in
conjunction  with the  financial  statements  included in the  Company's  Annual
Report  on Form  10-K for the year  ended  December  31,  1995  which  was filed
pursuant to Rule 15d-2 of the Securities  Exchange Act of 1934, as amended.  The
results of operations for the three- and nine-month  periods ended September 30,
1996 are not  necessarily  indicative of the results to be expected for the full
year.
    

PRO FORMA INFORMATION

   
The accompanying summarized pro forma information for the Company for the three-
and  nine-month  periods  ended  September  30,  1995  and 1996  represents  the
operations of the Company as if the  acquisitions of the Operating  Subsidiaries
and the Company's initial public offering had occurred on January 1, 1995.
    




<PAGE>
                                       9





                     3-D GEOPHYSICAL, INC. and SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1. ORGANIZATION AND BASIS OF PRESENTATION (continued)


                                  For the Three Months     For the Nine Months
                                   Ended September 30,     Ended September 30,
                                  (in thousands, except   (in thousands, except 
                                     per share data)         per share data)
                                   1995          1996          1995       1996
                                  -------     -------        -------    -------
Net sales                         $10,923     $16,612        $25,669    $39,974
                                  =======     =======        =======    =======
Extraordinary item, net of        
   tax expense                    $    -      $    -         $    -     $    57
                                  =======     =======        =======    =======
                                                 
Net income                        $   711     $ 1,299        $   470    $ 1,832
                                  =======     ========       =======    =======

Income per share before              
   extraordinary item                  .11         .21           .08        .28
Extraordinary item per share,
   net of tax expense                   -           -             -         .01
                                  --------    --------      --------   --------
Earnings per share                     .11         .21           .08        .29
                                  ========    ========      =========  ========

The pro forma results  described  above assume  weighted  average  common shares
outstanding of 6,232,000 shares.

The summarized pro forma information is not necessarily indicative of the actual
results that would have been  achieved if the public  offering and  acquisitions
had occurred on the date indicated or which may be realized in the future.

REVENUE RECOGNITION AND REVENUE ADJUSTMENTS


   
The Company  generates revenue through  performing  seismic data acquisition and
geophysical  services.  Revenues from seismic data  acquisition  and geophysical
services are  recognized as the work  progresses on the percentage of completion
method.

Net  sales  for the nine  months  ended  September  30,  1995  and 1996  include
contractual  revenue  adjustments  from the  Mexican  Operations,  for which the
related seismic data  acquisition  and geophysical  services have been provided.
These revenue adjustments are based on independent  economic data, primarily the
Mexican inflation rate as measured by the consumer price index. Certain of these
revenue adjustments recognized for the nine months ended September 30, 1996, for
which the Company has the contractual  right to invoice,  have not been invoiced
pending final review by the  Company's  major  customer in Mexico.  The Company,
historically,   has  been  able  to  collect  these  revenue   adjustments  and,
accordingly,  the Company has not recorded a valuation  allowance  against these
amounts as of December 31, 1995 or September 30, 1996.
    

2.     INITIAL PUBLIC OFFERING OF COMMON STOCK

   
On February 9, 1996, the Company  completed the offering of 4,000,000  shares of
common  stock at a price to the  public of $7.50  per  share.  Subsequently,  on
February 21, 1996, the  underwriters  exercised  their  overallotment  option to
purchase  an  additional  600,000  shares at a price to the  public of $7.50 per
share. The proceeds, net of the underwriters' discounts and offering costs, were
approximately  $28,654,000.  Of these net proceeds,  $3,510,000 was treated, for
accounting purposes,  as a dividend to the former stockholders of GEO and PIASA,
approximately  $10,328,000  was used to  purchase  the land  seismic  assets  of
Northern and all of the capital stock of Kemp, approximately $4,599,000 was used
to retire certain indebtedness of the Operating Subsidiaries,  $152,000 was used
to retire capital  leases and  $1,149,000 was paid  subsequent to the closing of
the  acquisitions  as a purchase  price  adjustment for the purchase of the land
seismic assets of Northern. The Company recognized $57,000 of extraordinary
    




<PAGE>
                                       10




                     3-D GEOPHYSICAL, INC. and SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


2.     INITIAL PUBLIC OFFERING OF COMMON STOCK (continued)
   
gain, net of tax, from the retirement of a certain portion of this debt.
    

3.     CONCENTRATIONS OF CREDIT RISK
   
During the nine  months  ended  September  30,  1995,  which  included  only the
operations of GEO and PIASA, one customer  accounted for 100.0% of net sales and
during the nine months ended September 30, 1996,  three customers  accounted for
25.1%, 18.1%, and 16.4% of net sales, respectively.

As of December 31, 1995,  which consisted only of the accounts of GEO and PIASA,
one customer accounted for 99.0% of accounts  receivable and as of September 30,
1996,  two  customers  accounted  for 29.1% and  28.0% of  accounts  receivable,
respectively.
    

4.     RECENT ACCOUNTING PRONOUNCEMENTS

During the fourth quarter of 1995,  Statement of Financial  Accounting Standards
No. 123  "Accounting for Stock-Based  Compensation"  (SFAS 123) was issued.  The
Company will continue to account for future grants of common stock options using
the intrinsic  value method under  Accounting  Principles  Board Opinion NO. 25,
"Accounting  for  Stock  issued to  Employees"  and will  adopt  the  disclosure
requirements of SFAS 123.


5.  EARNINGS PER SHARE

The number of shares used in the earnings per share calculation is determined as
follows:

                                                  For the Three   For the Nine
                                                  Months Ending   Months Ending
                                                  September 30,   September 30,
                                                       1996            1996
                                                  -------------   -------------
    Shares issued to the Company's
       stockholders giving effect to the 
       2,717.66 for 1 stock split                    1,400,681      1,400,681
    Shares  deemed to have  been  issued
       to fund cash portion of dividend
       to Geoevaluaciones stockholders                 468,000        468,000
    Shares issued to acquire
       Operating Subsidiaries                        1,599,319      1,406,677
    Shares sold in initial offering                  4,132,000      3,515,401
    Common  stock  equivalents,
       principally common stock options                136,036        136,036
                                                     ---------      ---------
                                                
    Weighted average common shares outstanding       7,736,036      6,926,795
                                                     =========      =========


6.     INCOME  TAXES

The effective  income tax rates for the nine months ended September 30, 1995 and
1996 are 6% and 26%, respectively. The differences between the statutory federal
income tax rate on income before  provision  for income taxes and  extraordinary
item, and the Company's effective income tax rate, result primarily from the tax
benefits associated with inflation adjustments with respect to the operations of
GEO for the nine months ended September 30, 1995 and the  anticipated  change in
the valuation  allowance  previously  established  with respect to net operating
loss carryforwards and inflation adjustments in Mexico for the nine months ended
September 30, 1996.



<PAGE>
                                       11




                     3-D GEOPHYSICAL, INC. and SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


7.     COMMITMENTS AND CONTINGENCIES

   
GEO has a dispute,  and may be threatened  with  litigation,  in connection with
certain agreements entered it into with Capilano  International Inc., a Canadian
company  ("Capilano").  The  dispute  concerns a certain  Letter of Intent and a
certain  Technical  Assistance  Agreement,  dated June 3, 1991 and June 1, 1992,
respectively  (the "Capilano  Agreements").  Capilano  stated in its 1994 Annual
Report to  Shareholders  that it has had difficulty in collecting  amounts owing
from a Mexican company  (presumably,  GEO) to which Capilano supplied  technical
assistance  and stated in its 1995  Annual  Report to  Shareholders  that it had
written  down  accounts  receivable  in Mexico by  approximately  Canadian  $1.9
million  (approximately  U.S.  $1.4  million).  GEO  maintains  that  it is  not
obligated to compensate  Capilano for certain  services GEO believes were either
inadequately  provided  or not  provided  at all by  Capilano  and  the  parties
disagree  upon how certain  profits  and losses  should be  allocated  under the
Capilano  Agreements.  Representatives  of  Capilano  and GEO have  had  ongoing
discussions since May, 1996 in an effort to resolve this dispute. The Company is
not  currently  able to  estimate  the  effect,  if any,  on  GEO's  results  of
operations  and  financial  position  which may result from  resolution  of this
matter.  Accordingly,  the  Company's  financial  statements  do not reflect any
adjustment related to this matter. A portion of the amounts payable to the 
former stockholders of Geoevaluaciones in connection with the acquisition by
the Company of the stock of Geoevaluaciones owned by such stockholders is held
in escrow and available to pay amounts in settlement or otherwise in connection 
with the dispute with Capilano.
    

8.     COMMON STOCK - PREDECESSOR

Common stock of the Company at December 31, 1995 consisted  solely of GEO common
stock of 1,200,000  shares of N$1 par value variable capital stock. In 1993, GEO
capitalized $229,582 of earnings by issuing 229,582 shares of common stock.

GEO and PIASA are required  under Mexican law to establish a legal reserve equal
to 5% of each  company's  earnings  until such time as the reserve equals 20% of
the minimum capital of GEO and PIASA.

9.  SUBSEQUENT EVENTS

   
 On July 12,  1996,  the Company  executed a letter of intent to acquire  J.R.S.
Exploration   Company  Limited   ("J.R.S."),   a  land  seismic  survey  company
headquartered in Calgary,  Alberta.  Under the  contemplated  terms, the Company
proposes  to  acquire   J.R.S.   for   approximately   Canadian   $3.5   million
(approximately  U.S. $2.6  million) in cash and shares of the  Company's  Common
Stock worth Canadian $3.35 million  (approximately  U.S. $2.5 million) valued on
the basis of the average  closing price of the  Company's  Common Stock prior to
the closing.  The  acquisition is subject to certain  conditions,  including the
execution  of  mutually   satisfactory   documentation  and  the  completion  of
satisfactory  due  diligence  by the  Company.  The  closing  of  this  proposed
acquisition is not anticipated to occur prior to January, 1997.

On October 8, 1996, the Company filed a Registration  Statement on Form S-1 (No.
333-13665)  with the Securities and Exchange  Commission  relating to a proposed
underwritten  sale to the public of  4,000,000  shares of the  Company's  Common
Stock (not including an over-allotment option of 600,000 shares).

In October 1996, the Company signed four separate lease agreements for the lease
of seismic data  acquisition  equipment  with rental terms ranging from three to
six months which contain aggregate minimum lease payments of approximately  $3.8
million.  Two of the  leases are with  Andrews  Group  International,  a related
party. Each has a six month minimum lease term and provides that the Company has
the option to purchase the equipment  being leased,  with 80% of rental payments
applying  towards the purchase.  Minimum lease  payments  under these leases are
approximately $660,000 and $173,000, respectively.
    

The Company also entered into two lease agreements with Geco-Prakla,  a division
of Schlumberger  Technology  Corporation.  The first agreement has a three month
minimum  lease term and provides that the Company has the option to purchase the
equipment  being  leased,  with 75% of  rental  payments  applying  towards  the
purchase.  Minimum lease payments under this lease are  approximately  $338,000.
The second agreement has a three month minimum lease term and contains no option
to purchase the equipment being leased.  Minimum lease payments under this lease
are approximately $2.6 million.





<PAGE>
                                       12





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

   
For accounting purposes, GEO (together with PIASA) is considered the predecessor
company and the financial performance of Northern, Kemp and Paragon are included
as of their  acquisition  date,  February 9, 1996.  As a result,  the  Company's
statements of operations for the three- and nine-month  periods ended  September
30, 1996 include the financial  activities  of the  Company's  operations in the
United States after  February 8, 1996,  and are not comparable to the statements
of  operations  and cash  flows for the  three-  and  nine-month  periods  ended
September 30, 1995. The following discussion has been divided into two sections.
The first section  relates to the Company and includes the historical  operating
performance  of GEO and PIASA (the  "Mexican  Operations").  The second  section
discusses  the  Company's  liquidity  and capital  resources as of September 30,
1996. The Company's statements of operations for the three and nine months ended
September 30, 1996 are not  comparable to the  statements of operations  for the
three and nine months ended September 30, 1995, and the Company's  balance sheet
as of September  30, 1996 is not  comparable to its balance sheet as of December
31, 1995.
    

RESULTS OF OPERATIONS

               Three Months Ended September 30, 1996 compared to
                      Three Months Ended September 30, 1995

   
NET SALES.  Net sales for the Company  increased  619.1% to $16.6 million in the
three  months  ended  September  30, 1996 from $2.3  million in the three months
ended  September  30,  1995.  The  increase  is  primarily  attributable  to the
inclusion  of $12.5  million  of net sales of the  Company's  operations  in the
United  States and a 77.4%  increase to $4.1  million in the three  months ended
September  30, 1996,  from $2.3 million in the three months ended  September 30,
1995, for the Mexican Operations. Net sales for the three months ended September
30, 1995 include $1.8 million of  contractual  adjustments  related to increased
costs due to the  devaluation  of the Mexican peso which occurred in December of
1994.  Net sales for the three months ended  September 30, 1995 include  similar
contractual adjustments of $522,000.

COST OF DATA  ACQUISITION.  Cost of data  acquisition for the Company  increased
1,217.8% to $12.1  million in the three  months  ended  September  30, 1996 from
$919,000 in the three months ended September 30, 1995. The increase is primarily
attributable  to the inclusion of $9.0 million of cost of data  acquisition  for
the  Company's  operations  in the United  States and a 236.1%  increase to $3.1
million in the three months ended September 30, 1996, from $919,000 in the three
months ended  September 30, 1995,  for the Mexican  Operations.  The decrease in
gross  margin  (net  sales  less  cost of  data  acquisition)  for  the  Mexican
Operations is primarily attributable to larger contractual  adjustments realized
during the third quarter of 1995 as well as the impact of the Southern  Services
crew (a drilling and field services crew operating in Southern Mexico) which did
not commence work in 1995 until November
    

DEPRECIATION  AND  AMORTIZATION.  Depreciation  and amortization for the Company
increased  1,194.3% to $1.1 million in the three months ended September 30, 1996
from  $88,000 in the three  months ended  September  30,  1995.  The increase is
primarily  attributable  to  the  inclusion  of  $715,000  of  depreciation  and
amortization  of the  Company's  operations  in  the  United  States,  including
$102,000 of goodwill  amortization  attributable to the acquisitions of Northern
and Kemp, and additional  depreciation  relating to new equipment  acquisitions.
This is in addition to a 301.1%  increase to $353,000 in the three  months ended
September 30, 1996,  from $88,000 in the three months ended  September 30, 1995,
for the Mexican Operations.

   
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses for the
Company increased 360.6% to $1.3 million in the three months ended September 30,
1996 from $287,000 in the three months ended September 30, 1995. The increase is
primarily   attributable   to  the   inclusion   of   $975,000  of  general  and
administrative  expenses  from the Company's  operations  in the United  States,
partially  offset by a 5.6%  decrease  to  $271,000  in the three  months  ended
September 30, 1996,  from $287,000 in the three months ended September 30, 1995,
for the Mexican Operations.  General and administrative expenses for the Company
have increased due to the added costs  associated  with being a publicly  traded
company and increased marketing costs.
    




<PAGE>
                                       13





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

RESULTS OF OPERATIONS (continued)

   
OPERATING  INCOME.  Operating  income for the Company  increased  100.8% to $2.0
million in the three  months ended  September  30, 1996 from $1.0 million in the
three months ended September 30, 1995. The increase is primarily attributable to
the inclusion of $1.7 million of operating  income from Company's  operations in
the United States,  partially  offset by a 62.1% decrease in operating income to
$385,000 in the three months ended  September  30, 1996 from $1.0 million in the
three months ended September 30, 1995 for the Mexican  Operations.  The decrease
in the operating income of the Mexican Operations is due to contractual  revenue
adjustments  of $1.8 million,  which were  realized  during the third quarter of
1995,  attributable  to increased  costs  resulting from the  devaluation of the
Mexican  peso  during  December  of 1994.  Similar  contractual  adjustments  of
$522,000 were realized during the three months ended September 30, 1996.

MISCELLANEOUS INCOME (EXPENSE).  The Company recognized  miscellaneous income of
$73,000 in the three months ended September 30, 1996 compared with miscellaneous
expense of $64,000  recognized in the three months ended September 30, 1995. The
increase is  primarily  the result of interest  income in Mexico due to the high
investment  interest  rates  available  in  Mexico,  interest  income  from  the
investment of the proceeds of the Company's initial public offering and interest
income from the  conversion of a trade  receivable to an  interest-bearing  note
receivable.

INTEREST EXPENSE. The Company's interest expense increased 785.7% to $372,000 in
the three months ended September 30, 1996 from $42,000 in the three months ended
September  30, 1995.  The increase is due to interest  charges on  borrowings of
approximately  $12 million under a credit facility with the Company's  principal
lender  during the three months ended  September 30, 1996 compared to borrowings
of approximately $300,000 during the nine months ended September 30, 1995.
    

FOREIGN  CURRENCY  LOSSES.  The Company  recognized a foreign  currency  loss of
$74,000 in the three  months  ended  September  30,  1996  compared to a foreign
currency loss of $95,000 in the three months ended  September 30, 1995, a change
of 22.1%.  The losses  are  primarily  attributable  to the  fluctuation  of the
Peso/U.S. dollar exchange rate.

INCOME TAX EXPENSE. The Company recognized income tax expense from operations of
$368,000 in the three months ended  September 30, 1996 compared to an income tax
benefit of $63,000 in the three months ended September 30, 1995. The increase is
primarily  attributable  to earnings of the  Company's  operations in the United
States taxed at a 26% effective tax rate,  partially  offset by an 18% effective
tax rate for earnings from the Mexican Operations.  The lower tax rate in Mexico
is due to  inflation  adjustments.  The  effective  tax rate  for the  Company's
operations  in the United States is lower than the statutory tax rate due to the
anticipated  change  in the  valuation  allowance  previously  established  with
respect to the net operating loss carryforwards.
 

                Nine Months Ended September 30, 1996 compared to
                      Nine Months Ended September 30, 1995.

   
NET SALES.  Net sales for the Company  increased  405.1% to $36.2 million in the
nine months ended  September 30, 1996 from $7.2 million in the nine months ended
September 30, 1995. The increase is primarily  attributable  to the inclusion of
$27.0 million of net sales of the Company's  operations in the United States and
a 27.0%  increase to $9.1 million for the nine months ended  September  30, 1996
from $7.2 million for the nine months ended  September  30, 1995 for the Mexican
Operations. Net sales for the nine months ended September 30, 1995 include $ 2.6
million  of  contractual  adjustments  related  to  increased  costs  due to the
devaluation of the Mexican peso which occurred in December of 1994. Net sales in
the nine months ended September 30, 1996 include similar contractual adjustments
of $1.1 million.
    


<PAGE>
                                       14




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

RESULTS OF OPERATIONS (continued)

   
COST OF DATA  ACQUISITION.  Cost of data  acquisition for the Company  increased
606.7% to $26.6  million in the nine months ended  September  30, 1996 from $3.8
million in the nine months ended  September 30, 1995.  The increase is primarily
attributable  to the inclusion of $19.6 million of cost of data  acquisition  of
the  Company's  operations  in the United  States and a 86.4%  increase  to $7.0
million in the nine months ended  September  30, 1996,  from $3.8 million in the
nine months ended September 30, 1995 for the Mexican Operations. The decrease in
gross  margin for the Mexican  Operations  is primarily  attributable  to larger
price  adjustments  realized during the nine months ended September 30, 1995 and
the impact in the nine months ended September 30, 1996 of the Southern  Services
crew (a drilling and field services crew operating in Southern Mexico) which did
not commence work in 1995 until November.

DEPRECIATION  AND  AMORTIZATION.  Depreciation  and amortization for the Company
increased  425.0% to $2.8  million in the nine months ended  September  30, 1996
from  $531,000 in the nine months  ended  September  30,  1995.  The increase is
primarily  attributable  to the  inclusion of $2.0 million of  depreciation  and
amortization  of the  Company's  operations  in  the  United  States,  including
$260,000 of goodwill  amortization  attributable to the acquisitions of Northern
and Kemp.  This is in  addition to a 27.1%  increase  to  $675,000  for the nine
months  ended  September  30,  1996,  from  $531,000  for the nine months  ended
September 30, 1995, for the Mexican Operations.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses for the
Company  increased 368.8% to $3.9 million in the nine months ended September 30,
1996 from $833,000 in the nine months ended  September 30, 1995. The increase is
primarily  attributable  to  the  inclusion  of  $2.9  million  of  general  and
administrative  expenses from the Company's operations in the United States, and
a 3.9% increase to $866,000 in the nine months ended  September  30, 1996,  from
$833,000  in  the  nine  months  ended  September  30,  1995,  for  the  Mexican
Operations.  General and administrative  expenses for the Company have increased
due to the added  costs  associated  with being a publicly  traded  company  and
increased marketing costs.

OPERATING  INCOME.  Operating  income for the  Company  increased  42.2% to $2.9
million in the nine months  ended  September  30, 1996 from $2.0  million in the
nine months  ended  September  30,  1995.  The  operating  income of the Mexican
Operations  decreased  73.4% to $540,000 in the nine months ended  September 30,
1996 from $2.0 million in the nine months ended September 30, 1995. The decrease
in the  operating  income of the Mexican  Operations  for the nine months  ended
September 30, 1996  compared to the nine months ended  September 30, 1995 is due
to contractual revenue adjustments of $ 2.6 million,  which were realized during
the nine months  ending  September  30, 1995,  attributable  to increased  costs
resulting from the devaluation of the Mexican peso during December of 1994. This
is contrasted with  contractual  adjustments of $1.1 million realized during the
nine months ended  September 30, 1996.  The decrease in the operating  income of
the Mexican  Operations was partially offset by the inclusion of $2.3 million of
operating  income of the Company's  operations in the United States for the nine
months ended September 30, 1996.

MISCELLANEOUS INCOME (EXPENSE).  The Company recognized  miscellaneous income of
$437,000 in the nine months ended  September 30, 1996 compared to  miscellaneous
income of $38,000 in the nine months ended  September 30, 1995.  The increase is
primarily  the result of  interest  income in Mexico due to the high  investment
interest rates  available in Mexico,  interest income from the investment of the
proceeds of the Company's  initial public  offering and interest income from the
conversion of a trade receivable to an interest-bearing note receivable.

INTEREST EXPENSE.  The Company's interest expense increased 18.9% to $668,000 in
the nine months ended  September 30, 1996 from $562,000 in the nine months ended
September  30, 1995.  The increase is due to interest  charges on  borrowings of
approximately  $12 million under a credit facility with the Company's  principal
lender during the nine months ended September 30, 1996 compared to borrowings of
approximately $300,000 during the nine months ended September 30, 1995.
    



<PAGE>
                                       15




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

RESULTS OF OPERATIONS (continued)

   
FOREIGN CURRENCY GAINS. The Company recognized a foreign currency gain of $7,000
in the nine months ended September 30, 1996 compared to a foreign  currency loss
of $83,000 in the nine months ended  September 30, 1995.  These gains and losses
are primarily  attributable to the reduction of U.S.  dollar  liabilities of the
Mexican Operations and the fluctuation of the Peso/U.S. dollar exchange rate.

INCOME TAX EXPENSE. The Company recognized income tax expense from operations of
$645,000  in the nine months  ended  September  30, 1996  compared to income tax
expense of $81,000 in the nine months ended  September 30, 1995. The increase is
primarily  attributable  to earnings of the  Company's  operations in the United
States taxed at a 26% effective tax rate,  partially offset by 18% effective tax
rate for earnings from the Mexican  Operations.  The lower tax rate in Mexico is
due  to  inflation  adjustments.  The  effective  tax  rate  for  the  Company's
operations  in the United States is lower than the statutory tax rate due to the
anticipated  change  in the  valuation  allowance  previously  established  with
respect to the net operating loss carryforwards.
    

EXTRAORDINARY  ITEM NET OF INCOME TAX EXPENSE.  The Company recognized a $57,000
extraordinary  item in the nine months  ended  September  30,  1996,  net of tax
expense of $36,000.  The  extraordinary  item is due to a gain recognized on the
early extinguishment of debt. No extraordinary items were recognized in the nine
months ended September 30, 1995.



LIQUIDITY AND CAPITAL RESOURCES

From  December  31, 1995 to  September  30,  1996,  total  assets of the Company
increased from $4.5 million to $54.4 million,  total liabilities  increased from
$2.7 million to $27.4 million and total stockholders' equity increased from $1.8
million to $27.0 million.  These increases  resulted from the Company's  initial
public offering,  the acquisition of the Operating  Subsidiaries and new capital
expenditures partially financed by a new credit line.

   
On  February 9, 1996,  the Company  completed  its  initial  public  offering of
4,000,000  shares of Common  Stock at a price to the  public of $7.50 per share.
Subsequently,   on  February  21,  1996,  the   underwriters   exercised   their
over-allotment option to purchase an additional 600,000 shares at a price to the
public of $7.50 per share.  The net  proceeds  to the Company  (after  deducting
underwriting discounts and commissions and offering expenses) were approximately
$28.7  million.  Of this amount,  approximately  $3.5  million was treated,  for
accounting purposes, as a dividend to the former stockholders of GEO and PIASA ,
approximately  $10.3  million was used to purchase  the land  seismic  assets of
Northern and all of the capital stock of Kemp ,  approximately  $4.6 million was
used to repay indebtedness of the Operating  Subsidiaries,  $152,000 was used to
retire capital leases and $1.1 million was paid  subsequent to the  acquisitions
as a purchase  price  adjustment  for the land seismic  assets of Northern.  The
remaining   proceeds  were  used  primarily  for  working  capital  and  capital
expenditures.
    

 At  September  30,  1996,  the  Company had $1.2  million of cash.  The Company
utilized  $2.1  million net cash from  operating  activities  in the nine months
ended September 30, 1996 compared with providing $1.6 million in the same period
of the prior year.  The reduction in net cash  provided by operating  activities
was primarily attributable to a net increase in working capital.


<PAGE>
                                       16




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

LIQUIDITY AND CAPITAL RESOURCES (continued)


   
Net cash used in investing  activities  increased  to $22.5  million in the nine
months ended  September  30, 1996 from  $123,000 in the same period in the prior
year. This increase was primarily due to the cash utilized to purchase  Northern
and Kemp of $10.3 million and for capital expenditures of $12.3 million,  offset
by cash proceeds of approximately $100,000 from the sale of equipment.
    

Net cash  provided by financing  activities  increased to $25.2  million for the
nine months ended  September  30,1996 from net cash  utilized of $663,000 in the
comparable  period  in the prior  year due to the  completion  of the  Company's
initial public offering and the closing of the Company's  credit  agreement with
First Interstate Bank of Texas, N.A.

   
The Company used $12.3 million for capital expenditures in the nine months ended
September 30, 1996 as compared to $123,000 in the same period of the prior year.
Simultaneously with the acquisition of the Operating Subsidiaries,  Northern and
Paragon  exercised  options to purchase  equipment which had been rented.  These
capital  expenditures  reduced the  Company's  reliance on leased  equipment and
improved  the  Company's  ability to meet the  demand  for 3-D data  acquisition
services.  On May 31, 1996, the Company purchased  approximately $8.5 million of
equipment  from  Input/Output,   Inc.  This  purchase  increased  the  Company's
recording  channel capacity from  approximately  7,500 to  approximately  12,000
channels. Simultaneously with the purchase of the equipment, the Company entered
into an $18 million credit facility with First  Interstate  Bank of Texas,  N.A.
The credit  facility is for three years and  includes  $7.5 million of financing
for the above  equipment and $4.5 million of refinancing  of  conditional  sales
agreements acquired by the Operating Subsidiaries prior to the Company's initial
public  offering.  The credit  facility  also  provides  $3.0 million for future
capital  expenditures and a working capital  facility of up to $3.0 million,  of
which $2.0 million is available as of September 30, 1996. The new equipment will
be utilized to meet the  requirements of a contract with a subsidiary of British
Petroleum  in Alaska,  increase  the channel  capacity  of one of the  Company's
Mexican  crews for a new 3-D  contract  with  PEMEX  and  increase  the  channel
capacity of the Company's two crews in the Rocky Mountain Region.

On  October  1,  1996,  the  Company  signed a  termination  agreement  with the
Company's  former Chief  Financial  Officer where the Company  agreed to pay him
$150,000  plus $7,000 per month  through  December 31, 1998, to provide him with
office space in the Company's New York City facility  through  December 31, 1997
and to provide him with certain insurance benefits. In exchange,  therefore, the
former  Chief  Financial  Officer has agreed to render  financial  and  advisory
services to the Company in connection  with its proposed  public  offering.  The
Company  anticipates a charge to fourth quarter  earnings of $400,000 related to
this agreement.

On October 8, 1996, the Company filed a Registration  Statement on Form S-1 (No.
333-13665) with the Securities and Exchange  Commission relating to the proposed
underwritten  sale to the public of 4.0 million  shares of the Company's  Common
Stock (not including an  over-allotment  option of 600,000 shares).  The Company
anticipates  that  the  proceeds  from  the  offering  will be used to  purchase
approximately  $17.0 million of additional  equipment,  repay approximately $6.0
million of debt incurred in connection  with the Company's  purchase in May 1996
of two 24-bit seismic data acquisition  systems,  approximately  $2.6 million to
pay a portion of the  purchase  price for J.R.S.  and the  balance,  if any, for
working capital and other general corporate purposes.

At November 1, 1996, the Company's estimated backlog of commitments for services
totaled $41.7  million.  The Company  expects to complete  substantially  all of
these  commitments  during 1996 and 1997;  however,  commitments  are subject to
cancellation  at the  option of the  Company's  customers,  on short  notice and
without penalty.
    

The  Company  believes  that its  planned  capital  expenditures  and  operating
requirements  through the end of 1996 will be funded  from cash from  operations
and proceeds from the First  Interstate Bank of Texas,  N.A. credit facility and
other equipment financing if required. If other financing is required, there can
be no assurance that the Company will be able to obtain  financing at all, or on
terms  favorable to the Company.  If the financing  sources  described above are
insufficient to fund the Company's  planned capital  expenditures  and operating
requirements,  and the Company is unable to obtain additional financing, it will
be unable to complete its capital  expenditure program and may be materially and
adversely affected as a result.




<PAGE>
                                       17






PART II.       OTHER INFORMATION


Item 1.   Legal Proceedings.

              None

Item 2.   Changes in Securities.

              None

Item 3.   Defaults Upon Senior Securities.

              None

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

              None

Item 5.   Other Information.

              None

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

       (a)   List of exhibits

               Financial Data Schedule

               Executive Employment Agreement dated September 30, 1996,
                 between the Registrant and Ronald L. Koons (Incorporated  by
                 reference to Exhibit  10.5 to the Registrant's  Registration 
                 Statement on Form S-1(No. 333-13665)).

   
       (b)   The Registrant did not file any Current  Reports on Form 8-K
                during the three months ended September 30, 1996.
    













<PAGE>
                                       19







                                    SIGNATURE

     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.





                                                     3-D Geophysical, Inc.

Dated:  November 14, 1996

                                                     By: /s/ Richard D. Davis
                                                         ---------------------
                                                     Richard D. Davis
                                                     President and 
                                                     Chief Executive Officer





Dated:  November 14, 1996

                                                      By: /s/ Ronald L. Koons
                                                         --------------------
                                                      Ronald L. Koons
                                                      Treasurer and
                                                      Chief Financial Officer
                                                      (principal financial
                                                      and accounting officer)









<PAGE>
                                       18