<PAGE>
 
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                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549
                                        
                                   FORM 10-Q
                                        

[X]  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934 for the Quarterly Period Ended December 31, 1998

[ ]  Transition Report Pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934



                        Commission file number 001-13601


                            OYO GEOSPACE CORPORATION
             (Exact Name of Registrant as Specified in Its Charter)


            DELAWARE                                    76-0447780
 (State or Other Jurisdiction of                    (I.R.S. Employer
   Incorporation or Organization)                     Identification No.)
           

                        12750 SOUTH KIRKWOOD, SUITE 200
                             STAFFORD, TEXAS 77477
                    (Address of Principal Executive Offices)


                                (281) 494-8282
             (Registrant's telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities 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
     ---        ---  
      
There were 5,494,689 shares of the Registrant's Common Stock outstanding as of
the close of business on February 6, 1999.

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<PAGE>
 
                                TABLE OF CONTENTS
 

                                                                          Page
                                                                          Number
                                                                          -----
PART I.  FINANCIAL INFORMATION 
 
  Item 1.  Financial Statements                                              3
 
  Item 2.  Management's Discussion and Analysis of Financial Condition 
             and Results of Operations                                      10
 
PART II.  OTHER INFORMATION
 
  Item 2.  Changes in Securities and Use of Proceeds                        15
 
  Item 6.  Exhibits and Reports on Form 8-K                                 15

                                       2
<PAGE>
 
                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                       REPORT OF INDEPENDENT ACCOUNTANTS

Board of Directors
OYO Geospace Corporation and Subsidiaries

  We have reviewed the accompanying consolidated balance sheet of OYO Geospace
Corporation and Subsidiaries as of December 31, 1998, and the related
consolidated statements of operations and cash flows for the three months ended
December 31, 1998 and 1997.  These financial statements are the responsibility
of the Company's management.

  We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants.  A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters.  It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole.  Accordingly, we do not express such an opinion.

     Based on our review, we are not aware of any material modifications that
should be made to the aforementioned financial statements for them to be in
conformity with generally accepted accounting principles.

     We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of September 30, 1998, and the
related consolidated statements of operations, changes in stockholders' equity,
and cash flows for the year then ended (not presented herein) and, in our report
dated November 17, 1998, we expressed an unqualified opinion on those
consolidated financial statements.  In our opinion, the information set forth in
the accompanying consolidated balance sheet as of September 30, 1998, is fairly
stated, in all material respects, in relation to the consolidated balance sheet
from which it has been derived.



                                                  /s/ PricewaterhouseCoopers LLP


Houston, Texas
January 25, 1999

                                       3
<PAGE>
 
                   OYO GEOSPACE CORPORATION AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                                 (in thousands)
<TABLE>
<CAPTION>
 
                         ASSETS                             DECEMBER 31, 1998    SEPTEMBER 30, 1998
                                                            ------------------   -------------------
                                                               (unaudited)
<S>                                                         <C>                  <C>
Current assets:
  Cash and cash equivalents..............................             $ 2,153               $ 3,970
  Trade accounts and notes receivable, net...............              10,504                11,946
  Inventories............................................              22,687                19,660
  Deferred income tax....................................               2,183                 1,827
  Prepaid expenses and other.............................                 348                   783
                                                                      -------               -------
     Total current assets................................              37,875                38,186
 
Rental equipment, net....................................               2,178                 2,615
Property, plant and equipment, net.......................              19,511                16,763
Goodwill and other intangible assets, net................               5,701                 4,510
Deferred income tax......................................                 999                   818
Other assets.............................................                 505                   396
                                                                      -------               -------
     Total assets........................................             $66,769               $63,288
                                                                      =======               =======
 
                  LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
  Current portion of long-term debt and notes payable....             $   175               $    38
  Accounts payable.......................................               6,391                 5,516
  Accrued expenses and other.............................               2,883                 5,276
  Income tax payable.....................................                 486                   506
                                                                      -------               -------
     Total current liabilities...........................               9,935                11,336
 
Long-term debt...........................................               4,809                   956
Deferred income tax......................................               1,823                 1,613
                                                                      -------               -------
 
     Total liabilities...................................              16,567                13,905
                                                                      -------               -------
 
Commitments and contingencies............................                   -                     -
 
Stockholders' equity:
  Preferred stock........................................                   -                     -
  Common stock...........................................                  55                    54
  Additional paid-in capital.............................              29,865                29,280
  Retained earnings......................................              22,343                22,228
  Accumulated other comprehensive income.................                (541)                 (509)
  Unearned compensation-restricted stock awards..........              (1,520)               (1,670)
                                                                      -------               -------
     Total stockholders' equity..........................              50,202                49,383
                                                                      -------               -------
     Total liabilities and stockholders' equity..........             $66,769               $63,288
                                                                      =======               =======
</TABLE>
 
  The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                       4
<PAGE>
 
                   OYO GEOSPACE CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
               (in thousands, except share and per share amounts)
                                  (unaudited)
<TABLE>
<CAPTION>
 
 
                                                      THREE MONTHS         THREE MONTHS
                                                         ENDED                ENDED
                                                   DECEMBER 31, 1998    DECEMBER 31, 1997
                                                   ------------------   ------------------
<S>                                                <C>                  <C>
 
Sales...........................................          $   11,076           $   12,535
Cost of sales...................................               6,752                7,527
                                                          ----------           ----------
 
Gross profit....................................               4,324                5,008
 
Operating expenses:
  Selling, general and administrative...........               2,515                2,655
  Research and development......................               1,658                  857
                                                          ----------           ----------
     Total operating expenses...................               4,173                3,512
                                                          ----------           ----------
 
Income from operations..........................                 151                1,496
 
Other income (expense):
  Interest expense..............................                 (51)                 (22)
  Interest income...............................                  30                   75
  Other, net....................................                  47                   21
                                                          ----------           ----------
     Total other income, net....................                  26                   74
                                                          ----------           ----------
 
Income before provision for income taxes........                 177                1,570
Provision for income taxes......................                  62                  597
                                                          ----------           ----------
Net income......................................          $      115           $      973
                                                          ==========           ==========
Basic and diluted earnings per share............          $     0.02           $     0.22
                                                          ==========           ==========

Weighted average shares outstanding - Basic.....           5,338,096            4,423,913
 
Weighted average shares outstanding - Diluted...           5,420,402            4,446,150
 
</TABLE>
   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                       5
<PAGE>
 
                   OYO GEOSPACE CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                  (unaudited)
<TABLE>
<CAPTION>
 
                                                                   THREE MONTHS         THREE MONTHS
                                                                      ENDED                ENDED
                                                                DECEMBER 31, 1998    DECEMBER 31, 1997
                                                                ------------------   ------------------
<S>                                                             <C>                  <C>
 
Cash flows from operating expenses:
 Net income..................................................             $   115              $   973
 Adjustments to reconcile net income to net cash used
   in operating activities:
   Deferred income tax.......................................                (327)                 (71)
   Depreciation and amortization.............................                 905                  469
   Amortization of restricted stock awards...................                 150                   20
   Bad debt expense (recovery)...............................                 323                  (22)
   Effects of changes in operating assets and liabilities:
     Trade accounts and notes receivable.....................               2,100               (2,700)
     Inventories.............................................              (1,667)              (1,247)
     Prepaid expenses and other assets.......................                  24                 (186)
     Accounts payable........................................                (352)               1,562
     Accrued expenses and other..............................              (2,783)                (339)
     Income tax payable......................................                 (20)                 371
                                                                          -------              -------
     Net cash used in operating activities...................              (1,532)              (1,170)
                                                                          -------              -------
 
Cash flows from investing activities:
 Capital expenditures........................................              (1,827)              (2,903)
 Purchase of business........................................              (1,000)                  --
 Proceeds from sale of equipment.............................                 317                   --
                                                                          -------              -------
 
     Net cash used in investing activities...................              (2,510)              (2,903)
                                                                          -------              -------
 
Cash flows from financing activities:
 Net proceeds from initial public offering...................                  --               14,643
 Increase in notes payable...................................               8,000                   --
 Decrease in notes payable...................................              (5,774)              (1,500)
                                                                          -------              -------
 
     Net cash provided by financing activities...............               2,226               13,143
                                                                          -------              -------
 
Effect of exchange rate changes on cash......................                  (1)                 (57)
                                                                          -------              -------

(Decrease) increase in cash and cash equivalents.............              (1,817)               9,013
 
Cash and cash equivalents, beginning of period...............               3,970                2,488
                                                                          -------              -------
Cash and cash equivalents, end of period.....................             $ 2,153              $11,501
                                                                          =======              =======
</TABLE>

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

                                       6
<PAGE>
 
                   OYO GEOSPACE CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.   BASIS OF PRESENTATION

  The consolidated balance sheet of OYO Geospace Corporation and its
subsidiaries (the "Company") at September 30, 1998, has been derived from the
Company's audited consolidated financial statements at that date. The
consolidated balance sheet at December 31, 1998, and the consolidated statements
of operations and cash flows for the three months ended December 31, 1998 and
1997, have been prepared by the Company, without audit. In the opinion of
management, all adjustments, consisting of normal recurring adjustments,
necessary to present fairly the consolidated financial position, results of
operations and cash flows have been made. The results of operations for the
three months ended December 31, 1998, are not necessarily indicative of the
operating results for a full year or of future operations.

  Certain information and footnote disclosures normally included in financial
statements presented in accordance with generally accepted accounting principles
have been omitted. The accompanying consolidated financial statements should be
read in conjunction with the financial statements and notes thereto contained in
the Company's Annual Report on Form 10-K for the year ended September 30, 1998.

2.   EARNINGS PER COMMON SHARE

  The following table summarizes the calculation of net earnings and weighted
average common shares and common equivalent shares outstanding for purposes of
the computation of earnings per share:

<TABLE>
<CAPTION>
 
 
                                                           THREE MONTHS ENDED
                                                  -------------------------------------
                                                  DECEMBER 31, 1998   DECEMBER 31, 1997
                                                  -----------------   -----------------
<S>                                               <C>                 <C>
 
  Net earnings available to common
    stockholders (in thousands)                          $      115          $      973
                                                         ==========          ==========
 
  Weighted average common shares outstanding              5,338,096           4,423,913
  Weighted average common share equivalents
    outstanding                                              82,306              22,237
                                                         ----------          ----------
  Weighted average common shares and common
     share equivalents outstanding                        5,420,402           4,446,150
                                                         ==========          ==========
  Basic earnings per common share                        $     0.02          $     0.22
                                                         ==========          ==========
  Diluted earnings per common share                      $     0.02          $     0.22
                                                         ==========          ==========
</TABLE>

3.   COMPREHENSIVE INCOME

  Effective October 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income", which
establishes standards for reporting and display of comprehensive income and its
components in a full set of financial statements.  Comprehensive income includes
all changes in a company's equity, except those resulting from investments by
and distributions to owners.  The following table summarizes the components of
comprehensive income (in thousands):

                                       7
<PAGE>
 
                   OYO GEOSPACE CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 
                                                    THREE MONTHS ENDED
                                        ---------------------------------------
                                         DECEMBER 31, 1998    DECEMBER 31, 1997
                                        ------------------   ------------------
 
  Net income                                   $ 115                $ 973
 
  Foreign currency translation adjustments       (32)                (180)
                                                ----                 ----
  Total comprehensive income                   $  83                $ 793
                                                ====                 ====


4.   INVENTORIES

  Inventories consisted of the following (in thousands):


                            December 31, 1998   September 30, 1998
                            -----------------   ------------------
 
       Finished goods                 $ 3,620              $ 3,282
       Work in process                  3,745                3,686
       Raw materials                   15,322               12,692
                                      -------              -------
                                      $22,687              $19,660
                                      =======              =======

5.   LONG-TERM DEBT

  In December 1998, the Company borrowed $3.5 million under the terms of a
fifteen year amortizing mortgage loan collateralized by one of the Company's
manufacturing facilities.  The mortgage loan bears interest at a fixed rate of
7.0% per annum.

6.   ACQUISITION

  On November 30, 1998, the Company acquired certain assets of LTI, Inc. and its
Canadian subsidiary (together, "LTI") for approximately $3.8 million, including
the assumption of approximately $1.9 million of long-term debt. In connection
with the acquisition, the Company issued 55,659 shares of its common stock
valued at $0.6 million.  As of December 31, 1998, the Company had paid
approximately $2.7 million of cash in connection with the acquisition including
the repayment of $1.7 million of long-term debt. A final cash payment is to be
made in February 1999 upon final determination of the value of the assets
acquired and liabilities assumed.  The operations of LTI include the design and
manufacture of land and marine seismic connectors, which have been combined with
the Company's existing seismic connector manufacturing operations.

  The allocation of the purchase price as of December 31, 1998, including
related direct costs, for the acquisition of LTI's net assets and assumption of
related debt, was as follows (in thousands):

                                       8
<PAGE>
 
       Net current assets..............................   $ 1,291
       Property, plant and equipment...................     1,309
       Goodwill........................................     1,184
       Long-term debt..................................    (1,896)
                                                          -------
 
       Total purchase price allocation.................     1,888
 
     Consideration:
       Estimated liability for final cash settlement...       300
       Common stock issued.............................       588
                                                          -------
       Cash used for acquisition.......................   $ 1,000
                                                          =======

  Goodwill is being amortized using the straight-line method over fifteen years.

7.   SUPPLEMENTAL NONCASH INVESTING AND FINANCING ACTIVITIES

  During the three months ended December 31, 1998, the Company increased its
common stock and additional paid-in capital by approximately $0.6 million
through the issuance of common stock in connection with the acquisition of
certain assets of LTI.

                                       9
<PAGE>
 
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS


  The following analysis of the financial condition and results of operations of
OYO Geospace Corporation should be read in conjunction with the Consolidated
Financial Statements and Notes related thereto included elsewhere in this Form
10-Q.

OVERVIEW

  We design and manufacture instruments and equipment used in the acquisition
and processing of seismic data for the oil and gas industry and for the
commercial graphics industry worldwide.

  Demand for our products used in the acquisition and processing of seismic data
is dependent primarily upon the level of worldwide oil and gas exploration
activity.  That activity, in turn, is dependent primarily upon prevailing oil
and gas prices.  Historically, the markets for oil and gas have been volatile,
and such markets are likely to continue to be volatile.  Oil and gas prices have
fallen sharply in recent quarters and continue to be depressed.  This has
resulted in a decline for our land-based seismic products.  If commodity prices
remain low in future periods, our sales may continue to decline.  However, as it
is impossible to predict future oil and gas price movements with certainty, no
assurance can be given as to the level of future demand for our products.

  Further, the recent decline in oil and gas prices has resulted in decreased
seismic exploration budgets throughout the industry.  As a result, many of our
customers are experiencing lower revenues and liquidity challenges.  From time
to time we extend credit to certain of our customers, and our credit risks
increase when our customers face a difficult business environment.  As discussed
below under "Liquidity and Capital Resources" and "Forward Looking Statements-
Credit Risks of Customer Financing", current industry conditions could result in
additional bad debt expenses in future periods.

  The current industry environment has resulted in, and will continue to result
in, competitive pricing pressures on our land-based seismic products.  We intend
to respond competitively to these market forces in order to maintain, or
improve, our market share.  In addition, the current industry environment has
resulted in, and likely will continue to result in, a greater percentage of our
sales being attributable to products that historically have provided lower gross
margins.  Further, as overall sales decrease, our manufacturing costs per unit
increase as fixed costs are allocated over fewer units.  The combination of
these factors may result in lower gross profit margins in future periods.

RESULTS OF OPERATIONS

  The following table sets forth for the three months ended December 31, 1998
and 1997, the percentage of certain statement of operations items to total
sales:
 
                                                 Three Months Ended December 31,
                                                 ------------------------------
                                                    1998                 1997
                                                 ----------           ---------
Sales............................................   100.0%               100.0%
Cost of sales....................................    61.0                  60.0
Gross profit.....................................    39.0                  40.0
Selling, general and administrative..............    22.7                  21.2
Research and development.........................    15.0                   6.8
Income from operations...........................     1.4                  11.9
Other income (expense), net......................     0.2                   0.6
Income before provision for income taxes.........     1.6                  12.5
Provision for income taxes.......................     0.6                   4.8
Net income.......................................     1.0                   7.8

Fiscal Year 1999 Compared to Fiscal Year 1998.

  Sales for the three months ended December 31, 1998 decreased $1.5 million, or
11.6%, from the corresponding period of the prior year.  The decrease in sales
was primarily due to a decline in product demand and competitive 

                                       10
<PAGE>
 
pricing pressures associated with our land-based seismic products, principally
resulting from the decline in worldwide oil and gas exploration activity.

  Cost of sales for the three months ended December 31, 1998 decreased $0.8
million, or 10.3%, from the corresponding period of the prior year. Cost of
sales increased as a percentage of total sales to 61.0% in the three months
ended December 31, 1998 from 60.0% in the corresponding period of the prior
year. This percentage increase was generally attributable to decreased
manufacturing efficiencies as a result of the lower sales volume and competitive
pricing pressures associated with our land-based seismic products during the
three months ended December 31, 1998.  This percentage increase was partially
offset by higher gross profit margins on our marine products sold by Concord
Technologies, Inc., which we acquired in February 1998.  Should sales continue
to decline in future quarters, we could experience lower gross profit margins.

  Selling, general and administrative expenses for the three months ended
December 31, 1998 remained fairly constant, decreasing $0.1 million, or 5.3%,
from the corresponding period of the prior year.  Selling, general and
administrative expenses increased as a percentage of total sales to 22.7% in the
three months ended December 31, 1998 from 21.2% in the corresponding period of
the prior year, primarily reflecting the impact of fixed operating expenses over
a decline in sales.

  Research and development expenses for the three months ended December 31, 1998
increased $0.8 million or 93.5%, from the corresponding period of the prior
year, principally resulting from an increase in expenditures targeted at new
product development. Research and development expenses increased as a percentage
of total sales to 15.0% in the three months ended December 31, 1998 from 6.8% in
the corresponding period of the prior year, reflecting both an increase in
expenditures along with a decline in sales.

  Our effective tax rate for the three months ended December 31, 1998 was 35.0%
compared to 38.0% in the corresponding period of the prior year.  The decrease
in the effective tax rate is principally the result of the implementation of
certain tax strategies during fiscal year 1998 designed to reduce domestic and
foreign income tax expense.

LIQUIDITY AND CAPITAL RESOURCES

  At December 31, 1998, we had $2.2 million in cash and cash equivalents.  For
the three months ended December 31, 1998, cash used in operating activities was
$1.5 million principally resulting from an increase in inventories and from a
decrease in accrued expenses primarily attributable to the payment of fiscal
1998 incentive compensation.  These uses of cash were offset by a decrease in
trade accounts and notes receivable.

  For the three months ended December 31, 1998, we used approximately $2.5
million in investing activities, including $1.8 million in capital expenditures
and $1.0 million associated with the acquisition of certain assets of LTI, Inc.
and its Canadian subsidiary (together, "LTI").  We estimate that total capital
expenditures in fiscal 1999 will be $5.0 million.

  Financing activities for the three months ended December 31, 1998 provided
$2.2 million of cash, principally resulting from a $3.5 million increase in
long-term mortgage notes payable offset by the repayment of $1.7 million of
long-term debt assumed in connection with the LTI asset acquisition and net
borrowings under our credit facility.

  The recent decline in oil and gas prices has increased our credit risks as our
customers face a difficult business environment.  At December 31, 1998, we had
an outstanding receivable form one customer in the amount of approximately
$768,000 that was over 120 days old and an outstanding receivable from another
customer in the amount of approximately $319,000 that was over 90 days old.  In
the three months ended December 31, 1998, we increased our bad debt reserve by
approximately $299,000 to $802,000.  Although we believe this reserve is a fair
representation of our credit risk with respect to outstanding receivables, we
can not assure you that this reserve will be adequate to cover our potential bad
debt expenses.  In addition, current industry conditions could result in
additional bad debt expenses in future periods.

  We have a working capital line of credit, under which we are able to borrow up
to $10.0 million.  This credit facility expires in June 2000 and is
collateralized by our accounts receivable and inventory. The credit facility

                                       11
<PAGE>
 
prohibits us from paying cash dividends on our common stock, limits our capital
expenditures, limits our additional indebtedness to $7.5 million, requires us to
maintain certain financial ratios and contains other covenants customary in
transactions of this type.  There was $0.5 million outstanding at December 31,
1998 under the credit facility, leaving borrowing availability at $9.5 million.

  We obtained a $3.5 million mortgage loan in December 1998 collateralized by
one of our manufacturing facilities.  This mortgage loan bears interest at 7.0%
per annum and matures in December 2013.

  We believe that the combination of cash flow from operations and borrowing
availability under our credit facility should provide us with sufficient capital
resources and liquidity to fund our planned operations through fiscal 1999.
However, there can be no assurance that these sources of capital will be
sufficient to support our capital requirements through fiscal 1999 or in the
long-term, and we may be required to issue additional debt or equity securities
in the future to meet our capital requirements.

  Inflation has not had a significant impact on our operations to date.

ACQUISITION

  On November 30, 1998, we acquired substantially all of the assets of LTI for
approximately $3.8 million including the assumption of approximately $1.9
million of long-term debt.  In connection with that acquisition, we issued
55,659 shares of our common stock valued at $0.6 million.  As of December 31,
1998, we have paid approximately $2.7 million of cash in connection with the
acquisition including the repayment of $1.7 million of long-term debt. A final
cash payment is to be made in February 1999 upon final determination of the
value of the assets acquired and liabilities assumed. The operations of LTI
include the design and manufacture of land and marine seismic connectors, which
have been combined with our existing seismic connector manufacturing operations.

RECENT ACCOUNTING PRONOUNCEMENTS

  In June 1998, the FASB issued Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"). SFAS 133 establishes accounting and reporting standards for derivative
instruments and hedging activities.  It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. SFAS 133 is effective for
all fiscal quarters of fiscal years beginning after June 15, 1999 and is not
expected to have a material impact on the Company's financial statements.

YEAR 2000 ISSUES

  The "Year 2000 problem" is the result of computer programs being written using
two digits rather than four to define the applicable year.  Any programs that
have time-sensitive software may recognize a date using "00" as the year 1900
rather than the year 2000.  This could result in a major system failure or
miscalculations in affected computer and operational systems.

  State of Readiness.  We have substantially completed a program of upgrading
our internal accounting software (information technology systems) to make those
systems more efficient and compatible company-wide (the "Upgrade"). The
suppliers of substantially all of the software we use for financial purposes
following the Upgrade have informed us that all of those suppliers' software is
Year 2000 compliant.

  Further, we are in the process of reviewing the operational computers built
into certain of our manufacturing equipment, such as milling machines and lathes
(non-information technology), to determine whether or not that equipment may be
effected by the Year 2000 problem.  We have received assurances from the
manufacturers of most of this equipment that its operation will not be effected
by the Year 2000.  We expect this review will be completed before the end of
fiscal 1999.

                                       12
<PAGE>
 
  We have begun soliciting suppliers and vendors with whom we have a material
relationship to determine the readiness of those suppliers and vendors for the
Year 2000.  Most, but not all, of those vendors have responded and indicated
that they do not expect to be materially adversely impacted by Year 2000
problems.

  Expected Costs and Material Risks.  Through December 31, 1998, we have
incurred approximately $50,000 in direct expenses related to investigating our
Year 2000 readiness and Year 2000 problems.  We do not maintain a record of
internal costs of our personnel in investigating Year 2000 issues.  We do not
expect that we will incur material additional expenditures in discovering and
addressing any Year 2000 problems we may have.  However, our review of certain
of our manufacturing equipment is ongoing and could result in unexpected expense
to repair Year 2000 problems or upgrade machinery.

  In addition, the Year 2000 problem may impact customers, suppliers, shippers
and other entities with which we transact business, and we cannot predict the
effect of the Year 2000 problem on those entities or how those entities' Year
2000 problems may indirectly effect us.

  Further, our customers use our seismic products in conjunction with data
acquisition systems not manufactured by us.  If those systems were to have Year
2000 problems, it is possible that some of our customers would be temporarily
unable to engage in seismic data acquisition, which could result in a decrease
in demand for our products.

  THE FOREGOING STATEMENTS ARE INTENDED TO BE AND ARE HEREBY DESIGNATED "YEAR
2000 READINESS DISCLOSURE" WITHIN THE MEANING OF THE YEAR 2000 INFORMATION AND
READINESS ACT.

FORWARD LOOKING STATEMENTS

  This Form 10-Q includes "forward-looking" statements which are subject to the
"Safe Harbor" provisions of Section 27A of the Securities Exchange Act of 1933
and Section 21E of the Securities Exchange Act of 1934.  All statements other
than statements of historical fact included herein, including statements about
potential future products and markets, our future financial position, business
strategy and other plans and objectives for future operations, are forward-
looking statements.  Although we believe the expectations reflected in such
forward-looking statements are reasonable, we can give no assurance that such
expectations will prove to have been correct, and actual results may differ
materially from such forward-looking statements.  Additional important factors
that could cause actual results to differ materially from our expectations are
disclosed in our Annual Report on Form 10-K for the year ended September 30,
1998.  Further, all written and verbal forward-looking statements attributable
to us or persons acting on our behalf are expressly qualified in their entirety
by such factors.

VOLATILITY OF DEMAND FOR OUR PRODUCTS; CURRENT INDUSTRY CONDITIONS

  Demand for our products depends primarily on the level of worldwide oil and
gas exploration activity. That activity, in turn, depends primarily on
prevailing oil and gas prices. Historically, the markets for oil and gas have
been volatile, and those markets are likely to continue to be volatile. Oil and
gas prices are subject to wide fluctuation in response to relatively minor
changes in the supply of and demand for oil and gas, market uncertainty and a
variety of additional factors that are beyond our control. These factors include
the level of consumer demand, weather conditions, domestic and foreign
governmental regulations, the price and availability of alternative fuels,
political conditions in the Middle East and other significant oil-producing
regions, the foreign supply of oil and gas, the price of foreign imports and
overall economic conditions.

  Currently, oil and gas prices are significantly lower than they have been in
recent history, which has decreased demand for our products. Continued low
demand for our products could materially and adversely affect our results of
operations and liquidity.

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<PAGE>
 
CREDIT RISKS OF CUSTOMER FINANCING

  We have in the past incurred significant write-offs in our accounts
receivables due to customer credit problems. We are subject to credit risks as
to certain of our customers, as we have found it necessary from time to time to
extend trade credit to long-term customers and others where some risks of
nonpayment or late payment exist.   Given current industry conditions, some of
our customers may experience liquidity difficulties, which increases those
credit risks.  We cannot assure you that sufficient aggregate amounts of
uncollectible receivables and bad debt write-offs will not have a material
adverse effect on our future results of operations.

LIMITED MARKET AND CUSTOMER CONCENTRATION

  We market our products to seismic contractors and large, independent and
government-owned oil and gas companies. We estimate, based on published industry
sources, that fewer than 100 seismic contracting companies are currently
operating worldwide (excluding those operating in Russia and the former Soviet
Union, India, the People's Republic of China and certain Eastern European
countries, where seismic data acquisition activity is difficult to verify). Due
to these market factors, a relatively small number of customers has accounted
for most of our sales. The loss of a small number of these customers could
materially and adversely impact our sales.

RAPID TECHNOLOGICAL EVOLUTION AND PRODUCT OBSOLESCENCE

  Seismic instruments and equipment are constantly undergoing rapid
technological improvement. Our future success depends on our ability to continue
to:
 .  improve our existing product lines;
 .  address the increasingly sophisticated needs of our customers;
 .  maintain a reputation for technological leadership;
 .  maintain market acceptance;
 .  anticipate changes in technology and industry standards; and
 .  respond to technological developments on a timely basis.

  Current competitors or new market entrants may develop new technologies,
products or standards that could render our products obsolete. We cannot assure
you that we will be successful in developing and marketing, on a timely and cost
effective basis, product enhancements or new products that respond to
technological developments, that are accepted in the marketplace or that comply
with industry standards.

HIGHLY COMPETITIVE MARKETS

  The markets for our products are highly competitive. Many of our existing and
potential competitors have substantially greater marketing, financial and
technical resources than we do. Additionally, one of our competitors currently
offers a broader range of seismic instruments and equipment for sale and markets
this equipment as a "packaged" data acquisition system. We do not now offer for
sale such a complete "packaged" data acquisition system. Further, certain of our
competitors offer financing arrangements to customers on terms that we may not
be able to match. In addition, new competitors may enter the market and
competition could intensify.

  We cannot assure you that sales of our products will continue at current
volumes or prices if current competitors or new market entrants introduce new
products with better features, performance, price or other characteristics than
our products. Competitive pressures or other factors also may result in
significant price competition that could have a material adverse effect on our
results of operations.

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<PAGE>
 
                          PART II - OTHER INFORMATION

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

     On November 30, 1998, we issued an aggregate of 55,659 shares of our common
stock, par value $.01 per share, to LTI in connection with our acquisition of
certain assets of LTI.  The issuance was exempt under Section 4(2) of the
Securities Act of 1933.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

(a)   The following exhibits are filed with this Quarterly Report.

2.1   Asset Purchase Agreement, dated November 17, 1998, as amended November 30,
      1998, regarding the acquisition of assets of LTI.

4.1   Promissory Note, dated as of December 30, 1998, made by and between the
      Company and Jefferson-Pilot Life Insurance Company. (This Instrument is
      not filed in reliance on Item 601 (b)(4)(iii)(A) of Regulation S-K. The
      Registrant agrees to furnish a copy of this agreement to the Commission
      upon request).

15.1  Awareness Letter of Independent Accountants

27.1  Financial Data Schedule


(b)   The Company did not file any reports on Form 8-K during the quarter for
      which this report is filed.

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<PAGE>
 
                                   SIGNATURES

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


                                       OYO GEOSPACE CORPORATION



Date:  February 3, 1998                By: /s/ Gary D. Owens
                                          ---------------------------------
                                          Gary D. Owens, Chairman of the Board
                                           President and Chief Executive Officer
                                                 (duly authorized officer)
                                        



Date:  February 3, 1998                 By: /s/ Thomas T. McEntire
                                          ---------------------------------
                                                Thomas T. McEntire
                                              Chief Financial Officer
                                            (principal financial officer)

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