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<SEC-DOCUMENT>0000950129-00-006006.txt : 20001218
<SEC-HEADER>0000950129-00-006006.hdr.sgml : 20001218
ACCESSION NUMBER:		0000950129-00-006006
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		5
CONFORMED PERIOD OF REPORT:	20001031
FILED AS OF DATE:		20001215

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			MITCHAM INDUSTRIES INC
		CENTRAL INDEX KEY:			0000926423
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359]
		IRS NUMBER:				760210849
		STATE OF INCORPORATION:			TX
		FISCAL YEAR END:			0131

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		
		SEC FILE NUMBER:	000-25142
		FILM NUMBER:		789996

	BUSINESS ADDRESS:	
		STREET 1:		44000 HIGHWAY 75 SOUTH
		STREET 2:		PO BOX 1175
		CITY:			HUNTSVILLE
		STATE:			TX
		ZIP:			77340
		BUSINESS PHONE:		4092912277

	MAIL ADDRESS:	
		STREET 1:		P O BOX 1175
		STREET 2:		P O BOX 1175
		CITY:			HUNTSVILLE
		STATE:			TX
		ZIP:			77342-1175
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>h82656e10-q.txt
<DESCRIPTION>MITCHAM INDUSTRIES, INC. - 10/31/2000
<TEXT>

<PAGE>   1

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

                                    FORM 10-Q

                                   ----------

(Mark One)

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

                 FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 2000

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

                        COMMISSION FILE NUMBER 000-25142

                                   ----------

                            MITCHAM INDUSTRIES, INC.
                (Name of registrant as specified in its charter)


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

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

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

                                   ----------

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

    Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 9,015,912 shares of Common
Stock, $0.01 par value, were outstanding as of December 13, 2000.

<PAGE>   2


                            MITCHAM INDUSTRIES, INC.
                                      INDEX



                          PART I. FINANCIAL INFORMATION

<TABLE>
<S>                                                                            <C>
Item 1. Financial Statements

                Condensed Consolidated Balance Sheets.......................   3
                Condensed Consolidated Statements of Operations.............   4
                Condensed Consolidated Statements of Cash Flows.............   5
                Notes to Condensed Consolidated Financial Statements........   6

Item 2. Management's Discussion and Analysis of Financial Condition
        and Results of Operations...........................................   7

Item 3. Quantitative and Qualitative Disclosures About Market Risk..........   9

                           PART II. OTHER INFORMATION

Item 1. Legal Proceedings...................................................  13

Item 6. Exhibits and Reports on Form 8-K....................................  13

        Signatures..........................................................  14
</TABLE>


                                       2
<PAGE>   3

PART I.  FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS


                            MITCHAM INDUSTRIES, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                        October 31,       January 31,
                                               ASSETS                       2000             2000
                                                                        -----------       -----------
                                                                        (Unaudited)
<S>                                                                     <C>               <C>
CURRENT ASSETS:
    Cash                                                                  $    793         $  3,588
    Marketable securities, at market                                         7,959           13,811
    Accounts receivable, net                                                 2,594            4,505
    Notes receivable                                                         1,607            1,183
    Inventory                                                                2,656            2,557
    Income tax receivable                                                    3,436            2,795
    Deferred tax asset                                                         335              220
    Prepaid expenses and other current assets                                  491              175
                                                                          --------         --------
       Total current assets                                                 19,871           28,834
Seismic equipment lease pool, property and equipment                        76,898           71,980
Accumulated depreciation of seismic equipment lease pool,
      property and equipment                                               (40,015)         (36,697)
Notes receivable                                                               881            1,100
Deferred tax asset                                                           2,046            2,488
                                                                          --------         --------
         Total assets                                                     $ 59,681         $ 67,705
                                                                          ========         ========

                                LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
    Accounts payable                                                      $  5,425         $  5,927
    Deferred revenue                                                           721              809
    Accrued liabilities and other current liabilities                          319              694
                                                                          --------         --------
         Total current liabilities                                           6,465            7,430

SHAREHOLDERS' EQUITY:
    Preferred stock, $1.00 par value; 1,000,000 shares authorized;
        none issued and outstanding                                             --               --
    Common stock, $0.01 par value; 20,000,000 shares authorized;
        9,591,112 and 9,551,112 shares, respectively, issued                    96               96
    Additional paid-in capital                                              61,601           61,459
    Treasury stock, at cost                                                 (2,932)              --
    Accumulated deficit                                                     (4,017)            (620)
    Cumulative translation adjustment                                       (1,532)            (660)
                                                                          --------         --------
         Total shareholders' equity                                         53,216           60,275
                                                                          --------         --------
         Total liabilities and shareholders' equity                       $ 59,681         $ 67,705
                                                                          ========         ========
</TABLE>

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


                                       3
<PAGE>   4

                            MITCHAM INDUSTRIES, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                 (IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED                      NINE MONTHS ENDED
                                                                 OCTOBER 31,                              OCTOBER 31,
                                                       -------------------------------         -------------------------------
                                                           2000                1999                2000                1999
                                                       -----------         -----------         -----------         -----------
<S>                                                    <C>                 <C>                 <C>                 <C>
REVENUES:
Short-term leasing                                     $     2,545         $     1,823         $     7,733         $     3,552
Leasing under lease/purchase agreements                        202                   8                 570                 210
Other equipment sales                                        1,006                 603               3,755                 942
                                                       -----------         -----------         -----------         -----------
         Total revenues                                      3,753               2,434              12,058               4,704

COSTS AND EXPENSES:
Direct costs                                                   347                 370               1,120                 673
Cost of other equipment sales                                  851                 448               2,659                 569
General and administrative                                   1,078                 845               3,121               2,795
Provision for doubtful accounts                                 25                  50                 100                 175
Depreciation                                                 3,268               2,374               9,260               6,972
                                                       -----------         -----------         -----------         -----------
         Total costs and expenses                            5,569               4,087              16,260              11,184
                                                       -----------         -----------         -----------         -----------

OPERATING LOSS                                              (1,816)             (1,653)             (4,202)             (6,480)

Other income - net                                             162                 168                 478                 478
                                                       -----------         -----------         -----------         -----------

LOSS BEFORE INCOME TAXES                                    (1,654)             (1,485)             (3,724)             (6,002)
BENEFIT FOR INCOME TAXES                                        --                (415)               (327)             (1,598)
                                                       -----------         -----------         -----------         -----------
NET LOSS                                               $    (1,654)        $    (1,070)        $    (3,397)        $    (4,404)
                                                       ===========         ===========         ===========         ===========

Loss per common share:
     Basic                                             $     (0.18)        $     (0.11)        $     (0.37)        $     (0.46)
     Diluted                                           $     (0.18)        $     (0.11)        $     (0.37)        $     (0.46)
                                                       ===========         ===========         ===========         ===========

Shares used in computing loss per common share:
     Basic                                               9,032,000           9,551,000           9,220,000           9,550,000
     Dilutive effect of common stock equivalents                --                  --                  --                  --
                                                       -----------         -----------         -----------         -----------
     Diluted                                             9,032,000           9,551,000           9,220,000           9,550,000
                                                       ===========         ===========         ===========         ===========
</TABLE>


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


                                       4
<PAGE>   5

                            MITCHAM INDUSTRIES, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                 NINE MONTHS ENDED
                                                                                     OCTOBER 31,
                                                                             -------------------------
                                                                               2000             1999
                                                                             --------         --------
<S>                                                                          <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                                     $ (3,397)        $ (4,404)
Adjustments to reconcile net loss to net cash flows
     provided by operating activities:
         Depreciation                                                           9,260            6,972
         Provision for doubtful accounts, net of charge offs                     (108)            (465)
         Inventory                                                                (87)             (26)
         Accounts receivable                                                      947            3,451
         Federal income taxes                                                    (313)          (2,107)
         Accounts payable and other current liabilities                          (676)             446
         Other assets                                                            (295)            (206)
                                                                             --------         --------
              Net cash provided by operating activities                         5,331            3,661

CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchases of seismic equipment held for lease                            (12,545)          (6,823)
     Purchases of property and equipment                                         (179)            (188)
     Sale (purchase) of marketable securities, net                              5,852            2,214
     Disposal of seismic equipment lease pool, property and equipment           1,536              577
                                                                             --------         --------
         Net cash used in investing activities                                 (5,336)          (4,220)

CASH FLOWS FROM FINANCING ACTIVITIES:
     Purchases of treasury stock                                               (2,932)              --
     Proceeds from issuance of common stock upon exercise of
       warrants and options                                                       142               --
                                                                             --------         --------
         Net cash used in financing activities                                 (2,790)              --

NET DECREASE IN CASH                                                           (2,795)            (559)
CASH, BEGINNING OF PERIOD                                                       3,588            2,525
                                                                             --------         --------
CASH, END OF PERIOD                                                          $    793         $  1,966
                                                                             ========         ========

SUPPLEMENTAL CASH FLOW INFORMATION:
     Cash paid for:
         Interest                                                            $     --         $     28
         Income taxes                                                        $     --         $    500
                                                                             ========         ========
</TABLE>

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


                                       5
<PAGE>   6

                            MITCHAM INDUSTRIES, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.       BASIS OF PRESENTATION

         The condensed consolidated financial statements of Mitcham Industries,
         Inc. ("the Company") have been prepared by the Company, without audit,
         pursuant to the rules and regulations of the Securities and Exchange
         Commission. Certain information and footnote disclosures normally
         included in financial statements prepared in accordance with generally
         accepted accounting principles have been condensed or omitted pursuant
         to such rules and regulations, although the Company believes that the
         disclosures are adequate to make the information presented not
         misleading. These condensed consolidated financial statements should be
         read in conjunction with the financial statements and the notes thereto
         included in the Company's latest Annual Report to Shareholders and the
         Annual Report on Form 10-K for the year ended January 31, 2000. In the
         opinion of the Company, all adjustments, consisting only of normal
         recurring adjustments, necessary to present fairly the financial
         position as of October 31, 2000; the results of operations for the
         three and nine months ended October 31, 2000 and 1999; and cash flows
         for the nine months ended October 31, 2000 and 1999 have been included.
         The foregoing interim results are not necessarily indicative of the
         results of the operations for the full fiscal year ending January 31,
         2001.

2.       COMMITMENTS AND CONTINGENCIES

         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
         October 2, 2000, the Court granted in part and denied in part
         Defendants' motion to dismiss the SCAC. The Court dismissed with
         prejudice the claims asserted on behalf of the entire class under
         Sections 11 and 12(a)(2) of the 1933 Act. The Court, however, has
         allowed plaintiffs Moskowitz and Finkelstein to proceed with their
         Section 11 claims on an individual basis. As to the Section 10(b)
         claims, the Court affirmed with prejudice its prior order, which
         limited all allegations of misstatements by the Defendants to the June
         4, 1997 to March 26, 1998 time period (i.e., the class period), and
         dismissed claims based on: (1) forward-looking statements entitled to
         safe-harbor protection under the Private Securities Litigation Reform
         Act of 1995; (2) allegations of improper revenue recognition; and (3)
         allegations based on analysts' statements. Defendants filed an answer
         to the remaining claims in the SCAC on December 6, 2000.

         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.


                                       6
<PAGE>   7


3.       TREASURY STOCK

         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 561,200 shares of its common stock at an average price of
         $5.22 per share as of October 31, 2000 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.

4.       RECLASSIFICATIONS

         Certain 1999 amounts have been reclassified to conform to 2000
         presentation.

5.       SUBSEQUENT EVENT

         On November 10, 2000, the Company closed an $8.5 million term loan. The
         loan will amortize 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. As of December 14, 2000, the Company has
         drawn $3.0 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.

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

OVERVIEW

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

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

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

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


                                       7
<PAGE>   8

both in Canada and worldwide declined dramatically in the fourth quarter of
fiscal 1999 and remained at historically low levels throughout fiscal 2000.

RESULTS OF OPERATIONS

For the three months ended October 31, 2000 and 1999

         For the quarter ended October 31, 2000, total revenues increased by
$1.3 million to $3.8 million from $2.4 million in the corresponding period of
the prior year. This quarter's results reflect a significant increase in all
categories of revenues compared to total revenues for the same period of the
prior year, mainly a reflection of the increased seismic activity worldwide.

         Equipment sales and leasing revenues under lease/purchase agreements
during the quarter ended October 31, 2000 were not significant, as the Company
recorded no revenues from the exercise of the purchase option of lease/purchase
contracts. During the quarter ended October 31, 2000, other equipment sales
generated a gross margin of 15% as compared to 26% for the same period in 1999.
Gross margins on equipment sales may vary significantly between periods due to
the mix of new versus older equipment being sold.

         General and administrative expenses increased by $233,000 from the
corresponding prior year period primarily due to an increase in rent and
storage, compensation and Texas franchise tax expenses partially offset by a
decrease in insurance expense and professional fees. Additionally, the Company
incurred personnel and related costs during 2000 associated with international
marketing efforts.

         Depreciation expense for the quarter ended October 31, 2000 increased
by $894,000, or 38%, to $3.3 million from $2.4 million for the same period last
year. The increase is primarily the result of capital additions to the seismic
equipment lease pool during the past year.

         The Company recorded a net loss for the quarter ended October 31, 2000
in the amount of $1.7 million compared to a net loss of $1.1 million for the
same period of the previous year.

For the nine months ended October 31, 2000 and 1999

         For the nine months ended October 31, 2000, total revenues increased by
$7.4 million to $12.1 million from $4.7 million in the corresponding period of
the prior year. Approximately $0.3 million of lease revenue is related to
rentals of equipment that occurred during the prior fiscal year, which had not
been recorded pending collection. These funds were collected in June. Year to
date revenues through October 31, 2000 reflects a significant increase in all
categories of revenues compared to total revenues for the same period of the
prior year, mainly a reflection of the increased seismic activity worldwide.

         Equipment sales and leasing revenues under lease/purchase agreements
during the nine months ended October 31, 2000 were not significant, as the
Company recorded no revenues from the exercise of the purchase option of
lease/purchase contracts.

         During the nine months ended October 31, 2000, other equipment sales
generated a gross margin of 29% as compared to 40% for the same period in 1999.
Gross margins on equipment sales may vary significantly between periods due to
the mix of new versus older equipment being sold.

         General and administrative expenses increased by $326,000 from the
corresponding prior year period primarily due to personnel and related costs
associated with international marketing efforts, as well as an increase in
insurance, compensation, convention, travel and business promotion expenses,
partially offset by a decrease in professional fees.

         Depreciation expense for the nine months ended October 31, 2000
increased by $2.3 million, or 33%, to $9.3 million from $7.0 million for the
same period last year. The increase is primarily the result of a larger seismic


                                       8
<PAGE>   9

equipment lease pool, on a cost basis, as compared to October 31, 1999.
Additionally, the Company has sold older, more fully depreciated seismic
equipment during the past year and replaced it with newer equipment, thus
increasing depreciation expense. The Company's seismic equipment lease pool
increased by $7.6 million, on a cost basis, to $75.1 million at October 31,
2000, from $67.5 million at October 31, 1999.

         The Company recorded a net loss for the nine months ended October 31,
2000 in the amount of $3.4 million compared to a net loss of $4.4 million for
the same period of the previous year.

LIQUIDITY AND CAPITAL RESOURCES

         As of October 31, 2000, the Company had net working capital of
approximately $13.4 million as compared to net working capital of $21.4 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 our principal sources of cash have been cash flows from operations
and issuances of equity securities. Net cash provided by operating activities
for the nine months ended October 31, 2000 was $5.3 million, as compared to net
cash provided by operating activities of $3.7 million for the nine months ended
October 31, 1999.

         At October 31, 2000, the Company had trade accounts receivable of $0.6
million that were more than 90 days past due. As of October 31, 2000, the
Company's allowance for doubtful accounts was approximately $1.2 million, which
management believes is sufficient to cover any losses in its customer
receivables, including any losses in its international customers' accounts.

         Capital expenditures for the nine months ended October 31, 2000 totaled
approximately $12.7 million compared to capital expenditures of $7.0 million for
the corresponding period in the prior year. During the nine months ended October
31, 2000, the Company repurchased 561,200 shares of its common stock for an
aggregate cost of $2,932,000, or $5.22 per share. The Company expects that its
capital expenditure requirements for the fourth quarter will be approximately
$15.0. 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.

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. The first three monthly
payments shall be interest only, with the remaining 45 monthly payments being
interest and principal. As of December 14, 2000, the Company has drawn $3.0
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.

ITEM 3. 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.


FORWARD-LOOKING STATEMENTS AND RISK FACTORS

     Certain information contained in this Quarterly Report on Form 10-Q
(including statements contained in Part I, Item 2. "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and in Part II, Item
1. "Legal Proceedings"), 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;


                                       9
<PAGE>   10

commitments and contingent liabilities; and future demand for the Company's
services and predicted improvement in energy industry and seismic service
industry conditions. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, it can give no
assurance that such expectations will prove to have been correct. When used in
this report, the words "anticipate," "believe," "estimate," "expect," "may," and
similar expressions, as they relate to the Company and its management, identify
forward-looking statements. The actual results of future events described in
such forward-looking statements could differ materially from the results
described in the forward-looking statements due to the risks and uncertainties
set forth below and elsewhere within this Quarterly Report on Form 10-Q.

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

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

LOSS OF SIGNIFICANT CUSTOMERS WILL ADVERSELY AFFECT THE COMPANY

     The Company typically leases and sells significant amounts of seismic
equipment to a relatively small number of customers, the composition of which
changes from year to year as leases are initiated and concluded and as
customers' equipment needs vary. Therefore, at any one time, a large portion of
the Company's revenues may be derived from a limited number of customers. In the
fiscal year ended January 31, 2000, the single largest customer accounted for
approximately 17% 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 RECEIVABLES WOULD ADVERSELY AFFECT THE
COMPANY'S RESULTS OF OPERATIONS

     The Company has approximately $6.3 million of customer accounts and notes
receivable at October 31, 2000, of which $0.6 million of customer accounts
receivable is over ninety days past-due. At October 31, 2000, the Company has an
allowance of $1.2 million to cover losses in its receivable balances.
Significant payment defaults by its customers in excess of the allowance would
have a material adverse effect on the Company's financial position and results
of operations.

DEPENDENCE ON ADDITIONAL LEASE CONTRACTS

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

DEPENDENCE ON KEY PERSONNEL

     The Company's success is dependent on, among other things, the services of
certain key personnel, including specifically Billy F. Mitcham, Jr., Chairman of
the Board, President and Chief Executive Officer of the Company.


                                       10
<PAGE>   11

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

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

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

VULNERABILITY TO WEATHER CONDITIONS AND SEASONAL RESULTS

     The first and fourth quarters of the Company's fiscal year have
historically accounted for a greater portion of the Company's revenues than do
the second and third quarters of its fiscal year. This seasonality in revenues
is primarily due to the increased seismic survey activity in Canada from October
through March, which affects the Company due to its significant Canadian
operations. This seasonal pattern may cause the Company's results of operations
to vary significantly from quarter to quarter. However, due to the significant
decrease in world oil prices in 1998, demand for the Company's services both in
Canada and worldwide declined dramatically in the fourth


                                       11
<PAGE>   12

quarter of fiscal 1999 and has remained at historically low levels throughout
fiscal 2000. Accordingly, period-to-period comparisons are not necessarily
meaningful and should not be relied on as indicative of future results.

DEPENDENCE ON KEY SUPPLIERS

     The Company has and continues to rely on purchase agreements with Sercel
and Pelton Company, Inc. 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 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.


                                       12
<PAGE>   13

                           PART II. OTHER INFORMATION

ITEM 1. 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
         October 2, 2000, the Court granted in part and denied in part
         Defendants' motion to dismiss the SCAC. The Court dismissed with
         prejudice the claims asserted on behalf of the entire class under
         Sections 11 and 12(a)(2) of the 1933 Act. The Court, however, has
         allowed plaintiffs Moskowitz and Finkelstein to proceed with their
         Section 11 claims on an individual basis. As to the Section 10(b)
         claims, the Court affirmed with prejudice its prior order, which
         limited all allegations of misstatements by the Defendants to the June
         4, 1997 to March 26, 1998 time period (i.e., the class period), and
         dismissed claims based on: (1) forward-looking statements entitled to
         safe-harbor protection under the Private Securities Litigation Reform
         Act of 1995; (2) allegations of improper revenue recognition; and (3)
         allegations based on analysts' statements. Defendants filed an answer
         to the remaining claims in the SCAC on December 6, 2000.


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

    (a) REPORTS ON FORM 8-K
        None

    (b) EXHIBITS

        10.1 -  Loan Agreement between Mitcham Industries, Inc. and First
                Victoria National Bank dated November 10, 2000

        10.2 -  Commercial Security Agreement between Mitcham Industries, Inc.
                and First Victoria National Bank dated November 9, 2000

        11   -  Statement Re Computation of Loss Per Share

        27   -  Financial Data Schedule


                                       13
<PAGE>   14

                                   SIGNATURES

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


                                         MITCHAM INDUSTRIES, INC.




Date:  December 15, 2000                 /s/ P. BLAKE DUPUIS
                                         ---------------------------------------
                                         P. BLAKE DUPUIS,
                                         CHIEF FINANCIAL OFFICER
                                         (AUTHORIZED OFFICER AND PRINCIPAL
                                         ACCOUNTING OFFICER)


                                       14



<PAGE>   15

                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
   NO.                                    DESCRIPTION
- -------                                   -----------
<S>            <C>
 10.1 -        Loan Agreement between Mitcham Industries, Inc. and First
               Victoria National Bank dated November 10, 2000

 10.2 -        Commercial Security Agreement between Mitcham Industries,  Inc.
               and First Victoria National Bank dated November 9, 2000

 11   -        Statement Re Computation of Loss Per Share

 27   -        Financial Data Schedule
</TABLE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>h82656ex10-1.txt
<DESCRIPTION>LOAN AGREEMENT DATED 11/10/2000
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 10.1

                                 LOAN AGREEMENT

THE STATE OF TEXAS

COUNTY OF WALKER                                                     WITNESSETH:

         THIS AGREEMENT made and entered into on this 10th day of November 2000,
by and between MITCHAM INDUSTRIES, INC., a Texas corporation, with principal
offices at 44,000 Highway 75S, Huntsville, Texas 77340, in Walker County, Texas
(herein referred to as "Borrower") and First Victoria National Bank, a national
banking corporation, with its offices and domicile in Victoria, Victoria County,
Texas, (herein referred to as "Lender") to induce Lender to extend credit to
Borrower in the amounts evidenced by the promissory notes described in Paragraph
II of this agreement (herein referred to as the "Loan").

         In consideration of their mutual warranties, covenants and agreements
contained herein and Lender's extension of credit to Borrower in the amount
aforesaid, Borrower and Lender hereby warrant, covenant and agree as follows:

                            I. WARRANTIES OF BORROWER

         A. That Borrower is a Texas corporation currently authorized to do
business in the State of Texas, and that all franchise taxes, employment taxes,
withholding taxes, income taxes, sales taxes, use taxes and all other taxes have
been paid current to the date of this agreement.

         B. That the execution by Borrower of this agreement and the other
documents described herein has been duly authorized by its corporate board and
that all of the agreements, indentures, or conveyances described herein to be
made or undertaken by Borrower are within its corporate powers and not
prohibited by law or its governing documents.

         C. That this Loan Agreement and all promissory notes and security
documents referenced herein are legal, valid and binding obligations of Borrower
which are enforceable against him in accordance with the respective terms
thereof.

         D. That all audits and financial information submitted to Lender may be
relied upon by Lender as fairly representing the financial condition of the
companies or individuals to which the same relate, and that there has been no
adverse material change in the financial condition of Borrower.



<PAGE>   2

         E. That there are no litigation, arbitration or governmental or
regulatory proceedings pending or threatened against Borrower which, if
adversely determined, could have a material adverse effect on Borrower's
financial condition or affect the legality, validity or enforceability of this
Loan Agreement or any promissory notes or security documents referenced herein
and that Borrower has no material contingent liabilities or material forward
commitments which are not disclosed in the financial information now held by
Lender.

         F. That there are no other liens or encumbrances against the property
given as security for the payment of the hereinafter described loan, except as
stated herein.

         G. That, except as has been disclosed to Lender in writing of even date
with this loan agreement and which writing shall be attached hereto, none of the
property given as security for the payment of the herein described Loan is now
or has at any time in the past been used for or contaminated by the generation,
transportation, treatment, disbursal, storage, discharge or disposal of any
pollutants, hazardous or toxic substances, or hazardous wastes as defined or
regulated by any of the following federal statutes: (a) The Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), as amended by
the Superfund Amendments and Re-Authorization Act of 1986 ("SARA"), (b) the
Resource Conservation and Recovery Act ("RCRA"), (c) the Toxic Substance Control
Act ("TSCA"), (d) any amendments to or regulations promulgated by any agency
under any of the above statutes, and (e) any other state or federal statute or
regulation for the control of hazardous or toxic substances.

         H. That Borrower presently has no claims or defenses against Lender
arising out of this Loan Agreement or the promissory notes or security documents
referenced herein, the indebtedness or obligations of any party governed
thereby, or any action previously taken or not taken by Lender with respect
thereto and that Borrower is aware that Lender is relying upon this warranty in
connection with this extension of credit. Borrower hereby waives, releases and
forever discharges Lender from and against any and all such claims, defenses and
causes of action which might now exist against Lender or which arise out of this
Loan Agreement or the promissory notes or security documents referenced herein,
the indebtedness or obligations of any party governed thereby, or any action
previously taken or not taken by Lender with respect thereto.



                                       2
<PAGE>   3

                                II. INDEBTEDNESS

         A. Lender shall advance to Borrower, according to the terms thereof and
subject to the limitations expressed therein and in this agreement, the
principal sum of the following promissory note:

          One certain promissory note of even date herewith executed by Borrower
          and payable to the order of Lender in the original principal sum of
          $8,500,000.00, bearing interest at the Wall Street Journal Prime Rate,
          plus One percent (1%) per annum, as such rate is determined daily on
          the principal balance outstanding, providing for multiple advances,
          until the total amount of principal has been advanced, interest being
          payable monthly as it accrues, and being due on or before the 9th day
          of November, 2004.

         B. Borrower agrees to execute and deliver to Lender such promissory
note in the form prescribed by Lender and on terms described herein, evidencing
the indebtedness created by such advances.

         C. Borrower hereby acknowledges and agrees that Lender has and shall
have the right, at any time, without the consent of or notice to Borrower, to
grant participations in all or part of the obligations of Borrower evidenced by
this note, together with any liens or collateral securing the payment hereof. In
the event Lender elects to participate any Overline Portion (as hereinafter
defined) of the obligations evidenced by this note and if Lender is unable to
procure a participant or a participant fails or refuses to advance to Borrower
any Overline Portion through no fault of Lender, it is agreed that Lender shall
have no liability to Borrower to fund such Overline Portion, nor shall Lender
have any obligation to procure funds from other sources or fund any amounts that
would cause Lender to be in violation of any state or federal law with respect
to Borrower being liable to Lender in an amount in excess of that permitted by
such applicable law. The term "Overline Portion" shall mean the amount of loan
proceeds in excess of the amount that Lender is permitted by applicable law or
Lender's loan policy limitations to loan to Borrower.

         D. Notwithstanding any other provision in this agreement or the
provisions of any promissory note or other loan document to the contrary, Lender
shall not charge or collect and Lender does not intend to contract for interest
in excess of that permitted by law for loans of this kind, and to prevent such
occurrence, Lender will, at maturity, or an earlier final payment of any
promissory note described above, determine the total amount of interest that can
be lawfully



                                       3
<PAGE>   4

charged or collected by applying the highest lawful rate of interest to the full
periodic balances of principal for the period each is outstanding and unpaid and
compare such amount with the total interest that has accrued under the terms of
such note, and, if necessary to prevent usury, reduce the total amount of
interest payable by Borrower to the lesser amount. If the amount of interest
that has been collected exceeds the lawful amount, Lender shall either make
direct refund of such excess to Borrower or credit it against other sums owed by
Borrower to Lender, whichever Lender deems appropriate. If at any time the rate
of interest provided for in any note shall exceed the highest lawful rate, the
annual rate at which interest shall accrue on such note shall be limited to such
highest lawful rate. The highest lawful rate shall thereafter be the rate at
which interest is accrued on such note until the total amount of interest
accrued equals the amount of interest that would have accrued if the interest
rate provided in such note had at all times been in effect, after which the
interest rate provided in such note, if it does not exceed the highest lawful
rate, shall apply. As used herein, the term "highest lawful rate" means the
highest rate of interest permitted to be charged or collected under the
applicable state or federal law for this type of loan applied to the full
periodic balances of principal advances for the period each is outstanding and
unpaid.

                                  III. SECURITY

         A. As security for the loan, Borrower and Guarantors shall execute and
deliver to, procure for, deposit with, and pay to Lender the following:

         1.       Commercial Security Agreement and financing statements in form
                  and content acceptable to Lender, executed by Borrower and
                  granting a purchase money security interest in all equipment
                  purchased from Sercel, Ltd., GeoSpace Corp. and Mark Products
                  and containing an assignment of all leases and revenues
                  generated from such equipment. Such security agreement shall
                  also cover all accounts receivable arising from Borrower's
                  business operations, together with all instruments, chattel
                  paper, general intangibles, proceeds and cash proceeds arising
                  therefrom, securing payment of the note described in Paragraph
                  II A. hereof evidencing a first lien and prior security
                  interest in such collateral, whether now owned or hereinafter
                  acquired by Borrower.

         2.       Such other documents and instruments as Lender may require for
                  the perfection of liens and their registration under the laws
                  of the State of Texas or of the United States.

         3.       Hazard insurance policy or policies in form and content and
                  issued by a company or companies with loss payable
                  endorsements acceptable to Lender, insuring all collateral
                  given as security against loss or damage and against vandalism
                  and malicious mischief and insuring said collateral



                                       4
<PAGE>   5

                   against the usual and customary risks and hazards as Lender
                   may request, all of such policy or policies to be for a total
                   amount acceptable to Lender.

          B. Borrower shall execute and deliver to Lender such other documents
and instruments as Lender may require to evidence the status or authority of
Borrower and to evidence, govern or secure the payment of the Loan or any
portion thereof.

                    IV. COVENANTS OF BORROWER AND GUARANTORS

         A. For so long as any portion of the Loan remains unpaid, Borrower
covenants and agrees as follows:

                               POSITIVE COVENANTS

         1.       That Borrower agrees to pay to Lender, upon demand, all
                  expenses of every nature incurred by Lender in connection with
                  the consummation of the transaction contemplated by this
                  agreement, or the enforcement or preservation of Lender's
                  rights hereunder, including attorney's fees and expenses of
                  Lender's counsel, hazard insurance premiums, filing and
                  recording fees, court costs, and other fees and reasonable
                  expenses incurred by Lender.

         2.       That Borrower shall furnish or cause to be furnished at its
                  expense to Lender financial statements or reports in form and
                  content acceptable to Lender, within 45 days of the end of
                  each quarter, which shall set forth an operating statement and
                  balance sheet for Borrower herein; an ageing of notes,
                  contract rights, accounts receivable and accounts payable of
                  Borrower for the preceding quarter. Lender shall be allowed to
                  make reasonable inspections of all assets securing said loan
                  and shall further have the right to inspect the books of
                  Borrower or other records relating to the affairs of Borrower.
                  The reasonable costs of any such inspection are to be borne by
                  Borrower.

         3.       That Borrower shall furnish at its expense to Lender annually,
                  within 90 days after the end of Borrower's income tax
                  reporting year, an audited report prepared by the Certified
                  Public Accounting firm for Borrower, including a balance
                  sheet, income statement, sources and uses of funds statement,
                  and a reconciliation of net worth. Additionally, Borrower
                  shall furnish their tax returns at its expense to Lender
                  annually, within 150 days after the end of Borrower's income
                  tax reporting year.

         4.       That while Borrower is indebted to Lender hereunder Borrower
                  will:

                  a.       Perform all of its obligations to appropriate
                           regulatory agencies;

                  b.       Punctually pay all indebtedness from time to time
                           owing hereunder when due;

                  c.       Perform all of its obligations under the Security
                           Instruments described herein;

                  d.       Promptly pay and discharge any and all indebtedness
                           or obligations when due and owing, including all
                           taxes of



                                       5
<PAGE>   6

                           every kind and character, all assessments, and other
                           claims which might give rise to a lien on the
                           property given as security for this loan or impair
                           Borrower's obligation to conduct its business, except
                           as it may in good faith contest or as to which a bona
                           fide dispute may arise, provided provision is made to
                           the satisfaction of Lender for eventual payment
                           thereof in the event that it is found that such
                           indebtedness or obligation or tax or claim is an
                           obligation of Borrower, and when such dispute or
                           contest is settled or determined, it will promptly
                           pay the amount then due.

                  e.       Maintain and keep in force insurance of the types and
                           in the amounts customarily carried by companies in
                           similar lines of business, including adequate amounts
                           of fire, windstorm, explosion, public liability,
                           property damage, and workman's compensation
                           insurance; all insurance is to be carried in company
                           or companies satisfactory to Lender, and Borrower
                           will deliver to Lender from time to time, at the
                           request of Lender, a schedule setting forth all
                           insurance in effect;

                  f.       Maintain a standard and modern accounting system in
                           accordance with generally accepted principles of
                           accounting, permit Lender to inspect its books of
                           account and records at all reasonable times, furnish
                           to Lender such information respecting the business
                           affairs and financial condition of Borrower as Lender
                           may reasonably request.

                  g.       Preserve all rights, privileges, franchises,
                           licenses, and permits connected with its business and
                           to the extent of its ability will conduct its
                           business in an orderly, efficient manner without
                           voluntary interruptions, and comply with all
                           applicable laws and regulations of government
                           agencies;

                  h.       Maintain, preserve and keep all properties and
                           equipment in good repair, working order and
                           condition, and from time to time make all necessary
                           and proper repairs, renewals, replacements, and
                           improvements thereto so that at all times the
                           efficiency and value thereof shall be fully preserved
                           and maintained, and maintain leases, licenses and
                           permits, but nothing herein contained shall prevent
                           Borrower from in good faith contesting or seeking
                           legal construction of any dispute, terms or
                           conditions of a contract, lease or other obligation;
                           Lender may, at reasonable times, visit and inspect
                           any of the properties of Borrower;

                  i.       To give notice in writing to Lender within 30 days of
                           any proceedings by any public or private body,
                           agency, or authority, pending or threatened, which
                           may have a substantial adverse effect on Borrower,
                           and of any litigation involving the possibility of
                           judgments or liabilities in excess of an aggregate of
                           $1,000,000.00 not covered by insurance.

                  j.       To provide copies of all correspondence between
                           Borrower and the Securities and Exchange Commission,
                           whether such correspondence is prepared by Borrower
                           or the



                                       6
<PAGE>   7

                           Securities and Exchange Commission, within thirty
                           (30) days of delivery or receipt of such
                           correspondence by Borrower.

                  k.       To provide monthly status reports of pending
                           litigation between Borrower and Stanley Moskowitz,
                           et al, in Cause No. 98-CV-1244, which cause of action
                           was filed April 23, 1998, in the U. S. District
                           Court, Southern District of Texas.

                  l.       Borrower shall maintain operating accounts at one of
                           the following Citizens Bank of Texas locations:
                           Huntsville, Texas; New Waverly, Texas or The
                           Woodlands, Texas.

         5.       That Borrower will indemnify Lender against and hold Lender
                  harmless from any and all claims, liabilities, obligations,
                  penalties, loss, damage or causes of action of any kind
                  (including attorney's fees and costs of remediation
                  necessarily incurred by Lender in connection therewith),
                  whether arising under statute or regulation, common law, tort
                  or contract, and whether claimed, asserted, or assessed, in
                  any way by or necessarily paid by Lender to any private party
                  or any governmental entity or agency or any number or
                  combination thereof, and resulting or arising in any way from
                  the generation, transportation, treatment, disbursal, storage,
                  discharge or disposal of any pollutants, hazardous or toxic
                  substances, or hazardous wastes by Borrower, its agents,
                  employees, or contractors, at any location, or from the past,
                  present or future use of any property given as security for
                  this Loan for such purposes by any party, or from the presence
                  of any pollutants, hazardous or toxic substances, or hazardous
                  wastes on any such property, or from the falsity of any
                  warranty made herein with regard to the presence or uses of
                  such pollutants, hazardous or toxic substances, or hazardous
                  wastes, or from the use by Borrower of any underground storage
                  tanks or the presence of such tanks on any property given as
                  security for this Loan, or in any way from the actual,
                  threatened or alleged discharge, disbursal, release, storage,
                  treatment, generation, disposal or escape of pollutants, or
                  other toxic or hazardous substances, at any location, whether
                  occurring before or after the date of this agreement.

                               NEGATIVE COVENANTS

         6.       Borrower will not, except with the prior written consent of
                  Lender:

                  a.       Permit any lien (other than for taxes not delinquent
                           and for taxes and other items being contested in good
                           faith) to exist on property given as security for
                           this loan or on the income or profits thereof,
                           excepting liens existing as of the date hereof
                           and as otherwise provided herein.

                  b.       Except in the normal course of business; amend,
                           modify, terminate or otherwise alter the terms of any
                           account, contract or lease, nor accept or surrender
                           of any personal property subject thereto;

                  c.       Assign any leases or the proceeds thereof to anyone
                           except Lender;

         7.       That Borrower may not assign or otherwise transfer this
                  Agreement or any rights hereunder, and that this Agreement
                  shall be binding upon Borrower



                                       7
<PAGE>   8

                  and the representatives, heirs, executors, legal
                  representatives and successors of Borrower.

         8.       That Borrower shall not incur any indebtedness or obligations
                  (other than accounts payable which arise in the usual and
                  normal course of Borrower's operations) or guarantee the debt
                  or obligations of others in excess of $20,000,000.00, without
                  the prior written approval of Lender.

         9.       That, except after written notice to Lender and where such use
                  and the activities relating thereto are in strict compliance
                  with all applicable laws and regulations, Borrower shall not
                  hereafter permit any property which is (a) given as security
                  for this Loan, (b) used by Borrower for any business or other
                  activities financed by Lender or (c) the source of repayment
                  of this Loan, to be used in any way for the generation,
                  transportation, treatment, disbursal, storage, discharge or
                  disposal of any pollutants, hazardous or toxic substances, or
                  hazardous wastes as defined or regulated by any of the
                  following federal statutes: (a) The Comprehensive
                  Environmental Response, Compensation and Liability Act
                  ("CERCLA"), as amended by the Superfund Amendments and
                  Re-Authorization Act of 1986 ("SARA"), (b) the Resource
                  Conservation and Recovery Act ("RCRA"), (c) the Toxic
                  Substance Control Act ("TSCA"), (d) any amendments to or
                  regulations promulgated by any agency under any of the above
                  statutes, and (e) any other state or federal statute or
                  regulation for the control of hazardous or toxic substances.

                             V. COVENANTS OF LENDER

         A. Subject to the terms of this agreement and of the notes and security
instruments described herein, Lender covenants and agrees as follows:

         1.       That Lender shall be bound to make the advances herein on the
                  following conditions up to the amount specified as the
                  original principal sum of each note, subject to the following:

                  a.       Compliance with all terms and conditions of Loan
                           Commitment and Loan Agreement, with respect to said
                           loan.

                  b.       Payment of all fees and expenses contemplated by such
                           loan commitment, including remittance of a Twenty-six
                           Thousand Dollars ($26,000.00) commitment fee to
                           Lender.

                  c.       Execution of all documents required by Lender.

                  d.       Furnishing of financial statements evidencing sound
                           and satisfactory financial condition of each
                           Borrower.

         2.       Lender shall from time to time advance to Borrower portions of
                  the principal amount of the note described in Paragraph II.A.1
                  hereof upon delivery of an appraisal in form and content
                  satisfactory to Lender, establishing valuation of the
                  geophysical seismic equipment to be purchased with proceeds of
                  this loan in the amount of $22,000,000.00 or more, along with
                  purchase orders and other documentation from Sercel, Ltd.,
                  GeoSpace Corp, and Mark Products which evidences Borrower's
                  purchase and provides a specific description of such
                  collateral. The aggregate unpaid balance of all such advances
                  at any one time outstanding



                                       8
<PAGE>   9

                  shall not exceed $8,500,000.00. The provisions of said
                  security agreement are hereby incorporated herewith by this
                  reference.

                            VI. DEFAULT AND REMEDIES

         A. The occurrence of any one of the following events of default shall,
at the option of Lender and without notice or demand, except as described
hereunder, make all or such parts of the sums owing from Borrower to Lender
hereunder, as Lender in its discretion shall determine, immediately due and
payable:

         1.       Failure of Borrower to pay within 10 days after demand any sum
                  past due hereunder;

         2.       Failure of Borrower to pay within 5 days after demand any debt
                  hereunder, the maturity of which has been accelerated;

         3.       The breach of any warranties of Borrower herein contained in
                  any material respect;

         4.       Insolvency;

         5.       The making by Borrower of an assignment for the benefit of
                  creditors;

         6.       The levy of any attachment, execution, or other like process
                  against any of Borrower's property;

         7.       The voluntary suspension of business by Borrower;

         8.       The entry of any decree or order of a court having
                  jurisdiction in the premises appointing a receiver of all or
                  any substantial part of Borrower's property;

         9.       The breach by Borrower of any of the provisions of this
                  Agreement, or of any of the promissory notes or security
                  instruments described herein, if the same is not remedied
                  within 10 days after written notice from Lender.

          B. That no waiver of any default on the part of Borrower shall be
considered waiver of any other or subsequent default and no forbearance, delay,
or omission in exercising or enforcing the rights and powers of Lender shall be
construed as a waiver of such rights and powers, and likewise no exercise or
partial exercise of any rights or powers hereunder by Lender shall be held to
preclude further exercise of such rights and powers, and every such right and
power may be exercised from time to time.


         C. The rights, powers and remedies given to Lender hereunder shall be
in addition to all rights, powers and remedies given to Lender by law against
Borrower and any other person.

         D. No action shall be commenced by Borrower for any claim against
Lender under





                                       9
<PAGE>   10

the terms of this Loan Agreement or arising from the subject loan relationship
unless a notice in writing specifically setting forth the claim of Borrower
shall have been given to Lender within six (6) months after the occurrence of
the event which Borrower alleges gave rise to such claim. Failure to give such
notice shall constitute a waiver of any such claim.

                             VII. GENERAL PROVISIONS

         A. Any notice or demand required or permitted to be given hereunder by
Lender may be given in writing by depositing such notice in the United States
Mail, postage prepaid, addressed to Borrower at 44,000 Highway 75S, Huntsville,
Texas 77340, Attn: Billy F. Mitcham, Jr., or such other place as Borrower shall
have designated in writing. Notice shall be deemed to have been given 48 hours
after being so deposited in the United States Mail.

         B. This agreement shall be construed under and in accordance with the
laws of the State of Texas, and all obligations of the parties created hereunder
are performable in Victoria County, Texas. In any suit arising under this
agreement or relating in any way to the obligations of the parties hereunder,
venue shall be fixed in Victoria County, Texas. Notwithstanding the provisions
of this paragraph, Chapter Fifteen of the Texas Credit Code, Art. 5069-15.01 et
seq., shall not apply to the loan governed by this agreement or any part
thereof.

         C. In any case, if any one or more of the provisions contained in this
Agreement shall for any reason be held to be invalid, illegal, or unenforceable
in any respect, such invalidity, illegality, or unenforceability shall not
affect any other provision hereof and this Agreement shall be construed as if
such invalid, illegal, or unenforceable provision had never been contained
herein.

         D. This Agreement constitutes the sole and only agreement of the
parties hereto and supersedes any prior understandings or written or oral
agreements between the parties respecting the within subject matter.

         E. This agreement shall apply to and govern the herein described
extensions of credit and all renewals, extensions and rearrangements of such
indebtedness of Borrower and Guarantors to Lender.





                                       10
<PAGE>   11


         EXECUTED on the date first hereinabove mentioned in New Waverly, Walker
County, Texas.


                                               MITCHAM INDUSTRIES, INC.
ATTEST:

                                               By  /s/ BILLY F. MITCHAM, JR.
                                                  ------------------------------
/s/ KIM WILLIAMS                                  Billy F. Mitcham, Jr.
- --------------------------                        Its CEO

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

                                                                 BORROWER


                                               FIRST VICTORIA NATIONAL BANK

ATTEST:

                                               By  /s/ JOHN D. HOWARD
                                                  ------------------------------
/s/ KIM WILLIAMS                                  John D. Howard
- --------------------------                        Its Vice President

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

                                                                 LENDER

THE STATE OF TEXAS

COUNTY OF WALKER


         This instrument was acknowledged before me on November 10, 2000, by
Billy F. Mitcham, Jr., as President of Mitcham Industries, Inc., on behalf of
said corporation.


[STATE OF TEXAS NOTARY SEAL]                 /s/ KIM WILLIAMS
                                             -----------------------------------
                                             Notary Public, State of Texas

THE STATE OF TEXAS

COUNTY OF WALKER


         This instrument was acknowledged before me on November 10, 2000, by
John D. Howard, as Vice President of First Victoria National Bank, on behalf of
said corporation.


[STATE OF TEXAS NOTARY SEAL]                 /s/ KIM WILLIAMS
                                             -----------------------------------
                                             Notary Public, State of Texas
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>3
<FILENAME>h82656ex10-2.txt
<DESCRIPTION>COMMERCIAL SECURITY AGREEMENT
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 10.2



                         COMMERCIAL SECURITY AGREEMENT

<TABLE>
<CAPTION>
  PRINCIPAL       LOAN DATE      MATURITY       LOAN NO.     CALL     COLLATERAL     ACCOUNT        OFFICE     INITIALS
<S>              <C>            <C>           <C>            <C>      <C>            <C>            <C>       <C>
$8,500,000.00    11-09-2000     11-09-2004     0038862700     4A          30           NEW            171

REFERENCES IN THE SHADED AREA ARE FOR LENDER'S USE ONLY AND DO NOT LIMIT THE
APPLICABILITY OF THIS DOCUMENT TO ANY PARTICULAR LOAN OR ITEM.
</TABLE>

<TABLE>
<S>                                                               <C>
Borrower:      MITCHAM INDUSTRIES INC. (TIN: 76-0210849)          Lender:   First Victoria National Bank
               44000 HWY 75 S                                               Main Bank
               HUNTSVILLE, TX 77340                                         P O Box 1338
                                                                            101 South Main
                                                                            Victoria, TX 77902-1338
</TABLE>

THIS COMMERCIAL SECURITY AGREEMENT is entered into between MITCHAM INDUSTRIES
INC. (referred to below as "Grantor"); and First Victoria National Bank
(referred to below as "Lender"). For valuable consideration, Grantor grants to
Lender a security interest in the Collateral to secure the Indebtedness and
agrees that Lender shall have the rights stated in this Agreement with respect
to the Collateral, in addition to all other rights which Lender may have by law.

DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of
America.

     AGREEMENT. The word "Agreement" means this Commercial Security Agreement,
     as this Commercial Security Agreement may be amended or modified from time
     to time, together with all exhibits and schedules attached to this
     Commercial Security Agreement from time to time.

     COLLATERAL. The word "Collateral" means the following described property of
     Grantor, whether now owned or hereafter acquired, whether now existing or
     hereafter arising, and wherever located:

          PURCHASE MONEY SECURITY INTEREST ON ALL EQUIPMENT AND INVENTORY
          PURCHASED FROM SERCEL, LTD., GEOSPACE CORP. AND MARK PRODUCTS; AND
          ASSIGNMENT OF ALL LEASES AND REVENUES GENERATED FROM SAID EQUIPMENT
          AND INVENTORY.

     In addition, the word "Collateral" includes all the following, whether now
     owned or hereafter acquired, whether now existing or hereafter arising, and
     wherever located:

          (a) All other accessions, accessories, tools, parts, supplies,
          increases, and additions to and all replacements of and substitutions
          for any property described above.

          (b) All products and produce of any of the property described in this
          Collateral section.

          (c) All accounts, general intangibles, Instruments, rents, monies,
          payments, and all other rights, arising out of a sale, lease, or other
          disposition of any of the property described in this Collateral
          section.

          (d) All proceeds (including insurance proceeds) from the sale,
          destruction, loss, or other disposition of any of the property
          described in this Collateral section.

          (e) All records and data relating to any of the property described in
          this Collateral section, whether in the form of a writing, photograph,
          microfilm, microfiche, or electronic media, together with all of
          Grantors right, title, and interest in and to all computer software
          required to utilize, create, maintain, and process any such records or
          data on electronic media.

     EVENT OF DEFAULT. The words "Event of Default" mean and include without
     limitation any of the Events of Default set forth below in the section
     titled "Events of Default".

     GRANTOR. The word "Grantor" means MITCHAM INDUSTRIES INC., its successors
     and assigns

     GUARANTOR. The word "Guarantor" means and includes without limitation each
     and all of the guarantors, sureties, and accommodation parties in
     connection with the Indebtedness.

     INDEBTEDNESS. The word "Indebtedness" means the indebtedness evidenced by
     the Note, including all principal and earned interest, together with all
     other Indebtedness end costs and expenses for which Grantor is responsible
     under this Agreement or under any of the Related Documents. In addition;
     the word "indebtedness" includes all other obligations, debts and
     liabilities, plus interest thereon, of Grantor, or any one or more of them,
     to Lender, as well as all claims by Lender against Grantor, or any one or
     more of them, whether existing now or later, whether they are voluntary or
     involuntary, due or not due, direct or indirect, absolute or contingent
     liquidated or unliquidated; whether Grantor may be liable individually or
     jointly with others; whether Grantor may be obligated as guarantor, surety,
     accommodation party or otherwise.

     LENDER. The word "Lender" means First Victoria National Bank, its
     successors and assigns.

     NOTE. The word "Note" means the note or credit agreement dated November 9,
     2000, in the principal amount of $8,500,000.00 from MITCHAM INDUSTRIES INC.
     to Lender, together with its renewals of, extensions of, modifications of,
     refinancing of, consolidations of and substitutions for the note or credit
     agreement.

     RELATED DOCUMENTS. The words "Related Documents" mean and include without
     limitation all promissory notes, credit agreements, loan agreements,
     environmental agreements, guaranties, security agreements, mortgages, deeds
     of trust, and all other instruments, agreements and documents, whether now
     or hereafter existing, executed in connection with the indebtedness.

     OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to lender as
     follows:

     ORGANIZATION. Grantor is a corporation which is duly organized, validly
     existing, and in good standing under the laws of the State of Texas.

     AUTHORIZATION. The execution, delivery, and performance of this Agreement
     by Grantor have been duly authorized by all necessary action by Grantor and
     do not conflict with, result in a violation of, or constitute a default
     under (a) any provision of its articles of incorporation or organization,
     or bylaws, or any agreement or other instrument binding upon Grantor or (b)
     any law, governmental regulation, court decree, or order applicable to
     Grantor.

     PERFECTION OF SECURITY INTEREST. Grantor agrees to execute such financing
     statements and to take whatever other actions are requested by Lender to
     perfect and continue Lenders security interest in the Collateral. Upon
     request of Lender, Grantor will deliver to Lender any and all of the
     documents evidencing or constituting the Collateral, and Grantor will note
     Lenders interest upon any and all chattel paper if not delivered to Lender
     for possession by Lender. Grantor hereby appoints Lender as its
     irrevocable attorney-in-fact for the purpose of executing any documents
     necessary to perfect or to continue the security interest granted in this
     Agreement. Lender may at any time, and without further authorization from
     Grantor, file a carbon, photographic or other reproduction of any financing
     statement or of this Agreement for use as a financing statement. Grantor
     will reimburse Lender for all expenses for the perfection and the
     continuation of the perfection of Lender's security interest in the
     Collateral. Grantor promptly will notify Lender before any change in
     Grantor's name including any change to the assumed business names of
     Grantor. This is a continuing Security Agreement and will continue in
     effect even though all or any part of the indebtedness is paid in full and
     even though for a period of time Grantor may not be indebted to Lender.

     NO VIOLATION. The execution and delivery of this Agreement will not violate
     any law or agreement governing Grantor or to which Grantor is a party, and
     its certificate or articles of incorporation and bylaws do not prohibit any
     term or condition of this Agreement.

     ENFORCEABILITY OF COLLATERAL. To the extent the Collateral consists of
     accounts, chattel paper, or general intangibles, the Collateral is
     enforceable in accordance with its terms, is genuine, and complies with
     applicable laws concerning torte, content and manner of preparation and
     execution, and all persons appearing to be obligated on the Collateral have
     authority and capacity to contract and are in fact obligated as they appear
     to be on the Collateral.

     LOCATION OF THE COLLATERAL. Grantor, upon request of Lender, will deliver
     to Lender in forth satisfactory to Lender a schedule of real properties and
     Collateral locations relating to Grantor's operations, including without
     limitation the following: (a) all real property owned or being purchased by
     Grantor, (b) all real property being rented or leased by Grantor, (c) all
     storage facilities owned, rented, leased, or being used by Grantor, and (d)
     all other properties where Collateral is or may be located. Except in the
     ordinary course of its business, Grantor shall not remove the Collateral
     from its existing locations without the prior written consent of Lender.

     REMOVAL OF COLLATERAL. Grantor shall keep the Collateral (or to the extent
     the Collateral consists of intangible property such as accounts, the
     records concerning the collateral) at Grantor's address shown above, or all
     such other locations as are acceptable to Lender. Except in the


<PAGE>   2

11-09-2000                COMMERCIAL SECURITY AGREEMENT                  Page 2
Loan No 0038862700

     records concerning the Collateral) at Grantor's address shown above, or at
     such other locations as are acceptable to Lender. Except in the ordinary
     course of its business, including the sales of inventory, Grantor shall not
     remove the Collateral from its existing locations without the prior written
     consent of Lender. To the extent that the Collateral consists of vehicles,
     or other titled property, Grantor shall not take or permit any action which
     would require application for certificates of title for the vehicles
     outside the State of Texas, without the prior written consent of Lender.

     TRANSACTIONS INVOLVING COLLATERAL. Except for inventory sold or accounts
     collected in the ordinary course of Grantor's business, Grantor shall not
     sell, offer to sell, or otherwise transfer or dispose of the Collateral.
     While Grantor is not in default under this Agreement, Grantor may sell
     inventory, but only in the ordinary course of its business and only to
     buyers who qualify as a buyer in the ordinary course of business. A sale in
     the ordinary course of Grantor's business does not include a transfer in
     partial or total satisfaction of a debt or any bulk sale. Grantor shall not
     pledge, mortgage, encumber or otherwise permit the Collateral to be subject
     to any lien, security interest, encumbrance, or charge, other than the
     security interest provided for in this Agreement, without the prior written
     consent of Lender. This includes security interests even if junior in right
     to the security interests granted under this Agreement. Unless waived by
     Lender, all proceeds from any disposition of the Collateral (for whatever
     reason) shall be held in trust for Lender and shall not be commingled with
     any other funds; provided however, this requirement shall not constitute
     consent by Lender to any sale or other disposition. Upon receipt, Grantor
     shall immediately deliver any such proceeds to Lender.

     TITLE. Grantor represents and warrants to Lender that it holds good and
     marketable title to the Collateral, free and clear of all liens and
     encumbrances except for the lien of this Agreement. No financing statement
     covering any of the Collateral is on file in any public office other than
     those which reflect the security interest created by this Agreement or to
     which Lender has specifically consented. Grantor shall defend Lender's
     rights in the Collateral against the claims and demands of all other
     persons.

     COLLATERAL SCHEDULES AND LOCATIONS. Insofar as the Collateral consists of
     inventory, Grantor shall deliver to Lender, as often as Lender shall
     require, such lists, descriptions, and designations of such Collateral as
     Lender may require to identify the nature, extent, and location of such
     Collateral. Such information shall be submitted for Grantor and each of its
     subsidiaries or related companies.

     MAINTENANCE AND INSPECTION OF COLLATERAL. Grantor shall maintain all
     tangible Collateral in good condition and repair. Grantor will not commit
     or permit damage to or destruction of the Collateral or any part of the
     Collateral. Lender and its designated representatives and agents shall have
     the right at all reasonable times to examine, inspect, and audit the
     Collateral wherever located. Grantor shall immediately notify Lender of all
     cases involving the return, rejection, repossession, loss or damage of or
     to any Collateral; of any request for credit or adjustment or of any other
     dispute arising with respect to the Collateral; and generally of all
     happenings and events affecting the Collateral or the value or the amount
     of the Collateral.

     TAXES, ASSESSMENTS AND LIENS. Grantor will pay when due all taxes,
     assessments and liens upon the Collateral, its use or operation, upon this
     Agreement, upon any promissory note or notes evidencing the Indebtedness,
     or upon any of the other Related Documents. Grantor may withhold any such
     payment or may elect to contest any lien if Grantor is in good faith
     conducting an appropriate proceeding to contest the obligation to pay and
     so long as Lender's Interest in the Collateral is not jeopardized in
     Lender's sole opinion. If the Collateral is subjected to a lien which is
     not discharged within fifteen (15) days, Grantor shall deposit with Lender
     cash, a sufficient corporate surety bond or other security satisfactory to
     Lender in an amount adequate to provide for the discharge of the lien plus
     any interest, costs, attorneys' fees or other charges that could accrue as
     a result of foreclosure or sale of the Collateral. In any contest Grantor
     shall defend itself and Lender and shall satisfy any final adverse judgment
     before enforcement against the Collateral. Grantor shall name Lender as an
     additional obligee under any surety bond furnished in the contest
     proceedings.

     COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. Grantor shall comply promptly
     with all laws, ordinances, rules and regulations of all governmental
     authorities, now or hereafter in effect, applicable to the ownership,
     production, disposition, or use of the Collateral. Grantor may contest in
     good faith any such law, ordinance or regulation and withhold compliance
     during any proceeding, including appropriate appeals, so long as Lender's
     Interest in the Collateral, in Lender's opinion, is not jeopardized.

     HAZARDOUS SUBSTANCES. Grantor represents and warrants that the Collateral
     never has been, and never will be so long as this Agreement remains a lien
     on the Collateral, used for the generation, manufacture, storage,
     transportation, treatment, disposal, release or threatened release of any
     hazardous waste or substance, as those terms are defined in the
     Comprehensive Environmental Response, Compensation, and Liability Act of
     1980, as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund
     Amendments and Reauthorization Act of 1986, Pub. L No. 99-499 ("SARA"), the
     Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq.,
     the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et
     seq., or other applicable state or Federal laws, rules, or regulations
     adopted pursuant to any of the foregoing. The terms "hazardous waste" and
     "hazardous substance" shall also include, without limitation, petroleum and
     petroleum by-products or any fraction thereof and asbestos. The
     representations and warranties contained herein are based on Grantor's due
     diligence in investigating the Collateral for hazardous wastes and
     substances. Grantor hereby (a) releases and waives any future claims
     against Lender for indemnity or contribution in the event Grantor becomes
     liable for cleanup or other costs under any such laws, and (b) agrees to
     indemnify and hold harmless Lender against any and all claims and losses
     resulting from a breach of this provision of this Agreement. This
     obligation to indemnify shall survive the payment of the Indebtedness and
     the satisfaction of this Agreement.

     MAINTENANCE OF CASUALTY INSURANCE. Grantor shall procure and maintain all
     risks insurance, including without limitation fire, theft and liability
     coverage together with such other insurance as Lender may require with
     respect to the Collateral, in form, amounts, coverages and basis reasonably
     acceptable to Lender. GRANTOR MAY FURNISH THE REQUIRED INSURANCE WHETHER
     THROUGH EXISTING POLICIES OWNED OR CONTROLLED BY GRANTOR OR THROUGH
     EQUIVALENT INSURANCE FROM ANY INSURANCE COMPANY AUTHORIZED TO TRANSACT
     BUSINESS IN THE STATE OF TEXAS. If Grantor fails to provide any required
     insurance or fails to continue such insurance in force, Lender may, but
     shall not be required to, do so at Grantor's expense, and the cost of the
     insurance will be added to the Indebtedness. If any such insurance is
     procured by Lender at a rate or charge not fixed or approved by the State
     Board of Insurance, Grantor will be so notified, and Grantor will have the
     option for five (5) days of furnishing equivalent insurance through any
     insurer authorized to transact business in Texas. Grantor, upon request of
     Lender, will deliver to Lender from time to time the policies or
     certificates of insurance in form satisfactory to Lender, including
     stipulations that coverages will not be cancelled or diminished without at
     least ten (10) days' prior written notice to Lender and not including any
     disclaimer of the insurer's liability for failure to give such a notice.
     Each insurance policy also shall include an endorsement - providing that
     coverage in favor of Lender will not be impaired in any way by any act,
     omission or default of Grantor or any other person. In connection with all
     policies covering assets in which Lender holds or is offered a security
     interest, Grantor will provide Lender with such loss payable or other
     endorsements as Lender may require. If Grantor at any time fails to obtain
     or maintain any insurance as required under this Agreement, Lender may (but
     shall not be obligated to) obtain such insurance as Lender deems
     appropriate, including if it so chooses "single interest insurance," which
     will cover only Lender's interest in the Collateral.

     APPLICATION OF INSURANCE PROCEEDS. Grantor shall promptly notify Lender of
     any loss or damage to the Collateral. Lender may make proof of loss if
     Grantor fails to do so within fifteen (15) days of the casualty. All
     proceeds of any insurance on the Collateral, including accrued proceeds
     thereon, shall be held by Lender as part of the Collateral. If Lender
     consents to repair or replacement of the damaged or destroyed Collateral,
     Lender shall, upon satisfactory proof of expenditure, pay or reimburse
     Grantor from the proceeds for the reasonable cost of repair or restoration.
     If Lender does not consent to repair or replacement of the Collateral,
     Lender shall retain a sufficient amount of the proceeds to pay all of the
     Indebtedness, and shall pay the balance to Grantor. Any proceeds which have
     not been disbursed within six (6) months after their receipt and which
     Grantor has not committed to the repair or restoration of the Collateral
     shall be used to prepay the Indebtedness.

     INSURANCE RESERVES. Lender may require Grantor to maintain with Lender
     reserves for payment of insurance premiums, which reserves shall be created
     by monthly payments from Grantor of a sum estimated by Lender to be
     sufficient to produce, at least fifteen (15) days before the premium due
     date, amounts at least equal to the insurance premiums to be paid. If
     fifteen (15) days before payment is due, the reserve funds are
     insufficient, Grantor shall upon demand pay any deficiency to Lender. The
     reserve funds shall be held by Lender as a general deposit and shall
     constitute a non-interest-bearing account which Lender may satisfy by
     payment of the insurance premiums required to be paid by Grantor as they
     become due. Lender does not hold the reserve funds in trust for Grantor,
     and Lender is not the agent of Grantor for payment of the insurance
     premiums required to be paid by Grantor. The responsibility for the payment
     of premiums shall remain Grantor's sole responsibility.

     INSURANCE REPORTS. Grantor, upon request of Lender, shall furnish to Lender
     reports on each existing policy of insurance showing such information as
     Lender may reasonably request including the following: (a) the name of the
     insurer; (b) the risks insured; (c) the amount of the policy; (d) the
     property insured; (e) the then current value on the basis of which
     insurance has been obtained and the manner of determining that value; and
     (f) the expiration date of the policy. In addition, Grantor shall upon
     request by Lender (however not more often than annually) have an
     independent appraiser satisfactory to Lender determine, as applicable, the
     cash value or replacement cost of the Collateral.

GRANTOR'S RIGHT TO POSSESSION. Until default, Grantor may have possession of the
tangible personal property and beneficial use of all the Collateral and may use
it in any lawful manner not inconsistent with this Agreement or the Related
Documents, provided that Grantor's right to possession and beneficial use shall
not apply to any Collateral where possession of the Collateral by Lender is
required by law to perfect Lender's security interest in such Collateral. If
Lender at any time has possession of any Collateral, whether before or after an
Event of Default, Lender shall be deemed to have exercised reasonable care in
the custody and preservation of the Collateral if Lender takes such action for
that purpose as Grantor shall request or as Lender, in Lender's sole discretion,
shall deem appropriate under the circumstances, but failure to honor any request
by Grantor shall not of itself be deemed to be a failure to exercise reasonable
care. Lender shall not be required to take any steps necessary to preserve any
rights in the Collateral against prior parties, nor to protect, preserve or
maintain any security interest given to secure the Indebtedness.

EXPENDITURES BY 1 LENDER If not discharged [ILLEGIBLE]



<PAGE>   3
11-OS-2000                COMMERCIAL SECURITY AGREEMENT                   Page 3
LOAN NO 00388132700                (CONTINUED)

required to be discharged or paid by Grantor under this Agreement, including
without limitation all taxes, liens, security interests, encumbrances, and other
claims, at any time levied or placed on the Collateral. Lender also may (but
shall not be obligated to) pay all costs for insuring, maintaining and
preserving the Collateral. All such expenditures incurred or paid by Lender for
such purposes will then bear interest at the Note rate from the date incurred or
paid by Lender to the date of repayment by Grantor. All such expenses shall
become a part of the Indebtedness and, at Lender's option, will (a) be payable
on demand, (b) be added to the balance of the Note and be apportioned among and
be payable with any Installment payments to become due during either (i) the
term of any applicable Insurance policy or (ii) the remaining term of the Note,
or (c) be treated as a balloon payment which will be due and payable at the
Note's maturity. This Agreement also will secure payment of these amounts. Such
right shall be in addition to all other rights and remedies to which Lender may
be entitled upon the occurrence of an Event of Default.

EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:

     DEFAULT ON INDEBTEDNESS. Failure of Grantor to make any payment when due on
     the Indebtedness.

     OTHER DEFAULTS. Failure of Grantor to comply with or to perform any other
     term, obligation, covenant or condition contained in this Agreement or in
     any of the Related Documents or in any other agreement between Lender and
     Grantor.

     FALSE STATEMENTS. Any warranty, representation or statement made or
     furnished to Lender by or on behalf of Grantor under this Agreement, the
     Note or the Related Documents is false or misleading in any material
     respect, either now or at the time made or furnished.

     DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related Documents
     ceases to be in full force and effect (including failure of any collateral
     documents to create a valid and perfected security interest or lien) at any
     time and for any reason.

     INSOLVENCY. The dissolution or termination of Grantor's existence as a
     going business, the Insolvency of Grantor, the appointment of a receiver
     for any part of Grantor's property, any assignment for the benefit of
     creditors, any type of creditor workout, or the commencement of any
     proceeding under any bankruptcy or Insolvency laws by or against Grantor.

     CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
     forfeiture proceedings, whether by judicial proceeding, self-help,
     repossession or any other method, by any creditor of Grantor or by any
     governmental agency against the Collateral or any other collateral securing
     the Indebtedness. This includes a garnishment of any of Grantor's deposit
     accounts with Lender. However, this Event of Default shall not apply if
     there is a good faith dispute by Grantor as to the validity or
     reasonableness of the claim which is the basis of the creditor or
     forfeiture proceeding and if Grantor gives Lender written notice of the
     creditor or forfeiture proceeding and deposits with Lender monies or a
     surety bond for the creditor or forfeiture proceeding, in an amount
     determined by Lender, in its sole discretion, as being an adequate reserve
     or bond for the dispute.

     EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with respect
     to any Guarantor of any of the Indebtedness or such Guarantor dies or
     becomes incompetent Lender, at its option, may, but shall not be required
     to, permit the Guarantor's estate to assume unconditionally the obligations
     arising under the guaranty in a manner satisfactory to Lender, and, in
     doing so, cure the Event of Default.

     ADVERSE CHANGE. A material adverse change occurs in Grantor's financial
     condition.

     RIGHT TO CURE. If any default, other than a Default on Indebtedness, is
     curable and if Grantor has not been given a prior notice of a breach of the
     same provision of this Agreement, it may be cured (and no Event of Default
     will have occurred) if Grantor, after Lender sends written notice demanding
     cure of such default, (a) cures the default within fifteen (15) days; or
     (b), if the cure requires more than fifteen (15) days, immediately
     initiates steps which Lender deems in Lender's sole discretion to be
     sufficient to cure the default and thereafter continues and completes all
     reasonable and necessary steps sufficient to produce compliance as soon as
     reasonably practical.

RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a secured
party under the Texas Uniform Commercial Code. In addition and without
limitation, Lender may exercise any one or more of the following rights and
remedies:

     ACCELERATE INDEBTEDNESS. Lender may declare the entire Indebtedness
     immediately due and payable, without notice.

     ASSEMBLE COLLATERAL. Lender may require Grantor to deliver to Lender all or
     any portion of the Collateral and any and all certificates of title and
     other documents relating to the Collateral. Lender may require Grantor to
     assemble the Collateral and make it available to Lender at a place to be
     designated by Lender. Lender also shall have full power to enter, provided
     Lender does so without a breach of the peace or a trespass, upon the
     property of Grantor to take possession of and remove the Collateral. If the
     Collateral contains other goods not covered by this Agreement at the time
     of repossession, Grantor agrees Lender may take such other goods, provided
     that Lender makes reasonable efforts to return them to Grantor AFTER
     REPOSSESSION.

     SELL THE COLLATERAL. Lender shall have full power to sell, lease, transfer,
     or otherwise deal with the Collateral or proceeds thereof in its own name
     or that of Grantor. Lender may sell the Collateral at public auction or
     private sale. Unless the Collateral threatens to decline speedily in value
     or is of a type customarily sold on a recognized market, Lender will give
     Grantor reasonable notice of the time after which any private sale or any
     other intended disposition of the Collateral is to be made. The
     requirements of reasonable notice shall be met if such notice is given at
     least ten (10) days before the time of the sale or disposition. All
     expenses relating to the disposition of the Collateral, including without
     limitation the expenses of retaking, holding, insuring, preparing for sale
     and selling the Collateral, shall become a part of the Indebtedness secured
     by this Agreement and shall be payable on demand, with Interest at the Note
     rate from date of expenditure until repaid.

     APPOINT RECEIVER. To the extent permitted by applicable law, Lender shall
     have the following rights and remedies regarding the appointment of a
     receiver: (a) Lender may have a receiver appointed as a matter of right,
     (b) the receiver may be an employee of Lender and may serve without bond,
     and (c) all fees of the receiver and his or her attorney shall become part
     of the Indebtedness secured by this Agreement and shall be payable on
     demand, with Interest at the Note rate from date of expenditure until
     repaid.

     COILED REVENUES, APPLY ACCOUNTS. Lender, either itself or through a
     receiver, may coiled the payments, rents, Income, and revenues from the
     Collateral. Lender may at any time in its discretion transfer any
     Collateral into its own name or that of its nominee and receive the
     payments, rents, income, and revenues therefrom and hold the same as
     security for the Indebtedness or apply it to payment of the Indebtedness in
     such order of preference as Lender may determine. Insofar as the Collateral
     consists of accounts, general intangibles, insurance policies, instruments,
     chattel paper, choices in action, or similar property, Lender may demand,
     collect, receipt for, settle, compromise, adjust, sue for, foreclose, or
     realize on the Collateral as Lender may determine, whether or not
     Indebtedness or Collateral is then due. For these purposes, Lender may, on
     behalf of and in the name of Grantor, receive, open and dispose of mail
     addressed to Grantor; change any address to which mail and payments are to
     be sent; and endorse notes, checks, drafts, money orders, documents of
     title, instruments and items pertaining to payment, shipment, or storage of
     any Collateral. To facilitate collection, Lender may notify account debtors
     and obligors on any Collateral to make payments directly to Lender.

     OBTAIN DEFICIENCY. If Lender chooses to sell any or all of the Collateral,
     Lender may obtain a judgment against Grantor for any deficiency remaining
     on the Indebtedness due to Lender after application of all amounts received
     from the exercise of the rights provided In this Agreement. Grantor shall
     be liable for a deficiency even if the transaction described in this
     subsection is a sale of accounts or chattel paper.

     OTHER RIGHTS AND REMEDIES. Lender shall have all the rights and remedies of
     a secured creditor under the provisions of the Uniform Commercial Code, as
     may be amended from time to time. In addition, Lender shall have and may
     exercise any or all other rights and remedies it may have available at law,
     in equity, or otherwise.

     CUMULATIVE REMEDIES. All of Lender's rights and remedies, whether evidenced
     by this Agreement or the Related Documents or by any other writing, shall
     be cumulative and may be exercised singularly or concurrently. Election by
     Lender to pursue any remedy shall not exclude pursuit of any other remedy,
     and an election to make expenditures or to take action to perform an
     obligation of Grantor under this Agreement, after Grantor's failure to
     perform, shall not affect Lender's right to declare a default and to
     exercise the remedies.

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:

     AMENDMENTS. This Agreement, together with any Related Documents,
     constitutes the entire understanding and agreement of the parties as to the
     matters set forth in this Agreement. No alteration of or amendment to this
     Agreement shall be effective unless given in writing and signed by the
     party or parties sought to be charged or bound by the alteration or
     amendment.

     APPLICABLE LAW. This Agreement has been delivered to Lender and accepted by
     Lender in the State of Texas. If there is a lawsuit, Grantor agrees upon
     Lender's request to submit to the jurisdiction of the courts of the State
     of Texas. This Agreement shall be governed by and construed in accordance
     with the laws of the State of Texas and applicable Federal laws.

     ATTORNEYS' FEES AND OTHER COSTS. Lender may hire an attorney to help
     collect the Note if Grantor does not pay, and Grantor will pay Lender's
     reasonable attorneys' fees. Grantor also will pay Lender all other amounts
     actually incurred by Lender as court costs, lawful fees for filing,
     recording, or releasing to any public office any instrument securing the
     Note; the reasonable cost actually expended for repossessing, storing,
     preparing for sale, and selling any security; and fees for noting a lien on
     or transferring a certificate of title to any motor vehicle offered as
     security for the Note, or premiums or identifiable charges received in
     connection with the sale of authorized Insurance.
<PAGE>   4

11-09-2000                    COMMERCIAL SECURITY AGREEMENT              Page 4
Loan No 0038862700                     (Continued)

     CAPTION HEADINGS. Caption headings in this Agreement are for convenience
     purposes only and are not to be used to interpret or define the provisions
     of this Agreement.

     MULTIPLE PARTIES; CORPORATE AUTHORITY. All obligations of Grantor under
     this Agreement shall be joint and several, and all references to Grantor
     shall mean each and every Grantor. This means that each of the persons
     signing below is responsible for all obligations in this Agreement.

     NOTICES. All notices required to be given under this Agreement shall be
     given in writing, may be sent by telefacsimile (unless otherwise required
     by law), and shall be effective when actually delivered or when deposited
     with a nationally recognized overnight courier or deposited in the United
     States mail, first class, postage prepaid, addressed to the party to whom
     the notice is to be given at the address shown above. Any party may change
     its address for notices under this Agreement by giving formal written
     notice to the other parties, specifying that the purpose of the notice is
     to change the party's address. To the extent permitted by applicable law,
     if there is more than one Grantor, notice to any Grantor will constitute
     notice to all Grantors. For notice purposes, Grantor will keep Lender
     informed at all times of Grantor's current address(es).

     POWER OF ATTORNEY. Grantor hereby appoints Lender as its true and lawful
     attorney-in-fact, irrevocably, with full power of substitution to do the
     following: (a) to demand, collect, receive, receipt for, sue and recover
     all sums of money or other property which may now or hereafter become due,
     owing or payable from the Collateral; (b) to execute, sign and endorse any
     and all claims, instruments, receipts, checks, drafts or warrants issued in
     payment for the Collateral; (c) to settle or compromise any and all claims
     arising under the Collateral, and, in the place and stead of Grantor, to
     execute and deliver its release and settlement for the claim; and (d) to
     file any claim or claims or to take any action or institute or take part in
     any proceedings, either in its own name or in the name of Grantor, or
     otherwise, which in the discretion of Lender may seem to be necessary or
     advisable. This power is given as security for the Indebtedness, and the
     authority hereby conferred is and shall be irrevocable and shall remain in
     full force and effect until renounced by Lender.

     SEVERABILITY. If a court of competent jurisdiction finds any provision of
     this Agreement to be invalid or unenforceable as to any person or
     circumstance, such finding shall not render that provision invalid or
     unenforceable as to any other persons or circumstances. If feasible, any
     such offending provision shall be deemed to be modified to be within the
     limits of enforceability or validity; however, if the offending provision
     cannot be so modified, it shall be stricken and all other provisions of
     this Agreement in all other respects shall remain valid and enforceable.

     SUCCESSOR INTERESTS. Subject to the limitations set forth above on transfer
     of the Collateral, this Agreement shall be binding upon and inure to the
     benefit of the parties, their successors and assigns.

     WAIVER. Lender shall not be deemed to have waived any rights under this
     Agreement unless such waiver is given in writing and signed by Lender. No
     delay or omission on the part of Lender in exercising any right shall
     operate as a waiver of such right or any other right. A waiver by Lender of
     a provision of this Agreement shall not prejudice or constitute a waiver of
     Lender's right otherwise to demand strict compliance with that provision or
     any other provision of this Agreement. No prior waiver by Lender, nor any
     course of dealing between Lender and Grantor, shall constitute a waiver of
     any of Lender's rights or of any of Grantor's obligations as to any future
     transactions. Whenever the consent of Lender is required under this
     Agreement, the granting of such consent by Lender in any instance shall not
     constitute continuing consent to subsequent instances where such consent is
     required and in all cases such consent may be granted or withheld in the
     sole discretion of Lender.

LOCK BOX, COLLATERAL ACCOUNT. If Lender requests (whether before or after the
occurrence of an event of default), Grantor will direct each of its account
debtors to make payments directly to a special lock box which is controlled by
Lender. Grantor authorizes and directs Lender to deposit into a special
collateral account, to be maintained and established by Lender, all checks,
drafts and cash payments received in said lock box. All deposits in said
collateral account are designated to be proceeds of collateral and shall not
constitute payment of any obligation. However, Lender may apply collected funds
in the collateral account to the payment of the Indebtedness in such order of
application as Lender may determine, or permit Grantor to withdraw all or any
part of the balance on deposit in said collateral account. If a collateral
account is established, Grantor agrees that it will, immediately upon receipt,
deliver to Lender for deposit into said collateral account, all payments
received by it. Until deposited into said collateral account, all payments
received by Grantor shall be held in trust for Lender and shall not be
commingled with any funds or property of Grantor.

GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY
AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. THIS AGREEMENT IS DATED NOVEMBER 9,
2000.

GRANTOR:

BY: /s/ BILLY F MITCHAM, JR
    -----------------------------------
    BILLY F MITCHAM, JR, PRESIDENT
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-11
<SEQUENCE>4
<FILENAME>h82656ex11.txt
<DESCRIPTION>STATEMENT RE COMPUTATION OF LOSS PER SHARE
<TEXT>

<PAGE>   1
                                                                      EXHIBIT 11

                            MITCHAM INDUSTRIES, INC.
                        STATEMENT RE COMPUTATION OF LOSS
                                    PER SHARE
                 (IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                 THREE MONTHS ENDED                  NINE MONTHS ENDED
                                                                     OCTOBER 31,                         OCTOBER 31,
                                                           ------------------------------      ------------------------------
                                                               2000              1999              2000              1999
                                                           ------------      ------------      ------------      ------------
<S>                                                        <C>               <C>               <C>               <C>

COMPUTATION OF BASIC LOSS
  PER COMMON SHARE:

Net loss                                                   $     (1,654)     $     (1,070)     $     (3,397)     $     (4,404)
                                                           ------------      ------------      ------------      ------------

Weighted average number of common
     shares outstanding                                       9,032,000         9,551,000         9,220,000         9,550,000

Loss per common share                                      $      (0.18)     $      (0.11)     $      (0.37)     $      (0.46)
                                                           ============      ============      ============      ============


COMPUTATION OF LOSS PER COMMON SHARE
  ASSUMING DILUTION:

Net loss                                                   $     (1,654)     $     (1,070)     $     (3,397)     $     (4,404)
                                                           ------------      ------------      ------------      ------------

Weighted average number of common shares outstanding          9,032,000         9,551,000         9,220,000         9,550,000


Net effect of dilutive stock options and warrants
   based on the treasury stock method, using
   the average market price                                          --                --                --                --
                                                           ------------      ------------      ------------      ------------

Common shares outstanding assuming dilution                   9,032,000         9,551,000         9,220,000         9,550,000
                                                           ============      ============      ============      ============
Loss per common share assuming dilution                    $      (0.18)     $      (0.11)     $      (0.37)     $      (0.46)
                                                           ============      ============      ============      ============
</TABLE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-27
<SEQUENCE>5
<FILENAME>h82656ex27.txt
<DESCRIPTION>FINANCIAL DATA SCHEDULE
<TEXT>

<TABLE> <S> <C>

<ARTICLE> 5
<MULTIPLIER> 1,000

<S>                             <C>
<PERIOD-TYPE>                   9-MOS
<FISCAL-YEAR-END>                          JAN-31-2001
<PERIOD-START>                             FEB-01-2000
<PERIOD-END>                               OCT-31-2000
<CASH>                                             793
<SECURITIES>                                     7,959
<RECEIVABLES>                                    6,267
<ALLOWANCES>                                     1,185
<INVENTORY>                                      2,656
<CURRENT-ASSETS>                                19,871
<PP&E>                                          76,898
<DEPRECIATION>                                  40,015
<TOTAL-ASSETS>                                  59,681
<CURRENT-LIABILITIES>                            6,465
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                            96
<OTHER-SE>                                      53,120
<TOTAL-LIABILITY-AND-EQUITY>                    59,681
<SALES>                                          3,755
<TOTAL-REVENUES>                                12,058
<CGS>                                            2,659
<TOTAL-COSTS>                                   16,260
<OTHER-EXPENSES>                                13,501
<LOSS-PROVISION>                                   100
<INTEREST-EXPENSE>                                   0
<INCOME-PRETAX>                                (3,724)
<INCOME-TAX>                                     (327)
<INCOME-CONTINUING>                            (3,397)
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                   (3,397)
<EPS-BASIC>                                     (0.37)
<EPS-DILUTED>                                   (0.37)


</TABLE>
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
