##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-K/A
 (Amendment No. 1)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended January 31, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number: 000-25142
 Mitcham Industries, Inc.
  Texas
    
    76-0210849(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)8141 SH 75 SouthP.O. Box 1175Huntsville, Texas
    
    77342(Address of principal executive offices)
    
    (Zip Code)
 936-291-2277
 None
  None
 Common Stock, $.01 par value
(Title of class)
 o þ
 o þ
  þ o
 o
 o o Non-accelerated þ
 o þ
   Class

Outstanding
at May 1, 2006Common Stock, $.01 par value per share
    9,572,610 shares
 DOCUMENTS INCORPORATED BY REFERENCE
 Proxy Statement for the Annual Meeting of
Shareholders to be held July 27, 2006 (Proxy Statement)
    
    Part III




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##### 



MITCHAM
INDUSTRIES, INC.
 ANNUAL
REPORT ON FORM 10-K/A(AMENDMENT NO. 1)
 EXPLANATORY
NOTE
   TABLE OF CONTENTS
 PART IItem 1.
    
    Business
    
    
    2Item 1A.
    
    Risk Factors
    
    
    9Item 1B.
    
    Unresolved Staff
Comments
    
    
    11Item 2.
    
    Properties
    
    
    11Item 3.
    
    Legal Proceedings
    
    
    12Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    12PART IIItem 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    12Item 6.
    
    Selected Financial Data
    
    
    13Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    25Item 8.
    
    Financial Statements and Supplementary Data
    
    
    26Item 9.
    
    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
    
    
    26Item 9A.
    
    Controls and Procedures
    
    
    26Item 9B.
    
    Other Information
    
    
    26PART IIIItem 10.
    
    Directors and Executive Officers of the Registrant
    
    
    27Item 11.
    
    Executive Compensation
    
    
    27Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    27Item 13.
    
    Certain Relationships and Related Transactions
    
    
    27Item 14.
    
    Principal Accountant Fees and Services
    
    
    27PART IVItem 15.
    
    Exhibits, Financial Statement Schedules
    
    
    27Signatures
    
    
    30Consent of Hein & Associates LLPCertification of Billy F. Mitcham, Jr., CEOCertification of Michael A. Pugh, CFOCertification of Billy F. Mitcham, Jr., CEOCertification of Michael A. Pugh, CFO
  1




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##### Table of Contents



PART I
 
 Item 1. Business
      2




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##### Table of Contents



Business Strategy
  
    
    Provide a technologically advanced seismic equipment lease pool.We intend to maintain
the size and diversity of our equipment lease pool, including the addition of marine
equipment. We believe 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.
    
    Continue to expand international operations.Historically, North and South
America have been our core operating areas, with a limited amount of
other international leasing
activities; however, our revenues from international sources have increased. We intend to
expand our international leasing and sales activities utilizing Seamaps and MSEs
activities and locations to exploit new opportunities. We believe there are significant
opportunities to continue to expand our international leasing and sales activities.
    
    Maintain alliances with major seismic equipment manufacturers.Our
relationships with leading seismic equipment manufacturers allow us to expand our
equipment lease pool on favorable terms. We believe such relationships improve our access
to customers and provide a competitive advantage.
    
    Pursue additional business development opportunities.We regularly evaluate
opportunities to expand our business activities within the oil service industry,
particularly in the seismic sector.
 Recent Developments
   Seismic Technology and the Industry
  3




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4




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##### Table of Contents



Business and Operations
 Seismic Equipment Leasing.
      Seismic Equipment Sales.
 5




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##### Table of Contents



Other Equipment Sales.
 Key Supplier Agreements
 The Sercel Lease Agreement
    Other Agreements
   Discontinued Operations
  6




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##### Table of Contents



Customers, Sales and Marketing
     Year Ended January 31,2004
    
    
    2005
    
    
    2006Canada
    
    $
    9,530,000
    
    
    $
    6,587,000
    
    
    $
    8,914,000UK / Europe
    
    
    808,000
    
    
    
    1,950,000
    
    
    
    2,355,000Mexico
    
    
    110,000
    
    
    
    31,000
    
    
    
    13,000South America
    
    
    1,012,000
    
    
    
    2,931,000
    
    
    
    3,220,000Asia/South
Pacific
    
    
    4,569,000
    
    
    
    7,170,000
    
    
    
    10,479,000Other
    
    
    513,000
    
    
    
    458,000
    
    
    
    220,000Totals
    
    $
    16,542,000
    
    
    $
    19,127,000
    
    
    $
    25,201,000
  Competition
  7




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##### Table of Contents



Suppliers
  Employees
  Website Access to Our Periodic SEC Reports
  Forward-Looking Statements
  o
    
    our future financial position and results of operations;o
    
    planned capital expenditures;o
    
    our business strategy and other plans for future operations;o
    
    the future mix of revenues and business;o
    
    our commitments and contingent liabilities;o
    
    future demand for our services; ando
    
    predicted improvement in energy industry and seismic service industry conditions.
 8




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##### Table of Contents



Item 1A. Risk Factors
 Demand for Land-Based Seismic Data Is Not Assured
  o
    
    oil and gas prices and industry perceptions of future price levels;o
    
    the cost of exploring for, producing and delivering oil and gas;o
    
    the availability of current geophysical data;o
    
    the discovery rate of new oil and gas reserves; ando
    
    local and international political and economic conditions.
  Loss of Significant Customers Will Adversely Affect Us
  Significant Defaults of Past-Due Customer Accounts Would Adversely Affect Our Results of Operations
  International Economic and Political Instability Could Adversely Our Results of Operations
  9




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Foreign Currency Exchange Rates Have Increasingly Materially Affected Our Results of Operations
  Our Operations and Financial Condition Would Be Materially Adversely Affected if We Are Unable to Continually Obtain Additional Lease Contracts
  We Depend on Key Personnel
  Our Seismic Lease Pool is Subject to Technological Obsolescence
  Weather Conditions Cause Seasonal Fluctuations in Our Operating Results
  10




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##### Table of Contents



We Face Competition in Our Seismic Equipment Leasing Activities
   We Rely on a Small Number of Suppliers and Disruption in Vendor Supplies Could Adversely Affect Our Results of Operations
  Our Stock Price is Subject to Volatility
  Possible Adverse Effect of Anti-Takeover Provisions; Potential Issuance of Preferred Stock
  
 Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
  11




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Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 PART II
 
 Item 5. Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
 Market Information for Common Stock
  High
    
    LowFiscal Year Ended January 31, 2005:First Quarter
    
    $
    5.35
    
    
    $
    3.10Second Quarter
    
    
    5.25
    
    
    
    3.42Third Quarter
    
    
    7.68
    
    
    
    4.20Fourth Quarter
    
    
    8.94
    
    
    
    5.40Fiscal Year Ended January 31, 2006:First Quarter
    
    
    7.90
    
    
    
    6.03Second Quarter
    
    
    9.63
    
    
    
    6.34Third Quarter
    
    
    11.89
    
    
    
    8.05Fourth Quarter
    
    
    26.18
    
    
    
    10.55
  Dividend
Policy
  12




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Securities Authorized for Issuance Under Equity Compensation Plans
  EQUITY COMPENSATION PLAN INFORMATION
 Number of Securities
    
    Weighted-Average
    
    Number of Securitiesto be Issued Upon
    
    Exercise Price of
    
    Remaining AvailableExercise of
    
    Outstanding
    
    for Future IssuanceOutstanding Options,
    
    Options, Warrants
    
    Under EquityPlan Category
    
    Warrants and Rights
    
    and Rights
    
    Compensation Plans (1)Equity compensation plans approved
by our shareholders (2)
    
    
    1,054,920
    
    
    $
    5.15
    
    
    
    218,530Equity compensation plans not
approved by our shareholders
    
    
    0
    
    
    
    0
    
    
    
    0Total
    
    
    1,054,920
    
    
    $
    5.15
    
    
    
    218,530
 
 (1)
    
    Excludes securities to be issued upon the exercise of outstanding options, warrants
and rights.(2)
    
    Includes options granted under the 1994 Stock Option Plan, 1994 Non-Employee Director
Stock Option  Plan, 1998 Amended and Restated Stock Awards Plan and 2000 Stock
Option Plan, each of which is further described in footnote 17 to our
Consolidated Financial
Statements filed elsewhere herein. Purchases of Equity Securities By the Issuer and Affiliated Purchasers
  
 Item 6. Selected Financial Data
  Year Ended January 31,2002
    
    2003
    
    2004
    
    2005
    
    2006(Amounts in thousands, except per share amounts)Net sales and other revenues
    
    $
    27,183
    
    
    $
    14,139
    
    
    $
    22,406
    
    
    $
    26,368
    
    
    $
    34,589Income (loss) from continuing operations
    
    
    (8,457
    )
    
    
    (7,677
    )
    
    
    (3,574
    )
    
    
    2,049
    
    
    
    10,855Income (loss) from continuing operations per common
share  basic
    
    
    (0.95
    )
    
    
    (0.88
    )
    
    
    (0.41
    )
    
    
    0.23
    
    
    
    1.19Income (loss) from continuing operations per common
share  diluted
    
    
    (0.95
    )
    
    
    (0.88
    )
    
    
    (0.41
    )
    
    
    0.22
    
    
    
    1.10Cash dividends declared per common share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance Sheet Data:Cash and short-term investments
    
    
    8,244
    
    
    
    5,137
    
    
    
    6,834
    
    
    
    13,138
    
    
    
    18,976Seismic equipment lease pool and property and
equipment, net
    
    
    45,567
    
    
    
    33,154
    
    
    
    25,359
    
    
    
    19,725
    
    
    
    19,924Total assets
    
    
    58,795
    
    
    
    44,340
    
    
    
    40,730
    
    
    
    41,395
    
    
    
    57,620Long-term debt
    
    
    4,079
    
    
    
    4,622
    
    
    
    2,418
    
    
    
    
    
    
    
    3,000Total liabilities
    
    
    16,192
    
    
    
    10,682
    
    
    
    9,933
    
    
    
    7,518
    
    
    
    10,169Total shareholders equity
    
    
    42,603
    
    
    
    33,658
    
    
    
    30,797
    
    
    
    33,877
    
    
    
    47,451
 13




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Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
       Results
of Operations  Mitcham Consolidated
  14




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Revenues  Mitcham Consolidated
     Costs and Expenses  Mitcham Consolidated
   15




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16




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##### Table of Contents



Segment Reporting
  Results
of Operations  Mitcham Segment
    Revenues  Mitcham Segment
    17




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##### Table of Contents



Costs and Expenses  Mitcham Segment
       Results of Operations  Seamap Segment
  18




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##### Table of Contents



Revenues
 Seamap Segment
  Costs and Expenses   Seamap Segment
   19




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Liquidity and Capital Resources
         20




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Payments Due by PeriodLess Than
    
    
    
    
    
    
    
    
    
    
    More ThanContractual Obligations
    
    Total
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 YearsLong-term debt
    
    $
    3,300,000
    
    
    $
    
    
    
    $
    3,300,000
    
    
    $
    
    
    
    $
    Operating
leases
    
    
    1,935,000
    
    
    
    553,000
    
    
    
    1,003,000
    
    
    
    379,000
    
    
    
    Total
    
    $
    5,235,000
    
    
    $
    553,000
    
    
    $
    4,303,000
    
    
    $
    379,000
    
    
    $
    
 21




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Critical Accounting Policies
   Revenue Recognition
 Leases
  Equipment Sales
  Allowance for Doubtful Accounts
  Long-Lived Assets
  22




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23




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Income Taxes
   
    
    taxable income projections in future years;
    
    whether the carryforward period is so brief that it would limit realization of
tax benefits;
    
    future sales and operating cost projections that will produce more than enough
taxable income to realize the deferred tax asset based on existing sales prices and
cost structures; and
    
    our earnings history exclusive of the loss that created the future deductible
amount coupled with evidence indicating that the loss is an aberration rather than
a continuing condition.
  
    
    the current level of worldwide oil and gas exploration activities resulting from
historically high prices for oil and natural gas;
    
    increasing world demand for oil;
    
    our anticipated positive income in certain jurisdictions; and
    
    our existing customer relationships.
  
    
    the risk of the world oil supply increasing, thereby depressing the price of oil
and natural gas;
    
    the risk of decreased global demand for oil; and
    
    the potential for increased competition in the seismic equipment leasing and
sales business.
  24




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New Accounting Pronouncement
  
 Item 7A. Quantitative and Qualitative Disclosures about Market Risk
 Market Risk
  25




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##### Table of Contents



Foreign Currency Risk
   
 Item 8. Financial Statements and Supplementary Data
  
 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
  
 Item 9A. Controls and Procedures
 I. Restatement of Financial Statements and Impact on Internal Control over Financial Reporting and
Disclosure Controls and Procedures
 Restatement of Financial Statements
   
    
    Historically, the Company has reflected cash flows from continuing operations within the operating,
investing and financing categories and has aggregated operating, investing and financing
cash flows from
discontinued operations as a single line item in its Consolidated Statements of Cash Flows.
The Company
has now restated its Consolidated Statements of Cash Flows to reflect cash flows from
discontinued
operations within each category of operating, investing and financing activities.
    
    The Company had also previously reported cash receipts from the sale of lease pool
equipment as operating
activities. The Company has now determined that cash receipts from the sale of used lease
pool equipment
should be classified as investing activities and the Gross profit from sale of lease pool
equipment should
be reflected as a deduction in operating activities.
    
    Finally, the Company has reclassified certain of its investments in certificates of
deposit from cash and cash
equivalents to short-term investments.
   II. Evaluation of Disclosure Controls and Procedures
    Cash Flows from Discontinued Operations.
 Proceeds from Sale of Lease Pool Equipment.
  Determination of Cash and Cash Equivalents. generally
   III. Changes in Internal Control over Financial Reporting
    
 Item 9B. Other Information
  26




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PART III
 
 Item 10. Directors and Executive Officers of the Registrant
  
 Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
  
 Item 13. Certain Relationships and Related Transactions
  
 Item 14. Principal Accountant Fees and Services
  
 PART IV
 
 Item 15. Exhibits, Financial Statement Schedules
 List of Documents Filed
 (1) Financial Statements
  (2) Financial Statement Schedules
   (3) Exhibits
 Exhibits
 ExhibitNumber3.1
    
    -
    
    Amended and Restated Articles of Incorporation of Mitcham Industries, Inc. (1) (Exhibit 3.1)3.2
    
    -
    
    Second Amended and Restated Bylaws of Mitcham Industries, Inc.** (11)9
    
    -
    
    Voting Agreement, dated September 20, 1993, among the company, Billy F. Mitcham, Jr. and
certain shareholders (2) (Exhibit 9)*10.1
    
    -
    
    Employment Agreement, dated January 15, 1997, between the Company and Billy F. Mitcham, Jr.
(3) (Exhibit 10.4)
 27




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##### Table of Contents



ExhibitNumber10.2
    
    -
    
    Exclusive Lease Referral Agreement, dated May 14, 1996, between the Company and Pelton
Company, Inc., a Oklahoma corporation (Pelton) (4)10.3
    
    -
    
    First Amendment to Exclusive Lease Referral Agreement, dated January 15, 1997, between the
Company and Pelton (3) (Exhibit 10.17)10.4
    
    -
    
    Second Amendment to Exclusive Lease Referral Agreement, dated November 24, 1997, between
Mitcham Industries, Inc. and Pelton (5) (Exhibit 10.3)*10.5
    
    -
    
    Mitcham Industries, Inc. 1994 Stock Option Plan (2) (Exhibit 10.9)*10.6
    
    -
    
    Mitcham Industries, Inc. 1994 Non-Employee Director Stock Option Plan (2) (Exhibit 10.12)*10.7
    
    -
    
    Mitcham Industries, Inc. 1998 Stock Awards Plan (6)*10.7.1
    
    -
    
    Amended and Restated 1998 Stock Awards Plan (12) (Exhibit 10.3)*10.7.2
    
    -
    
    Form of Restricted Stock Agreement (12) (Exhibit 10.1)*10.7.3
    
    -
    
    Form of Nonqualified Stock Option Agreement (12) (Exhibit 10.2)*10.7.4
    
    -
    
    Form of Incentive Stock Option Agreement (12) (Exhibit 10.4)*10.7.5
    
    -
    
    Form of Phantom Stock Award Agreement (12) (Exhibit 10.5)*10.7.6
    
    -
    
    Form of Stock Appreciation Rights Agreement (12) (Exhibit 10.6)*10.8
    
    -
    
    Mitcham Industries, Inc. 2000 Stock Option Plan (7)*10.8.1
    
    -
    
    Form of Incentive Stock Option Agreement (12) (Exhibit 10.7)*10.8.2
    
    -
    
    Form of Nonqualified Stock Option Agreement (12) (Exhibit 10.8)10.9
    
    -
    
    Warrant No. M-7, dated July 18, 2001, issued to Bear Ridge Capital, L.L.C. (8)10.10
    
    -
    
    Share Sale Agreement, dated December 2002, between Mitcham Industries, Inc. and Nautronix
Inc. (9)*10.11
    
    -
    
    Agreement, dated April 4, 2003, between Mitcham Industries, Inc. and William J. Sheppard
(10) (Exhibit 10.14)*10.12
    
    -
    
    Second Consultant Agreement, dated April 1, 2003, but effective January 1, 2004, between
Mitcham Industries, Inc. and William J. Sheppard (10) (Exhibit 10.16)10.13
    
    -
    
    Equipment Lease Agreement, dated April 9, 2003, between Mitcham Industries, Inc. and Sercel,
Inc., a Oklahoma corporation (Sercel) (10) (Exhibit 10.17)10.14
    
    -
    
    Amendment to the Equipment Lease Agreement, dated as of December 17, 2003, between
Mitcham Industries, Inc. and Sercel (11) (Exhibit 10.14)10.15
    
    -
    
    Promissory Note of Mitcham Industries, Inc., dated as of February 11, 2002, payable to First
Victoria National Bank in the original principal amount of $8,518,919 (11) (Exhibit 10.15)10.16
    
    -
    
    Loan Agreement, dated March 30, 2004, by and between Mitcham Industries, Inc. and First
Victoria National Bank (11) (Exhibit 10.16)*10.17
    
    -
    
    Separation Agreement, Consulting Agreement and Release, dated June 24, 2004, between P.
Blake Dupuis and Mitcham Industries, Inc. (13)*10.18
    
    -
    
    Separation Agreement, dated
June 6, 2005 between Chris Siffert and Mitcham Industries, Inc.
(14)21
    
    -
    
    Subsidiaries of the Company**23
    
    -
    
    Consent of Hein & Associates
LLP***31.1
    
    -
    
    Certification of Billy F. Mitcham, Jr., Chief Executive Officer, pursuant to Rule 13a-14(a) and
Rule 15d-14(a) of the Securities Exchange Act, as amended***31.2
    
    -
    
    Certification of Michael A. Pugh, Chief Financial Officer, pursuant to Rule 13a-14(a) and
Rule 15d-14(a) of the Securities Exchange Act, as amended***32.1
    
    -
    
    Certification of Billy F. Mitcham,
Jr., Chief Executive Officer, under Section 906 of the Sarbanes
Oxley Act of 2002, 18 U.S.C. § 1350***32.2
    
    -
    
    Certification of Michael A. Pugh, Chief Financial Officer, under Section 906 of the Sarbanes
Oxley Act of 2002, 18 U.S.C. § 1350***
 
 *
    
    Management contract or compensatory plan or
arrangement**
    
    Previously filed***
    
    Filed herewith(1)
    
    Incorporated by reference to the indicated exhibit number of the Companys
Registration Statement
on Form S-8 (File No. 333-67208), filed with the SEC on August 9, 2001.(2)
    
    Incorporated by reference to the indicated exhibit number of the Companys
Registration Statement
on Form SB-2, filed with the SEC on July 5, 1994. 28




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##### Table of Contents



(3)
    
    Incorporated by reference to the indicated exhibit number of the Companys
Registration Statement
on Form S-l (File No. 333-19997), filed with the SEC on January 17, 1997.(4)
    
    Incorporated by reference to Exhibit 10.1 of the Companys Registration Statement on
Form S-3/A
(File No. 333-10555), filed with the SEC on October 25, 1996.(5)
    
    Incorporated by reference to the indicated exhibit number of the Companys
Registration Statement
on Form S-3/A (File No. 333-40507), filed with the SEC on December 17,1997.(6)
    
    Incorporated by reference to Exhibit A of the Companys proxy statement for the
fiscal year ended
January 31, 1998, filed with the SEC on June 1, 1998.(7)
    
    Incorporated by reference to Exhibit A of the Companys proxy statement for the
fiscal year ended
January 31, 2000, filed with the SEC on May 26, 2000.(8)
    
    Incorporated by reference to Exhibit 10.14 of the Companys Annual Report on Form
10-K for the
fiscal year ended January 31, 2002, filed with the SEC on May 1, 2002.(9)
    
    Incorporated by reference to Exhibit 2.1 of the Companys Current Report on Form 8-K,
filed with the
SEC on January 13, 2003.(10)
    
    Incorporated by reference to the indicated exhibit number of the Companys Annual
Report on
Form 10-K for the fiscal year ended January 31, 2003, filed with the SEC on May 1, 2003.(11)
    
    Incorporated by reference to the indicated exhibit number of the Companys Annual
Report on
Form 10-K for the fiscal year ended January 31, 2004, filed with the SEC on May 28, 2004.(12)
    
    Incorporated by reference to the indicated exhibit number of the Companys Current
Report on
Form 8-K, filed with the SEC on September 8, 2004.(13)
    
    Incorporated by reference to Exhibit 10.1 of the Companys Quarterly Report on
Form 10-Q for the
period ended July 31, 2004, filed with the SEC on September 14, 2004.(14)
    
    Incorporated by reference to Exhibit 10.1 of the
Companys Current Report on
Form 8-K, filed with the SEC on June 7, 2005. 29




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##### Table of Contents



SIGNATURES
 th
 MITCHAM INDUSTRIES, INC.By:
    /s/ BILLY F. MITCHAM, JR.Billy F. Mitcham, Jr.,President and Chief Executive Officer
(principal executive officer) 30




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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 PageReport of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets as of January 31, 2005 and 2006
    
    
    F-3Consolidated Statements of Operations for the Years Ended January 31, 2004, 2005 and 2006
    
    
    F-4Consolidated Statements of Changes in Shareholders Equity and Comprehensive Income for the
Years Ended January 31, 2004, 2005 and 2006
    
    
    F-5Consolidated Statements of Cash Flows for the Years Ended January 31, 2004, 2005 and 2006
    
    
    F-6Notes to Consolidated Financial Statements
    
    
    F-7
 F-1




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     /s/       HEIN & ASSOCIATES LLPHein & Associates LLP 
 F-2




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MITCHAM INDUSTRIES, INC.
 
 CONSOLIDATED BALANCE SHEETS
 January 31,2005
    
    
    2006ASSETSCurrent assets:Cash and cash equivalents
    
    $
    13,138,000
    
    
    $
    16,426,000Short-term investments
    
    
    
    
    
    
    2,550,000Accounts receivable, net of allowance for doubtful accounts of $723,000 and
$1,125,000 at January 31, 2005 and 2006, respectively
respectively
    
    
    6,021,000
    
    
    
    5,793,000Current portion of notes receivable, net of allowance for doubtful notes of
$286,000
and $48,000 at January 31, 2005 and 2006, respectively
    
    
    1,192,000
    
    
    
    2,734,000Inventories, net of allowance for obsolescence of $62,000
    
    
    
    
    
    
    1,155,000Prepaid expenses and other current assets
    
    
    705,000
    
    
    
    717,000Current assets of discontinued operations
    
    
    393,000
    
    
    
    366,000Total current assets
    
    
    21,449,000
    
    
    
    29,741,000Seismic equipment lease pool and property and equipment
    
    
    74,792,000
    
    
    
    79,023,000Accumulated depreciation of seismic lease pool and property and equipment
    
    
    (55,067,000
    )
    
    
    (59,099,000
    )Long-term assets of discontinued operations
    
    
    216,000
    
    
    
    Intangible assets, net of amortization of $266,000
    
    
    
    
    
    
    2,584,000Goodwill
    
    
    
    
    
    
    2,358,000Deferred tax asset, net of valuation allowance of $4,897,000
    
    
    
    
    
    
    3,000,000Other assets
    
    
    5,000
    
    
    
    13,000Total assets
    
    $
    41,395,000
    
    
    $
    57,620,000LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    4,893,000
    
    
    $
    4,436,000Current maturities  long-term debt
    
    
    918,000
    
    
    
    Income taxes  payable
    
    
    284,000
    
    
    
    286,000Deferred revenue
    
    
    652,000
    
    
    
    381,000Wages payable
    
    
    299,000
    
    
    
    383,000Current liabilities of discontinued operations
    
    
    14,000
    
    
    
    10,000Accrued expenses and other current liabilities
    
    
    458,000
    
    
    
    1,673,000Total current liabilities
    
    
    7,518,000
    
    
    
    7,169,000Long-term debt
    
    
    
    
    
    
    3,000,000Total liabilities
    
    
    7,518,000
    
    
    
    10,169,000Commitments and contingencies (Notes 9 and 16)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; 9,893,732 and
10,360,110 shares issued at January 31, 2005 and January 31, 2006,

respectively
    
    
    99,000
    
    
    
    104,000Additional paid-in capital
    
    
    62,702,000
    
    
    
    64,404,000Treasury stock, at cost (915,000 shares)
    
    
    (4,686,000
    )
    
    
    (4,686,000
    )Deferred compensation
    
    
    (94,000
    )
    
    
    (8,000
    )Accumulated deficit
    
    
    (26,282,000
    )
    
    
    (15,427,000
    )Accumulated other comprehensive income
    
    
    2,138,000
    
    
    
    3,064,000Total shareholders equity
    
    
    33,877,000
    
    
    
    47,451,000Total liabilities and shareholders equity
    
    $
    41,395,000
    
    
    $
    57,620,000
  F-3




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##### Table of Contents



MITCHAM INDUSTRIES, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Year Ended January 31,2004
    
    
    2005
    
    
    2006Revenues:Equipment leasing
    
    $
    13,765,000
    
    
    $
    17,086,000
    
    
    $
    22,104,000Lease pool equipment sales
    
    
    4,734,000
    
    
    
    6,282,000
    
    
    
    5,218,000Other equipment sales
    
    
    3,907,000
    
    
    
    3,000,000
    
    
    
    7,267,000Total revenues
    
    
    22,406,000
    
    
    
    26,368,000
    
    
    
    34,589,000Costs and expenses:Direct costs  equipment leasing
    
    
    2,326,000
    
    
    
    1,644,000
    
    
    
    2,907,000Direct costs  lease pool depreciation
    
    
    13,500,000
    
    
    
    10,359,000
    
    
    
    8,309,000Cost of
lease pool equipment sales
    
    
    1,994,000
    
    
    
    2,583,000
    
    
    
    950,000Cost of other equipment sales
    
    
    2,721,000
    
    
    
    2,043,000
    
    
    
    4,080,000General and administrative
    
    
    5,095,000
    
    
    
    6,969,000
    
    
    
    9,437,000Provision for doubtful accounts
    
    
    25,000
    
    
    
    155,000
    
    
    
    188,000Depreciation and amortization
    
    
    177,000
    
    
    
    237,000
    
    
    
    649,000Impairment of assets
    
    
    
    
    
    
    
    
    
    
    617,000Total costs and expenses
    
    
    25,838,000
    
    
    
    23,990,000
    
    
    
    27,137,000Operating income (loss)
    
    
    (3,432,000
    )
    
    
    2,378,000
    
    
    
    7,452,000Other income (expense):Interest income (expense), net of interest income of
$97,000, $119,000 and $528,000, respectively
    
    
    (176,000
    )
    
    
    (71,000
    )
    
    
    422,000Other, net
    
    
    34,000
    
    
    
    19,000
    
    
    
    17,000Total other income (expense)
    
    
    (142,000
    )
    
    
    (52,000
    )
    
    
    439,000Income (loss) from continuing operations before income
taxes
    
    
    (3,574,000
    )
    
    
    2,326,000
    
    
    
    7,891,000Provision (benefit) for income taxes
    
    
    
    
    
    
    277,000
    
    
    
    (2,964,000
    )Income (loss) from continuing operations
    
    
    (3,574,000
    )
    
    
    2,049,000
    
    
    
    10,855,000Income (loss) from discontinued operations, net of income
taxes of
$0 (including impairment charge of $700,000 in 2004)
    
    
    (2,715,000
    )
    
    
    80,000
    
    
    
    Net income (loss)
    
    $
    (6,289,000
    )
    
    $
    2,129,000
    
    
    $
    10,855,000Income (loss) per common share from continuing operations:Basic
    
    $
    (0.41
    )
    
    $
    0.23
    
    
    $
    1.19Diluted
    
    $
    (0.41
    )
    
    $
    0.22
    
    
    $
    1.10Income (loss) per common share from discontinued operations:Basic and diluted
    
    $
    (0.31
    )
    
    $
    0.01
    
    
    $
    Net income (loss) per common share  basic
    
    $
    (0.72
    )
    
    $
    0.24
    
    
    $
    1.19Net income (loss) per common share  diluted
    
    $
    (0.72
    )
    
    $
    0.23
    
    
    $
    1.10Shares used in computing income (loss) per common share:Basic
    
    
    8,772,000
    
    
    
    8,849,000
    
    
    
    9,126,000Dilutive effect of common stock equivalents
    
    
    
    
    
    
    455,000
    
    
    
    718,000Diluted
    
    
    8,772,000
    
    
    
    9,304,000
    
    
    
    9,844,000
  F-4




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##### Table of Contents



MITCHAM INDUSTRIES, INC.
 
 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
AND COMPREHENSIVE INCOME (LOSS)
 Years Ended January 31, 2004, 2005 and 2006AccumulatedUnearned
    
    
    OtherAdditional
    
    
    
    
    
    
    
    
    
    
    Compensation
    
    
    ComprehensiveCommon Stock
    
    
    Paid-In
    
    
    Treasury
    
    
    Accumulated
    
    
    & Restricted
    
    
    IncomeShares
    
    
    Amount
    
    
    Capital
    
    
    Stock
    
    
    Deficit
    
    
    Stock
    
    
    (Loss)
    
    
    TotalBalances, January 31,
2003
    
    
    9,658,000
    
    
    $
    97,000
    
    
    $
    61,814,000
    
    
    $
    (4,686,000
    )
    
    $
    (22,122,000
    )
    
    $
    
    
    
    $
    (1,445,000
    )
    
    $
    33,658,000Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,289,000
    )
    
    
    
    
    
    
    
    
    
    
    (6,289,000
    )Foreign currency
translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,412,000
    
    
    
    3,412,000Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,877,000
    )Issuance of common
stock upon exercise of
warrants and options
    
    
    4,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Restricted stock issued
    
    
    53,000
    
    
    
    
    
    
    
    99,000
    
    
    
    
    
    
    
    
    
    
    
    (99,000
    )
    
    
    
    
    
    
    Amortization of
restricted
stock grants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,000
    
    
    
    
    
    
    
    16,000Balances, January 31,
2004
    
    
    9,715,000
    
    
    
    97,000
    
    
    
    61,913,000
    
    
    
    (4,686,000
    )
    
    
    (28,411,000
    )
    
    
    (83,000
    )
    
    
    1,967,000
    
    
    
    30,797,000Comprehensive gain:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,129,000
    
    
    
    
    
    
    
    
    
    
    
    2,129,000Foreign currency
translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    171,000
    
    
    
    171,000Comprehensive gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,300,000Issuance of common
stock upon exercise of
warrants and options
    
    
    171,000
    
    
    
    2,000
    
    
    
    317,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    319,000Restricted stock issued
    
    
    20,000
    
    
    
    
    
    
    
    95,000
    
    
    
    
    
    
    
    
    
    
    
    (95,000
    )
    
    
    
    
    
    
    Amortization of
restricted
stock grants, net of
cancellations
    
    
    (12,000
    )
    
    
    
    
    
    
    (23,000
    )
    
    
    
    
    
    
    
    
    
    
    84,000
    
    
    
    
    
    
    
    61,000Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    400,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    400,000Balances, January 31,
2005
    
    
    9,894,000
    
    
    
    99,000
    
    
    
    62,702,000
    
    
    
    (4,686,000
    )
    
    
    (26,282,000
    )
    
    
    (94,000
    )
    
    
    2,138,000
    
    
    
    33,877,000Comprehensive gain:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,855,000
    
    
    
    
    
    
    
    
    
    
    
    10,855,000Foreign currency
translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    926,000
    
    
    
    926,000Comprehensive gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,781,000Issuance of common
stock upon exercise of
warrants and options
    
    
    471,000
    
    
    
    5,000
    
    
    
    1,635,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,640,000Amortization of
restricted
stock grants, net of
cancellations
    
    
    (5,000
    )
    
    
    
    
    
    
    (9,000
    )
    
    
    
    
    
    
    
    
    
    
    86,000
    
    
    
    
    
    
    
    77,000Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    76,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    76,000Balances, January 31,
2006
    
    
    10,360,000
    
    
    $
    104,000
    
    
    $
    64,404,000
    
    
    $
    (4,686,000
    )
    
    $
    (15,427,000
    )
    
    $
    (8,000
    )
    
    $
    3,064,000
    
    
    $
    47,451,000
  F-5




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##### Table of Contents



MITCHAM INDUSTRIES, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Year Ended January 31,2004
    
    
    2005
    
    
    2006(Restated)
    
    
    (Restated)Cash flows from operating activities:Net income (loss)
    
    $
    (6,289,000
    )
    
    $
    2,129,000
    
    
    $
    10,855,000Adjustments to reconcile net income (loss) to net cash
provided by operating activities:Depreciation and amortization
    
    
    13,963,000
    
    
    
    10,596,000
    
    
    
    8,958,000Impairment of assets
    
    
    700,000
    
    
    
    
    
    
    
    617,000Stock-based compensation
    
    
    
    
    
    
    461,000
    
    
    
    153,000Provision for doubtful accounts, net of
charge-offs and recoveries
    
    
    106,000
    
    
    
    133,000
    
    
    
    104,000Gross profit from sale of lease pool equipment
    
    
    (2,740,000
    )
    
    
    (3,699,000
    )
    
    
    (4,268,000
    )Reversal of deferred tax valuation allowance
    
    
    
    
    
    
    
    
    
    
    (3,000,000
    )Changes in:Trade accounts and notes receivable
    
    
    (3,680,000
    )
    
    
    (1,585,000
    )
    
    
    (808,000
    )Inventories
    
    
    
    
    
    
    
    
    
    
    (268,000
    )Current assets of discontinued operations
    
    
    (213,000
    )
    
    
    505,000
    
    
    
    27,000Federal income taxes, current
    
    
    
    
    
    
    284,000
    
    
    
    2,000Accounts payable, accrued expenses and other current
liabilities
    
    
    846,000
    
    
    
    2,685,000
    
    
    
    (1,093,000
    )Current liabilities of discontinued operations
    
    
    798,000
    
    
    
    (385,000
    )
    
    
    (4,000
    )Other, net
    
    
    62,000
    
    
    
    (67,000
    )
    
    
    (86,000
    )Net cash provided by operating activities
    
    
    3,553,000
    
    
    
    11,057,000
    
    
    
    11,189,000Cash flows from investing activities:Sales from used lease pool equipment
    
    
    4,734,000
    
    
    
    6,282,000
    
    
    
    5,218,000Acquisition of Seamap, net of $1,027,000 cash acquired
    
    
    
    
    
    
    
    
    
    
    (2,473,000
    )Seamap acquisition costs
    
    
    
    
    
    
    
    
    
    
    (64,000
    )Purchases of short-term investments
    
    
    
    
    
    
    
    
    
    
    (6,000,000
    )Redemptions of short-term investments
    
    
    
    
    
    
    
    
    
    
    3,450,000Purchases of seismic equipment held for lease
    
    
    (4,313,000
    )
    
    
    (6,253,000
    )
    
    
    (8,186,000
    )Purchases of property and equipment
    
    
    (59,000
    )
    
    
    (377,000
    )
    
    
    (784,000
    )Long-term assets of discontinued operations
    
    
    312,000
    
    
    
    275,000
    
    
    
    216,000Net cash provided by (used in) investing activities
    
    
    674,000
    
    
    
    (73,000
    )
    
    
    (8,623,000
    )Cash flows from financing activities:Payments on borrowings
    
    
    (2,530,000
    )
    
    
    (4,999,000
    )
    
    
    (918,000
    )Proceeds from issuance of common stock upon exercise of
warrants and options
    
    
    
    
    
    
    319,000
    
    
    
    1,640,000Net cash provided by (used in) financing
activities
    
    
    (2,530,000
    )
    
    
    (4,680,000
    )
    
    
    722,000Net increase in cash and cash equivalents
    
    
    1,697,000
    
    
    
    6,304,000
    
    
    
    3,288,000Cash, beginning of year
    
    
    5,137,000
    
    
    
    6,834,000
    
    
    
    13,138,000Cash, end of year
    
    $
    6,834,000
    
    
    $
    13,138,000
    
    
    $
    16,426,000
  F-6




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##### Table of Contents



MITCHAM INDUSTRIES, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. Organization and Summary of Significant Accounting Policies
 Organization
 Revenue Recognition of Leasing Arrangements
 Revenue Recognition of Equipment Sales
 Sales allowances and incentives
 Notes receivable
 Allowance for doubtful accounts
 F-7




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##### Table of Contents



MITCHAM INDUSTRIES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Cash and Cash Equivalents
 Short-term Investments 
 Inventories
 Seismic Equipment Lease Pool
 Property and Equipment
 Intangible Assets 
 Impairment
 F-8




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##### Table of Contents



MITCHAM INDUSTRIES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Income Taxes
  
    
    taxable income projections in future years;
    
    whether the carryforward period is so brief that it would limit realization of
tax benefits;
    
    future sales and operating cost projections that will produce more than enough
taxable income to realize the deferred tax asset based on existing sales prices and
cost structures; and
    
    our earnings history exclusive of the loss that created the future deductible
amount coupled with evidence indicating that the loss is an aberration rather than
a continuing condition.
  
    
    the current level of worldwide oil and gas exploration activities resulting from
historically high prices for oil and natural gas;
    
    increasing world demand for oil;
    
    our anticipated positive income in certain jurisdictions; and
    
    our existing customer relationships.
  
    
    the risk of the world oil supply increasing, thereby depressing the price of oil and
natural gas;
    
    the risk of decreased global demand for oil; and
 F-9




---



##### Table of Contents




    
    the potential for increased competition in the seismic equipment leasing and sales
business.
  Use of Estimates
  Foreign Currency Translation
 Stock-Based Compensation
 F-10




---



##### Table of Contents



MITCHAM INDUSTRIES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Year Ended January 31,2004
    
    
    2005
    
    
    2006Pro forma impact of fair value method (FAS
148)Reported income (loss) from continuing operations
attributable to common shareholders
    
    $
    (3,574,000
    )
    
    $
    2,049,000
    
    
    $
    10,855,000Less: fair value impact of employee stock
compensation
    
    
    (340,000
    )
    
    
    (402,000
    )
    
    
    (1,104,000
    )Pro forma income (loss) from continuing
operations
attributable to common shareholders
    
    $
    (3,914,000
    )
    
    $
    1,647,000
    
    
    $
    9,751,000Reported net income (loss)
    
    $
    (6,289,000
    )
    
    $
    2,129,000
    
    
    $
    10,855,000Income (loss) per common shareBasic  as reported income (loss) from
continuing operations
    
    $
    (0.41
    )
    
    $
    0.23
    
    
    $
    1.19Diluted  as reported income (loss) from
continuing operations
    
    $
    (0.41
    )
    
    $
    0.22
    
    
    $
    1.10Basic  pro forma income (loss) from continuing
operations
    
    $
    (0.45
    )
    
    $
    0.19
    
    
    $
    1.07Diluted  pro forma income (loss) from continuing
operations
    
    $
    (0.45
    )
    
    $
    0.18
    
    
    $
    0.99Basic  as reported net income (loss)
    
    $
    (0.72
    )
    
    $
    0.24
    
    
    $
    1.19Diluted  as reported net income (loss)
    
    $
    (0.72
    )
    
    $
    0.23
    
    
    $
    1.10Basic  pro forma net income (loss)
    
    $
    (0.76
    )
    
    $
    0.20
    
    
    $
    1.07Diluted  pro forma net income (loss)
    
    $
    (0.76
    )
    
    $
    0.19
    
    
    $
    0.99
  Earnings Per Share
 Year Ended January 31,2004
    
    
    2005
    
    
    2006Stock
options
    
    
    90,000
    
    
    
    451,000
    
    
    
    706,000Warrants
    
    
    
    
    
    
    4,000
    
    
    
    12,000Total dilutive
shares
    
    
    90,000
    
    
    
    455,000
    
    
    
    718,000
 Reclassifications
 F-11




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##### Table of Contents



MITCHAM INDUSTRIES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 2. New Accounting Pronouncements
  3. Long-Term Debt and Equipment Notes Payable
  F-12




---



##### Table of Contents



MITCHAM INDUSTRIES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   4. Supplemental Statements of Cash Flows Information
  Year Ended January 31,2004
    
    2005
    
    2006Interest paid, continuing operations
    
    $
    273,000
    
    
    $
    190,000
    
    
    $
    22,000Interest paid, discontinued operations
    
    $
    3,000
    
    
    $
    8,000
    
    
    $
    Taxes paid (refunded), net
    
    $
    
    
    
    $
    
    
    
    $
    Note payable to prior owners of Seamap
    
    $
    
    
    
    $
    
    
    
    $
    3,000,000Seismic equipment acquired in exchange for
cancellation of accounts receivable
    
    $
    48,000
    
    
    $
    685,000
    
    
    $
    192,000Seismic equipment acquired from vendor in exchange
for debt
    
    $
    1,733,000
    
    
    $
    
    
    
    $
    Equipment sold in exchange for notes receivable (Note 5)
  5. Notes Receivable
  F-13




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##### Table of Contents



MITCHAM INDUSTRIES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   6. Discontinued Operations
   Year Ended January 31,2004
    
    
    2005
    
    
    2006Revenues
    
    $
    4,524,000
    
    
    $
    
    
    
    $
    Pretax income (loss)
    
    $
    (2,715,000
    )
    
    $
    80,000
    
    
    $
    
 January 31,2004
    
    
    2005
    
    
    2006Accounts and notes receivable from discontinued
operations
peroperations
    
    $
    815,000
    
    
    $
    498,000
    
    
    $
    355,000Other current assets from discontinued operations
operations
    
    $
    83,000
    
    
    $
    111,000
    
    
    $
    11,000Net property plant and equipment from discontinued
operations
    
    $
    4,000
    
    
    $
    
    
    
    $
    Accounts payable and accrued liabilities from discontinued
operations
    
    $
    399,000
    
    
    $
    14,000
    
    
    $
    10,000
 7. Concentrations
 Credit Risk
  F-14




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##### Table of Contents



MITCHAM INDUSTRIES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Industry Concentration
 Supplier Concentration
 8. Seismic Equipment Lease Pool and Property and Equipment
  January 31,2005
    
    
    2006Recording channels
    
    $
    31,372,000
    
    
    $
    32,711,000Other peripheral equipment
    
    
    40,993,000
    
    
    
    42,981,000Cost of seismic equipment lease pool
    
    
    72,365,000
    
    
    
    75,692,000Land
    
    
    25,000
    
    
    
    25,000Buildings and improvements
    
    
    594,000
    
    
    
    960,000Furniture and fixtures
    
    
    1,548,000
    
    
    
    1,989,000Autos and trucks
    
    
    260,000
    
    
    
    357,000Cost of property and equipment
    
    
    2,427,000
    
    
    
    3,331,000Cost of seismic equipment lease pool and
property and  equipment
    
    
    74,792,000
    
    
    
    79,023,000Less accumulated depreciation
    
    
    (55,067,000
    )
    
    
    (59,099,000
    )Net book value of property and equipment
    
    $
    19,725,000
    
    
    $
    19,924,000
  9. Leases
  F-15




---



##### Table of Contents



MITCHAM INDUSTRIES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   10. Inventories
  January 31,2005
    
    
    2006Raw materials
    
    $
    
    
    
    $
    542,000Finished goods
    
    
    
    
    
    
    293,000Work in progress
    
    
    
    
    
    
    382,000Cost of inventories
    
    
    
    
    
    
    1,217,000Less allowance for obsolescence
    
    
    
    
    
    
    (62,000
    )Net inventories
    
    $
    
    
    
    $
    1,155,000
 11. Income Taxes
  Year Ended January 31,2004
    
    
    2005
    
    
    2006Current:Federal
    
    $
    
    
    
    $
    108,000
    
    
    $
    130,000Foreign
    
    
    
    
    
    
    169,000
    
    
    
    (94,000
    )State
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    277,000
    
    
    
    36,000Deferred
    
    
    
    
    
    
    
    
    
    
    (3,000,000
    )Income tax expense (benefit)
    
    $
    
    
    
    $
    277,000
    
    
    $
    (2,964,000
    )
 F-16




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##### Table of Contents



MITCHAM INDUSTRIES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  January 31,2005
    
    
    2006Deferred tax assets:Allowance for doubtful accounts
    
    $
    343,000
    
    
    $
    367,000Canadian net operating loss carry forward
    
    
    5,616,000
    
    
    
    4,355,000U.S. net operating loss carry forward
    
    
    2,734,000
    
    
    
    651,000U.S. net operating loss carry forward attributable to
excess stock option deductions
    
    
    
    
    
    
    903,000Inventory valuation allowance
    
    
    137,000
    
    
    
    263,000Depreciation
    
    
    555,000
    
    
    
    840,000Accruals not yet deductible for tax
purposes
    
    
    220,000
    
    
    
    92,000AMT credit
    
    
    310,000
    
    
    
    426,000Gross deferred tax assets
    
    
    9,915,000
    
    
    
    7,897,000Valuation allowance
    
    
    (9,915,000
    )
    
    
    (4,897,000
    )Net assets
    
    
    
    
    
    
    3,000,000Deferred tax liabilities
    
    
    
    
    
    
    Deferred tax assets, net
    
    $
    
    
    
    $
    3,000,000
  Year Ended January 31,2004
    
    
    2005
    
    
    2006Federal income tax
expense (benefit) at 34%
    
    $
    (2,138,000
    )
    
    $
    818,000
    
    
    $
    2,683,000Tax credit utilization
    
    
    
    
    
    
    
    
    
    
    (105,000
    )Deferred benefit not currently
recognized
    
    
    2,192,000
    
    
    
    
    
    
    
    Utilization of valuation
allowance
    
    
    
    
    
    
    (388,000
    )
    
    
    (2,921,000
    )Reversal of valuation allowance
    
    
    
    
    
    
    
    
    
    
    (3,000,000
    )Permanent
differences
    
    
    21,000
    
    
    
    (20,000
    )
    
    
    27,000Foreign rate
differential
    
    
    (98,000
    )
    
    
    (133,000
    )
    
    
    258,000Other
    
    
    23,000
    
    
    
    
    
    
    
    94,000$
    
    
    
    $
    277,000
    
    
    $
    (2,964,000
    )
   F-17




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##### Table of Contents



MITCHAM INDUSTRIES, INC
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 12. Acquisition
  Business
Combinations
   Working capital
    
    $
    1,203Equipment
    
    
    153Covenant not to compete
    
    
    1,000Proprietary rights
    
    
    1,850Goodwill
    
    
    2,358Total purchase price
    
    $
    6,564
  Pro Forma Results of Operations
  F-18




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##### Table of Contents



MITCHAM INDUSTRIES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Year Ended January 31,2005
    
    
    2006(In thousands except per share amounts)Revenues
    
    $
    32,054
    
    
    $
    39,629Income from continuing operations
    
    $
    3,002
    
    
    $
    8,824Net income from continuing operations
    
    $
    2,613
    
    
    $
    11,702Earnings per share:Basic
    
    $
    0.30
    
    
    $
    1.28Diluted
    
    $
    0.28
    
    
    $
    1.19
 13. Sales and Major Customers
  Year Ended January 31,2004
    
    
    2005
    
    
    2006Canada
    
    $
    9,530,000
    
    
    $
    6,587,000
    
    
    $
    8,914,000UK / Europe
    
    
    808,000
    
    
    
    1,950,000
    
    
    
    2,355,000Mexico
    
    
    110,000
    
    
    
    31,000
    
    
    
    13,000South America
    
    
    1,012,000
    
    
    
    2,931,000
    
    
    
    3,220,000Asia
    
    
    4,569,000
    
    
    
    7,170,000
    
    
    
    10,479,000Other
    
    
    513,000
    
    
    
    458,000
    
    
    
    220,000Totals
    
    $
    16,542,000
    
    
    $
    19,127,000
    
    
    $
    25,201,000
  14. Fair Value of Financial Instruments
  15. Shareholders Equity
  F-19




---



##### Table of Contents



MITCHAM INDUSTRIES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENT  (Continued)
    16. Commitments and Contingencies
 Sercel
Lease Agreement
 Employment Agreement
 F-20




---



##### Table of Contents



MITCHAM INDUSTRIES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Seamap Acquisition 
 17. Stock Option Plans
        F-21




---



##### Table of Contents



MITCHAM INDUSTRIES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  1994 Stock Option Plan
 1998 Amended and Restated Stock Awards Plan
 2000 Stock Option Plan
 Director Plan
 F-22




---



##### Table of Contents



MITCHAM INDUSTRIES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Weighted AverageWeighted Average
    
    
    Fair ValueNumber of
    
    
    Exercise Price
    
    
    Per Share onShares
    
    
    Per Share
    
    
    Grant DateOutstanding, January
31, 2003
    
    
    1,366,870
    
    
    $
    4.40Exercised
    
    
    (10,000
    )
    
    
    1.99Granted
    
    
    182,500
    
    
    
    1.89
    
    
    $
    1.34Forfeited
    
    
    (144,580
    )
    
    
    6.10Outstanding, January 31,
2004
    
    
    1,394,790
    
    
    $
    3.91Exercised
    
    
    (170,738
    )
    
    
    1.86Granted
    
    
    353,000
    
    
    
    4.97
    
    
    $
    3.65Forfeited
    
    
    (193,770
    )
    
    
    5.68Outstanding, January 31,
2005
    
    
    1,383,282
    
    
    $
    4.19Exercised
    
    
    (471,378
    )
    
    
    3.86Granted
    
    
    175,500
    
    
    
    8.41
    
    
    $
    5.88Forfeited
    
    
    (32,484
    )
    
    
    3.63Outstanding, January 31, 2006
    
    
    1,054,920
    
    
    $
    5.15
   F-23




---



##### Table of Contents



MITCHAM INDUSTRIES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 18. Segment Reporting
 Disclosures About Segments of an Enterprise and Related
Information.
   For the Year Ended January 31, 2006Mitcham
    
    
    Seamap
    
    
    ConsolidatedRevenues
    
    $
    30,569
    
    
    $
    4,020
    
    
    $
    34,589Percentage
    
    
    88
    %
    
    
    12
    %
    
    
    100
    %Interest income
    
    $
    524
    
    
    $
    4
    
    
    $
    528Percentage
    
    
    99
    %
    
    
    1
    %
    
    
    100
    %Interest expense
    
    $
    106
    
    
    $
    
    
    
    $
    106Percentage
    
    
    100
    %
    
    
    0
    %
    
    
    100
    %Fixed assets, net
    
    $
    19,694
    
    
    $
    230
    
    
    $
    19,924Percentage
    
    
    99
    %
    
    
    1
    %
    
    
    100
    %Intangible assets, net
    
    $
    
    
    
    $
    2,584
    
    
    $
    2,584Percentage
    
    
    0
    %
    
    
    100
    %
    
    
    100
    %Goodwill
    
    $
    
    
    
    $
    2,358
    
    
    $
    2,358Percentage
    
    
    0
    %
    
    
    100
    %
    
    
    100
    %Capital expenditures
    
    $
    8,857
    
    
    $
    113
    
    
    $
    8,970Percentage
    
    
    99
    %
    
    
    1
    %
    
    
    100
    %Depreciation and amortization expense
    
    $
    8,649
    
    
    $
    309
    
    
    $
    8,958Percentage
    
    
    97
    %
    
    
    3
    %
    
    
    100
    %Income tax benefit
    
    $
    2,931
    
    
    $
    33
    
    
    $
    2,964Percentage
    
    
    99
    %
    
    
    1
    %
    
    
    100
    %
  F-24




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##### Table of Contents



MITCHAM INDUSTRIES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 19. Quarterly Financial Data (Unaudited)
 Fiscal Year
    
    
    April 30
    
    
    July 31
    
    
    October 31
    
    
    January 31(In thousands, except per share amounts)Net sales, continuing operations:
    
    
    2006
    
    
    $
    7,638
    
    
    $
    7,002
    
    
    $
    9,815
    
    
    $
    10,1342005
    
    
    
    8,206
    
    
    
    6,393
    
    
    
    4,738
    
    
    
    7,031Gross profit, excluding depreciation expense:
    
    
    2006
    
    
    
    6,349
    
    
    
    5,321
    
    
    
    7,539
    
    
    
    7,4432005
    
    
    
    5,966
    
    
    
    4,919
    
    
    
    3,731
    
    
    
    5,482Income (loss) from continuing operations
    
    
    2006
    
    
    
    2,304
    
    
    
    1,045
    
    
    
    2,907
    
    
    
    1,635before income taxes:
    
    
    2005
    
    
    
    1,370
    
    
    
    75
    
    
    
    (559
    )
    
    
    1,440Incomes taxes (benefit):
    
    
    2006
    
    
    
    162
    
    
    
    (194
    )
    
    
    57
    
    
    
    (2,989
    )2005
    
    
    
    
    
    
    
    
    
    
    
    264
    
    
    
    13Income (loss) from continuing operations:
    
    
    2006
    
    
    
    2,142
    
    
    
    1,239
    
    
    
    2,850
    
    
    
    4,8012005
    
    
    
    1,370
    
    
    
    75
    
    
    
    (823
    )
    
    
    1,427Income (loss) from discontinued operations:
    
    
    2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2005
    
    
    
    
    
    
    
    80
    
    
    
    
    
    
    
    Income (loss):
    
    
    2006
    
    
    
    2,142
    
    
    
    1,239
    
    
    
    2,850
    
    
    
    4,6242005
    
    
    
    1,370
    
    
    
    155
    
    
    
    (823
    )
    
    
    1,427Income (loss) per common share from
    
    
    2006
    
    
    $
    0.24
    
    
    $
    0.14
    
    
    $
    0.31
    
    
    $
    0.50continuing operations  basic:
    
    
    2005
    
    
    $
    0.16
    
    
    $
    0.01
    
    
    $
    (0.09
    )
    
    $
    0.16Income (loss) per common share from
    
    
    2006
    
    
    $
    0.22
    
    
    $
    0.13
    
    
    $
    0.29
    
    
    $
    0.46continuing operations  diluted:
    
    
    2005
    
    
    $
    0.15
    
    
    $
    0.01
    
    
    $
    (0.09
    )
    
    $
    0.15Income (loss) per common share from
    
    
    2006
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    discontinued operations  basic and diluted:
    
    
    2005
    
    
    $
    
    
    
    $
    0.01
    
    
    $
    
    
    
    $
    Income (loss) per common share  basic:
    
    
    2006
    
    
    $
    0.24
    
    
    $
    0.14
    
    
    $
    0.31
    
    
    $
    0.502005
    
    
    $
    0.16
    
    
    $
    0.02
    
    
    $
    (0.09
    )
    
    $
    0.16Income (loss) per common share  diluted:
    
    
    2006
    
    
    $
    0.22
    
    
    $
    0.13
    
    
    $
    0.29
    
    
    $
    0.462005
    
    
    $
    0.15
    
    
    $
    0.02
    
    
    $
    (0.09
    )
    
    $
    0.15
 F-25




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##### Table of Contents



Consolidated Statements of Cash Flows
Amounts in thousands
 Year Ended January 31,2004
    
    
    2005As
    
    
    
    
    
    
    Aspreviously
    
    
    
    
    
    
    previouslyreported
    
    
    Restated
    
    
    reported
    
    
    RestatedCash flows from operating activities:Net income (loss)
    
    $
    (3,574
    )
    
    $
    (6,289
    )
    
    $
    2,049
    
    
    $
    2,129Depreciation and amortization
    
    
    13,677
    
    
    
    13,963
    
    
    
    10,596
    
    
    
    10,596Impairment on assets
    
    
    
    
    
    
    700
    
    
    
    
    
    
    
    Stock based compensation
    
    
    
    
    
    
    
    
    
    
    461
    
    
    
    461Provision for doubtful accounts, net of
charge-offs and recoveries
    
    
    106
    
    
    
    106
    
    
    
    133
    
    
    
    133Net book value of equipment sold
    
    
    2,975
    
    
    
    
    
    
    
    1,944Gross profit from sale of lease pool equipment
    
    
    
    
    
    
    (2,740
    )
    
    
    
    
    
    
    (3,699
    )Changes in:Trade accounts and notes receivable
    
    
    (4,167
    )
    
    
    (3,680
    )
    
    
    (1,098
    )
    
    
    (1,585
    )Federal income taxes current
    
    
    
    
    
    
    
    
    
    
    284
    
    
    
    284Current assets of discontinued operations
    
    
    
    
    
    
    (213
    )
    
    
    
    
    
    
    505Accounts payable, accrued expenses and other
current liabilities
    
    
    846
    
    
    
    846
    
    
    
    2,685
    
    
    
    2,685Current liabilities of discontinued operations
    
    
    
    
    
    
    798
    
    
    
    
    
    
    
    (385
    )Other, net
    
    
    62
    
    
    
    62
    
    
    
    (13
    )
    
    
    (67
    )Net cash provided by operating activities
    
    
    9,925
    
    
    
    3,553
    
    
    
    17,041
    
    
    
    11,057Cash flows from investing activities:Purchases of seismic equipment held for lease
    
    
    (3,576
    )
    
    
    (4,313
    )
    
    
    (5,668
    )
    
    
    (6,253
    )Purchases of property and equipment
    
    
    (59
    )
    
    
    (59
    )
    
    
    (377
    )
    
    
    (377
    )Sales from used lease pool
equipment
    
    
    
    
    
    
    4,734
    
    
    
    
    
    
    
    6,282Long term assets of discontinued operations
    
    
    
    
    
    
    312
    
    
    
    
    
    
    
    275Net cash provided by (used in) investing
activities
    
    
    (3,635
    )
    
    
    674
    
    
    
    (6,045
    )
    
    
    (73
    )
 F-26




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##### Table of Contents



Year Ended January 31,2004
    
    
    2005As
    
    
    
    
    
    
    Aspreviously
    
    
    
    
    
    
    previouslyreported
    
    
    Restated
    
    
    reported
    
    
    RestatedCash flows from financing activities:Payments on borrowings
    
    
    (2,093
    )
    
    
    (2,530
    )
    
    
    (4,999
    )
    
    
    (4,999
    )Proceeds from issuance of common stock upon
exercise of warrants and options
    
    
    
    
    
    
    
    
    
    
    319
    
    
    
    319Net cash provided by financing activities
    
    
    (2,093
    )
    
    
    (2,530
    )
    
    
    (4,680
    )
    
    
    (4,680
    )Net increase in cash and cash equivalents
continuing operations
    
    
    4,197
    
    
    
    1,697
    
    
    
    6,316
    
    
    
    6,304Net increase in cash and cash equivalents 
discontinued operations
    
    
    (2,500
    )
    
    
    
    
    
    
    (12
    )
    
    
    Cash, beginning of year
    
    
    5,137
    
    
    
    5,137
    
    
    
    6,834
    
    
    
    6,834Cash, end of year
    
    $
    6,834
    
    
    $
    6,834
    
    
    $
    13,138
    
    
    $
    13,138
 Consolidated Statements of Cash Flows
Amounts in Thousands
 Three-month period
    
    
    Six-month period ended
    
    
    Nine-month periodended
April 30, 2005
    
    
    July 31, 2005
    
    
    ended October 31, 2005As
    
    
    
    
    
    
    As
    
    
    
    
    
    
    Aspreviously
    
    
    
    
    
    
    previously
    
    
    
    
    
    
    previouslyreported
    
    
    Restated
    
    
    reported
    
    
    Restated
    
    
    reported
    
    
    RestatedCash flows from operating activities:Net income
    
    $
    2,142
    
    
    $
    2,142
    
    
    $
    3,381
    
    
    $
    3,381
    
    
    $
    6,231
    
    
    $
    6,231Adjustments to reconcile net income
to net cash provided by
operating activities:Depreciation and amortization
    
    
    2,177
    
    
    
    2,177
    
    
    
    4,332
    
    
    
    4,332
    
    
    
    6,585
    
    
    
    6,585Stock based compensation
    
    
    36
    
    
    
    36
    
    
    
    65
    
    
    
    65
    
    
    
    82
    
    
    
    82Provision for doubtful accounts, net
of charge-offs and recoveries
    
    
    79
    
    
    
    79
    
    
    
    79
    
    
    
    79
    
    
    
    162
    
    
    
    162Net book value of seismic equipment sold
    
    
    91
    
    
    
    
    
    
    
    44
    
    
    
    
    
    
    
    109Gross profit from sale of lease
pool equipment
    
    
    
    
    
    
    (545
    )
    
    
    
    
    
    
    (1,205
    )
    
    
    
    
    
    
    (1,806
    )Changes in:Trade accounts and notes receivable
    
    
    253
    
    
    
    253
    
    
    
    2,074
    
    
    
    2,074
    
    
    
    (58
    )
    
    
    (58
    )Inventories
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (792
    )
    
    
    (792
    )Current assets of discontinued
operations
    
    
    
    
    
    
    (39
    )
    
    
    
    
    
    
    78
    
    
    
    
    
    
    
    5Federal income taxes current
    
    
    56
    
    
    
    56
    
    
    
    (232
    )
    
    
    (232
    )
    
    
    (133
    )
    
    
    (133
    )Accounts payable, accrued expenses and
other  current
liabilities
    
    
    (3,926
    )
    
    
    (3,926
    )
    
    
    (4,143
    )
    
    
    (4,143
    )
    
    
    (4,494
    )
    
    
    (4,494
    )Current liabilities of discontinued
operations
    
    
    
    
    
    
    (7
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9
    )Other, net
    
    
    (89
    )
    
    
    (15
    )
    
    
    361
    
    
    
    279
    
    
    
    367
    
    
    
    322Net cash provided by operating activities
    
    
    819
    
    
    
    211
    
    
    
    5,961
    
    
    
    4,708
    
    
    
    8,059
    
    
    
    6,095Cash flows from investing activities:Sales from used lease
pool equipment
    
    
    
    
    
    
    713
    
    
    
    
    
    
    
    1,669
    
    
    
    
    
    
    
    2,341Acquisition of Seamap, net of $1,027
cash acquired
    
    
    
    
    
    
    
    
    
    
    (2,474
    )
    
    
    (2,474
    )
    
    
    (2,473
    )
    
    
    (2,473
    )Seamap acquisition costs
    
    
    
    
    
    
    
    
    
    
    (39
    )
    
    
    (39
    )
    
    
    (56
    )
    
    
    (56
    )Long term assets of discontinued
operations
    
    
    
    
    
    
    71
    
    
    
    
    
    
    
    143
    
    
    
    
    
    
    
    216Purchases of short-term investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,950
    )
    
    
    
    
    
    
    (3,950
    )Redemption of short-term investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,950
    
    
    
    
    
    
    
    2,950Purchases of seismic equipment held
for lease
    
    
    (1,007
    )
    
    
    (1,158
    )
    
    
    (1,899
    )
    
    
    (2,237
    )
    
    
    (3,274
    )
    
    
    (3,655
    )Purchases of property and equipment
    
    
    (184
    )
    
    
    (184
    )
    
    
    (457
    )
    
    
    (457
    )
    
    
    (374
    )
    
    
    (374
    )
 F-27




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##### Table of Contents



Three-month period
    
    
    Six-month period ended
    
    
    Nine-month periodended April 30, 2005
    
    
    July 31, 2005
    
    
    ended October 31, 2005As
    
    
    
    
    
    
    As
    
    
    
    
    
    
    Aspreviously
    
    
    
    
    
    
    previously
    
    
    
    
    
    
    previouslyreported
    
    
    Restated
    
    
    reported
    
    
    Restated
    
    
    reported
    
    
    RestatedNet cash provided by (used in) investing
activities
    
    
    (1,191
    )
    
    
    (558
    )
    
    
    (4,869
    )
    
    
    (4,395
    )
    
    
    (6,177
    )
    
    
    (5,001
    )Cash flows from financing activities:Payments on borrowings
    
    
    (580
    )
    
    
    (580
    )
    
    
    (918
    )
    
    
    (918
    )
    
    
    (918
    )
    
    
    (918
    )Proceeds from issuance of common stock
upon exercise of warrants and options
    
    
    18
    
    
    
    18
    
    
    
    274
    
    
    
    274
    
    
    
    882
    
    
    
    882Net cash provided by financing activities
    
    
    (562
    )
    
    
    (562
    )
    
    
    (644
    )
    
    
    (644
    )
    
    
    (36
    )
    
    
    (36
    )Net increase in cash and cash
equivalents continuing operations
    
    
    (934
    )
    
    
    (909
    )
    
    
    448
    
    
    
    (331
    )
    
    
    1,846
    
    
    
    1,058Net increase in cash and cash
equivalents  discontinued operations
    
    
    25
    
    
    
    
    
    
    
    221
    
    
    
    
    
    
    
    212Cash, beginning of period
    
    
    13,138
    
    
    
    13,138
    
    
    
    13,138
    
    
    
    13,138
    
    
    
    13,138
    
    
    
    13,138Cash, end of period
    
    $
    12,229
    
    
    $
    12,229
    
    
    $
    13,807
    
    
    $
    12,807
    
    
    $
    15,196
    
    
    $
    14,196
 F-28




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON FINANCIAL STATEMENT SCHEDULE
 
  /s/     HEIN & ASSOCIATES LLPHein & Associates LLP 
 F-29




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##### Table of Contents



SCHEDULE II
 MITCHAM INDUSTRIES, INC.
 VALUATION AND QUALIFYING ACCOUNTS
 Col. A
    
    Col. B
    
    
    Col. C(1)
    
    
    Col. D
    
    
    Col. EBalance at
    
    
    Additions Charged to
    
    
    Deductions -
    
    
    Balance atDescription
    
    Beginning of Period
    
    
    Costs and Expenses
    
    
    Describe
    
    
    End of PeriodJanuary 31, 2004Allowance for
doubtful
accounts
    
    $
    770,000
    
    
    $
    103,000
    
    
    $
    (3,000
    )(A)
    
    $
    876,000January 31, 2005Allowance for
doubtful
accounts
    
    $
    876,000
    
    
    $
    155,000
    
    
    $
    22,000
    (A)
    
    $
    1,009,000January 31, 2006Allowance for
doubtful
accounts
    
    $
    1,009,000
    
    
    $
    188,000
    
    
    $
    22,000
    (A)
    
    $
    1,175,000
 
 (A)
    
    Represents recoveries and uncollectible accounts written
off. Note: C(2)
 Col. A
    
    Col. B
    
    
    Col. C(1)
    
    
    Col. D
    
    
    Col. EBalance at
    
    
    Additions Charged to
    
    
    Deductions -
    
    
    Balance atDescription
    
    Beginning of Period
    
    
    Costs and Expenses
    
    
    Describe
    
    
    End of PeriodJanuary 31, 2004Allowance for
obsolete
equipment
    
    $
    243,000
    
    
    $
    8,000
    
    
    $
    57,000
    (B)
    
    $
    194,000January 31, 2005Allowance for
obsolete
equipment
    
    $
    194,000
    
    
    $
    409,000
    
    
    $
    84,000
    (B)
    
    $
    519,000January 31, 2006Allowance for
obsolete
inventory and lease pool equipment
    
    $
    519,000
    
    
    $
    15,000
    
    
    $
    183,000
    (B)
    
    $
    351,000
 
 (B)
    
    Represents sale or scrap of obsolete equipment. Note: C(2)
 F-30




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##### Table of Contents



Exhibit Index
 ExhibitNumber
    
    
    
    Description of Exhibit3.1
    
    -
    
    Amended and Restated Articles of Incorporation of Mitcham Industries, Inc. (1) (Exhibit 3.1)3.2
    
    -
    
    Second Amended and Restated Bylaws of Mitcham Industries, Inc.** (11)9
    
    -
    
    Voting Agreement, dated September 20, 1993, among the company, Billy F. Mitcham, Jr. and
certain shareholders (2) (Exhibit 9)*10.1
    
    -
    
    Employment Agreement, dated January 15, 1997, between the Company and Billy F. Mitcham, Jr.
(3) (Exhibit 10.4)




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##### Table of Contents



ExhibitNumber
    
    
    
    Description of Exhibit10.2
    
    -
    
    Exclusive Lease Referral Agreement, dated May 14, 1996, between the Company and Pelton
Company, Inc., a Oklahoma corporation (Pelton) (4)10.3
    
    -
    
    First Amendment to Exclusive Lease Referral Agreement, dated January 15, 1997, between the
Company and Pelton (3) (Exhibit 10.17)10.4
    
    -
    
    Second Amendment to Exclusive Lease Referral Agreement, dated November 24, 1997, between
Mitcham Industries, Inc. and Pelton (5) (Exhibit 10.3)*10.5
    
    -
    
    Mitcham Industries, Inc. 1994 Stock Option Plan (2) (Exhibit 10.9)*10.6
    
    -
    
    Mitcham Industries, Inc. 1994 Non-Employee Director Stock Option Plan (2) (Exhibit 10.12)*10.7
    
    -
    
    Mitcham Industries, Inc. 1998 Stock Awards Plan (6)*10.7.1
    
    -
    
    Amended and Restated 1998 Stock Awards Plan (12) (Exhibit 10.3)*10.7.2
    
    -
    
    Form of Restricted Stock Agreement (12) (Exhibit 10.1)*10.7.3
    
    -
    
    Form of Nonqualified Stock Option Agreement (12) (Exhibit 10.2)*10.7.4
    
    -
    
    Form of Incentive Stock Option Agreement (12) (Exhibit 10.4)*10.7.5
    
    -
    
    Form of Phantom Stock Award Agreement (12) (Exhibit 10.5)*10.7.6
    
    -
    
    Form of Stock Appreciation Rights Agreement (12) (Exhibit 10.6)*10.8
    
    -
    
    Mitcham Industries, Inc. 2000 Stock Option Plan (7)*10.8.1
    
    -
    
    Form of Incentive Stock Option Agreement (12) (Exhibit 10.7)*10.8.2
    
    -
    
    Form of Nonqualified Stock Option Agreement (12) (Exhibit 10.8)10.9
    
    -
    
    Warrant No. M-7, dated July 18, 2001, issued to Bear Ridge Capital, L.L.C. (8)10.10
    
    -
    
    Share Sale Agreement, dated December 2002, between Mitcham Industries, Inc. and Nautronix
Inc. (9)*10.11
    
    -
    
    Agreement, dated April 4, 2003, between Mitcham Industries, Inc. and William J. Sheppard
(10) (Exhibit 10.14)*10.12
    
    -
    
    Second Consultant Agreement, dated April 1, 2003, but effective January 1, 2004, between
Mitcham Industries, Inc. and William J. Sheppard (10) (Exhibit 10.16)10.13
    
    -
    
    Equipment Lease Agreement, dated April 9, 2003, between Mitcham Industries, Inc. and Sercel,
Inc., a Oklahoma corporation (Sercel) (10) (Exhibit 10.17)10.14
    
    -
    
    Amendment to the Equipment Lease Agreement, dated as of December 17, 2003, between
Mitcham Industries, Inc. and Sercel (11) (Exhibit 10.14)10.15
    
    -
    
    Promissory Note of Mitcham Industries, Inc., dated as of February 11, 2002, payable to First
Victoria National Bank in the original principal amount of $8,518,919 (11) (Exhibit 10.15)10.16
    
    -
    
    Loan Agreement, dated March 30, 2004, by and between Mitcham Industries, Inc. and First
Victoria National Bank (11) (Exhibit 10.16)*10.17
    
    -
    
    Separation Agreement, Consulting Agreement and Release, dated June 24, 2004, between P.
Blake Dupuis and Mitcham Industries, Inc. (13)*10.18
    
    -
    
    Separation Agreement, dated
June 6, 2005 between Chris Siffert and Mitcham Industries, Inc.
(14)21
    
    -
    
    Subsidiaries of the Company**23
    
    -
    
    Consent of Hein & Associates
LLP***31.1
    
    -
    
    Certification of Billy F. Mitcham, Jr., Chief Executive Officer, pursuant to Rule 13a-14(a) and
Rule 15d-14(a) of the Securities Exchange Act, as amended***31.2
    
    -
    
    Certification of Michael A. Pugh, Chief Financial Officer, pursuant to Rule 13a-14(a) and
Rule 15d-14(a) of the Securities Exchange Act, as amended***32.1
    
    -
    
    Certification of Billy F. Mitcham,
Jr., Chief Executive Officer, under Section 906 of the Sarbanes Oxley Act of 2002, 18 U.S.C. § 1350***32.2
    
    -
    
    Certification of Michael A. Pugh, Chief Financial Officer, under Section 906 of the Sarbanes
Oxley Act of 2002, 18 U.S.C. § 1350***
 
 *
    
    Management contract or compensatory plan or
arrangement**
    
    Previously filed***
    
    Filed herewith(1)
    
    Incorporated by reference to the indicated exhibit number of the Companys
Registration Statement
on Form S-8 (File No. 333-67208), filed with the SEC on August 9, 2001.(2)
    
    Incorporated by reference to the indicated exhibit number of the Companys
Registration Statement
on Form SB-2, filed with the SEC on July 5, 1994.




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##### Table of Contents



(3)
    
    Incorporated by reference to the indicated exhibit number of the Companys
Registration Statement
on Form S-l (File No. 333-19997), filed with the SEC on January 17, 1997.(4)
    
    Incorporated by reference to Exhibit 10.1 of the Companys Registration Statement on
Form S-3/A
(File No. 333-10555), filed with the SEC on October 25, 1996.(5)
    
    Incorporated by reference to the indicated exhibit number of the Companys
Registration Statement
on Form S-3/A (File No. 333-40507), filed with the SEC on December 17,1997.(6)
    
    Incorporated by reference to Exhibit A of the Companys proxy statement for the
fiscal year ended
January 31, 1998, filed with the SEC on June 1, 1998.(7)
    
    Incorporated by reference to Exhibit A of the Companys proxy statement for the
fiscal year ended
January 31, 2000, filed with the SEC on May 26, 2000.(8)
    
    Incorporated by reference to Exhibit 10.14 of the Companys Annual Report on Form
10-K for the
fiscal year ended January 31, 2002, filed with the SEC on May 1, 2002.(9)
    
    Incorporated by reference to Exhibit 2.1 of the Companys Current Report on Form 8-K,
filed with the
SEC on January 13, 2003.(10)
    
    Incorporated by reference to the indicated exhibit number of the Companys Annual
Report on
Form 10-K for the fiscal year ended January 31, 2003, filed with the SEC on May 1, 2003.(11)
    
    Incorporated by reference to the indicated exhibit number of the Companys Annual
Report on
Form 10-K for the fiscal year ended January 31, 2004, filed with the SEC on May 28, 2004.(12)
    
    Incorporated by reference to the indicated exhibit number of the Companys Current
Report on
Form 8-K, filed with the SEC on September 8, 2004.(13)
    
    Incorporated by reference to Exhibit 10.1 of the Companys Quarterly Report on
Form 10-Q for the
period ended July 31, 2004, filed with the SEC on September 14, 2004.(14)
    
    Incorporated by reference to Exhibit 10.1 of the
Companys Current Report on
Form 8-K, filed with the SEC on June 7, 2005.