<PAGE>   1

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

                                ----------------
                                    FORM 10-K
(MARK ONE)
              [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                   FOR THE FISCAL YEAR ENDED JANUARY 31, 2000
                                       OR
              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                          COMMISSION FILE NO. 000-25142

                                ----------------

                            MITCHAM INDUSTRIES, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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

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

        Registrant's telephone number, including area code: 936-291-2277

           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

                                ----------------

                                      NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                          COMMON STOCK, $.01 PAR VALUE
                                (TITLE OF CLASS)

         Indicate by check mark whether the registrant (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes  X  No
                                              ---    ---

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this form 10-K.  X
                             ---

         Aggregate market value of the voting stock held by non-affiliates of
the registrant: $26,820,710 as of April 25, 2000.

         As of April 25, 2000, there were outstanding 9,315,112 shares of the
registrant's common stock, par value $.01, which is the only class of common or
voting stock of the registrant.

                       DOCUMENTS INCORPORATED BY REFERENCE

         The information called for by Part III of this Form 10-K is
incorporated by reference from the registrant's Proxy Statement for the 2000
Annual Meeting of Shareholders of the Company to be filed with the Securities
and Exchange Commission not later than 120 days after the end of the fiscal year
covered by this report.


<PAGE>   2


                            MITCHAM INDUSTRIES, INC.
                           ANNUAL REPORT ON FORM 10-K
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                   PART I

<S>               <C>                                                                                    <C>
Item 1.           Business..............................................................................   1

Item 2.           Properties............................................................................  12

Item 3.           Legal Proceedings.....................................................................  12

Item 4.           Submission of Matters to a Vote of Security Holders...................................  12

                                                   PART II

Item 5.           Market for the Registrant's Common Equity and Related
                  Stockholder Matters...................................................................  13

Item 6.           Selected Financial Data...............................................................  13

Item 7.           Management's Discussion and Analysis of Financial
                  Condition and Results of Operations...................................................  14

Item 7A.          Quantitative and Qualitative Disclosures About Market Risk............................  17

Item 8.           Financial Statements and Supplementary Data...........................................  17

Item 9.           Changes in and Disagreements With Accountants on Accounting
                  and Financial Disclosure..............................................................  17

                                                  PART III

Item 10.          Directors and Executive Officers of the Registrant....................................  17

Item 11.          Executive Compensation................................................................  18

Item 12.          Security Ownership of Certain Beneficial Owners and Management........................  18

Item 13.          Certain Relationships and Related Transactions........................................  18

                                                   PART IV

Item 14.          Exhibits, Financial Statement Schedules, and Reports on Form 8-K......................  18

                  Signatures............................................................................  20
</TABLE>



<PAGE>   3


                                     PART I

ITEM 1. BUSINESS

BACKGROUND

         Mitcham Industries, Inc. leases and sells geophysical and other
equipment used primarily by seismic data acquisition contractors to perform
seismic data surveys on land and in transition zones (marsh and shallow water
areas). The Company conducts its operations on a worldwide basis and is a
leading independent seismic equipment lessor in North and South America. Over
the last several years advances in seismic technology have increased drilling
success rates, thereby reducing the overall costs of finding oil and gas. As a
result, the Company and many seismic contractors have significantly expanded
their seismic equipment fleets. From January 31, 1996 through January 31, 2000,
the Company's equipment lease pool, at cost, increased from approximately $10.1
million to $70.3 million.

         The Company owns a variety of technologically advanced equipment
acquired from the leading seismic manufacturers. The Company's lease pool
includes many types of equipment used in seismic data acquisition, including all
components of land and transition zone seismic data acquisition systems,
geophones and cables, earth vibrators, peripheral equipment, survey and other
equipment. A substantial amount of the Company's equipment lease pool is
provided by two manufacturers, the Sercel subsidiaries of Compagnie Generale de
Geophysique (collectively, "Sercel") and Input/Output, Inc. ("I/O"). The Company
believes that most of the advanced seismic data acquisition systems in use
worldwide are either Sercel or I/O systems. In the last two years, the Company
has significantly diversified its equipment lease pool to include a wider
variety of seismic equipment. At January 31, 2000, approximately 47% of the
Company's equipment lease pool, on a cost basis, consisted of seismic recording
channel boxes, with the remainder consisting of peripheral and other equipment.

         The Company leases its equipment on a short-term basis, generally for
three to nine months, to seismic contractors who need additional capacity to
complete a seismic survey. In doing so, the Company enables its customers to
achieve operating and capital investment efficiencies. Demand for short-term
seismic equipment leases is affected by many factors including: (i) the highly
variable size and technological demands of individual seismic surveys, (ii)
seasonal weather patterns and sporadic demand for seismic surveys in certain
regions, (iii) rapidly changing technology and (iv) costs of seismic equipment.
The Company believes these factors allow seismic contractors to use short-term
seismic equipment leasing as a cost-effective alternative to purchasing
additional equipment. The Company's equipment lease rates vary according to an
item's expected useful life, utilization and initial cost.

         A typical seismic crew uses a wide variety of equipment to perform
seismic data acquisition surveys. The Company's customers may lease a small
amount of equipment to expand an existing crew's capabilities or a complete
seismic data acquisition system to equip an entire crew.

         Certain of the Company's leases contain a purchase option, allowing the
customer to apply a portion of the lease payments to the eventual purchase of
the equipment. Additionally, the Company sells a broad range of used seismic
equipment on a worldwide basis and, in certain markets, acts as a sales
representative or distributor of new seismic equipment.

         The Company has supply and exclusive lease referral agreements with
several leading seismic equipment manufacturers, including Sercel and Pelton
Company, Inc. ("Pelton"). The Company believes that these agreements provide it
with certain competitive advantages. Under these agreements, the Company is the
exclusive worldwide short-term leasing representative for certain products. An
additional



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agreement exists with Sercel that allows the Company to act as sales
representative or distributor for such manufacturer's products in selected
markets. See "Key Supplier Agreements."

BUSINESS STRATEGY

         The Company's business strategy is to meet the needs of users of
seismic equipment through its leasing and support services. To accomplish this,
the Company has identified the following major objectives:

         o        Provide a technologically advanced seismic equipment lease
                  pool. The Company intends to maintain the size and diversity
                  of its equipment lease pool. The Company believes that the
                  availability of a large and diverse seismic equipment lease
                  pool encourages seismic data acquisition contractors to lease,
                  rather than purchase, such equipment, due to the capital and
                  operating efficiencies provided by short-term leases.

         o        Expand international operations. Historically, the Company's
                  activities outside North America have consisted of equipment
                  sales, with a limited amount of leasing activities. The
                  Company believes that there are opportunities to expand its
                  international leasing activities as its customers' operations
                  grow in international markets. The Company receives referrals
                  from Sercel and other manufacturers on a worldwide basis. The
                  Company believes that its alliances with manufacturers provide
                  opportunities to further penetrate international markets,
                  where such manufacturers are well recognized and have
                  well-developed business relationships.

         o        Develop and enhance alliances with major seismic equipment
                  manufacturers. The Company's relationships with leading
                  seismic equipment manufacturers allow it to expand its
                  equipment lease pool on favorable terms. The Company believes
                  such relationships improve its access to customers and provide
                  a competitive advantage. The Company has exclusive short-term
                  lease agreements with certain manufacturers and is seeking to
                  develop additional arrangements.

         o        Pursue additional business development opportunities. The
                  Company regularly evaluates opportunities to expand its
                  business activities within the oil service industry,
                  particularly in the seismic sector.

SEISMIC TECHNOLOGY AND THE INDUSTRY

         Seismic surveys are a principal source of information used by oil and
gas companies to identify geological conditions that are favorable for the
accumulation of oil and gas and to evaluate the potential for successful
drilling, development and production of oil and gas. Seismic technology has been
used by the oil and gas industry since the 1920's and has advanced significantly
with improvements in computing and electronic technologies. In recent years, the
oil and gas industry has significantly expanded its use of 3-D seismic data
which provides a more comprehensive subsurface image and is believed to have
contributed to improved drilling success rates, particularly in mature oil and
gas basins such as those in North America. Additionally, 2-D seismic data
continues to be used in many areas where 3-D data acquisition is cost
prohibitive or logistical access is limited.

         Oil and gas exploration companies utilize seismic data generated from
the use of digital seismic systems and peripheral equipment in determining
optimal locations for drilling oil and gas wells, in the development of oil and
gas reserves and in reservoir management for the production of oil and gas. A
complete digital seismic data acquisition system generally consists of (i) a
central electronics unit that



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records and stores digital data ("CEU"), (ii) seismic recording channel boxes
that contain from one to eight seismic channels ("channel boxes"), (iii)
geophones, or seismic sensors, (iv) energy sources including dynamite,
compressed air guns or earth vibrators that create the necessary acoustic wave
to be recorded, (v) cables that transmit digital seismic data from the channel
boxes to the CEU, (vi) survey equipment, drilling equipment for shot holes and
other equipment and (vii) other peripheral, or accessory, equipment.

         In seismic data acquisition, an acoustic wave is generated at or below
the earth's surface through the discharge of compressed air, the detonation of
small explosive charges or the use of vibrators. As the acoustic wave travels
through the earth, it is reflected by the underlying rock layers and the
reflected energy is captured by the geophones, which are sited at intervals
along paths from the point of acoustical impulse. The resulting signals are then
transmitted to the channel boxes, which convert the signals from analog to
digital data and transmit this data via cable to the CEU. The CEU stores the
seismic data on magnetic tape or disk for processing. The digital data is then
input into a specialized seismic processing system that uses sophisticated
computer software programs to enhance the recorded signal and produce an image
of the subsurface strata. By interpreting seismic data, oil and gas exploration
companies create detailed maps of exploration prospects and oil and gas
reservoirs.

         In the past, the 2-D seismic survey was the standard data acquisition
technique used to map geologic formations over a broad area. 2-D seismic data
can be visualized as a single vertical plane of subsurface information. Data
gathered from a 3-D seismic survey is best visualized as a cube of information
that can be sliced into numerous planes, providing different views of a geologic
structure with much higher resolution than is available with traditional 2-D
seismic survey techniques. 3-D seismic surveys require much larger data
acquisition systems. By using a greater number of channels and flexible
configuration, 3-D seismic data provides more extensive and detailed information
regarding the subsurface geology than does 2-D data. As a result, 3-D data
allows the geophysicists interpreting the data to more closely select the
optimal location of a prospective drillsite or oil and gas reservoir.

         In the exploration and development process, oil and gas companies
establish requirements for seismic data acquisition programs based on their
technical objectives. Because of the expense associated with drilling oil and
gas wells, decisions whether or where to drill are critical to the overall
process. Because 3-D seismic data increase drilling success rates and reduce
costs, the Company believes that oil and gas companies are increasingly
requiring 3-D seismic surveys in their activities. As a result of the increasing
requirements for this higher resolution data, which in turn requires additional
channels to collect and transmit the data, seismic data acquisition systems have
been expanding in size during the past several years.

         Recent industry advances include the use of high resolution 3-D,
three-component geophones ("3C-3D"), which enhance the 3-D image, and time lapse
("4-D") seismic, where surveys are periodically reacquired to allow the
monitoring of producing oil and gas field for optimal production and reserve
recovery. These and other technical advances have contributed to increased
drilling success rates and reduced oil and gas finding costs and consequently,
have increased demand for seismic data acquisition equipment and services.

         With the expanded use of seismic technology, particularly 3-D seismic,
the size of data acquisition surveys has increased substantially in the past
several years. Demand for higher resolution data, larger surveys and more rapid
completion of such surveys is requiring seismic contractors to use data
acquisition systems with a greater number of seismic recording channels.
Additionally, in many areas, such as North America, the size of seismic surveys
varies significantly, requiring frequent changes in the configuration of
equipment and crews used for seismic surveys. As a result of these advances,
seismic survey channel



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count has increased from smaller 2-D surveys, which typically averaged 120
channels, to larger 3-D surveys which today average approximately 1,500 channels
and often use 3,000 or more channels. The Company believes that many seismic
contractors will continue to meet changes in equipment needs by leasing
incremental equipment to expand crew size as necessary to meet specific survey
requirements, and thereby reduce the substantial capital expenditures necessary
to purchase such equipment.

BUSINESS AND OPERATIONS

         SEISMIC EQUIPMENT LEASING. The Company typically purchases new and used
seismic equipment for short-term (less than one year) lease to its customers,
which primarily include seismic contractors. After the termination of the
original equipment lease, the Company enters into additional short-term leases
with other customers, often leasing such equipment multiple times until the end
of its useful life or its sale. The Company's equipment leasing services
generally include the lease of the various components of seismic data
acquisition systems and related equipment to meet a customer's job
specifications. Such specifications frequently vary as to the number of required
recording channels, geophones, energy sources (e.g., earth vibrators) and other
equipment. The Company's customers generally lease seismic equipment to meet
shortages of recording channels and related equipment for specific surveys.
Typically, the Company does not lease all of the channel boxes and other
peripheral equipment required for seismic surveys, although it has the
capability to lease equipment for an entire seismic system and, from time to
time, will do so.

         The Company currently has an equipment lease pool comprising a total of
approximately 27,700 seismic recording channels (each channel being capable of
electronically converting seismic data from analog to digital format and
transmitting the digital data), geophones and cables, earth vibrators,
peripheral equipment and survey and other equipment. All of the Company's lease
pool equipment is manufactured by leading seismic equipment manufacturers and is
widely used in the seismic industry.

         The Company's equipment leases generally have terms of three to nine
months and are typically renewable on a month-to-month basis. The Company offers
maintenance of its leased equipment during the lease term for malfunctions due
to failure of material and parts and will provide replacement equipment as
necessary. In addition, the Company provides telephone support services to
answer its lease customers' questions.

         The Company's equipment lease rates vary according to an item's
expected useful life, utilization and initial cost. The lessee must also obtain
and keep in force insurance for the replacement value of the equipment and a
specified minimum amount of general liability and casualty insurance on the
leased equipment during the term of the lease. Before equipment is delivered,
the lessee must provide certification that the Company has been named an
additional insured and loss payee on its policies. The lessee is responsible for
all maintenance and repairs of leased equipment other than those arising from
normal wear and tear. All taxes (other than U.S. federal income taxes) and
assessments are the contractual obligation of the lessee. To the extent foreign
taxes are not paid by the lessee, the relevant foreign taxing authority might
seek to collect such taxes from the Company. To date, no such collection action
has been taken against the Company.

         A majority of the Company's leasing revenues has historically come from
North American operations. Within North America, a significant portion of the
Company's total revenues is attributable to Canadian operations. Management
believes that the United States and Canada will continue to be the focal points
of the Company's seismic equipment leasing operations for the foreseeable
future, although the Company is pursuing an expanded presence in other
international locations such as South and Central America and the Far East.



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         Historically, seismic equipment leasing has been susceptible to weather
patterns in certain geographic regions. There is some seasonality to the
Company's operations in Canada, where a significant percentage of the seismic
survey activity usually occurs in the winter season, from October through March.
During the months in which the weather is warmer, certain areas are not
accessible to trucks, earth vibrators and other heavy equipment because of the
unstable terrain. In the United States, most of the seismic survey work is not
usually affected by weather. As a result of weather conditions, the Company
attempts to manage its equipment lease pool to meet seasonal demands. Equipment
leased in Canada during the winter months may be moved to the United States in
the warmer months.

         SEISMIC EQUIPMENT SALES. The Company's equipment sales business serves
a diverse base of industry, governmental, university and research customers. The
Company typically buys used equipment for resale and new equipment in response
to specific customer orders. On occasion, the Company will also hold equipment
of third parties and sell such equipment on consignment.

         SEISMIC EQUIPMENT LEASE/PURCHASES. The Company's lease/purchase
activities reflect the two components involved in lease/purchase option
contracts. The lease revenue component represents the lease amounts paid under
the lease/purchase contracts and the sales component represents the sales
revenue and related cost associated with the customers' exercise of the purchase
option.

         SEISMIC EQUIPMENT COMMISSIONED SALES. Under the Sercel Sales Agreement
discussed below, the Company receives sales commissions on all Sercel equipment
and spare parts sold in Canada.

KEY SUPPLIER AGREEMENTS

THE SERCEL LEASE AGREEMENT

         Effective December 16, 1999, the Company renewed its exclusive leasing
arrangement with Sercel, a major manufacturer of 3-D seismic data acquisition
equipment, by entering into a new Exclusive Equipment Lease Agreement (the
"Sercel Lease Agreement"). With the exception of a different minimum purchase
requirement for the Company, the Agreement is substantially similar to the
former Exclusive Equipment Lease Agreement between Mitcham and Sercel (the
"Former Sercel Agreement") that the parties entered into in September 1996. The
Former Sercel Agreement required the Company to purchase from Sercel an
aggregate of $10.2 million of Sercel equipment by December 31, 1999, and the
Company satisfied that purchase requirement in fiscal 1998.

         Under the Agreement, the Company acts as Sercel's exclusive third-party
worldwide short-term (for leases of a duration of less than one year) leasing
representative and Sercel will refer to the Company all requests it receives to
lease Sercel 3-D data acquisition equipment and other field equipment, through
December 31, 2002. Except for the fact that Sercel may engage in short-term
leasing directly to its customers and affiliates, Sercel may not recommend or
suggest any competitor of the Company as a potential lessor of such data
acquisition equipment.

         A condition of the Agreement is that the Company purchases at favorable
prices a total of six 408UL 3-D data acquisition systems with at least 600
channels (a "System") and other field equipment from Sercel over the term of the
Agreement, with at least one System to be purchased in each of the following
periods: December 16, 1999-June 30, 2000; July 1, 2000-December 31, 2000;
January 1, 2001-June 30, 2001; July 1, 2001-December 31, 2001; January 1,
2002-June 30, 2002; and July 1, 2002-



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December 31, 2002. The list price of a 600-channel system is approximately
$1,100,000. Subject to certain exceptions, if the Company does not purchase such
equipment on or before such dates, then Sercel may terminate the Agreement on 90
days' written notice to the Company. In that event, the Company will have no
further obligation to purchase additional equipment from Sercel.

         The agreement is subject to termination by Sercel before December 21,
2002: (i) at any time upon (a) Sercel's reasonable belief that the Company has
violated or intends to violate the Foreign Corrupt Practices Act of 1977, as
amended, (b) the Company's refusal or inability to certify that it is in
compliance with laws applicable to its activities, or (c) the Company's
insolvency, voluntary or involuntary bankruptcy, assignment for the benefit of
creditors or discontinuance as a going concern, and (ii) upon 90 days' prior
written notice if the Company no longer employs Billy F. Mitcham, Jr. in a
senior management capacity.

THE SERCEL SALES AGREEMENT

         Through Mitcham Canada Ltd., the Company's wholly-owned subsidiary, the
Company entered into the Commercial Representation Agreement (the "Sercel Sales
Agreement") with Georex, Inc. ("Georex"), a wholly-owned subsidiary of Sercel,
under which the Company is Sercel's designated sales representative in Canada
for its seismic data acquisition and other field equipment through September 19,
2000, subject to earlier termination by either party on 90 days' prior notice.
If not sooner terminated, the agreement will automatically be extended for
successive one-year periods after September 19, 2000. Under the agreement, the
Company is entitled to receive a commission on all Sercel equipment and spare
parts sold in Canada.

         The Company is prohibited from selling certain seismic equipment that
competes with Sercel equipment during the term of the agreement and for six
months thereafter, except that the Company may sell individual components that
compete with components of Sercel equipment, such as I/O channel boxes and
Pelton vibrator control electronics, as well as any seismic equipment previously
used in its lease fleet.

         The Sercel Sales Agreement is subject to termination by Georex upon (i)
Georex's reasonable belief that the Company has violated or intends to violate
the Foreign Corrupt Practices Act of 1977, as amended, (ii) the Company's
refusal or inability to certify that it is in compliance with laws applicable to
its activities or (iii) the Company's insolvency, voluntary or involuntary
bankruptcy, assignment for the benefit of creditors or discontinuance as a going
concern.

OTHER AGREEMENTS

         In May 1996, the Company entered into an exclusive lease referral
agreement (the "Pelton Agreement") with Pelton. The Company believes Pelton is
the leading manufacturer and supplier of vibrator control electronics. The terms
of the Pelton Agreement regarding exclusive lease referrals and favorable prices
are substantially similar to those of the Sercel Lease Agreement. The Pelton
Agreement is valid until terminated by either party upon three months prior
written notice.


CUSTOMERS; SALES AND MARKETING

         The Company's major lease customers are seismic data acquisition
contractors and major and independent oil and gas companies. The Company
typically has a small number of lease customers, the composition of which
changes yearly as leases are negotiated and concluded and equipment needs vary.



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As of January 31, 2000, the Company had lease customers with 38 active leases of
various lengths. Customers of the Company's used and new seismic equipment sales
and service business include its lease customers, foreign governments,
universities, engineering firms and research organizations worldwide.

         The Company participates in both domestic and international trade shows
and expositions to inform the oil and gas industry of its products and services.
In addition to advertising in major geophysical trade journals, direct
advertising in the form of a semi-annual listing of equipment offerings is
mailed to over 3,000 oil and gas industry participants. The Company believes
this mailing generates significant seismic equipment lease and sales revenues.
In addition, the Company advertises its alliances with Sercel and Pelton in
several major geophysical trade journals. The Company also maintains a web site
on which it lists its seismic equipment for sale and lease.

         The Company works with a network of representatives in several
international markets, including Europe, the Far East, Russia and other former
Soviet Union countries. These agents generate equipment sales and, to a lesser
extent, equipment leasing business for the Company and are compensated on a
commission basis. The Company also expends resources in the areas of customer
service, product support and the maintenance of customer relationships. The
Company also has an office in Calgary, Alberta, Canada from which it leases and
sells seismic equipment.

COMPETITION

         While the Company is aware of several companies that engage in seismic
equipment leasing, competition has historically been fragmented and the
Company's competitors have not had as extensive a seismic equipment lease pool
as does the Company.

         On April 26, 1999, the Company and I/O terminated its Preferred
Supplier Agreement with the Company. As a result, I/O is no longer restricted
from competing with the Company in the short-term equipment leasing business. As
a result, I/O may seek to more aggressively pursue lease and lease/purchase
arrangements that would likely have been prohibited under the Preferred Supplier
Agreement. I/O has significantly greater resources than the Company, and I/O's
entry into competition in the short-term equipment leasing business could have a
material adverse effect on the Company's operations and financial condition.

         The Company competes for seismic equipment leases on the basis of (i)
price and delivery, (ii) availability of both peripheral seismic equipment and
complete data acquisition systems which may be configured to meet a customer's
particular needs and (iii) length of lease term. The Company competes in the
used equipment sales market with a broad base of seismic equipment owners,
including major oil and gas exploration companies and seismic data acquisition
contractors which use and eventually dispose of seismic equipment, many of which
have substantially greater financial resources than the Company. The Company
believes there is one competitor in the used seismic equipment sales business
that generates comparable revenues from such sales, as well as numerous, smaller
competitors who, in the aggregate, generate significant revenue from such sales.


SUPPLIERS

         The Company has several suppliers of the seismic equipment for its
lease pool. The Company has historically acquired the majority of its seismic
lease pool equipment from Sercel and I/O and acquires the majority of its
vibrator control electronics from Pelton. The Company believes that Sercel and
I/O



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manufacture most of the land-based seismic systems and equipment in use. Other
suppliers of peripheral seismic equipment include OYO Geospace Corporation
(geophones, cables and seismic cameras), Steward Cable (cables) and Mark
Products (geophones and cables). From time to time, the Company purchases new
and used peripheral seismic equipment from various other manufacturers.
Management believes that its current relationships with its suppliers are
satisfactory.

EMPLOYEES

         As of January 31, 2000, the Company employed 50 people, none of whom is
covered by a collective bargaining agreement. The Company considers its employee
relations to be satisfactory.

FORWARD-LOOKING STATEMENTS AND RISK FACTORS

         Certain information contained in this Annual Report on Form 10-K
(including statements contained in Part I, Item 1. "Business", Part I, Item 3.
"Legal Proceedings" and in Part II, Item 7. "Management's Discussion and
Analysis of Financial Condition and Results of Operations"), as well as other
written and oral statements made or incorporated by reference from time to time
by the Company and its representatives in other reports, filings with the
Securities and Exchange Commission, press releases, conferences, or otherwise,
may be deemed to be forward-looking statements within the meaning of Section 21E
of the Securities Exchange Act of 1934. This information includes, without
limitation, statements concerning the Company's future financial position and
results of operations; planned capital expenditures; business strategy and other
plans for future operations; the future mix of revenues and business;
commitments and contingent liabilities; and future demand for the Company's
services and predicted improvement in energy industry and seismic service
industry conditions. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, it can give no
assurance that such expectations will prove to have been correct. When used in
this report, the words "anticipate," "believe," "estimate," "expect," "may," and
similar expressions, as they relate to the Company and its management, identify
forward-looking statements. The actual results of future events described in
such forward-looking statements could differ materially from the results
described in the forward-looking statements due to the risks and uncertainties
set forth below and elsewhere within this Annual Report on Form 10-K.

PROLONGED AND GRADUAL RECOVERY OF OIL AND GAS INDUSTRY AND REDUCED DEMAND FOR
SERVICES

         Demand for the Company's services depends on the level of spending by
oil and gas companies for exploration, production and development activities, as
well as on the number of crews conducting land and transition zone seismic data
acquisition worldwide, and especially in North America. Because of the prolonged
and gradual recovery of the energy services sector, there has been a decreased
demand for the Company's services. Increases in the price of oil have not yet
countered decreased demand. As such, the seismic equipment sector may lag other
sectors of the energy services industry in its turnaround. Any future
fluctuations in the price of oil and gas in response to relatively minor changes
in the supply and demand for oil and gas will continue to have a major effect on
exploration, production and development activities and thus, on the demand for
the Company's services.

LOSS OF SIGNIFICANT CUSTOMERS WILL ADVERSELY AFFECT THE COMPANY

         The Company typically leases and sells significant amounts of seismic
equipment to a relatively small number of customers, the composition of which
changes from year to year as leases are initiated and concluded and as
customers' equipment needs vary. Therefore, at any one time, a large portion of
the



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Company's revenues may be derived from a limited number of customers. In the
fiscal years ended January 31, 1998, 1999 and 2000, the single largest customer
accounted for approximately 20%, 36% and 17%, respectively, of the Company's
total revenues. Because the Company's customer base is relatively small, the
loss of one or more customers for any reason could adversely affect the
Company's results of operations.

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

         The Company has approximately $7.6 million of customer accounts and
notes receivable at January 31, 2000, of which $629,000 is over ninety days
past-due. At January 31, 2000, the Company has an allowance of $843,000 to cover
losses in its receivable balances. Significant payment defaults by its customers
in excess of the allowance would have a material adverse effect on the Company's
financial position and results of operations.

DEPENDENCE ON ADDITIONAL LEASE CONTRACTS

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

DEPENDENCE ON KEY PERSONNEL

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


TECHNOLOGICAL OBSOLESCENCE

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



                                       9
<PAGE>   12

         During the fiscal year ended January 31, 1999, the Company recorded a
pretax asset impairment charge of $15.1 million. Included in this charge is a
$900,000 lower of cost or market adjustment related to certain seismic equipment
assets classified as inventory. The non-cash asset impairment charge was
recorded in accordance with SFAS No. 121, which requires that long-lived assets
and certain identifiable intangibles held and used by the Company be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The severity as well as the
duration of the current oil and gas industry downturn is such an event. The
Company's review of its long-lived assets indicated that the carrying value of
certain of the Company's seismic equipment lease pool and inventory assets was
more than the estimated undiscounted future net cash flows. As such, under SFAS
No. 121, the Company wrote down those assets to their estimated fair market
value based on discounted cash flows using an effective rate of 8.0%.
Undiscounted future net cash flows were calculated based on individual types of
seismic equipment using projected future utilization and lease rates over the
estimated remaining useful lives of the assets. The Company's seismic equipment
assets have been historically depreciated over 3-10 years. The impairment was
recorded based on certain estimates and projections as stipulated in SFAS No.
121. There can be no assurance that the Company will not record asset impairment
charges under SFAS No. 121 in the future.

INTERNATIONAL ECONOMIC AND POLITICAL INSTABILITY COULD ADVERSELY AFFECT THE
COMPANY'S RESULTS OF OPERATIONS

         The Company's results of operations are dependent upon the current
political and economic climate of several international countries in which its
customers either operate or are located. International sources accounted for
approximately 71% of the Company's revenues in the fiscal year ended January 31,
2000, and 9% of international revenues were attributable to lease and sales
activities in South America. Since the majority of the Company's lease and sales
contracts with its customers are denominated in U.S. dollars, there is little
risk of loss from fluctuations in foreign currencies. However, the Company's
internationally-sourced revenues are still subject to the risk of currency
exchange controls (in which payment could not be made in U.S. dollars), taxation
policies, and appropriation, as well as to political turmoil, civil
disturbances, armed hostilities, and other hazards. While the Company's results
of operations have not been adversely affected by those risks to date, there is
no assurance its business and results of operations won't be adversely affected
in the future.

VULNERABILITY TO WEATHER CONDITIONS AND SEASONAL RESULTS

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

DEPENDENCE ON KEY SUPPLIERS

         The Company has and continues to rely on purchase agreements with
Sercel and Pelton. To a lesser extent, the Company also relies on its suppliers
for lease referrals. The termination of these



                                       10
<PAGE>   13
agreements for any reason could materially adversely affect the Company's
business. Any difficulty in obtaining seismic equipment from suppliers could
have a material adverse effect on the Company's business, financial condition
and results of operations.

COMPETITION

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

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

VOLATILE STOCK PRICES AND NO PAYMENT OF DIVIDENDS

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


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

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

LIMITATION ON DIRECTORS' LIABILITY

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


                                       11
<PAGE>   14

ITEM 2.  PROPERTIES

         The Company owns its corporate office and warehouse facilities in
Huntsville, Texas. Its headquarters facility consists of 25,000 square feet of
office and warehouse space on approximately six acres. The Company also leases
approximately 10,000 square feet of office and warehouse space at its facility
in Calgary, Alberta, Canada.


ITEM 3.  LEGAL PROCEEDINGS

         On or about April 23, 1998, several class action lawsuits were filed
against the Company and its chief executive officer and then chief financial
officer in the U.S. District Court for the Southern District of Texas, Houston
Division. The first-filed complaint, styled Stanley Moskowitz ("Plaintiffs") v.
Mitcham Industries, Inc., Billy F. Mitcham, Jr. and Roberto Rios ("Defendants"),
alleged violations of Section 10(b), Rule 10b-5 and 20(a) of the Securities
Exchange Act of 1934 and Sections 11 and 12(a)(2) of the Securities Act of 1933.
On or about September 21, 1998, the complaints were consolidated into one
action. On November 4, 1998, the Plaintiffs filed a consolidated amended
complaint ("CAC"), which seeks class action status on behalf of those who
purchased the Company's common stock from June 4, 1997 through March 26, 1998,
and damages in an unspecified amount plus costs and attorney's fees. The CAC
alleges that the Defendants made materially false and misleading statements and
omissions in public filings and announcements concerning its business and its
allowance for doubtful accounts. On or about January 15, 1999, the Defendants
filed a motion to dismiss the CAC. On September 28, 1999, the Court granted in
part and denied in part the Defendants' motion to dismiss, and granted
Plaintiffs leave to amend on certain claims. On December 8, 1999, Plaintiffs
filed their second consolidated amended complaint ("SCAC"). On December 14,
1999, Plaintiffs served discovery on Defendants. On January 28, 2000, Defendants
filed a motion to dismiss the SCAC. On February 4, 2000, the Court agreed with
Defendants that Plaintiffs' discovery was improper because, under the Reform
Act, discovery is stayed until the Court sustains the sufficiency of the SCAC.
On February 28, 2000, the Plaintiffs filed an opposition to Defendants' motions
to dismiss, and on March 15, 2000, Defendants filed their reply. The Company
awaits the Court's ruling.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         None



                                       12
<PAGE>   15
                                     PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
         MATTERS

MARKET INFORMATION FOR COMMON STOCK

         The common stock is traded on the Nasdaq National Market under the
symbol "MIND." The following table sets forth, for the periods indicated, the
high and low sales prices as reported on the Nasdaq National Market.

<TABLE>
<CAPTION>

                                                           High            Low
                                                           ----            ---
<S>                                                       <C>             <C>
Fiscal Year Ended January 31, 1999:
     First Quarter                                        19 1/2          9 3/4
     Second Quarter                                       13 1/2          7 1/16
     Third Quarter                                         9 7/8          4 1/2
     Fourth Quarter                                        8 1/8          3 11/16

Fiscal Year Ended January 31, 2000:
     First Quarter                                         5              3 1/16
     Second Quarter                                        4 13/16        3 5/8
     Third Quarter                                         6 3/4          3 11/16
     Fourth Quarter                                        4 3/4          3 3/16
</TABLE>

         As of April 25, 2000, there were approximately 500 shareholders of
record of the common stock.


                                 DIVIDEND POLICY

         The Company has not paid any cash dividends on the common stock since
its inception, and the Board of Directors does not contemplate the payment of
cash dividends in the foreseeable future. It is the present policy of the Board
of Directors to retain earnings, if any, for use in developing and expanding the
Company's business. In the future, payment of dividends by the Company will also
depend on the Company's financial condition, results of operations and such
other factors as the Board of Directors may consider.

ITEM 6.  SELECTED FINANCIAL DATA
(Amounts in thousands, except per share amounts)

<TABLE>
<CAPTION>

                                                                           Years Ended
January 31,
                                                          1996       1997      1998        1999        2000
                                                        --------   --------   --------   --------    --------
<S>                                                     <C>        <C>        <C>        <C>         <C>
Net sales and other revenues                            $  7,292   $ 14,690   $ 42,027   $ 37,936    $ 10,644
Income (loss) from continuing operations                   1,713      2,702      6,392     (8,526)     (4,864)
Income (loss) from continuing operations
   per common share - diluted                               0.50       0.60       0.83      (0.90)      (0.51)
Cash dividends declared per common share                       -          -          -          -           -
Balance Sheet Data:
Cash and marketable securities                               637        301     32,507     19,860      17,399
Seismic equipment lease pool, property and equipment,
   cost basis                                             10,141     22,540     50,994     65,116      71,980
Total assets                                              12,239     24,293     91,562     67,174      67,705
Long-term obligations and redeemable preferred stock       1,524      3,319      2,294          -           -
Total liabilities                                          4,191      9,051     17,326      2,422       7,430
Total shareholders' equity                                 8,048     15,242     74,236     64,752      60,275
</TABLE>


                                       13
<PAGE>   16

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATION

OVERVIEW

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

         Until the exploration and production companies can forecast with
reasonable certainty that future oil prices will stabilize, seismic data
acquisition activity is not expected to improve. Additional declines in oil
prices, or expectations that the recent improvement in oil prices will not hold,
could cause the Company's customers to further reduce their spending and further
adversely affect the Company's results of operation and financial condition.

         The Company leases and sells seismic data acquisition equipment
primarily to seismic data acquisition companies and oil and gas companies
conducting land and transition zone seismic surveys worldwide. The Company
provides short-term leasing of seismic equipment to meet a customer's
requirements and offers maintenance and support during the lease term. The
majority of all leases at January 31, 2000 were for a term of one year or less.
Seismic equipment held for lease is carried at cost, net of accumulated
depreciation.

         For the years ended January 31, 1998, 1999 and 2000, revenues from
foreign customers totaled $17.1 million, $20.7 million and $7.5 million,
respectively. The majority of the Company's transactions with foreign customers
are denominated in United States dollars.

SEASONALITY

         Historically, seismic equipment leasing has been susceptible to weather
patterns in certain geographic regions. There is some seasonality to the
Company's expected lease revenues, especially from customers operating in
Canada, where a significant percentage of seismic survey activity occurs in the
winter months, from October through March. During the months in which the
weather is warmer, certain areas are not accessible to trucks, earth vibrators
and other equipment because of the unstable terrain. This seasonal leasing
activity by the Company's Canadian customers has historically resulted in
increased lease revenues in the Company's first and fourth fiscal quarters.
However, due to the significant decrease in world oil prices in 1998, demand for
the Company's services both in Canada and worldwide declined dramatically in the
fourth quarter of fiscal 1999 and remained at historically low levels throughout
fiscal 2000.

RESULTS OF OPERATIONS

         Revenues of $10.6 million for fiscal 2000 decreased $27.3 million
compared to revenues of $37.9 million for fiscal 1999, which reflected a
decrease of $4.1 million as compared to revenues of $42.0 million for fiscal
1998. Short-term leasing revenues and leasing revenues under lease/purchase
arrangements totaling $6.8 million for fiscal 2000 represented a substantial
decrease from fiscal 1999 leasing revenues of $22.4 million. Fiscal 1999
combined leasing revenues of $22.4 million represented a $2.8 million increase
over fiscal 1998 combined leasing revenues of $19.6 million. The current year



                                       14
<PAGE>   17

decrease in leasing revenues is reflective of the prolonged and gradual energy
services sector recovery and continued decreased demand for seismic equipment
and services. The increase in leasing revenues in fiscal 1999 reflects additions
of lease pool equipment throughout fiscal 1999 and 1998 to meet lease demand.
Seismic equipment sales for fiscal 2000 were $3.9 million as compared to $15.6
million and $22.1 million for fiscal 1999 and 1998, respectively. The decrease
in sales revenues during fiscal 2000 compared to fiscal 1999 is a result of
decreased capital expenditure budgets throughout the oil and gas industry
coupled with a three-year trend of fewer customers exercising the purchase
option of lease/purchase contracts.

         Depreciation expense for fiscal 2000 was $9.8 million, representing a
21% decrease from fiscal 1999 expense of $12.4 million. The $5.8 million
increase in depreciation expense for fiscal 1999 represented an approximate 87%
increase over fiscal 1998 expense. The current year reduction in depreciation
expense is largely attributable to the $15.1 million asset impairment charge
recorded in fiscal 1999, partially offset by the $6.7 million increase, on a
cost basis, in the Company's seismic equipment lease pool during fiscal 2000.
The significant increase in depreciation expense during the prior two fiscal
years is a direct result of the seismic equipment lease pool increasing nearly
$42 million, on a cost basis, from January 31, 1997 to January 31, 1999. Current
year direct costs were $1.4 million, a decrease of approximately $200,000 from
fiscal 1999 amounts, reflecting the decrease in leasing activities during fiscal
2000. While the Company's leasing revenues have increased in each of the prior
two fiscal years, direct costs associated with short-term leasing have also
increased steadily. Direct costs for fiscal 1999 were $1.6 million, compared to
$1.0 million for fiscal 1998.

         For the fiscal year ended January 31, 2000, leasing and equipment sales
under lease/purchase arrangements generated an aggregate gross margin of 99%,
compared to 25% and 20% for fiscal 1999 and 1998, respectively. The gross margin
achieved in fiscal 2000 is not comparable to the margins achieved in fiscal 1999
and 1998 because the Company recorded no sales of equipment under lease/purchase
arrangements during fiscal 2000. In addition, the recorded gross margins in
fiscal 1999 and 1998 are lower than historical levels due to the Company selling
primarily newer equipment when customers exercised purchase options on leased
equipment that had only recently been purchased and added to the Company's
equipment lease pool.

         Gross margins on seismic equipment sales were 41%, 25% and 10% for
fiscal years 2000, 1999 and 1998, respectively. Gross margins on equipment sales
may vary significantly between periods due to the mix of newly added seismic
equipment to the lease pool versus older, more depreciated seismic equipment
being sold.

         During fiscal 1999, the Company incurred a pre-tax, non-cash asset
impairment charge of approximately $15.1 million related to the impairment of
certain seismic equipment assets. This impairment charge is primarily the result
of the application of Statement of Financial Accounting Standards ("SFAS") No.
121, which requires that long-lived assets held and used by the Company be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be fully recoverable through cash
flows from future operations. The severity of the decline in seismic activity,
and thus, the demand for the Company's equipment, was such an event. Based on
the application of SFAS No. 121, the Company recognized a $14.2 million pretax
charge during fiscal 1999 related to its seismic equipment lease pool. In
addition, the Company recognized approximately $900,000 of pretax charges
related to a lower of cost or market adjustment to certain seismic equipment
assets classified in the consolidated financial statements as inventory. There
was no such charge in fiscal 2000.

         General and administrative expenses decreased nearly $1.1 million in
fiscal 2000 as compared to fiscal 1999 expense of $4.9 million, which reflected
an increase of $1.8 million compared to fiscal 1998.



                                       15
<PAGE>   18

During fiscal 2000, the Company realized general and administrative expense
savings in professional fees, primarily legal and audit. The Company recorded
lower compensation and payroll tax expense, partially offset by an increase in
insurance expense. Additionally, due to the downturn in the seismic industry,
the Company realized cost savings in its advertising, convention and travel
expenses.

         The fiscal 1999 increase was due to increased professional fees
including management and systems consulting, legal and audit fees and increased
compensation and payroll tax expense related to the increase in the size of the
Company's operations and number of employees. Additionally during fiscal 1999,
the Company incurred or accrued approximately $425,000 of expense related to an
ongoing Texas sales tax audit and the class action lawsuit filed on April 23,
1998.

         For fiscal 2000, the Company's provision for doubtful accounts expense
decreased from $1.7 million in fiscal 1999 to $575,000. This decrease in fiscal
2000 is reflective of the improvement in the Company's aging of receivables. At
January 31, 2000 and 1999, the Company had past due trade accounts receivable in
the amount of $629,000 and $7.1 million, respectively. During fiscal 2000, the
Company wrote off approximately $1,757,000 of accounts and notes receivable that
were more than 90 days past due. In addition, the Company canceled approximately
$817,000 of receivables more than 90 days past due in exchange for certain
seismic equipment. The Company's provision for doubtful accounts expense
increased from $842,000 in fiscal 1998 to $1.7 million in fiscal 1999. This
increase is related to the ongoing downturn in seismic activity worldwide. As of
January 31, 2000 and 1999, the Company's allowance for doubtful accounts
receivable amounted to $843,000 and $1.6 million, respectively.

         For fiscal 2000, the Company recorded a net loss in the amount of $4.9
million as compared to the fiscal 1999 net loss of $8.5 million. Net income for
fiscal 1999 decreased approximately $14.9 million from fiscal 1998, reflecting
the inclusion of the asset impairment charge and provision for doubtful accounts
charge.


LIQUIDITY AND CAPITAL RESOURCES

         As of January 31, 2000, the Company had net working capital of
approximately $21.4 million as compared to net working capital of $26.9 million
at January 31, 1999. Historically, the Company's principal liquidity
requirements and uses of cash have been for capital expenditures and working
capital and principal sources of cash have been cash flows from operations and
issuances of equity securities. Net cash provided by operating activities for
the year ended January 31, 2000 was $8.4 million, as compared to $10.4 million
and $3.8 million for the years ended January 31, 1999 and 1998, respectively.
Net cash provided by financing activities for the years ended January 31, 2000,
1999 and 1998 was $0, $0.2 million and $47.9 million, respectively.

         During March 1997, the Company completed a public offering of 3,450,000
shares of common stock, of which 2,875,000 shares were sold by the Company and
575,000 shares were sold by selling shareholders. The net proceeds to the
Company from the offering were approximately $18.2 million. The net proceeds
were used to purchase additional 3-D seismic data acquisition equipment, to pay
outstanding debt to the Company's commercial lender under a revolving line of
credit and a term loan and for certain other corporate expenses.

         During December 1997, the Company completed a public offering of a
total of 1,920,000 shares of its common stock, of which 1,900,000 shares were
sold by the Company and 20,000 shares were sold by selling shareholders. The net
proceeds to the Company from the offering were approximately $33.6



                                       16
<PAGE>   19

million. Of the proceeds from the two public offerings, the Company used
approximately $34.5 million in fiscal 1998 to pay for lease pool equipment.
During fiscal 1999, the Company used $32.5 million for purchases of lease pool
equipment.

         At January 31, 2000, the Company had trade accounts receivable of $0.6
million that were more than 90 days past due, as compared to $7.1 million at
January 31, 1999. During fiscal 2000, the Company wrote off approximately
$1,757,000 of accounts and notes receivable that were more than 90 days past
due. In addition, the Company canceled approximately $817,000 of receivables
more than 90 days past due in exchange for certain seismic equipment. As of
January 31, 2000, the Company's allowance for doubtful accounts was
approximately $843,000, which management believes is sufficient to cover any
losses in its trade accounts receivable and notes receivable.

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

         Capital expenditures for the 2000 fiscal year totaled approximately
$12.8 million as compared to capital expenditures of $32.9 million for fiscal
1999. Management believes that cash on hand and cash provided by future
operations will be sufficient to fund its anticipated capital and liquidity
needs over the next twelve months.




ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The information required by this item appears at pages F-1 through F-22
hereof and incorporated herein by reference.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         None


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         Information regarding directors and executive officers of the Company
will be set forth in the proxy statement for the 2000 Annual Meeting of
Shareholders under the heading "Election of Directors," and is incorporated
herein by reference. Information regarding compliance by the officers, directors
and



                                       17
<PAGE>   20

control persons of the Company with Section 16(a) of the Securities Exchange
Act of 1934 will be set forth in the Company's proxy statement for the 2000
Annual Meeting of Shareholders under the heading "Other Matters-Compliance with
Section 16(a) of the Exchange Act," and is incorporated herein by reference.

ITEM 11.  EXECUTIVE COMPENSATION

         Information regarding executive compensation will be set forth in the
Company's proxy statement for the 2000 Annual Meeting of Shareholders under the
heading "Executive Compensation," and is incorporated herein by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         Information regarding security ownership of certain beneficial owners
and management will be set forth in the Company's proxy statement for the 2000
Annual Meeting of Shareholders under the heading "Principal Holders of
Securities and Security Ownership of Management," and is incorporated herein by
reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Information regarding certain relationships and related transactions
will be set forth in the Company's proxy statement for the 2000 Annual Meeting
of Shareholders under the heading "Certain Transactions," and is incorporated
herein by reference.

                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) EXHIBITS




      Exhibit Number
      --------------
         3.1    --         Amended and Restated Articles of Incorporation of
                           Mitcham Industries, Inc. (1) (Exhibit 3.1)

         3.2    --         Amended and Restated Bylaws of Mitcham Industries,
                           Inc. (1) (Exhibit 3.2)

         4.1    --         Copy of Specimen stock certificate evidencing Common
                           Stock of Mitcham Industries, Inc. (2) (Exhibit 4.1)

         9      --         Voting Agreement, dated September 20, 1993, between
                           the Company, Billy F. Mitcham, Jr. and certain
                           shareholders (1) (Exhibit 9)

       * 10.1   --         Employment Agreement, dated January 15, 1997, between
                           the Company and Billy F. Mitcham, Jr. (4) (Exhibit
                           10.4)

         10.2   --         Exclusive Lease Referral Agreement, dated May 14,
                           1996, between the Company and Pelton Company, Inc.
                           (3) (Exhibit 10.1)

         10.3   --         First Amendment to the Exclusive Lease Referral
                           Agreement, dated January 1997, between the Company
                           and Pelton (6) (Exhibit 10.17)

         10.4   --         Second Amendment to the Exclusive Lease Referral
                           Agreement between Mitcham Industries, Inc. and Pelton
                           Company, Inc., dated November 24, 1997 (6) (Exhibit
                           10.3)

         10.5   --         Exclusive Equipment Lease Agreement, effective
                           September 20, 1996, between the Company and SERCEL,
                           S.A. (3) (Exhibit 10.2)

         10.6   --         Commercial Representation Agreement, effective
                           September 20, 1996, between



                                       18
<PAGE>   21

                           Mitcham Canada Ltd., an Alberta corporation, and
                           Georex, Inc. (3) (Exhibit 10.3)

         10.7   --         Amendment No. 1 to the Commercial Representation
                           Agreement between Mitcham Canada, Ltd. and Georex,
                           Inc., dated November 11, 1997 (6) (Exhibit 10.1)

         10.8   --         Exclusive Lease Representative and Distributor
                           Agreement between Mitcham Industries, Inc. and
                           StrucTec Systems, Inc., dated October 30, 1997 (6)
                           (Exhibit 10.2)

         10.9   --         Letter Loan Agreement between Mitcham Industries,
                           Inc. and Bank One, Texas, N.A., dated December 7,
                           1997 (6) (Exhibit 10.4)

         10.10  --         Promissory Note in the original principal amount of
                           $15,000,000, made payable to the order of Bank One,
                           Texas, N.A., dated December 8, 1997 (6) (Exhibit
                           10.5)

         10.11  --         Preferred Supplier Agreement between Mitcham
                           Industries, Inc. and Input/Output, Inc., dated June
                           30, 1998 (7) (Exhibit 10.1)

       * 10.12  --         1994 Stock Option Plan of Mitcham Industries, Inc.
                           (2) (Exhibit 10.9)

         10.13  --         1994 Non-Employee Director Stock Option Plan of
                           Mitcham Industries, Inc. (2) (Exhibit 10.12)

         10.14  --         Form of Mitcham Industries, Inc. customer lease
                           agreement (1) (Exhibit 10.20)

         10.15  --         1998 Stock Awards Plan of Mitcham Industries, Inc.
                           (8) (Exhibit A)

         21     --         Subsidiary of the Company (5) (Exhibit 11)

         23     --         Consent of Hein + Associates LLP

         27     --         Financial Data Schedule

         *                 Management contract or compensatory plan or
                           arrangement

(1)      Incorporated by reference to the indicated exhibit number of the
         Company's Registration Statement on Form SB-2 (File No. 33-81164-D),
         filed with the SEC on July 5, 1994.
(2)      Incorporated by reference to the indicated exhibit number of the
         Company's Amendment No. 2 to the Registration Statement on Form SB-2,
         filed with the SEC on November 9, 1994.
(3)      Incorporated by reference to the indicated exhibit number of the
         Company's Registration Statement on Form S-3 (File No. 333-10555),
         filed with the SEC on October 30, 1996.
(4)      Incorporated by reference to the indicated exhibit number of the
         Company's Registration Statement on Form S-1 (File No. 333-19997),
         filed with the SEC on January 17, 1997.
(5)      Incorporated by reference to the indicated exhibit number of the
         Company's Amendment No. 1 to its Registration Statement on Form S-1,
         filed with the SEC on January 31, 1997.
(6)      Incorporated by reference to the indicated exhibit number of the
         Company's Registration Statement on Form S-3 (File No. 333-40507),
         filed with the SEC on November 18, 1997.
(7)      Incorporated by reference to the indicated exhibit number of the
         Company's Current Report on Form 8-K, filed with the SEC on July 15,
         1998.
(8)      Incorporated by reference to Exhibit A of the Company's proxy statement
         for the fiscal year ended January 31, 1998.

(b) REPORTS ON FORM 8-K

     On January 4, 2000, the Company filed a Form 8-K reporting the renewal of
its exclusive leasing arrangement with Sercel under the Exclusive Equipment
Lease Agreement entered into by the parties effective December 16, 1999.



                                       19
<PAGE>   22
                                   SIGNATURES

     PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) 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, ON THE 1ST DAY OF MAY,
2000.


                                      MITCHAM INDUSTRIES, INC.



                                   By:       /s/ BILLY F. MITCHAM, JR.
                                      ------------------------------------------
                                       Billy F. Mitcham, Jr., Chairman of the
                                    Board, President and Chief Executive Officer
                                          (principal executive officer)



    PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE PERSONS ON BEHALF OF THE REGISTRANT AND IN
THE CAPACITIES AND ON THE DATES INDICATED.

<TABLE>
<CAPTION>

                  Signature                             Title/Capacity           Date
                  ---------                             --------------           ----
<S>                                                 <C>                          <C>
            /s/ BILLY F. MITCHAM, JR.                Chairman of the Board,      May 1, 2000
--------------------------------------------         President and Chief
                  Billy F. Mitcham, Jr.              Executive Officer


             /s/ PAUL C. MITCHAM                     Vice President -            May 1, 2000
--------------------------------------------         Operations and Director
                  Paul C. Mitcham

                /s/ P. BLAKE DUPUIS                   Vice President -           May 1, 2000
--------------------------------------------          Finance, Secretary,
                  P. Blake Dupuis                     and Treasurer
(principal financial and accounting officer)

           /s/ WILLIAM J. SHEPPARD                    Vice President -           May 1, 2000
--------------------------------------------          International Operations
                William J. Sheppard                   and Director
</TABLE>




                                       20
<PAGE>   23








                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>

                                                                                                            Page
                                                                                                            ----

<S>                                                                                                        <C>
Independent Auditor's Report............................................................................... F-2

Consolidated Balance Sheets as of January 31, 1999 and 2000................................................ F-3

Consolidated Statements of Operations for the Years Ended
        January 31, 1998, 1999 and 2000.................................................................... F-4

Consolidated Statements of Changes in Shareholders' Equity and Comprehensive Income
        for the Years Ended January 31, 1998, 1999 and 2000................................................ F-5

Consolidated Statements of Cash Flows for the Years Ended
        January 31, 1998, 1999 and 2000.................................................................... F-6

Notes to Consolidated Financial Statements................................................................. F-7
</TABLE>


                                       F-1

<PAGE>   24






                          INDEPENDENT AUDITOR'S REPORT



Board of Directors and Shareholders
Mitcham Industries, Inc.
Huntsville, Texas

We have audited the accompanying consolidated balance sheets of Mitcham
Industries, Inc. and Subsidiary as of January 31, 1999 and 2000, and the related
consolidated statements of operations, changes in shareholders' equity and
comprehensive income and cash flows for each of the years in the three-year
period ended January 31, 2000. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Mitcham Industries, Inc. and
Subsidiary as of January 31, 1999 and 2000, and the results of their operations
and their cash flows for each of the years in the three-year period ended
January 31, 2000, in conformity with generally accepted accounting principles.



/s/ HEIN + ASSOCIATES LLP
--------------------------------
HEIN + ASSOCIATES LLP

Houston, Texas
March 28, 2000


                                       F-2
<PAGE>   25
                            MITCHAM INDUSTRIES, INC.


                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                                                            JANUARY 31,
                                                                                                  ---------------------------------
                                                                                                       1999                 2000
                                                                                                  ------------         ------------
<S>                                                                                                 <C>                  <C>
                                                      ASSETS
Current assets:
   Cash                                                                                           $  2,525,000         $  3,588,000
   Marketable securities, at market                                                                 17,335,000           13,811,000
   Accounts receivable, net of allowance for doubtful accounts of
      $1,625,000 and $843,000 at January 31, 1999 and 2000, respectively                             5,318,000            4,505,000
   Notes receivable                                                                                  2,357,000            1,183,000
   Inventory                                                                                         1,191,000            2,557,000
   Prepaid expenses and other current assets                                                            88,000              175,000
   Income taxes receivable                                                                                   -            2,795,000
   Deferred tax asset                                                                                  483,000              220,000
                                                                                                  ------------         ------------
         Total current assets                                                                       29,297,000           28,834,000

Seismic equipment lease pool, property and equipment                                                65,116,000           71,980,000
Accumulated depreciation of seismic equipment lease pool,
   property and equipment                                                                          (31,472,000)         (36,697,000)
Notes receivable                                                                                       205,000            1,100,000
Deferred tax asset                                                                                   4,028,000            2,488,000
                                                                                                  ------------         ------------
         Total assets                                                                             $ 67,174,000         $ 67,705,000
                                                                                                  ============         ============
                                       LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                                                               $    668,000         $  5,927,000
   Customer deposits                                                                                   215,000              255,000
   Sales taxes payable                                                                                 228,000              150,000
   Accrued wages                                                                                       260,000              233,000
   Income taxes payable                                                                                817,000                    -
   Deferred revenue                                                                                    131,000              809,000
   Accrued expenses and other current liabilities                                                      103,000               56,000
                                                                                                  ------------         ------------
         Total current liabilities                                                                   2,422,000            7,430,000
Commitments and contingencies (Note 11)
Shareholders' equity:
   Preferred stock, $1.00 par value; 1,000,000 shares authorized; none
      issued and outstanding                                                                                 -                    -
   Common stock, $.01 par value; 20,000,000 shares authorized;
      9,545,658 and 9,551,112 shares issued and outstanding,
      respectively                                                                                      95,000               96,000
   Additional paid-in capital                                                                       61,459,000           61,459,000
   Retained earnings (accumulated deficit)                                                           4,244,000             (620,000)
   Accumulated other comprehensive income                                                           (1,046,000)            (660,000)
                                                                                                  ------------         ------------
         Total shareholders' equity                                                                 64,752,000           60,275,000
                                                                                                  ------------         ------------
         Total liabilities and shareholders' equity                                               $ 67,174,000         $ 67,705,000
                                                                                                  ============         ============




                       THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>

                                       F-3

<PAGE>   26

                            MITCHAM INDUSTRIES, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>



                                                                                                YEARS ENDED JANUARY 31,
                                                                                    -----------------------------------------------
                                                                                        1998            1999                2000
                                                                                    ------------     ------------      ------------
<S>                                                                                 <C>              <C>               <C>
Revenues:
   Short-term leasing                                                               $ 17,115,000     $ 17,626,000      $  6,509,000
   Lease/purchase activities:
      Leasing revenues                                                                 2,435,000        4,758,000           242,000
      Sales of equipment                                                              12,770,000       10,634,000                 -
   Sales of seismic equipment                                                          9,303,000        4,918,000         3,893,000
   Sales commissions                                                                     404,000                -                 -
                                                                                    ------------     ------------      ------------
         Total revenues                                                               42,027,000       37,936,000        10,644,000
                                                                                    ------------     ------------      ------------
Costs and expenses:
   Direct costs                                                                        1,007,000        1,576,000         1,378,000
   Cost of sales:
      Sales of seismic equipment under lease purchase
         agreements                                                                   12,163,000       11,578,000             3,000
      Other sales of seismic equipment                                                 8,334,000        3,689,000         2,283,000
   General and administrative                                                          3,166,000        4,944,000         3,891,000
   Provision for doubtful accounts                                                       842,000        1,705,000           575,000
   Provision for asset impairment                                                              -       15,082,000                 -
   Depreciation                                                                        6,590,000       12,356,000         9,847,000
                                                                                    ------------     ------------      ------------
         Total costs and expenses                                                     32,102,000       50,930,000        17,977,000
                                                                                    ------------     ------------      ------------
Operating income (loss)                                                                9,925,000      (12,994,000)       (7,333,000)
Other income (expense):
   Interest income (net of interest expense of approximately
      $143,000, $38,000 and $31,000, respectively)                                       340,000        1,002,000           675,000
   Other, net                                                                             74,000            6,000            (5,000)
                                                                                    ------------     ------------      ------------
        Total other income (expense)                                                     414,000        1,008,000           670,000
                                                                                    ------------     ------------      ------------
Income (loss) before income taxes                                                     10,339,000      (11,986,000)       (6,663,000)
Provision (benefit) for income taxes                                                   3,947,000       (3,460,000)       (1,799,000)
                                                                                    ------------     ------------      ------------
Net income (loss)                                                                   $  6,392,000     $ (8,526,000)     $ (4,864,000)
                                                                                    ============     ============      ============
Earnings (loss) per common share:
         Basic                                                                      $       0.87     $      (0.90)     $      (0.51)
         Diluted                                                                    $       0.83     $      (0.90)     $      (0.51)
Shares used in computing earnings per common share:
         Basic                                                                         7,307,000        9,502,000         9,550,000
         Dilutive effect of common stock equivalents                                     379,000                -                 -
                                                                                    ------------     ------------      ------------
         Diluted                                                                       7,686,000        9,502,000         9,550,000
                                                                                    ============     ============      ============




                       THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>

                                       F-4

<PAGE>   27

                            MITCHAM INDUSTRIES, INC.



           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                            AND COMPREHENSIVE INCOME
                   YEARS ENDED JANUARY 31, 1998, 1999 AND 2000

<TABLE>
<CAPTION>


                                                                                                   ACCUMULATED
                                                                                                      OTHER
                                                                     ADDITIONAL       RETAINED    COMPREHENSIVE
                                              COMMON STOCK             PAID-IN         EARNINGS       INCOME
                                      ----------------------------                 (ACCUMULATED
                                         SHARES          AMOUNT       CAPITAL         DEFICIT)         (LOSS)         TOTAL
                                      ------------    ------------   ------------   ------------    ------------   ------------
<S>                                   <C>          <C>            <C>            <C>            <C>              <C>
Balances, January 31, 1997              4,475,000    $     45,000   $  8,819,000   $  6,378,000   $           -    $ 15,242,000
   Comprehensive income:
      Net income                                -               -              -      6,392,000               -       6,392,000
      Foreign currency translation              -               -              -              -          97,000          97,000
                                                                                                                   ------------
      Comprehensive income                                                                                            6,489,000
                                                                                                                   ------------
   Issuance of common stock, net
      of offering expenses              4,775,000          48,000     51,743,000              -               -      51,791,000
   Issuance of common stock upon
      exercise of warrants and
      options                             176,000           1,000        713,000              -               -         714,000
                                     ------------    ------------   ------------   ------------    ------------    ------------
Balances, January 31, 1998              9,426,000          94,000     61,275,000     12,770,000          97,000      74,236,000
   Comprehensive loss:
      Net loss                                  -               -              -     (8,526,000)              -      (8,526,000)
      Foreign currency translation              -               -              -              -      (1,143,000)     (1,143,000)
                                                                                                                   ------------
      Comprehensive loss                                                                                             (9,669,000)
                                                                                                                   ------------
   Issuance of common stock upon
      exercise of warrants and
      options                             120,000           1,000        184,000              -               -         185,000
                                     ------------    ------------   ------------   ------------    ------------    ------------
Balances, January 31, 1999              9,546,000          95,000     61,459,000      4,244,000      (1,046,000)     64,752,000
   Comprehensive loss:
      Net loss                                  -               -              -     (4,864,000)              -      (4,864,000)
      Foreign currency translation              -               -              -              -         386,000         386,000
                                                                                                                   ------------
      Comprehensive loss                                                                                             (4,478,000)
                                                                                                                   ------------
   Issuance of common stock upon
      exercise of warrants and
      options                               5,000           1,000              -              -               -           1,000
                                     ------------    ------------   ------------   ------------    ------------    ------------
Balances, January 31, 2000              9,551,000    $     96,000   $ 61,459,000   $   (620,000)   $   (660,000)   $ 60,275,000
                                     ============    ============   ============   ============    ============    ============






                       THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>

                                       F-5
<PAGE>   28


                            MITCHAM INDUSTRIES, INC.


                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>


                                                                             YEARS ENDED JANUARY 31,
                                                                  --------------------------------------------
                                                                      1998            1999            2000
                                                                  ------------    ------------    ------------
<S>                                                               <C>             <C>             <C>
Cash flows from operating activities:
  Net income (loss)                                               $  6,392,000    $ (8,526,000)   $ (4,864,000)
  Adjustments to reconcile net income (loss) to net cash
      provided by operating activities:
      Depreciation                                                   6,590,000      12,356,000       9,847,000
      Provision for doubtful accounts, net of chargeoffs              (476,000)        601,000        (782,000)
      Provision for asset impairment                                         -      15,182,000               -
      Deferred income taxes                                            792,000      (6,850,000)              -
  Changes in:
      Inventory                                                       (469,000)     (1,228,000)        466,000
      Trade accounts receivable                                     (9,299,000)      6,033,000         228,000
      Federal income taxes, current                                   (478,000)      1,028,000      (1,810,000)
      Accounts payable, accrued expenses and other
       current liabilities                                             661,000      (8,382,000)      5,418,000
      Other, net                                                        41,000         166,000         (87,000)
                                                                  ------------    ------------    ------------
        Net cash provided by operating activities                    3,754,000      10,380,000       8,416,000
                                                                  ------------    ------------    ------------
Cash flows from investing activities:
   Purchases of seismic equipment held for lease                   (34,511,000)    (32,488,000)    (12,581,000)
   Purchases of property and equipment                                (426,000)       (401,000)       (207,000)
   Sale (purchase) of marketable securities                        (20,009,000)      2,674,000       3,524,000
   Disposal of lease pool equipment                                 10,495,000      14,677,000       1,911,000
                                                                  ------------    ------------    ------------
         Net cash used in investing activities                     (44,451,000)    (15,538,000)     (7,353,000)
                                                                  ------------    ------------    ------------
Cash flows from financing activities:
   Payments on short-term borrowings                                  (999,000)              -               -
   Payments on long-term debt and capitalized lease obligations     (3,612,000)              -               -
   Proceeds from issuance of common stock upon exercise of
    warrants and options                                               714,000         185,000               -
   Proceeds from issuance of common stock, net of
    offering expenses                                               51,791,000               -               -
                                                                  ------------    ------------    ------------
        Net cash provided by financing activities                   47,894,000         185,000               -
                                                                  ------------    ------------    ------------
Net increase (decrease) in cash                                      7,197,000      (4,973,000)      1,063,000
Cash, beginning of year                                                301,000       7,498,000       2,525,000
                                                                  ------------    ------------    ------------
Cash, end of year                                                 $  7,498,000    $  2,525,000    $  3,588,000
                                                                  ============    ============    ============



                       THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>

                                       F-6
<PAGE>   29



                            MITCHAM INDUSTRIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1.   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Organization - Mitcham Industries, Inc. (the "Company") is a Texas
     corporation formed on January 29, 1987. The Company and its wholly-owned
     Canadian subsidiary provide full-service equipment leasing, sales and
     services to the seismic industry worldwide, primarily in North and South
     America.

     The accompanying consolidated financial statements include the accounts of
     the Company and its wholly-owned Canadian subsidiary. All intercompany
     transactions and balances have been eliminated in consolidation.

     Description of Leasing Arrangements - The Company leases various types of
     seismic equipment to seismic data acquisition companies. The majority of
     leases at January 31, 1999 and 2000 are for one year or less. Lease revenue
     is recognized ratably over the term of the lease.

     Lease/Purchase Activities - The Company periodically leases equipment to
     customers, allowing them the option to purchase the equipment at a
     pre-determined price any time during the lease term. The Company allows its
     customers to credit a portion of the monthly lease payments to the purchase
     price. Monthly lease revenue is recognized over the term of the lease until
     the election to purchase is exercised, at which time the Company records
     the sale. Lease revenue is deferred to the extent that the estimated net
     book value, at the end of the lease term, exceeds the adjusted purchase
     price.

     Marketable Securities - Marketable securities to be held to maturity are
     stated at amortized cost. Marketable securities classified as
     available-for-sale are stated at market value, with unrealized gains and
     losses reported as a separate component of shareholders' equity, net of
     deferred income taxes. If a decline in market value is determined to be
     other than temporary, any such loss is charged to earnings. Trading
     securities are stated at fair value, with unrealized gains and losses
     recognized in earnings. The Company records the purchases and sales of
     marketable securities and records realized gains and losses on the trade
     date. Realized gains or losses on the sale of securities are recognized on
     the specific identification method.

     As of January 31, 1999 and 2000, approximately $7,600,000 and $0,
     respectively, was invested in preferred stocks, and the balance in
     government securities. Also, as of January 31, 1999 and 2000, the
     securities were classified as available-for-sale, and market value was
     approximately equal to the original cost.

     Inventory - Inventory consists primarily of used seismic equipment
     purchased in bulk liquidation sales as well as components used in the
     Company's seismic equipment repair

                                      F-7

<PAGE>   30

                            MITCHAM INDUSTRIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




1.   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     operations. Inventory is valued at the lower of cost or market using the
     average cost method.

     Seismic Equipment Lease Pool - Seismic equipment held for lease consists
     primarily of remote signal conditioners (channel boxes) and peripheral
     equipment and is carried at cost, net of accumulated depreciation.
     Depreciation is computed on the straight-line method over the estimated
     useful lives of the equipment, which historically was seven years for
     channel boxes and 3 - 10 years for other peripheral equipment. In
     conjunction with the impairment analysis discussed in Note 15, the Company
     reevaluated depreciable lives and beginning in fiscal 2000, the Company
     depreciated newly acquired channel boxes over a five-year life and certain
     other peripheral equipment over 2 - 10 years (as discussed in Note 15).

     Statement of Financial Accounting Standards ("SFAS") No. 121, Accounting
     for the Impairment of Long-Lived Assets and Long-Lived Assets to be
     Disposed of, sets forth guidance as to when to recognize an impairment of
     long-lived assets and how to measure such impairment. The standard requires
     certain assets be reviewed for impairment whenever events or circumstances
     indicate the carrying amount may not be recoverable. Based on the
     application of SFAS No. 121, the Company recognized a $14.2 million pretax
     charge during fiscal 1999 related to its seismic equipment lease pool (see
     Note 15 for additional information). In addition, the Company recognized
     approximately $900,000 of pretax charges related to a lower of cost or
     market adjustment to certain seismic equipment assets classified as
     inventory.

     Property and Equipment - Property and equipment is carried at cost, net of
     accumulated depreciation. Depreciation is computed on the straight-line
     method over the estimated useful lives of the property and equipment. The
     estimated useful lives of equipment range from three to seven years.
     Buildings are depreciated over 40 years and property improvements over 10
     years.

     Income Taxes - The Company files a separate federal return for its
     subsidiary in Canada. The Company accounts for its taxes under the
     liability method, whereby the Company recognizes, on a current and
     long-term basis, deferred tax assets and liabilities which represent
     differences between the financial and income tax reporting bases of its
     assets and liabilities. Historically the Company has paid income taxes on
     the cash basis of accounting. Beginning in fiscal 1998, the Company no
     longer was eligible to report on the cash basis of accounting for federal
     income tax reporting purposes.

     Cash Equivalents - For purposes of presenting cash flows, the Company
     considers all highly liquid investments with a maturity of three months or
     less at the date of purchase to

                                      F-8

<PAGE>   31

                            MITCHAM INDUSTRIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1.   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     be cash equivalents.

     Use of Estimates - The preparation of the Company's consolidated financial
     statements in conformity with generally accepted accounting principles
     requires the Company's management to make estimates and assumptions that
     affect the amounts reported in these consolidated financial statements and
     accompanying notes. Actual results could differ from these estimates.

     As discussed in Note 15, in fiscal 1999 an impairment loss was recognized
     in accordance with SFAS No. 121. It is reasonably possible that additional
     provisions for impairment losses could be recognized in the future.

     Industry Concentration - The Company's revenues are derived from seismic
     equipment leased and sold to companies providing seismic acquisition
     services. The seismic industry has rapidly expanded its 3-D seismic
     acquisition capabilities over the past few years as this technology has
     gained broad market acceptance from oil and gas exploration companies. With
     this expansion, many of the seismic acquisition companies in North America,
     while experiencing rapid growth in 3-D seismic acquisition revenues, have
     not experienced corresponding increases in profitability and have become
     increasingly leveraged. Should the financial performance of the companies
     in this industry not improve, the Company could be exposed to additional
     credit risk and be subjected to declining demand for its leasing services.

     Foreign Currency Translation - All balance sheet accounts of the Canadian
     subsidiary have been translated at the current exchange rate as of the end
     of the accounting period. Income statement items have been translated at
     average currency exchange rates. The resulting translation adjustment is
     recorded as a separate component of comprehensive income within
     shareholders' equity.

     Reclassifications - Certain 1999 balances have been reclassified to conform
     with 2000 presentation. Such reclassifications had no effect on net income
     or comprehensive income.


2.   REVOLVING CREDIT FACILITY

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

                                      F-9

<PAGE>   32

                            MITCHAM INDUSTRIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



3.   SUPPLEMENTAL STATEMENTS OF CASH FLOWS INFORMATION

     Supplemental disclosures of cash flow information for the years ended
     January 31, 1998, 1999 and 2000 are as follows:

<TABLE>
<CAPTION>

                                                                  YEARS ENDED JANUARY 31,
                                                    ------------------------------------------------
                                                        1998              1999              2000
                                                    ------------      ------------      ------------
<S>                                                 <C>               <C>               <C>
     Interest paid                                  $    143,000      $     38,000      $     31,000
     Taxes paid                                        3,526,000         2,297,055           500,000
     Purchase of marketable securities in
       accounts payable                                5,000,000                 -                 -
     Seismic equipment acquired in exchange
       for cancellation of accounts receivable                 -                 -           781,000
     Seismic equipment acquired in exchange
       for issuance of leasing credits                         -                 -         1,250,000
</TABLE>

4.   NOTES RECEIVABLE

     Notes receivable consisted of $2,562,000 due from five customers and
     $2,283,000 due from four customers as of January 31, 1999 and 2000,
     respectively. These notes bear interest ranging from 9.5% - 12%. During
     fiscal 2000, the Company wrote off $316,000 of notes receivable and
     canceled $489,000 of notes receivable in exchange for seismic equipment. In
     addition, during fiscal 2000 the Company established two notes receivable
     totaling $400,000 related to sales of seismic equipment. The Company does
     not recognize interest income related to notes that were established to
     finance trade receivables. Interest will be recognized once all principal
     balances have been repaid.


5.   CONCENTRATIONS OF CREDIT RISK

     As of January 31, 1999 and 2000, amounts due from customers which exceeded
     10% of accounts receivable amounted to an aggregate of $5.3 million from
     four customers and $2.4 million from two customers, respectively.

     The Company maintains deposits with banks which exceed the Federal Deposit
     Insurance Corporation ("FDIC") insured limit and has a money market account
     included in its cash balances which is not FDIC insured. Management
     believes the risk of loss in connection with these accounts is minimal.



                                      F-10

<PAGE>   33

                            MITCHAM INDUSTRIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



6.   SEISMIC EQUIPMENT LEASE POOL, PROPERTY AND EQUIPMENT

     Seismic equipment lease pool, property and equipment consisted of the
     following as of:


<TABLE>
<CAPTION>

                                                                    JANUARY 31,
                                                          -------------------------------
                                                              1999               2000
                                                          ------------       ------------

<S>                                                       <C>                <C>
Remote signal conditioners (channel boxes)                $ 32,693,000       $ 33,284,000
Other peripheral equipment                                  30,921,000         37,027,000
                                                          ------------       ------------
  Seismic equipment lease pool                              63,614,000         70,311,000
                                                          ------------       ------------

Land                                                            25,000             25,000
Buildings and improvements                                     439,000            517,000
Furniture and fixtures                                         828,000            922,000
Autos and trucks                                               210,000            205,000
                                                          ------------       ------------
  Property and equipment                                     1,502,000          1,669,000
                                                          ------------       ------------

Seismic equipment lease pool, property and equipment        65,116,000         71,980,000
Less: accumulated depreciation                             (31,472,000)       (36,697,000)
                                                          ------------       ------------
                                                          $ 33,644,000       $ 35,283,000
                                                          ============       ============
</TABLE>

7.   LEASES

     The Company leases and subleases seismic equipment to customers under
     operating leases with non-cancelable terms of one year or less. These
     leases are generally renewable on a month-to-month basis. All taxes (other
     than U.S. federal income taxes) and assessments are the contractual
     responsibility of the lessee. To the extent the foreign taxes are not paid
     by the lessee, the relevant foreign taxing authorities might seek to
     collect such taxes from the Company. Under the terms of its lease
     agreements, any amounts paid by the Company to such foreign taxing
     authorities may be billed and collected from the lessee. If the Company is
     unable to collect the foreign taxes it paid on behalf of its lessees, the
     Company may have foreign tax credits in the amounts paid which could be
     applied against its U.S. income tax liability subject to certain
     limitations. The Company is not aware of any foreign tax obligations as of
     January 31, 1999 and 2000 that have not already been reflected on the
     accompanying consolidated financial statements.

     The Company leases seismic equipment from others under month-to-month
     operating leases. Lease expense incurred by the Company in connection with
     such leases amounted to $477,000, $460,000 and $155,000 for the years ended
     January 31, 1998, 1999 and 2000, respectively.




                                      F-11

<PAGE>   34

                            MITCHAM INDUSTRIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


8.   INCOME TAXES

     The components of income tax expense (benefit) were as follows:

<TABLE>
<CAPTION>


                                                                          YEARS ENDED JANUARY 31,
                                                          ------------------------------------------------------
                                                              1998                  1999                 2000
                                                          -----------           -----------           -----------
<S>                                                       <C>                   <C>                   <C>
        Current:
          Federal                                         $ 2,417,000           $ 3,102,000           $(3,604,000)
          Foreign                                             670,000               288,000                 2,000
          State                                                68,000                     -                     -
                                                          -----------           -----------           -----------
                                                            3,155,000             3,390,000            (3,602,000)
        Deferred                                              792,000            (6,850,000)            1,803,000
                                                          -----------           -----------           -----------
                                                          $ 3,947,000           $(3,460,000)          $(1,799,000)
                                                          ===========           ===========           ===========
</TABLE>


     The components of the Company's deferred tax asset consisted of the
     following as of:

<TABLE>
<CAPTION>

                                                                                              JANUARY 31,
                                                                                 -----------------------------------
                                                                                     1999                   2000
                                                                                 ------------           ------------
<S>                                                                              <C>                    <C>
        Deferred tax assets:
          Allowance for doubtful accounts                                        $    553,000           $    289,000
          Canadian net operating loss carryforward                                    777,000              1,471,000
          Imputed interest carryforward                                               458,000                374,000
          Inventory valuation allowance                                               333,000                333,000
          Depreciation                                                              4,677,000              2,310,000
          AMT credit                                                                        -                802,000
          Other                                                                             -                 36,000
                                                                                 ------------           ------------
          Gross deferred tax assets                                                 6,798,000              5,615,000
          Valuation allowance                                                      (1,483,000)            (2,505,000)
                                                                                 ------------           ------------
                    Net assets                                                      5,315,000              3,110,000
        Deferred tax liabilities:
          Tax accounting change from cash basis to accrual
            basis                                                                    (804,000)              (402,000)
                                                                                 ------------           ------------
          Deferred tax asset, net                                                $  4,511,000           $  2,708,000
                                                                                 ============           ============
</TABLE>


                                      F-12

<PAGE>   35


                            MITCHAM INDUSTRIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





8.   INCOME TAXES (CONTINUED)

     The following is a reconciliation of expected to actual income tax
     expense (benefit):

<TABLE>
<CAPTION>

                                                                                          YEARS ENDED JANUARY 31,
                                                                          -------------------------------------------------------
                                                                              1998                  1999                  2000
                                                                          -----------           -----------           -----------
<S>                                                                     <C>                   <C>                   <C>
     Federal income tax expense (benefit) at 34%                          $ 3,515,000           $(4,075,000)          $(2,265,000)
     State and foreign taxes                                                  277,000                     -                     -
     Non-taxable interest income                                                    -                     -              (227,000)
     Deferred benefit not currently recognized                                      -             1,483,000             1,022,000
     Nondeductible expenses                                                    47,000                16,000                16,000
     Prior year over accrual                                                        -              (600,000)             (639,000)
     Other                                                                    108,000              (284,000)              294,000
                                                                          -----------           -----------           -----------
                                                                          $ 3,947,000           $(3,460,000)          $(1,799,000)
                                                                          ===========           ===========           ===========
</TABLE>


     The Company had Canadian net operating loss carryforwards of approximately
     $3,268,000 as of January 31, 2000. The Canadian net operating losses expire
     in various years through 2007.

     The Company recorded a valuation allowance of $1,483,000 as of January 31,
     1999 and $2,505,000 as of January 31, 2000.


9.   SALES AND MAJOR CUSTOMERS

     A summary of the Company's revenues from foreign customers by geographic
     region is as follows:

<TABLE>
<CAPTION>


                                                                                      YEARS ENDED JANUARY 31,
                                                                        -----------------------------------------------------
                                                                            1998                1999                 2000
                                                                        -----------          -----------          -----------
<S>                                                                     <C>                  <C>                  <C>
     Canada                                                              $ 8,064,000          $ 7,138,000          $ 4,538,000
     UK/Europe                                                             4,172,000            3,673,000            2,144,000
     Mexico                                                                  940,000            2,121,000                8,000
     South America                                                         2,842,000            6,819,000              678,000
     Asia                                                                    919,000              915,000              107,000
     Other                                                                   160,000                    -               36,000
                                                                         -----------          -----------          -----------
        Totals                                                           $17,097,000          $20,666,000          $ 7,511,000
                                                                         ===========          ===========          ===========
</TABLE>


     Two customers represented approximately 20% and 17%, respectively, of
     fiscal 1998 total revenues, and one customer represented approximately 36%
     of fiscal 1999 total revenues. Three customers represented approximately
     17%, 12% and 10% of fiscal 2000 total revenues. No other customer exceeded
     10% of revenues for fiscal 1998, 1999 and 2000.


                                      F-13

<PAGE>   36

                            MITCHAM INDUSTRIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




10.  SHAREHOLDERS' EQUITY

     The Company has 1,000,000 shares of preferred stock authorized, none of
     which are outstanding as of January 31, 1999 and 2000. The preferred stock
     may be issued in multiple series with various terms, as authorized by the
     Company's Board of Directors. The Company has 20,000,000 shares of common
     stock authorized, of which 9,545,658 and 9,551,112 are issued and
     outstanding as of January 31, 1999 and 2000, respectively. During March and
     December 1997, the Company consummated public offerings of its common
     stock, as more fully discussed in Note 14, in which it sold to underwriters
     an aggregate of 4,775,000 shares of common stock.

     The Company issued warrants to various shareholders during fiscal 1995 to
     acquire 49,500 shares of the Company's common stock at $5.00 per share. The
     number of shares and exercise price of the warrants were adjusted to 63,953
     and $3.87, respectively, during fiscal 1996 as a result of the
     anti-dilution provisions of the warrants. At January 31, 1999, 40,711 of
     these warrants remained unexercised. During fiscal 2000, all of the
     outstanding warrants were exercised on a cashless basis.

     In July 1995, the Company issued warrants to acquire 35,000 shares of its
     common stock to a public relations firm engaged by the Company. The
     warrants are exercisable at $3.50 per share for a period of five years from
     their issuance, and 15,000 remain unexercised at January 31, 1999 and 2000.

     In August 1996, in exchange for services, the Company issued warrants to
     its legal counsel to purchase 50,000 shares of its common stock for $6.43
     per share (the "August 1996 Warrants"), exercisable beginning August 1997
     for a period of four years thereafter. Of this amount, warrants to acquire
     40,000 shares are unexercised at January 31, 1999 and 2000. In December
     1996, in exchange for services, the Company issued warrants to its legal
     counsel to purchase 50,000 shares of its common stock at $9.28 per share
     (the "December 1996 Warrants"), exercisable beginning December 14, 1997 for
     a period of five years. As of January 31, 1999 and 2000, none of the
     December 1996 Warrants have been exercised. In October 1997, in exchange
     for services rendered in connection with the Company's secondary offering,
     the Company issued warrants to its legal counsel to purchase 25,000 shares
     of its common stock for $28.12 per share (the "1997 Warrants"), exercisable
     beginning October 28, 1998 for a period of five years thereafter; all
     25,000 remain unexercised at January 31, 1999 and 2000. As of January 31,
     2000, the exercise prices of the December 1996 Warrants and the 1997
     Warrants were $3.56 per share, a result of the anti-dilution provisions of
     those warrants.

     Warrants to acquire 200,000 shares of the Company's common stock were
     issued to underwriters in connection with the Company's secondary offering
     in March 1997. The


                                      F-14
<PAGE>   37



                           MITCHAM INDUSTRIES, INC.

                   NOTE TO CONSOLIDATED FINANCIAL STATEMENTS



10.    SHAREHOLDERS' EQUITY (continued)

       warrants are exercisable at $8.40 per share for a period of two years
       from their issuance. At January 31, 1999, 55,000 remained unexercised.
       During fiscal 2000, the remaining balance of unexercised warrants
       outstanding expired.


11.    COMMITMENTS AND CONTINGENCIES

       Sercel Lease Agreement - Effective December 16, 1999, the Company
       renewed its exclusive leasing arrangement with Sercel by entering into a
       new Exclusive Equipment Lease Agreement (the "Sercel Lease Agreement").
       The Sercel Lease Agreement replaces the parties' former Exclusive
       Equipment Lease Agreement (the "Former Agreement") that was entered into
       in September 1996, under which the Company had completely fulfilled its
       purchase obligations. With the exception of a different minimum purchase
       requirement for the Company, the Sercel Lease Agreement is substantially
       similar to the Former Agreement. Under the Sercel Lease Agreement, the
       Company agreed to purchase a total of six 408UL 3-D data acquisition
       systems with at least 600 channels in stated increments over a
       three-year term. Under the agreement, the Company acts as Sercel's
       exclusive third-party worldwide short-term leasing representative and
       Sercel will refer to the Company all requests it receives to lease
       Sercel 3-D data acquisition equipment and other field equipment, through
       December 31, 2002.

       Legal Proceedings - On or about April 23, 1998, several class action
       lawsuits were filed against the Company and its chief executive officer
       and then chief financial officer in the U.S. District Court for the
       Southern District of Texas, Houston Division. The first-filed complaint,
       styled Stanley Moskowitz ("Plaintiffs") v. Mitcham Industries, Inc.,
       Billy F. Mitcham, Jr. and Roberto Rios ("Defendants"), alleged
       violations of Section 10(b), Rule 10b-5 and 20(a) of the Securities
       Exchange Act of 1934 and Sections 11 and 12(a)(2) of the Securities Act
       of 1933. On or about September 21, 1998, the complaints were
       consolidated into one action. On November 4, 1998, the Plaintiffs filed
       a consolidated amended complaint ("CAC"), which seeks class action
       status on behalf of those who purchased the Company's common stock from
       June 4, 1997 through March 26, 1998, and damages in an unspecified
       amount plus costs and attorney's fees. The CAC alleges that the
       Defendants made materially false and misleading statements and omissions
       in public filings and announcements concerning its business and its
       allowance for doubtful accounts. On or about January 15, 1999, the
       Defendants filed a motion to dismiss the CAC. On September 28, 1999, the
       Court granted in part and denied in part the Defendants' motion to
       dismiss, and granted Plaintiffs leave to amend on certain claims. On
       December 8, 1999, Plaintiffs filed their second consolidated amended
       complaint ("SCAC"). On December 14, 1999, Plaintiffs served discovery on
       Defendants. On January 28, 2000, Defendants filed a motion to dismiss



                                     F-15
<PAGE>   38





                           MITCHAM INDUSTRIES, INC.

                   NOTE TO CONSOLIDATED FINANCIAL STATEMENTS




11.    COMMITMENTS AND CONTINGENCIES  (continued)

       the SCAC. On February 4, 2000, the Court agreed with Defendants that
       Plaintiffs' discovery was improper because, under the Reform Act,
       discovery is stayed until the Court sustains the sufficiency of the
       SCAC. On February 28, 2000, the Plaintiffs filed an opposition to
       Defendants' motions to dismiss, and on March 15, 2000, Defendants filed
       their reply. The Company awaits the Court's ruling.

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

       Employment Agreement - Effective January 15, 1997, the Company entered
       into an employment agreement with the Company's president for a term of
       five years, beginning January 15, 1997, which term is automatically
       extended for successive one-year periods unless either party gives
       written notice of termination at least 30 days prior to the end of the
       current term. The agreement provides for an annual salary of $150,000,
       subject to increase by the Board of Directors. It may be terminated
       prior to the end of the initial term or any extension thereof if the
       president dies; if it is determined that the president has become
       disabled; if the Board of Directors determines that the president has
       breached the employment agreement in any material respect, has
       appropriated a material business opportunity of the Company or has
       engaged in fraud or dishonesty with respect to the Company's business
       that is punishable by imprisonment. If the president's employment is
       terminated by the Company prior to the end of the initial five-year term
       other than for a reason enumerated above, the president will be entitled
       to payments equal to $450,000, payable ratably over the 24 months
       following such termination. For a period of two years after the
       termination of the agreement, the president is prohibited from engaging
       in any business activities that are competitive with the Company's
       business and from diverting any of the Company's customers to a
       competitor.


12.    STOCK OPTION PLANS

       The Company's stock option plans consist of the 1994 Stock Option Plan,
       the 1998 Stock Awards Plan and the 1994 Non-Employee Director Plan.
       Under the 1994 Stock Option Plan, options to purchase a maximum of
       350,000 shares of common stock may be issued to officers, employee
       directors, key employees and consultants of the Company. The plan
       provides both for the grant of options intended to qualify as "incentive
       stock options" under the Internal Revenue Code of 1986, as amended (the
       "Code"), as well as options that do not so qualify. As of January 31,
       2000, 349,700 options authorized for issuance have been granted.



                                     F-16
<PAGE>   39






                           MITCHAM INDUSTRIES, INC.

                   NOTE TO CONSOLIDATED FINANCIAL STATEMENTS




12.    STOCK OPTION PLANS  (continued)

       At the 1998 Annual Meeting of Shareholders, the Company's shareholders
       approved the adoption of the 1998 Stock Awards Plan. Under the 1998
       Stock Awards Plan, up to 350,000 shares of common stock may be issued in
       the form of stock options, stock appreciation rights, restricted stock
       awards, performance awards and phantom stock awards to the Company's
       employees.

       With respect to incentive stock options issued under both the 1994 Stock
       Option Plan and the 1998 Stock Awards Plan, no option may be granted
       more than 10 years after the effective date of the stock option plan or
       exercised more than 10 years after the date of grant (five years if the
       optionee owns more than 10% of the common stock of the Company at the
       date of grant). The vesting period for options will be determined by the
       Compensation Committee, except that no option may be exercised sooner
       than six months from the date of grant. Additionally, with regard to
       incentive stock options, the exercise price of the option may not be
       less than 100% of the fair market value of the common stock at the date
       of grant (110% if the optionee owns more than 10% of the common stock of
       the Company). Subject to certain limited exceptions, options may not be
       exercised unless, at the time of exercise, the optionee is in the
       service of the Company.

       As of January 31, 2000, options to purchase an aggregate of 191,700
       shares of common stock are issued and outstanding under the 1994 Stock
       Option Plan, 67,250 of which are exercisable at a price of $5.00 per
       share, 30,000 of which are exercisable at $3.29 per share, 30,000 of
       which are exercisable at $5.75 per share, 49,450 of which are
       exercisable at $22.00 per share and 15,000 of which are exercisable at
       $5.38 per share. As of January 31, 2000, options to purchase an
       aggregate of 348,500 shares of common stock are issued and outstanding
       under the 1998 Stock Awards Plan, 60,000 of which are exercisable at a
       price of $7.38 per share and 290,000 of which are exercisable at $3.56
       per share.

       The Company has a non-employee director stock option plan (the "Director
       Plan") which provides for the grant of options that do not qualify as
       "incentive stock options" under the Code. Options granted under the
       Director Plan must have an exercise price at least equal to the fair
       market value of the Company's common stock on the date of grant.
       Pursuant to the Director Plan, options to purchase 5,000 shares of
       common stock are granted to each non-employee director upon his election
       to the Board and every year thereafter so long as he is re-elected to
       the Board of Directors. Options granted under the Director Plan are
       fully vested one year after their grant and expire 10 years after the
       date of the grant. As of January 31, 2000, options to purchase an
       aggregate of 29,000 shares of common stock are issued and outstanding
       under the Director Plan, 1,000 of which are exercisable at $2.88 per
       share, 2,000 of which are exercisable at $3.13 per share, 10,000 of
       which are exercisable at $4.06 per



                                     F-17



<PAGE>   40





                           MITCHAM INDUSTRIES, INC.

                   NOTE TO CONSOLIDATED FINANCIAL STATEMENTS




12.    STOCK OPTION PLANS  (continued)

       share, 3,000 of which are exercisable at $7.38 per share, 10,000 of
       which are exercisable at $11.00 per share and 3,000 of which are
       exercisable at $11.13 per share.

       Activity in the 1994 Stock Option Plan, 1998 Stock Awards Plan and
       Director Plan for the years ended January 31, 1998, 1999 and 2000 was as
       follows:

<TABLE>
<CAPTION>
                                                                     Weighted
                                                                      Average
                                                                     Exercise
                                                   Number of           Price
                                                    Shares           Per Share
                                                   ----------       ----------
<S>                                           <C>            <C>
       Outstanding, January 31, 1997                 293,750        $    4.73
             Exercised                               (89,120)            4.68
             Granted                                  67,750            21.52
             Expired                                    (500)            3.29
                                                   ---------        ---------
       Outstanding, January 31, 1998                 271,880             8.91
             Exercised                               (41,000)            4.31
             Granted                                  85,000             7.45
             Expired                                 (15,300)           22.00
                                                   ---------        ---------
       Outstanding, January 31, 1999                 300,580        $    8.46
             Exercised                                     -
             Granted                                 300,000             3.58
             Expired                                 (31,380)            4.93
                                                   ---------        ---------
       Outstanding, January 31, 2000                 569,200        $    6.08
                                                   =========        =========
</TABLE>


       As of January 31, 2000, options to acquire 230,700 shares of the
       Company's common stock were fully vested and exercisable at a weighted
       average exercise price of $9.10 per share.

       The remaining options, which have a weighted average exercise price of
       $4.03 per share, will vest over the next three fiscal years. If not
       previously exercised, options outstanding at January 31, 2000 will
       expire as follows: 67,250 options expire on May 9, 2004; 1,000 options
       expire on March 16, 2005; 2,000 options expire on June 8, 2005; 30,000
       options expire on December 4, 2005; 3,000 options expire on June 12,
       2006; 30,000 options expire on August 14, 2006; 3,000 options expire on
       June 11, 2007; 49,450 options expire on October 3, 2007; 10,000 options
       expire on July 9, 2008; 15,000 options expire on August 31, 2008; 60,000
       options expire on September 29, 2008; 288,500 options expire on February
       23, 2009 and 10,000 options expire on July 23, 2009.






                                     F-18
<PAGE>   41




                           MITCHAM INDUSTRIES, INC.

                   NOTE TO CONSOLIDATED FINANCIAL STATEMENTS





12.    STOCK OPTION PLANS  (continued)

       The Company applies APB Opinion No. 25, Accounting for Stock Issued to
       Employees, and related Interpretations in accounting for its plans.
       Accordingly, no compensation cost has been recognized for its stock
       option plans since options have been granted at fair value. Had
       compensation expense for the Company's stock-based compensation plans
       been determined based on the fair value at the grant dates for awards
       under those plans, consistent with the method of SFAS No. 123, the
       Company's net income (loss) and income (loss) per common share would
       have been decreased to the pro forma amounts indicated below:


<TABLE>
<CAPTION>
                                                                                YEARS ENDED JANUARY 31,
                                                                 ------------------------------------------------------
                                                                      1998               1999               2000
                                                                 ----------------   ----------------   ----------------
                 <S>                                             <C>                <C>                <C>
                 Net income (loss)
                       As reported                               $    6,392,000     $   (8,526,000)    $   (4,864,000)
                       Pro forma                                      6,011,000         (9,177,000)        (5,238,000)
                 Net income (loss) per common share (basic)
                       As reported                               $          .87     $         (.90)    $         (.51)
                       Pro forma                                            .82               (.97)              (.55)
</TABLE>

       The fair value of each option grant was estimated on the date of grant
       using the Black-Scholes option pricing model with the following
       assumptions: risk free rates of 4.5% to 7%; volatility of 59%, 66% and
       62% for 1998, 1999 and 2000, respectively; no assumed dividend yield;
       and expected lives of 5 years.


13.    FAIR VALUE OF FINANCIAL INSTRUMENTS

       The Company's financial instruments consist of trade receivables,
       marketable securities, notes receivable and payables. The Company
       believes the carrying value of these financial instruments approximates
       their estimated fair value due to the short maturity of these
       instruments.


14.    PUBLIC OFFERINGS OF COMMON STOCK

       During March 1997, the Company completed a public offering of a total of
       3,450,000 shares of its common stock, of which 2,875,000 shares were sold
       by the Company and 575,000 shares were sold by the selling shareholders.
       The net proceeds to the Company from the offering (after deducting
       underwriting discounts and commissions and estimated expenses of the
       offering) were approximately $18.2 million.





                                     F-19
<PAGE>   42






                           MITCHAM INDUSTRIES, INC.

                   NOTE TO CONSOLIDATED FINANCIAL STATEMENTS




14.    PUBLIC OFFERINGS OF COMMON STOCK (continued)

       During December 1997, the Company completed a public offering of a total
       of 1,920,000 shares of its common stock, of which 1,900,000 shares were
       sold by the Company and 20,000 shares were sold by selling shareholders.
       The net proceeds to the Company from the offering (after deducting
       underwriting discounts and commissions and estimated expenses of the
       offering) were approximately $33.6 million.


15.    PROVISION FOR ASSET IMPAIRMENT

       During the fiscal year ended January 31, 1999, the Company recorded a
       pretax asset impairment charge of $15.1 million. Included in this charge
       was a $900,000 lower of cost or market adjustment related to certain
       seismic equipment assets classified as inventory. The non-cash asset
       impairment charge was recorded in accordance with SFAS No. 121, which
       requires that long-lived assets and certain identifiable intangibles
       held and used by the Company be reviewed for impairment whenever events
       or changes in circumstances indicate that the carrying amount of an
       asset may not be recoverable. The severity as well as the duration of
       the current oil and gas industry downturn was such an event. The
       Company's review of its long-lived assets indicated that the carrying
       value of certain of the Company's seismic equipment lease pool and
       inventory assets was more than the estimated undiscounted future net
       cash flows. As such, under SFAS No. 121, the Company wrote down those
       assets to their estimated fair market value based on discounted cash
       flows using an effective rate of 8.0%. Undiscounted future net cash
       flows were calculated based on individual types of seismic equipment
       using projected future utilization and lease rates over the estimated
       remaining useful lives of the assets. The Company's seismic equipment
       assets have been historically depreciated over 3-10 years. The
       impairment was recorded based on certain estimates and projections as
       stipulated in SFAS No. 121. There was no such charge in fiscal 2000.


16.    SUBSEQUENT EVENT

       Stock Repurchase Program - Subsequent to January 31, 2000, the Company
       announced that its Board of Directors authorized the repurchase of up to
       1,000,000 shares of the Company's common stock. The Company expects the
       repurchases to take place from time to time in the open market or in
       privately negotiated purchase transactions as market and financial
       conditions warrant. The Company has repurchased 236,000 shares of its
       common stock at an average price of $4.84 per share.




                                     F-20
<PAGE>   43





                          INDEPENDENT AUDITOR'S REPORT
                        ON FINANCIAL STATEMENT SCHEDULE




To the Board of Directors and Shareholders
Mitcham Industries, Inc.
Huntsville, Texas

We have audited, in accordance with generally accepted auditing standards, the
consolidated financial statements of Mitcham Industries, Inc. and Subsidiary
included in this Form 10-K and have issued our report thereon dated March 28,
2000. Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The financial statement schedule listed
in Item 16(b) herein (Schedule II - Valuation and Qualifying Accounts) is the
responsibility of the Company's management and is presented for the purpose of
complying with the Securities and Exchange Commission's rules and is not part
of the basic financial statements. The financial statement schedule has been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, is fairly stated in all material
respects with the financial data required to be set forth therein in relation
to the basic financial statements taken as a whole.


/s/ HEIN + ASSOCIATES LLP
-------------------------------
HEIN + ASSOCIATES LLP

Houston, Texas
March 28, 2000




                                     F-21
<PAGE>   44



                                  SCHEDULE II

                            MITCHAM INDUSTRIES, INC.

                       VALUATION AND QUALIFYING ACCOUNTS


<TABLE>
<CAPTION>
       COL. A                        COL. B                COL. C(1)              COL. D                COL. E
---------------------        -------------------     --------------------      ---------------       -------------
                                  BALANCE AT         ADDITIONS CHARGED TO       DEDUCTIONS -           BALANCE AT
    DESCRIPTION              BEGINNING OF PERIOD      COSTS AND EXPENSES          DESCRIBE           END OF PERIOD
---------------------        -------------------     --------------------      ---------------       -------------
<S>                            <C>                     <C>                     <C>                   <C>
January 31, 1998
   Allowance for
    doubtful accounts          $   1,500,000           $     842,000           $  1,318,000(A)       $   1,024,000

January 31, 1999
   Allowance for
    doubtful accounts          $   1,024,000           $   1,705,000           $  1,104,000(A)       $   1,625,000

January 31, 2000
   Allowance for
    doubtful accounts          $   1,625,000           $     575,000           $  1,357,000(A)       $     843,000
</TABLE>
----------------------
(A) Represents recoveries and uncollectible accounts written off.

Note: Column C(2) has been omitted, as all answers would be "none."


                                     F-22
<PAGE>   45




                               INDEX TO EXHIBITS



<TABLE>
<CAPTION>
  EXHIBIT
  NUMBER                               DESCRIPTION
-----------                            -----------
<S>              <C>
   3.1   --      Amended and Restated Articles of Incorporation of Mitcham
                 Industries, Inc. (1) (Exhibit 3.1)

   3.2   --      Amended and Restated Bylaws of Mitcham Industries, Inc. (1)
                 (Exhibit 3.2)

   4.1   --      Copy of Specimen stock certificate evidencing Common Stock of
                 Mitcham Industries, Inc. (2) (Exhibit 4.1)

   9     --      Voting Agreement, dated September 20, 1993, between the
                 Company, Billy F. Mitcham, Jr. and certain shareholders (1)
                 (Exhibit 9)

* 10.1   --      Employment Agreement, dated January 15, 1997, between the
                 Company and Billy F. Mitcham, Jr. (4) (Exhibit 10.4)

  10.2   --      Exclusive Lease Referral Agreement, dated May 14, 1996,
                 between the Company and Pelton Company, Inc. (3) (Exhibit 10.1)

  10.3   --      First Amendment to the Exclusive Lease Referral Agreement,
                 dated January 1997, between the Company and Pelton (6)
                 (Exhibit 10.17)

  10.4   --      Second Amendment to the Exclusive Lease Referral Agreement
                 between Mitcham Industries, Inc. and Pelton Company, Inc.,
                 dated November 24, 1997 (6) (Exhibit 10.3)

  10.5   --      Exclusive Equipment Lease Agreement, effective September 20,
                 1996, between the Company and SERCEL, S.A. (3) (Exhibit 10.2)

  10.6   --      Commercial Representation Agreement, effective September 20,
                 1996, between Mitcham Canada Ltd., an Alberta corporation, and
                 Georex, Inc. (3) (Exhibit 10.3)

  10.7   --      Amendment No. 1 to the Commercial Representation Agreement
                 between Mitcham Canada, Ltd. and Georex, Inc., dated November
                 11, 1997 (6) (Exhibit 10.1)

  10.8   --      Exclusive Lease Representative and Distributor Agreement
                 between Mitcham Industries, Inc. and StrucTec Systems, Inc.,
                 dated October 30, 1997 (6) (Exhibit 10.2)

  10.9   --      Letter Loan Agreement between Mitcham Industries, Inc. and
                 Bank One, Texas, N.A., dated December 7,1997 (6) (Exhibit 10.4)

  10.10  --      Promissory Note in the original principal amount of
                 $15,000,000, made payable to the order of Bank One, Texas,
                 N.A., dated December 8, 1997 (6) (Exhibit 10.5)

  10.11  --      Preferred Supplier Agreement between Mitcham Industries, Inc.
                 and Input/Output, Inc., dated June 30, 1998 (7) (Exhibit 10.1)

* 10.12  --      1994 Stock Option Plan of Mitcham Industries, Inc. (2)
                 (Exhibit 10.9)

  10.13  --      1994 Non-Employee Director Stock Option Plan of Mitcham
                 Industries, Inc. (2) (Exhibit 10.12)

  10.14  --      Form of Mitcham Industries, Inc. customer lease agreement (1)
                 (Exhibit 10.20)

  10.15  --      1998 Stock Awards Plan of Mitcham Industries, Inc. (8)
                 (Exhibit A)

  21     --      Subsidiary of the Company (5) (Exhibit 11)

  23     --      Consent of Hein + Associates LLP

  27     --      Financial Data Schedule

   *             Management contract or compensatory plan or
                 arrangement
</TABLE>

(1)      Incorporated by reference to the indicated exhibit number of the
         Company's Registration Statement on Form SB-2 (File No. 33-81164-D),
         filed with the SEC on July 5, 1994.




<PAGE>   46


(2)      Incorporated by reference to the indicated exhibit number of the
         Company's Amendment No. 2 to the Registration Statement on Form SB-2,
         filed with the SEC on November 9, 1994.

(3)      Incorporated by reference to the indicated exhibit number of the
         Company's Registration Statement on Form S-3 (File No. 333-10555),
         filed with the SEC on October 30, 1996.

(4)      Incorporated by reference to the indicated exhibit number of the
         Company's Registration Statement on Form S-1 (File No. 333-19997),
         filed with the SEC on January 17, 1997.

(5)      Incorporated by reference to the indicated exhibit number of the
         Company's Amendment No. 1 to its Registration Statement on Form S-1,
         filed with the SEC on January 31, 1997.

(6)      Incorporated by reference to the indicated exhibit number of the
         Company's Registration Statement on Form S-3 (File No. 333-40507),
         filed with the SEC on November 18, 1997.

(7)      Incorporated by reference to the indicated exhibit number of the
         Company's Current Report on Form 8-K, filed with the SEC on July 15,
         1998.

(8)      Incorporated by reference to Exhibit A of the Company's proxy statement
         for the fiscal year ended January 31, 1998.


(b) REPORTS ON FORM 8-K

     On January 4, 2000, the Company filed a Form 8-K reporting the renewal of
its exclusive leasing arrangement with Sercel under the Exclusive Equipment
Lease Agreement entered into by the parties effective December 16, 1999.