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                                  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, 2001
                                       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: $45,849,546 as of April 27, 2001.

         As of April 27, 2001, there were outstanding 8,890,415 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 2001
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.


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

<TABLE>
<S>                                                                          <C>
                                     PART I

Item 1.  Business............................................................  1

Item 2.  Properties.......................................................... 11

Item 3.  Legal Proceedings................................................... 11

Item 4.  Submission of Matters to a Vote of Security Holders................. 11

                                     PART II

Item 5.  Market for the Registrant's Common Equity and Related
         Stockholder Matters................................................. 12

Item 6.  Selected Financial Data............................................. 12

Item 7.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations................................. 13

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.......... 16

Item 8.  Financial Statements and Supplementary Data......................... 16

Item 9.  Changes in and Disagreements With Accountants on Accounting
         and Financial Disclosure............................................ 16

                                    PART III

Item 10. Directors and Executive Officers of the Registrant.................. 16

Item 11. Executive Compensation.............................................. 16

Item 12. Security Ownership of Certain Beneficial Owners and Management...... 17

Item 13. Certain Relationships and Related Transactions...................... 17

                                     PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.... 17

         Signatures.......................................................... 19
</TABLE>


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                                     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, 1998 through January 31, 2001,
the Company's equipment lease pool, at cost, increased from approximately $49.9
million to $89.7 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, 2001, approximately 38% 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.

         The Company currently has an equipment lease pool comprising a total of
approximately 46,800 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").

         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. As of January 31, 2001, the Company has purchased 10,481
channels of Sercel 408UL equipment and is in compliance with the agreement.

         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.

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("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. The agreement has
been extended for an additional one-year period. 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.
As of January 31, 2001, the Company had lease customers with 86 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.


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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.

         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 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, 2001, the Company employed 63 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


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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.

RECOVERY OF OIL AND GAS INDUSTRY AND RECENT INCREASED DEMAND FOR SERVICES COULD
BE SHORT-LIVED

         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. 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, but began to
improve during fiscal 2001. 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 Company's revenues may be derived from a limited number of customers. In the
fiscal years ended January 31, 1999, 2000 and 2001, the single largest customer
accounted for approximately 36%, 17% and 21%, 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 $7.8 million of customer accounts and
notes receivable at January 31, 2001, of which $855,000 is over ninety days
past-due. At January 31, 2001, the Company has an allowance of $1,230,000 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.

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 93% of the Company's revenues in the fiscal year ended January 31,
2001, and 17% 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.


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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 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.

         During the fiscal year ended January 31, 1999, the Company recorded a
pretax asset impairment charge of $15.1 million. 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 recent 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 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.


                                       9
<PAGE>   12

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. 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 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

                                       10
<PAGE>   13

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.

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 31,000 square feet of office and warehouse space at its new
facility in Calgary, Alberta, Canada. Additionally, the Company still holds the
lease on its old facility in Calgary of approximately 10,000 square feet, which
has been subleased from the Company.

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. On April 17, 2001, Defendants agreed in principle
with Plaintiffs to a $2,700,000 settlement agreement, to be paid by the Company
and its insurance carrier, pending execution of a final settlement agreement and
approval by the Court.

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

         None


                                       11
<PAGE>   14


                                     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, 2000:
             First Quarter                           5.00           3.06
             Second Quarter                          4.81           3.63
             Third Quarter                           6.75           3.69
             Fourth Quarter                          4.75           3.19

        Fiscal Year Ended January 31, 2001:
             First Quarter                           6.63           3.44
             Second Quarter                          6.13           4.31
             Third Quarter                           7.50           4.38
             Fourth Quarter                          6.00           3.31
</TABLE>

         As of April 27, 2001, 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,
                                                        ------------------------------------------------------
                                                          1997       1998       1999        2000        2001
                                                        --------   --------   --------    --------    --------
<S>                                                     <C>        <C>        <C>         <C>         <C>
Net sales and other revenues                            $ 14,690   $ 42,027   $ 37,936    $ 10,644    $ 20,597
Income (loss) from continuing operations                   2,702      6,392     (8,526)     (4,864)     (2,946)
Income (loss) from continuing operations
   per common share - diluted                               0.60       0.83      (0.90)      (0.51)      (0.32)
Cash dividends declared per common share                      --         --         --          --          --
Balance Sheet Data:
Cash and marketable securities                               301     32,507     19,860      17,399      11,402
Seismic equipment lease pool, property and equipment,
   cost basis                                             22,540     50,994     65,116      74,537      91,435
Total assets                                              24,293     91,562     67,174      67,705      72,561
Long-term obligations and redeemable preferred stock       3,319      2,294         --          --       5,444
Total liabilities                                          9,051     17,326      2,422       7,430      18,573
Total shareholders' equity                                15,242     74,236     64,752      60,275      53,988
</TABLE>


                                       12
<PAGE>   15

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. Declines in oil and natural
gas prices, or expectations that the recent improvement in oil and natural gas
prices will not hold, could cause the Company's customers to alter their
spending plans and 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, 2001 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, 1999, 2000 and 2001, revenues from
foreign customers totaled $20.7 million, $7.5 million and $19.1 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, but began to improve during fiscal 2001.

RESULTS OF OPERATIONS

         Fiscal 2001 revenues were $20.6 million, a $10.0 million increase over
fiscal 2000 revenues of $10.6 million. During fiscal 2001, the Company
experienced a greater demand for short-term leasing from its customers,
primarily in response to the higher level of commodity prices. Fiscal 2000
revenues were approximately $27 million below those of fiscal 1999, reflecting
the significant downturn in the seismic sector that began during fiscal 1999.
Short-term leasing revenues and leasing revenues under lease/purchase
arrangements totaling $14.0 million for fiscal 2001 represented a substantial
increase from fiscal 2000 leasing revenues of $6.8 million. Fiscal 2000 combined
leasing revenues of $6.8 million represented a $15.6 million decrease from
fiscal 1999 combined leasing revenues of $22.4 million. Seismic equipment sales
for fiscal 2001 were $6.5 million as compared to $3.9 million and $15.6 million


                                       13
<PAGE>   16

for fiscal 2000 and 1999, respectively. The fiscal 2001 increase in equipment
sales of $2.6 million is largely attributable to increased demand for seismic
equipment as a result of the higher commodity prices during the year. 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 2001 was approximately $13.1 million,
representing an increase of $3.3 million, or 33%, above the fiscal 2000 amount.
The current year increase in depreciation expense is a result of the Company
adding $16.8 million, on a cost basis, to the seismic equipment lease pool.
Depreciation expense for fiscal 2000 was $9.8 million, representing a 21%
decrease from fiscal 1999 expense of $12.4 million. The fiscal 2000 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.

         Current year direct costs were $1.8 million, an increase of
approximately $400,000 from fiscal 2000 amounts, reflecting the significant
increase in leasing activities during fiscal 2001. Direct costs typically
increase with leasing revenues, as the two main components of direct costs are
freight and equipment repairs. Direct costs for fiscal 2000 were $1.4 million,
compared to $1.6 million for fiscal 1999, reflecting the decrease in leasing
revenues during fiscal 2000.

         For the fiscal year ended January 31, 2001, leasing and equipment sales
under lease/purchase arrangements generated an aggregate gross margin of 95%,
compared to 99% and 25% for fiscal 2000 and 1999, respectively. The gross margin
achieved in fiscal 2001 and 2000 is not comparable to the margins achieved in
fiscal 1999 because the Company recorded only one sale of equipment under
lease/purchase arrangements during fiscal 2001 and no sales in fiscal 2000. In
addition, the recorded gross margin in fiscal 1999 is misleadingly lower than
historical levels because the Company sold 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 22%, 41% and 25% for
fiscal years 2001, 2000 and 1999, 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 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 $15.1 million pretax
charge during fiscal 1999 related to its seismic equipment lease pool. There was
no such charge in fiscal 2000 or 2001.

         General and administrative expenses increased approximately $0.3
million in fiscal 2001 as compared to fiscal 2000 expense of $3.9 million. The
current year increase in general and administrative expenses is due to an
increase in rent and storage fees associated with the new facility in Calgary,
as well as an increase in insurance, customer relations, travel and compensation
expenses partially offset by a decrease in professional fees and convention and
advertising expenses. Additionally, during fiscal 2001,


                                       14
<PAGE>   17

the Company incurred personnel and related costs associated with international
marketing efforts. General and administrative expenses totaling $3.9 million for
fiscal 2000 reflected a decrease of $1.1 million compared to fiscal 1999. 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.

         During fiscal 2001, the Company's provision for doubtful accounts was
$225,000, reflecting a decrease of $350,000 from fiscal 2000. The decrease in
fiscal 2001 is attributable to the Company's improvement in its receivables
aging and the Company's collecting approximately $400,000 of receivables
previously written off. During fiscal 2001, the Company wrote off approximately
$289,000 of receivables deemed uncollectable. For fiscal 2000, the Company's
provision for doubtful accounts expense decreased to $575,000 from $1.7 million
in fiscal 1999. This decrease in fiscal 2000 is reflective of the improvement in
the Company's aging and collection of receivables. At January 31, 2001 and 2000,
the Company had past due trade accounts receivable in the amount of $855,000 and
$629,000, 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. As of
January 31, 2001 and 2000, the Company's allowance for doubtful accounts
receivable amounted to $1,230,000 and $843,000, respectively.

         For fiscal 2001, the Company recorded a net loss in the amount of $2.9
million, as compared to the fiscal 2000 net loss of $4.9 million. Net loss for
fiscal 1999 was $8.5 million, which included the asset impairment charge and
provision for doubtful accounts charge.

LIQUIDITY AND CAPITAL RESOURCES

         As of January 31, 2001, the Company had net working capital of
approximately $8.8 million as compared to net working capital of $18.8 million
at January 31, 2000. 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, 2001 was $13.3 million, as compared to $8.0 million
and $11.6 million for the years ended January 31, 2000 and 1999, respectively.
Net cash provided by financing activities for the years ended January 31, 2001,
2000 and 1999 was $4.2 million, $0 and $0.2 million, respectively.

         At January 31, 2001, the Company had trade accounts receivable of
$900,000 that were more than 90 days past due, as compared to $600,000 at
January 31, 2000. During fiscal 2001, the Company wrote off approximately
$289,000 of accounts and notes receivable that were more than 90 days past due,
and collected $400,000 of previously written-off receivables. As of January 31,
2001, the Company's allowance for doubtful accounts was approximately $1.2
million, 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
exceeded its expected needs for future capital expenditures, the Company did not
pursue negotiations to renew or extend the line of credit.


                                       15
<PAGE>   18

         On November 10, 2000, the Company closed an $8.5 million term loan with
First Victoria National Bank. The loan amortizes over 48 months and bears
interest at the rate of prime plus one percent, adjusted daily. The first three
monthly payments shall be interest only, with the remaining 45 monthly payments
being interest and principal in the approximate amount of $229,000. As of
January 31, 2001, the Company has drawn $7.3 million under this loan agreement.
The loan is collateralized by the lease pool equipment purchased for the
Company's fiscal 2001 winter capital expenditure program.

         Capital expenditures for the 2001 fiscal year totaled approximately
$27.7 million as compared to capital expenditures of $12.3 million for fiscal
2000. During fiscal 2001, the Company repurchased 616,300 shares of its common
stock for an aggregate cost of $3.2 million, or an average cost of $5.18 per
share. At the present time, management believes that cash on hand, cash provided
by future operations and funds available under the Company's loan agreement will
be sufficient to fund its anticipated capital and liquidity needs over the next
twelve months. However, should demand warrant, the Company may pursue additional
borrowings to fund capital expenditures.


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-24
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 2001 Annual Meeting of
Shareholders under the heading "Election of Directors," and is incorporated
herein by reference. Information regarding compliance by the officers, directors
and 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 2001
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 2001 Annual Meeting of Shareholders under the
heading "Executive Compensation," and is incorporated herein by reference.


                                       16
<PAGE>   19


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 2001
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 2001 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

<TABLE>
<CAPTION>
Exhibit Number
--------------
<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
                           December 16, 1999, between the Company and SERCEL,
                           S.A. (8) (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     --       Mitcham Industries, Inc. 1994 Stock Option Plan (2)
                           (Exhibit 10.9)

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

         10.11    --       Form of Mitcham Industries, Inc. customer lease
                           agreement (1) (Exhibit 10.20)
</TABLE>


                                       17
<PAGE>   20

<TABLE>
<CAPTION>
Exhibit Number
--------------
<S>                        <C>
         10.12    --       Mitcham Industries, Inc. 1998 Stock Awards Plan (7)
                           (Exhibit A)

         10.13    --       Mitcham Industries, Inc. 2000 Stock Option Plan (9)

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

         23       --       Consent of Hein + Associates LLP

         27       --       Financial Data Schedule
</TABLE>

*        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 Exhibit A of the Company's proxy statement
         for the fiscal year ended January 31, 1998.

(8)      Incorporated by reference to Exhibit 10 of the Company's Current Report
         on Form 8-K filed with the SEC on January 4, 2000.

(9)      Incorporated by reference to Exhibit A of the Company's proxy statement
         for the fiscal year ended January 31, 2000.

(b) REPORTS ON FORM 8-K

    None.


                                       18
<PAGE>   21


                                   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,
2001.


                                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, 2001
  ------------------------------     President and Chief
      Billy F. Mitcham, Jr.          Executive Officer

  /s/ PAUL C. MITCHAM                Executive Vice President -    May 1, 2001
  ------------------------------     Operations and Director
      Paul C. Mitcham

  /s/ P. BLAKE DUPUIS                Executive Vice President -    May 1, 2001
  ------------------------------     Finance, Secretary,
      P. Blake Dupuis                Treasurer, and Director
  (principal financial officer)

  /s/ WILLIAM J. SHEPPARD            Executive Vice President -    May 1, 2001
  ------------------------------     International Operations
      William J. Sheppard            and Director

  /s/ CHRISTOPHER C. SIFFERT         Vice President and            May 1, 2001
  ------------------------------     Corporate Controller
      Christopher C. Siffert
  (principal accounting officer)
</TABLE>


                                       19
<PAGE>   22


                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


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

Consolidated Balance Sheets as of January 31, 2000 and 2001.............................. F-3

Consolidated Statements of Operations for the Years Ended
        January 31, 1999, 2000 and 2001.................................................. F-4

Consolidated Statements of Changes in Shareholders' Equity and Comprehensive Income
        for the Years Ended January 31, 1999, 2000 and 2001.............................. F-5

Consolidated Statements of Cash Flows for the Years Ended
        January 31, 1999, 2000 and 2001.................................................. F-6

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


                                      F-1
<PAGE>   23


                          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, 2000 and 2001, 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, 2001. 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, 2000 and 2001, and the results of their operations
and their cash flows for each of the years in the three-year period ended
January 31, 2001, in conformity with generally accepted accounting principles.


/s/ HEIN + ASSOCIATES LLP
HEIN + ASSOCIATES LLP

Houston, Texas
March 29, 2001


                                      F-2
<PAGE>   24


                            MITCHAM INDUSTRIES, INC.


                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                           JANUARY 31,
                                                                  ----------------------------
                                                                      2000           2001
                                                                  ------------    ------------
<S>                                                               <C>             <C>
                                     ASSETS
Current assets:
   Cash                                                           $  3,588,000    $  4,317,000
   Marketable securities, at market                                 13,811,000       7,085,000
   Accounts receivable, net of allowance for doubtful accounts
      of $843,000 and $1,230,000 at January 31, 2000 and 2001,
      respectively                                                   4,505,000       5,742,000
   Notes receivable                                                  1,183,000       1,470,000
   Prepaid expenses and other current assets                           175,000         458,000
   Income taxes receivable                                           2,795,000         787,000
   Deferred tax asset                                                  220,000       2,067,000
                                                                  ------------    ------------
         Total current assets                                       26,277,000      21,926,000

Seismic equipment lease pool, property and equipment                74,537,000      91,435,000
Accumulated depreciation of seismic equipment lease pool,
   property and equipment                                          (36,697,000)    (42,380,000)
Notes receivable                                                     1,100,000         610,000
Deferred tax asset                                                   2,488,000         646,000
Other assets                                                                --         324,000
                                                                  ------------    ------------
         Total assets                                             $ 67,705,000    $ 72,561,000
                                                                  ============    ============

                      LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                               $  5,927,000    $  8,259,000
   Customer deposits                                                   255,000         503,000
   Accrued wages                                                       233,000         236,000
   Current maturities - long-term debt                                      --       1,856,000
   Deferred revenue                                                    809,000         947,000
   Accrued lawsuit settlement liability                                200,000       1,202,000
   Accrued expenses and other current liabilities                        6,000         126,000
                                                                  ------------    ------------
         Total current liabilities                                   7,430,000      13,129,000
Long-term debt                                                              --       5,444,000
                                                                  ------------    ------------
         Total liabilities                                           7,430,000      18,573,000
Commitments and contingencies (Note 12)
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; 9,551,112 and 9,591,112 shares, respectively,
      issued                                                            96,000          96,000
   Additional paid-in capital                                       61,459,000      61,601,000
   Treasury stock, at cost                                                  --      (3,195,000)
   Accumulated deficit                                                (620,000)     (3,566,000)
   Accumulated other comprehensive loss                               (660,000)       (948,000)
                                                                  ------------    ------------
         Total shareholders' equity                                 60,275,000      53,988,000
                                                                  ------------    ------------
         Total liabilities and shareholders' equity               $ 67,705,000    $ 72,561,000
                                                                  ============    ============
</TABLE>


       THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
                             FINANCIAL STATEMENTS.


                                       F-3
<PAGE>   25

                            MITCHAM INDUSTRIES, INC.


                      CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                                        YEARS ENDED JANUARY 31,
                                                               --------------------------------------------
                                                                   1999            2000            2001
                                                               ------------    ------------    ------------
<S>                                                            <C>             <C>             <C>
Revenues:
   Short-term leasing                                          $ 17,626,000    $  6,509,000    $ 12,358,000
   Lease/purchase activities:
      Leasing revenues                                            4,758,000         242,000       1,651,000
      Sales of equipment                                         10,634,000              --          69,000
   Sales of seismic equipment                                     4,918,000       3,893,000       6,519,000
                                                               ------------    ------------    ------------
         Total revenues                                          37,936,000      10,644,000      20,597,000
                                                               ------------    ------------    ------------
Costs and expenses:
   Direct costs                                                   1,576,000       1,378,000       1,789,000
   Cost of sales:
      Sales of seismic equipment under lease purchase
         agreements                                              11,578,000              --          92,000
      Other sales of seismic equipment                            3,689,000       2,286,000       5,091,000
   General and administrative                                     4,944,000       3,891,000       4,199,000
   Provision for doubtful accounts                                1,705,000         575,000         225,000
   Provision for asset impairment                                15,082,000              --              --
   Depreciation                                                  12,356,000       9,847,000      13,123,000
                                                               ------------    ------------    ------------
         Total costs and expenses                                50,930,000      17,977,000      24,519,000
                                                               ------------    ------------    ------------
Operating loss                                                  (12,994,000)     (7,333,000)     (3,922,000)
Other income (expense):
   Interest income (net of interest expense of approximately
      $38,000, $31,000 and $82,000, respectively)                 1,002,000         675,000         559,000
   Other, net                                                         6,000          (5,000)     (1,092,000)
                                                               ------------    ------------    ------------
        Total other income (expense)                              1,008,000         670,000        (533,000)
                                                               ------------    ------------    ------------
Loss before income taxes                                        (11,986,000)     (6,663,000)     (4,455,000)
Benefit for income taxes                                         (3,460,000)     (1,799,000)     (1,509,000)
                                                               ------------    ------------    ------------
Net loss                                                       $ (8,526,000)   $ (4,864,000)   $ (2,946,000)
                                                               ============    ============    ============
Loss per common share:
         Basic                                                 $      (0.90)   $      (0.51)   $      (0.32)
         Diluted                                               $      (0.90)   $      (0.51)   $      (0.32)
Shares used in computing loss per common share:
         Basic                                                    9,502,000       9,550,000       9,167,000
         Dilutive effect of common stock equivalents                     --              --              --
                                                               ------------    ------------    ------------
         Diluted                                                  9,502,000       9,550,000       9,167,000
                                                               ============    ============    ============
</TABLE>


       THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
                             FINANCIAL STATEMENTS.


                                       F-4
<PAGE>   26
                            MITCHAM INDUSTRIES, INC.


           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                            AND COMPREHENSIVE INCOME
                   YEARS ENDED JANUARY 31, 1999, 2000 AND 2001


<TABLE>
<CAPTION>
                                         COMMON STOCK                                      RETAINED      ACCUMULATED
                                    ----------------------   ADDITIONAL                    EARNINGS        OTHER
                                                              PAID-IN       TREASURY     (ACCUMULATED   COMPREHENSIVE
                                       SHARES      AMOUNT     CAPITAL        STOCK          DEFICIT)    INCOME (LOSS)     TOTAL
                                    ------------   -------  ------------  ------------   ------------   -------------  ------------
<S>                                 <C>            <C>      <C>           <C>            <C>            <C>            <C>
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
   Comprehensive loss:
      Net loss                                --        --            --            --     (2,946,000)            --     (2,946,000)
      Foreign currency translation            --        --            --            --             --       (288,000)      (288,000)
                                                                                                                       ------------
      Comprehensive loss                                                                                                 (3,234,000)
                                                                                                                       ------------
   Issuance of common stock upon
      exercise of warrants and
      options                             40,000        --       142,000            --             --             --        142,000
   Acquisition of treasury stock              --        --            --    (3,195,000)            --             --     (3,195,000)
                                    ------------   -------  ------------  ------------   ------------   ------------   ------------
Balances, January 31, 2001             9,591,000   $96,000  $ 61,601,000  $ (3,195,000)  $ (3,566,000)  $   (948,000)  $ 53,988,000
                                    ============   =======  ============  ============   ============   ============   ============
</TABLE>


       THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
                             FINANCIAL STATEMENTS.


                                       F-5
<PAGE>   27

                            MITCHAM INDUSTRIES, INC.


                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                       YEARS ENDED JANUARY 31,
                                                            --------------------------------------------
                                                                1999           2000          2001
                                                            ------------    ------------    ------------
<S>                                                         <C>             <C>             <C>
Cash flows from operating activities:
  Net loss                                                  $ (8,526,000)   $ (4,864,000)   $ (2,946,000)
  Adjustments to reconcile net loss to net cash provided
      by operating activities:
      Depreciation                                            12,356,000       9,847,000      13,123,000
      Provision for doubtful accounts, net of chargeoffs         601,000        (782,000)        (63,000)
      Provision for asset impairment                          15,182,000              --              --
      Deferred income taxes                                   (6,850,000)      1,803,000          (4,000)
  Changes in:
      Trade accounts receivable                                6,033,000         228,000      (1,838,000)
      Federal income taxes, current                            1,028,000      (3,613,000)      2,008,000
      Accounts payable, accrued expenses and other
         current liabilities                                  (8,382,000)      5,418,000       3,631,000
      Other, net                                                 166,000         (87,000)       (586,000)
                                                            ------------    ------------    ------------
        Net cash provided by operating activities             11,608,000       7,950,000      13,325,000
                                                            ------------    ------------    ------------
Cash flows from investing activities:
   Purchases of seismic equipment held for lease             (33,716,000)    (12,115,000)    (27,482,000)
   Purchases of property and equipment                          (401,000)       (207,000)       (229,000)
   Sale (purchase) of marketable securities                    2,674,000       3,524,000       6,726,000
   Disposal of lease pool equipment                           14,677,000       1,911,000       4,142,000
                                                            ------------    ------------    ------------
         Net cash used in investing activities               (16,766,000)     (6,887,000)    (16,843,000)
                                                            ------------    ------------    ------------
Cash flows from financing activities:
   Proceeds from short-term borrowings                                --              --       1,856,000
   Proceeds from long-term debt                                       --              --       5,444,000
   Purchase of common stock for treasury                              --              --      (3,195,000)
   Proceeds from issuance of common stock upon exercise
      of warrants and options                                    185,000              --         142,000
                                                            ------------    ------------    ------------
        Net cash provided by financing activities                185,000              --       4,247,000
                                                            ------------    ------------    ------------
Net increase (decrease) in cash                               (4,973,000)      1,063,000         729,000
Cash, beginning of year                                        7,498,000       2,525,000       3,588,000
                                                            ------------    ------------    ------------
Cash, end of year                                           $  2,525,000    $  3,588,000    $  4,317,000
                                                            ============    ============    ============
</TABLE>


       THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
                             FINANCIAL STATEMENTS.


                                       F-6

<PAGE>   28

                            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, 2000 and 2001 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, 2000 and 2001, all investments consisted of
         certificates of deposit or government securities. Also, as of January
         31, 2000 and 2001, the securities were classified as
         available-for-sale, and market value was approximately equal to the
         original cost.

         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


                                      F-7
<PAGE>   29

                            MITCHAM INDUSTRIES, INC.


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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

         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 $15.1 million pretax charge during fiscal 1999 related to
         its seismic equipment lease pool (see Note 15 for additional
         information).

         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.

         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 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.


                                      F-8
<PAGE>   30


                            MITCHAM INDUSTRIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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

         As discussed in Note 15, in fiscal 1999 an impairment loss was
         recognized in accordance with SFAS No. 121. It is 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 2000 balances have been reclassified to
         conform with 2001 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.

3.       TERM BANK LOAN

         On November 10, 2000, the Company closed an $8.5 million term loan with
         First Victoria National Bank. The loan will amortize over 48 months and
         bears interest at the rate of prime plus one percent, adjusted daily
         (10.0% at January 31, 2001). The first three monthly payments shall be
         interest only, with the remaining 45 monthly payments being interest
         and principal in the approximate amount of $229,000. As of January 31,
         2001, the Company

                                      F-9
<PAGE>   31

                            MITCHAM INDUSTRIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


3.       TERM BANK LOAN (continued)

         has drawn $7.3 million under this loan agreement. The loan is
         collateralized by the lease pool equipment purchased for the Company's
         fiscal 2001 winter capital expenditure program. Long-term debt
         repayments are scheduled to be $1,856,000, $2,215,000, $2,435,000 and
         $794,000 in fiscal 2002, 2003, 2004 and 2005, respectively.


4.       SUPPLEMENTAL STATEMENTS OF CASH FLOWS INFORMATION

         Supplemental disclosures of cash flow information for the years ended
         January 31, 1999, 2000 and 2001 are as follows:


<TABLE>
<CAPTION>
                                                    YEARS ENDED JANUARY 31,
                                            ---------------------------------------
                                               1999           2000          2001
                                            -----------   -----------   -----------
<S>                                         <C>           <C>           <C>
Interest paid                               $    38,000   $    31,000   $    31,000
Taxes paid (refunded), net                    2,297,000         3,000    (3,529,000)
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       500,000
</TABLE>


5.       NOTES RECEIVABLE

         Notes receivable consisted of $2,283,000 due from four customers and
         $2,080,000 due from seven customers as of January 31, 2000 and 2001,
         respectively. These notes bear interest ranging from 9.5%-12%. During
         fiscal 2001, the Company established four notes receivable totaling
         $901,000 related to sales of seismic equipment and one note receivable
         to finance trade receivables in the amount of $527,000. Additionally,
         one of the new notes established during fiscal 2001 has been repaid by
         the customer as of year-end. 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.

                                      F-10
<PAGE>   32

                            MITCHAM INDUSTRIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


6.       CONCENTRATIONS OF CREDIT RISK

         As of January 31, 2000 and 2001, amounts due from customers which
         exceeded 10% of accounts receivable amounted to an aggregate of $2.4
         million from two customers and $3.5 million from three 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.


7.       SEISMIC EQUIPMENT LEASE POOL, PROPERTY AND EQUIPMENT

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

<TABLE>
<CAPTION>
                                                                JANUARY 31,
                                                       ----------------------------
                                                          2000             2001
                                                       ------------    ------------
<S>                                                    <C>             <C>
Remote signal conditioners (channel boxes)             $ 33,284,000    $ 34,405,000
Other peripheral equipment                               39,584,000      55,245,000
                                                       ------------    ------------
   Seismic equipment lease pool                          72,868,000      89,650,000
                                                       ------------    ------------

Land                                                         25,000          25,000
Buildings and improvements                                  517,000         587,000
Furniture and fixtures                                      922,000         919,000
Autos and trucks                                            205,000         254,000
                                                       ------------    ------------
   Property and equipment                                 1,669,000       1,785,000
                                                       ------------    ------------

Seismic equipment lease pool, property and equipment     74,537,000      91,435,000
Less: accumulated depreciation                          (36,697,000)    (42,380,000)
                                                       ------------    ------------
                                                       $ 37,840,000    $ 49,055,000
                                                       ============    ============
</TABLE>

8.       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

                                      F-11

<PAGE>   33


                            MITCHAM INDUSTRIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


8.       LEASES (continued)

         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, 2000 and 2001 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 $460,000, $155,000 and $513,000 for the
         years ended January 31, 1999, 2000 and 2001, respectively.


9.       INCOME TAXES

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

<TABLE>
<CAPTION>
                                      YEARS ENDED JANUARY 31,
                            -----------------------------------------
                                1999           2000           2001
                            -----------    -----------    -----------
<S>                         <C>            <C>            <C>
Current:
   Federal                  $ 3,102,000    $(3,604,000)   $(1,505,000)
   Foreign                      288,000          2,000             --
   State                             --             --             --
                            -----------    -----------    -----------
                              3,390,000     (3,602,000)    (1,505,000)
Deferred                     (6,850,000)     1,803,000         (4,000)
                            -----------    -----------    -----------
                            $(3,460,000)   $(1,799,000)   $(1,509,000)
                            ===========    ===========    ===========
</TABLE>


                                      F-12
<PAGE>   34

                            MITCHAM INDUSTRIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


9.       INCOME TAXES (continued)

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

<TABLE>
<CAPTION>
                                                               JANUARY 31,
                                                      --------------------------
                                                          2000           2001
                                                      -----------    -----------
<S>                                                   <C>            <C>
Deferred tax assets:
   Allowance for doubtful accounts                    $   289,000    $   418,000
   Canadian net operating loss carryforward             1,471,000      2,000,000
   Imputed interest carryforward                          374,000             --
   Inventory valuation allowance                          333,000        366,000
   Depreciation                                         2,310,000      1,064,000
   Accruals not yet deductible for tax purposes                --        426,000
   AMT credit                                             802,000        434,000
    Other                                                  36,000          5,000
                                                      -----------    -----------
   Gross deferred tax assets                            5,615,000      4,713,000
   Valuation allowance                                 (2,505,000)    (2,000,000)
                                                      -----------    -----------
         Net assets                                     3,110,000      2,713,000
Deferred tax liabilities:
   Tax accounting change from cash basis to accrual
    basis                                                (402,000)            --
                                                      -----------    -----------
   Deferred tax asset, net                            $ 2,708,000    $ 2,713,000
                                                      ===========    ===========
</TABLE>

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

<TABLE>
<CAPTION>
                                                         YEARS ENDED JANUARY 31,
                                              -----------------------------------------
                                                  1999          2000           2001
                                              -----------    -----------    -----------
<S>                                           <C>            <C>            <C>
Federal income tax expense (benefit) at 34%   $(4,075,000)   $(2,265,000)   $(1,515,000)
State and foreign taxes                                --             --             --
Non-taxable interest income                            --       (227,000)      (160,000)
Deferred benefit not currently recognized       1,483,000      1,022,000        324,000
Nondeductible expenses                             16,000         16,000         22,000
Prior year over accrual                          (600,000)      (639,000)       (57,000)
Other                                            (284,000)       294,000       (123,000)
                                              -----------    -----------    -----------
                                              $(3,460,000)   $(1,799,000)   $(1,509,000)
                                              ===========    ===========    ===========
</TABLE>

         The Company had Canadian net operating loss carryforwards of
         approximately $4,500,000 as of January 31, 2001. The Canadian net
         operating losses expire in various years through 2007.

         The Company recorded a valuation allowance of $2,505,000 as of January
         31, 2000 and $2,000,000 as of January 31, 2001.


                                      F-13
<PAGE>   35

                            MITCHAM INDUSTRIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


10.      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,
                                     ---------------------------------------
                                         1999         2000           2001
                                     -----------   -----------   -----------
<S>                                  <C>           <C>           <C>
         Canada                      $ 7,138,000   $ 4,538,000   $10,484,000
         UK/Europe                     3,673,000     2,144,000     4,154,000
         Mexico                        2,121,000         8,000     1,044,000
         South America                 6,819,000       678,000     3,171,000
         Asia                            915,000       107,000        63,000
         Other                                --        36,000       174,000
                                     -----------   -----------   -----------
            Totals                   $20,666,000   $ 7,511,000   $19,090,000
                                     ===========   ===========   ===========
</TABLE>


         One customer represented approximately 36% of fiscal 1999 total
         revenues and three customers represented approximately 17%, 12% and 10%
         of fiscal 2000 total revenues. Three customers represented
         approximately 21%, 13% and 10% of fiscal 2001 total revenues. No other
         customer exceeded 10% of revenues for fiscal 1999, 2000 and 2001.

11.      SHAREHOLDERS' EQUITY

         The Company has 1,000,000 shares of preferred stock authorized, none of
         which are outstanding as of January 31, 2000 and 2001. 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 9,551,112 and
         9,591,112 are issued as of January 31, 2000 and 2001, respectively.

         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, 2000.
         During fiscal 2001, the 15,000 unexercised warrants expired.

         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 were unexercised at January 31, 2000.
         During fiscal 2001, all of these warrants were exercised. 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


                                      F-14
<PAGE>   36

                            MITCHAM INDUSTRIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11.      SHAREHOLDERS' EQUITY (continued)

         December 14, 1997 for a period of five years. As of January 31, 2000
         and 2001, 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, 2000 and 2001. As of January 31, 2001, 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.

         In February 2000, the Board of Directors authorized the repurchase of
         up to 1,000,000 shares of the Company's common stock. The Company has
         repurchased 616,300 shares of its common stock at an average cost of
         $5.18 per share as of January 31, 2001 and has classified these shares
         as treasury stock in the accompanying financial statements. The Company
         expects it will continue to purchase its shares from time to time in
         the open market or in privately negotiated purchase transactions as
         market and financial conditions warrant.

12.      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. As of
         January 31, 2001, the Company has purchased 10,481 channels of Sercel
         408UL equipment. 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


                                      F-15
<PAGE>   37

                            MITCHAM INDUSTRIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


12.      COMMITMENTS AND CONTINGENCIES (continued)

         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. On
         April 17, 2001, Defendants agreed in principle with Plaintiffs to a
         $2,700,000 settlement agreement, to be paid by the Company and its
         insurance carrier, pending execution of a final settlement agreement
         and approval by the Court. (See Note 17 for discussion regarding
         settlement agreement.)

         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,


                                      F-16
<PAGE>   38

                            MITCHAM INDUSTRIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12.      COMMITMENTS AND CONTINGENCIES (continued)

         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.

13.      STOCK OPTION PLANS

         The Company's stock option plans consist of the 1994 Stock Option Plan,
         the 1998 Stock Awards Plan, the 2000 Stock Option Plan and the 1994
         Non-Employee Director Plan (the "Director Plan"). Under the 1994 Stock
         Option Plan, incentive stock options and unqualified stock 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.

         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.

         Under the 2000 Stock Option Plan, up to 500,000 shares of common stock
         may be issued in the form of incentive stock options and unqualified
         stock options to the Company's employees, consultants and non-employee
         directors.

         With respect to incentive stock options issued under the 1994 Stock
         Option Plan, the 1998 Stock Awards Plan and the 2000 Stock Option 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, 2001, options to purchase an aggregate of 349,700
         shares have been granted and options to purchase 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

                                      F-17

<PAGE>   39
                            MITCHAM INDUSTRIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


13.      STOCK OPTION PLANS (continued)

         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, 2001, options to purchase an aggregate of 347,900 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
         287,900 of which are exercisable at $3.56 per share. As of January 31,
         2001, options to purchase an aggregate of 279,750 shares of common
         stock are issued and outstanding under the 2000 Stock Option Plan,
         279,000 of which are exercisable at a price of $5.13 per share and 750
         of which are exercisable at $5.53 per share.

         The Director Plan provides for the grant of up to 50,000 unqualified
         stock options. 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, 2001, options to purchase an aggregate of 41,000 shares of
         common stock are issued and outstanding under the Director Plan, 1,000
         of which are exercisable at $2.88 per share, 1,000 of which are
         exercisable at $3.13 per share, 10,000 of which are exercisable at
         $4.06 per share, 15,000 of which are exercisable at $5.13 per share,
         2,000 of which are exercisable at $7.38 per share, 10,000 of which are
         exercisable at $11.00 per share and 2,000 of which are exercisable at
         $11.13 per share.

         Activity in the 1994 Stock Option Plan, 1998 Stock Awards Plan, 2000
         Stock Option Plan and Director Plan for the years ended January 31,
         1999, 2000 and 2001 was as follows:


                                      F-18
<PAGE>   40

                            MITCHAM INDUSTRIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13.      STOCK OPTION PLANS (continued)

<TABLE>
<CAPTION>
                                                           Weighted
                                                           Average
                                                           Exercise
                                             Number of       Price
                                              Shares       Per Share
                                             ---------     ---------
<S>                                          <C>           <C>
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
      Exercised                                     --           --
      Granted                                  304,350         5.13
      Expired                                  (13,200)        5.53
                                             ---------      -------
Outstanding, January 31, 2001                  860,350      $  5.75
                                             =========      =======
</TABLE>


         As of January 31, 2001, options to acquire 353,667 shares of the
         Company's common stock were fully vested and exercisable at a weighted
         average exercise price of $7.37 per share.

         The remaining options, which have a weighted average exercise price of
         $4.62 per share, will vest over the next three fiscal years. If not
         previously exercised, options outstanding at January 31, 2001 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; 287,900 options expire on
         February 23, 2009; 10,000 options expire on July 23, 2009; 294,000
         options expire on July 27, 2010 and 750 options expire on August 15,
         2010.

         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 loss and loss per common share would have

                                      F-19
<PAGE>   41

                            MITCHAM INDUSTRIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13.      STOCK OPTION PLANS (continued)

         been decreased to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                YEARS ENDED JANUARY 31,
                                    -----------------------------------------------
                                         1999            2000             2001
                                    -------------    -------------    -------------
<S>                                 <C>              <C>              <C>
Net loss
      As reported                   $  (8,526,000)   $  (4,864,000)   $  (2,946,000)
      Pro forma                        (9,177,000)      (5,238,000)      (3,431,000)
Net loss per common share (basic)
      As reported                   $        (.90)   $        (.51)   $        (.32)
      Pro forma                              (.97)            (.55)            (.37)
</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 66%, 62% and
         65% for 1999, 2000 and 2001, respectively; no assumed dividend yield;
         and expected lives of 3-5 years.


14.      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.


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. 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 recent 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 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.


                                      F-20
<PAGE>   42


                            MITCHAM INDUSTRIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


15.      PROVISION FOR ASSET IMPAIRMENT (continued)

         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 or 2001.


16.      QUARTERLY FINANCIAL DATA (Unaudited)

           (in thousands, except per share amounts)

<TABLE>
<CAPTION>
                           Fiscal Year   April 30     July 31    October 31    January 31
                           -----------   --------     -------    ----------    ----------
<S>                        <C>           <C>          <C>        <C>           <C>
Net sales:                      2001     $ 4,108      $ 4,197      $ 3,753      $ 8,539
                                2000       1,645          625        2,434        5,940

Gross profit:                   2001       2,753        2,971        2,555        5,346
                                2000       1,341          417        1,616        3,606

Income (loss) before taxes:     2001      (1,120)        (950)      (1,654)        (731)
                                2000      (1,822)      (2,695)      (1,485)        (661)

Income taxes (benefit):(1)      2001        (327)          --           --       (1,182)
                                2000        (580)        (603)        (415)        (201)

Net income (loss):              2001        (793)        (950)      (1,654)         451
                                2000      (1,242)      (2,092)      (1,070)        (460)

Basic earnings (loss) per
common share:                   2001       (0.08)       (0.10)       (0.18)        0.05
                                2000       (0.13)       (0.22)       (0.11)       (0.05)

Diluted earnings (loss) per
common share:                   2001       (0.08)       (0.10)       (0.18)        0.05
                                2000       (0.13)       (0.22)       (0.11)       (0.05)
</TABLE>


(1) During the fourth quarter of fiscal 2001, the Company triggered alternative
    minimum tax credits and experienced better than expected operating results
    allowing the Company to recover previously paid taxes.


17.      SUBSEQUENT EVENT

         Lawsuit Settlement --

         On April 17, 2001, the Company announced that it had reached an
         agreement in principle with plaintiffs to settle the shareholder class
         action suits pending against the Company and certain of its officers
         and directors in the United States District Court for the Southern
         District of Texas. The principal terms of the agreement call for the
         establishment of a settlement fund consisting of $2.7 million to be
         paid by the Company and its insurance

                                      F-21

<PAGE>   43

                            MITCHAM INDUSTRIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


17.      SUBSEQUENT EVENT (continued)

         carrier. The agreement is subject to execution of definitive settlement
         documents and Court approval. As such, the Company took a $1.1 million
         charge (pre-tax) in its January 31, 2001 financial statements related
         to lawsuit settlement, which is included in other expenses.


                                      F-22
<PAGE>   44


                          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 29,
2001. 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 29, 2001


                                      F-23
<PAGE>   45


                                   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, 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

January 31, 2001
   Allowance for
    doubtful accounts         $  843,000             $  225,000        $ (162,000)(A)    $1,230,000
</TABLE>


---------
(A) Represents recoveries and uncollectible accounts written off.

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


                                      F-24
<PAGE>   46

                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
  NO.                              DESCRIPTION
-------                            -----------
<S>             <C>
  23            Consent of Independent Certified Public Accountants
</TABLE>