GRANT GEOPHYSICAL INC - 10-K Annual Report

Back to GetFilings.com

================================================================================

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

FORM 10-K

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

OR

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

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER: 333-89863*

GRANT GEOPHYSICAL, INC.
(Exact name of registrant as specified in its charter)

DELAWARE 76-0548468
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

16850 PARK ROW, HOUSTON, TEXAS 77084
(Address of principal executive offices) (Zip Code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (281) 398-9503

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None

Indicate by check mark whether the registrant: (1) has filed all reports 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
requirement for the past 90 days. [ ] Yes [ ] No

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

As of March 28, 2002, 14,547,055 shares of the Registrant's Common Stock,
$.001 par value per share, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE: NONE

* The Commission file number refers to a Form S-1 registration statement filed
by the Registrant under the Securities Act of 1933, which became effective
January 12, 2000.

================================================================================

GRANT GEOPHYSICAL, INC.
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2001

TABLE OF CONTENTS

2

PART I

ITEM 1. BUSINESS.

OVERVIEW

Grant Geophysical, Inc., a Delaware corporation (together with its
subsidiaries, "Grant," or the "Company"), is a leading provider of seismic data
acquisition services in land and transition zone environments in the United
States, Latin America and Canada. Grant also markets seismic data acquisition
services in the Middle East and the Far East. The Company has participated in
the seismic data acquisition services business in the United States and Latin
America since the 1940s, the Far East since the 1960s and Canada since the
1970s. The Company's seismic data acquisition services typically are provided on
an exclusive contract basis to domestic and international oil and gas
exploration and production companies and seismic data marketing companies. Grant
also provides seismic data processing services through offices located in
Houston, Texas and Quito, Ecuador.

The Company utilizes sophisticated equipment to perform specialized 3D and
2D seismic surveys. All of the Company's seismic data acquisition crews are
capable of performing surveys in land environments and two are equipped to
perform surveys in transition zone environments. Transition zone environments
are swamps, marshes and shallow water areas that require specialized equipment
and must be surveyed with minimal disruption to the natural environment.

The market for seismic land acquisition, both domestically and in the
international areas where the Company was active, remained significantly
depressed throughout 2001. Additionally, demand for land and transition zone
seismic data acquisition services are primarily determined by oil and gas
industry capital expenditures, budgets and spending patterns. These spending
patterns are affected by individual oil and gas company budgets as well as
industry-wide conditions. Overcapacity in the seismic service industry continues
to suppress pricing and activity levels and has materially adversely affected
the Company's results of operations. The Company's world-wide seismic crew count
ranged from seven to twelve during 2001. As of March 28, 2002, the Company had
eight active crews. As a result of the low levels of crew activity, the Company
continued to sustain significant operating losses in 2001. Management has
implemented a business plan in 2002 with the specific objectives of improving
profitability and generating positive operating cash flow through intensified
sales and marketing, tighter cost controls and reduced overhead expenses. (See
Item 7, Management's Discussion and Analysis of Financial Condition and Results
of Operations--Liquidity and Capital Resources and Note 1 of Notes to
Consolidated Financial Statements).

As of March 28, 2002, the Company was operating one crew in the United
States and operating or mobilizing five crews in Latin America and two crews in
Canada. For the year ended December 31, 2001, the Company's total revenues were
$93.5 million, with approximately 37.3% from the United States, 47.2% from Latin
America, 2.1% from the Far East and 13.4% from Canada. International operations,
excluding Canada, accounted for approximately 49.3% of consolidated revenues and
63.1% of data acquisition revenues for the year ended December 31, 2001.

Grant's principal executive office is located at 16850 Park Row, Houston,
Texas 77084 and its telephone number is 281-398-9503.

3

LAND AND TRANSITION ZONE SEISMIC DATA ACQUISITION

A land or transition zone seismic data acquisition crew typically consists
of a surveying crew that marks out the lines to be recorded and marks the sites
for energy source or geophone placement and equipment location, an explosives or
mechanical vibrating or compressed air unit crew, and a recording crew that lays
out the geophones and field recording boxes, directs shooting operations and
records the seismic energy reflected from subsurface structures. A land seismic
data acquisition crew utilizing an explosives unit is supported by several drill
crews, generally furnished by third parties under short-term contracts. Drill
crews operate in advance of the seismic data acquisition crew and bore shallow
holes for small explosive charges that, when detonated, produce the necessary
seismic impulse. In locations where conditions dictate or where the use of
explosives is precluded due to regulatory, topographical or ecological factors,
a mechanical vibrating unit or compressed air unit is substituted for explosives
as the seismic energy source. The Company also employs specialized crew
mobilization equipment to improve productivity in certain applications,
including helicopters for rugged terrain or in agricultural areas, small
watercraft for transition zone applications, and man-portable equipment in
jungle and other environments where vehicular access is limited. Depending on
the size of the seismic survey, the location and other logistical factors, a
seismic data acquisition crew operated by the Company may involve from as few as
30 to as many as 1,500 employees.

One of the challenges inherent in land seismic data acquisition is operating
in difficult logistical environments without disrupting the sensitive ecosystems
in which surveys are frequently located. The Company currently operates
approximately 10,000 channels of remote digital seismic equipment, which can be
deployed without the use of conventional seismic cables, thereby allowing access
to such environments. Remote digital seismic equipment, which uses radio signals
to transmit data, is typically used in transition zone and other logistically
challenging environments such as highly populated regions with numerous
topographic obstructions and areas where conventional cable-based recording
systems are impractical. The Company has over 20 years of experience operating
in transition zone environments in the Gulf Coast region of the United States,
Latin America, the Far East and Africa.

Once recorded by the seismic data acquisition crew, seismic data is computer
processed to enhance the recorded signal by reducing noise and distortion and
improving resolution to produce a representation of the survey site's subsurface
structures. The Company presently has two data processing centers at which it
performs seismic data processing services. These centers are located in Houston,
Texas and Quito, Ecuador.

The Company markets its seismic data acquisition and processing services
from its Houston and Calgary corporate offices and its regional and
international administrative centers by personnel whose duties include
technical, supervisory or executive responsibilities. The Company primarily
acquires seismic data on a turnkey basis for oil and gas companies which
provides a fixed fee for each project. The Company has also in the past acquired
seismic data on a term basis, which provides for a periodic fee during the term
of the project, and a cost-plus basis, which provides that the costs of a
project, plus a percentage fee, are borne by the customer.

In addition the Company, in the United States and Canada, has in the past
acquired and owns multi-client seismic data surveys, and remaining surveys are
marketed on a non-exclusive basis to oil and gas companies.

The Company conducts a substantial portion of its business in currencies
other than the U.S. or Canadian dollars, particularly various Latin American
currencies, and its operations are subject to fluctuations in foreign currency
exchange rates. Accordingly, the Company's results from performing international
contracts could be significantly affected by fluctuations in exchange rates,
particularly in Brazil and Colombia. The Company's international contracts
requiring payment in currency other than U.S. or Canadian dollars typically are
indexed to inflationary tables and partially used to fund local expenses. The
Company attempts to structure the majority of its international contracts to be
partially billed and paid in U.S. dollars.

4

MARKET AREAS

During the last three years, the Company conducted seismic operations in the
United States, Canada, Latin America and the Far East. The following table sets
forth the Company's revenues by geographic area, for the years ended December
31, 1999, 2000 and 2001:

(1) Includes the $15 million sale of a substantial portion of the Company's
multi-client data library, with ongoing rights thereto, in the southern United
States.

As part of the Company's 2002 business plan, the Company is taking measures
to resize its United States operations to reduced current demand levels,
including reducing crew support personnel, consolidating administrative offices
and support facilities and reducing overhead. Additionally, the Company expects
its revenues from United States multi-client data library sales to be
significantly reduced from levels experienced in 2000 and 2001. Therefore, the
Company expects United States revenues to be decreased in 2002 and expects that
revenues from international operations, excluding Canada, will be increased as a
percentage of the Company's consolidated revenues.

BACKLOG

As of December 31, 2001, the Company estimated that its total contractual
backlog for services was approximately $54.9 million, all of which is expected
to be completed in 2002. As of March 31, 2002, the Company estimated that its
total backlog was approximately $35.4 million. The decrease in backlog is
primarily the result of 2002 activity. Most of the Company's contracts are
terminable by the customer upon relatively short notice and, in some cases,
without penalty. The Company's backlog as of any particular date is not
indicative of the likely operating results for any succeeding period, and there
can be no assurance that any amount of backlog will ultimately be realized as
revenue.

CAPITAL EXPENDITURES AND TECHNOLOGY

The Company's ability to compete and maintain a significant market position
in the land and transition zone seismic data acquisition business is partially
driven by its ability to provide technology comparable to that of its primary
competitors. Accordingly, the Company continually maintains and periodically
upgrades its seismic data acquisition equipment to maintain its competitive
position. Due to the depressed state of the seismic industry and the Company's
operating results and lack of funding, the Company made only $3.5 million and
$5.0 million in capital expenditures in 2000 and 2001, respectively. The level
of future capital expenditures will depend on the availability of funding and
market requirements as dictated by industry activity levels.

Over the past several years, the Company has focused its efforts on
developing operating procedures and acquiring equipment that will enhance the
efficiency of its seismic data acquisition crews and reduce the time required to
complete projects. The Company's strategy relies on the use of third-party
equipment suppliers to provide equipment, although certain equipment may be
customized to the Company's specifications to enhance operating efficiency.
Certain of the equipment, processes and techniques used by the Company are
subject to the patent rights of others, and the Company holds non-exclusive
licenses with respect to a number of such patents. While the Company regards as
beneficial its access to third-party technology through licensing, the Company
believes that substantially all presently licensed technology could be replaced
without significant disruption to its business.

LICENSING OF MULTI-CLIENT DATA

The Company has in the past acquired and processed seismic data for its own
account by conducting surveys either partially or wholly funded by multiple
customers. In this mode of operation, ownership of the data is retained by the
Company and the data is licensed on a non-exclusive basis.

5

Due to the depressed demand for seismic services, an inability to secure
adequate initial customer underwriting and a lack of sufficient liquidity, the
Company, in the first quarter of 2000, curtailed its strategy of building a
multi-client data library in the southern United States.

On March 23, 2001, the Company completed the sale of a substantial portion
of its multi-client data library in the southern United States for $15,000,000
cash, retaining all of its Canadian multi-client data library as well as several
data surveys in the southern United States. Although the Company may selectively
continue to build a data library if adequate liquidity exists, it is unlikely
that the Company will undertake any multi-client seismic projects without
significant underwriting levels.

CUSTOMERS AND PROJECTS

The Company's customers consist of domestic and international oil and gas
companies and seismic data marketing companies. As is the case for many service
companies in the oil and gas industry, a relatively small number of customers or
a limited number of significant projects may account for a large percentage of
the Company's net revenues in any given year. Moreover, such customers and
projects may, and often do, vary from year to year. During 2001, the Company's
five largest customers accounted for approximately $49.3 million, or 52.7% of
revenues, and two of these customers accounted for $15.7 million (16.9%) and
$14.8 million (15.8%), respectively, of revenues. During 2000, the Company's
five largest customers accounted for approximately $30.8 million, or 46.6% of
revenues, and two of these customers accounted for $10.1 million (15.3%) and
$9.7 million (14.7%), respectively, of revenues.

COMPETITION

The acquisition and processing of seismic data for the oil and gas industry
is highly competitive worldwide. In the current market environment, competition
is based primarily on price, but is also affected by crew availability, prior
performance, technology, safety, quality, dependability and the contractor's
expertise in the particular area where the survey is to be conducted. The
Company's principal competitors in North America are PGS - Petroleum Geo
Services ASA; Veritas DGC, Inc.; and Western Geco, a joint venture between
Schlumberger Limited and Baker Hughes, Inc. The Company competes against these
three companies for most of its seismic data acquisition and processing
contracts in North America. The Company believes that its principal competitors
have financial, operating and other resources in excess of its own. Also in
North America, the Company competes with approximately 20 smaller companies that
target narrow market segments. In Latin America and the Far East, the Company
competes with Western Geco, CGG - Compagnie General de Geophysique, PGS -
Petroleum Geo Services ASA and a few smaller local competitors.

EMPLOYEES

As of March 1, 2002, the Company employed approximately 330 full-time and
approximately 2,400 temporary contract personnel worldwide. None of the
Company's employees is subject to collective bargaining agreements. The Company
considers its relations with its employees to be good.

ENVIRONMENTAL MATTERS/GOVERNMENTAL REGULATION

The Company's domestic operations are subject to a variety of federal, state
and local laws and regulations relating to the protection of human health and
the environment, the violation of which may result in civil or criminal
penalties. The Company invests financial and managerial resources to comply with
such laws and regulations, and management believes that it is in compliance in
all material respects with applicable environmental laws and regulations.
Although such environmental expenditures by the Company historically have not
been significant, there can be no assurance that these laws and regulations will
not change in the future or that the Company will not incur significant costs in
the future performance of its operations. The Company is not involved in any
legal proceedings concerning environmental matters and is not aware of any
claims or potential liability concerning environmental matters that could have a
material adverse impact on the Company's financial position, cash flows or
results of operations.

The Company's operations outside of the United States are subject to similar
environmental regulations. Management believes that the Company is in material
compliance with the existing environmental requirements of these foreign
governmental bodies. The Company has not incurred any significant environmental
costs in connection with the performance of its foreign operations; however, any
regulatory changes that impose

6

additional environmental restrictions or requirements on the Company or its
customers could adversely affect the Company through increased operating costs
and decreased demand for the Company's services.

CAUTIONARY STATEMENTS

Certain statements made in this Annual Report on Form 10-K that are not
historical facts are "forward-looking statements". Forward-looking statements
may include, without limitation, the following:

o statements regarding the Company's business strategy, plans and
objectives;

o statements expressing the beliefs and expectations of management of the
Company regarding future demand for the Company's seismic services and
other events and conditions that may influence demand for the Company's
services and its performance in the future; and

o statements concerning the Company's business strategy and expectations,
industry conditions, market position, backlog, future operations,
margins, profitability, liquidity and capital resources.

Forward-looking statements can generally be identified by such terminology
as "may," "will," "expect," "believe," "anticipate," "project," "estimate" or
similar expressions. Such statements are based on certain assumptions and
analyses made by the Company's management in light of its experience and its
perception of historical trends, current conditions, expected future
developments and other factors that it believes to be appropriate. The Company
cautions that such statements are only current expectations and not guarantees
of future performance and that actual results, developments and business
decisions may differ from those envisioned by the forward-looking statements.

All phases of the Company's operations are subject to a number of
uncertainties, risks and other influences, many of which are beyond the control
of the Company. Any one of such influences, or a combination, could materially
affect the accuracy of the forward-looking statements and the projections on
which the statements are based. Some important factors that could cause actual
results to differ materially from the anticipated results or other expectations
expressed in the Company's forward-looking statements include the following:

Debt and Liquidity Limitations.

The Company currently has substantial indebtedness. The level of the
Company's indebtedness and the Company's current level of cash flow generated
from its operations (i) will make it difficult for the Company to meet its debt
service requirements without refinancing its current debt or reaching an
accommodation with the holders of that debt; (ii) makes it extremely difficult
for the Company to obtain necessary any additional debt or equity financing for
any purpose; (iii) requires that a substantial portion of the Company's
available cash be dedicated to debt service and, accordingly, is not available
for use in its business; (iv) limits the Company's flexibility in planning for,
or reacting to, changes in its business; (v) results in the Company being more
highly leveraged than most of its competitors, which places it at a competitive
disadvantage in pursuing contract opportunities; and (vi) makes it more
vulnerable to current business conditions in the seismic services industry.

The Company is currently in default of certain non-financial covenants in
its credit facility (the "Foothill/Elliott Credit Facility"), with Foothill
Capital Corporation ("Foothill") and Elliott Associates, L.P. ("Elliott").
Accordingly, the Company has classified $17.8 million of otherwise long-term
debt as current in the Company's financial statements for the fiscal year ended
December 31, 2001. While Foothill has not taken any steps to accelerate the
maturity of amounts outstanding under the Foothill/Elliott Credit Facility, it
could do so at any time. Also, Foothill could refuse to advance additional
amounts to the Company under the revolving credit portion of the
Foothill/Elliott Credit Facility. If Foothill were to accelerate amounts due
under the Foothill/Elliott Credit Facility, the trustee under the indenture for
the Company's 9 3/4% Senior Notes due 2008 could take the steps necessary to
cause that debt to become immediately due and payable. Accordingly, the Company
has classified $43.5 million of otherwise long-term debt as current in the
Company's financial statements for the fiscal year ended December 31, 2001. If
the maturity of any of the Company's debt was accelerated, it would be unlikely
that the Company would be able to continue its operations without seeking
protection from its creditors under the federal bankruptcy code.

The Company's ability to meet it debt service and other obligations depends
on its future performance, which in turn is subject to general economic
conditions, activity levels in the oil and gas exploration sector, and other
factors beyond the Company's control. The Company has incurred significant net
losses for the past three years and, given the continuing low activity level
in the United States and Canada for land data seismic acquisition services, the
Company expects to continue to incur net losses through 2002. While management
believes there has been a recent improvement in market conditions for seismic
services, especially in Latin America, access to necessary working capital to
finance operations will remain limited through 2002 and may not be available at
all to allow the Company to continue its operations in the ordinary course of
business if the Company cannot refinance its debt, reach an accommodation with
its lenders or obtain additional financing or credit support.

There are currently no additional committed sources of financing available
to the Company and no availability under its existing facilities. The Company
has in the past relied on its majority stockholder, Elliott, to provide credit
support and interim funding. Elliott has indicated to the Company that it will
not commit to provide additional financial and credit support to the Company
during 2002. Even if the Company's operating results substantially improve and
cost control initiatives are successful during 2002, the Company will require
additional financing to sustain its operations and meet its debt service
requirements as those amounts become due. There can be no assurance that amounts
that become due in 2002 can be paid or refinanced or that any additional
financing can be obtained to meet the Company's needs.

Dependence on the Oil and Gas Industry; Industry Volatility.

The Company's business depends in large part on the conditions of the oil
and gas industry and, specifically, on the capital expenditures of the Company's
customers. Demand for land and transition zone seismic acquisition services
remains severely depressed over levels experienced in the past. The Company is
unable to predict with any certainty when and the extent to which the market for
seismic services is likely to improve and, until such time, will continue to
experience operating losses.

Intense Price Competition in a Depressed Market.

Competition among seismic contractors is intense. Competitive factors have
in recent years included price, crew experience, equipment availability,
technological expertise and reputation for quality and dependability. Certain of
the Company's competitors operate more data acquisition crews than the Company
does and have substantially greater financial and other resources. These larger
and better capitalized companies enjoy an advantage over the Company in the
current competitive environment for contract awards where competition is
characterized principally by intense price competition.

7

Risks of High Levels of Fixed Costs.

The Company's business has high fixed costs, and downtime or low
productivity due to reduced demand, weather interruptions, equipment failures or
other causes could result in significant operating losses.

Technology Risks.

Seismic data acquisition and processing is a capital-intensive and
technological business. The development of seismic data acquisition and
processing equipment has been characterized by rapid technological advancements
in recent years, and the Company expects this trend to continue. Manufacturers
of seismic equipment may develop new systems that have competitive advantages
over systems now in use that could render the Company's current equipment
obsolete or require the Company to make significant capital expenditures to
maintain its competitive position. Under such circumstances, there can be no
assurance that the Company would have the necessary funds or be able to obtain
the necessary financing required.

Dependence upon Significant Customers.

The Company derives a significant amount of its revenue from a small number
of major and independent oil and gas companies. The inability of the Company to
continue to perform services for a number of its large existing customers, if
not offset by contracts with new or other existing customers, could have a
material adverse effect on the Company's business and operations.

Intense Competition.

The Company competes in a highly competitive segment of the oil field
services industry. The Company's services are sold in a highly competitive
market and its revenues and earnings may be affected by the following factors:

o changes in competitive prices;

o fluctuations in the level of activity and major markets;

o general economic conditions; and

o governmental regulation.

The Company competes with the oil and gas industry's largest seismic service
providers. Management of the Company believes that the principal competitive
factors in the market areas served by the Company are product and service
quality and availability, technical proficiency and price.

Risks of International Operations.

The Company's international operations, which are expected to continue to
contribute materially to revenues, are subject to risks inherent in doing
business in foreign countries. These risks include, but are not limited to:

o operating risks;

o sourcing and retaining qualified personnel;

o commodity prices for oil and natural gas;

o political changes;

o expropriation;

o currency restrictions and changes in currency exchange rates;

8

o taxes; and

o boycotts and other civil disturbances.

Dependence on Key Personnel.

The Company depends on the continued services of key management and
operating personnel. If the Company were to lose a significant number of these
personnel, this could adversely affect its operations.

ITEM 2. PROPERTIES.

The Company owns a 30,000 square foot building and storage yard in Houston,
Texas, which serves as its corporate headquarters, and leases a 26,000 square
foot building and storage yard in Brookshire, Texas, which serves as a warehouse
and crew and equipment support facility. The Company also owns a staging and
repair facility located on a two-acre tract in New Iberia, Louisiana. In
Calgary, Alberta (Canada), the Company owns an 18,000 square foot office
building and storage yard that serves as the Company's Canadian headquarters. In
addition, the Company leases office, warehouse and storage space in areas
throughout the world as may be required from time to time to market and support
the Company's operations.

ITEM 3. LEGAL PROCEEDINGS.

On August 18, 2000, two residents of Starr County, Texas, filed a purported
class action against the Company and Millennium Seismic, Inc. "Etica Valdez and
Marta G. Garza on behalf of themselves and all others similarly situated v.
Grant Geophysical, Inc. and Millennium Seismic, Inc." No. DC-00-214 on the
docket of the 229th Judicial District, Starr County, Texas. The lawsuit was
recently amended, among other things, to substitute two new plaintiffs and add
defendants. The case name has been changed accordingly: "Juan O. Villareal and
Maria E. Villarreal v. Grant Geophysical, Inc., Grant Geophysical Corp.,
Millennium Seismic, Inc. and Seitel, Inc."

The plaintiffs allege that the Company and Millennium Seismic, Inc. obtained
geophysical information about plaintiffs' mineral estates without permission
while conducting 3-D surveys in Texas. They further allege that the Company
licensed that information to third parties and eventually sold it to Seitel in
2001. The plaintiffs seek unspecified damages and attorneys' fees from the
Company.

The litigation is in early stages of discovery and no dates have yet been
set for a class certification hearing or trial on the merits. The Company has
denied liability, believes the claims are without merit, and intends to defend
vigorously.

The Company is involved in or threatened with other various legal
proceedings from time to time arising in the ordinary course of business.
Management of the Company does not believe that any liabilities resulting from
any such current proceedings will have a material adverse effect on the
Company's financial position, cash flows, or results of operations.

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

None.

9

PART II

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

As of March 28, 2002, there were 14,547,055 shares of the Company's common
stock, $.001 par value per share (the "Common Stock"), outstanding. See Item 12
for the number of shares of Common Stock owned by the Company's executive
officers, directors and each person known to the Company to own beneficially
more than 5% of the outstanding shares of Common Stock. The Common Stock is not
listed on any stock exchange or qualified for trading in any other market. The
Company does not anticipate paying cash dividends with respect to the common
stock in the future. In addition, the payment of cash dividends is currently
prohibited by the indenture governing the Company's 9 3/4% Senior Notes Due 2008
and credit agreements governing the Company's other indebtedness for borrowed
money. The Company is currently issuing paid-in-kind preferred stock to satisfy
its dividend requirements on its 8% convertible preferred stock.

ITEM 6. SELECTED FINANCIAL DATA.

The statement of operations and cash flow data of GGI Liquidating
Corporation ("GGI") or "predecessor" presented below for the nine-month period
ended September 30, 1997, is derived from the consolidated financial statements
of GGI. The statement of operations data for the three-month period ended
December 31, 1997 and each of the years in the four-year period ended December
31, 2001 and the balance sheet data of the Company at December 31, 1997, 1998,
1999, 2000 and 2001 are derived from the consolidated financial statements of
the Company. The selected historical financial data set forth below should be
read in conjunction with the consolidated financial statements and the notes
thereto included in Item 8 of this Form 10-K. See also "Management's Discussion
and Analysis of Financial Condition and Results of Operations."

10

(1) See Note 9 of Notes to Consolidated Financial Statements regarding the
January 2000 exchange of $56.3 million of Senior Notes plus accrued
interest therein for 389,772 shares of Convertible Preferred Stock.

(2) Includes $15 Million sale of substantial portion of the Company's
multi-client data library, with ongoing rights thereto, in the southern
United States (see Note 6).

(3) Charge for asset impairment related to the Company's goodwill, fixed assets,
and multi-client data library (see Note 4).

(4) See Note 9 of Notes to Consolidated Financial Statements regarding the
classification of the Foothill/Elliott credit facility and the 9 3/4%
Senior Notes.

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

OVERVIEW

The Company was formed in September 1997. On September 30, 1997, the Company
acquired substantially all of the assets and assumed certain liabilities of GGI
as part of GGI's reorganization plan, confirmed in September 1997.

The Company's business activities involve the performance of land and
transition zone seismic data acquisition services in selected markets worldwide,
including the United States, Canada, Latin America and the Far East. The Company
primarily acquires seismic data on a turnkey basis for oil and gas companies,
which provides a fixed fee for each project. The Company has also in the past
acquired seismic data on a term basis, which provides for a periodic fee during
the term of the project, and a cost-plus basis, which provides that the costs of
a project, plus a percentage fee, are borne by the customer.

In addition, in the United States and Canada, the Company has in the past
acquired multi-client seismic data surveys, and remaining surveys are marketed
on a non-exclusive basis to oil and gas companies.

The Company's results are influenced by oil and gas industry capital
expenditures, budgets and spending patterns. These spending patterns are
affected by individual oil and gas company budgets as well as industry-wide
conditions. Overcapacity in the seismic service industry continues to suppress
pricing and activity levels and has materially adversely affected the Company's
results of operations.

The Company has relied on financial and credit support provided by Elliott
for the past two years to supplement its cash flow and obtain third party
financing. Elliott has indicated to the Company that it will not commit to
provide additional financial and credit support to the Company during 2002. The
Company has also experienced significant operating losses for the past three
years, has operated with a working capital deficiency and there is uncertainty
surrounding the sufficiency and timing of the Company's future cash flows.
Although Foothill has not taken the steps to accelerate the maturity of amounts
outstanding under the Foothill/Elliott Credit Facility, the Company is in
default of certain of its non-financial obligations under the Foothill/Elliott
Credit Facility. All of these factors have caused the Company's independent
accountants to issue their audit report for the fiscal year ended December 31,
2001 with a "going concern" qualification. The Company cannot make any
assurance that its cash flow or ability to obtain financing will allow it to
continue its business in the ordinary course during 2002.

The following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements and Notes thereto and the other financial
information contained in the Company's periodic reports previously filed with
the commission and incorporated herein by reference.

The historical results of operations of the Company for the years ended
December 31, 1999, 2000 and 2001 are presented below.

RESULTS OF OPERATIONS

11

CRITICAL ACCOUNTING POLICIES

The Company's discussion and analysis of its financial condition and
results of operations are based on its consolidated financial statements. The
preparation of these financial statements requires the Company's management to
make estimates and judgements that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosures of contingent
assets and liabilities. Actual results may differ from these estimates under
different assumptions or conditions.

The Company considers certain accounting policies to be critical policies
due to the significant judgements, estimation processes and uncertainties
involved for each in the preparation of its consolidated financial statements.
The Company believes the following represents its critical accounting policies.

Revenue Recognition

Revenue from non-cancelable exclusive and non-exclusive seismic surveys is
recognized in accordance with the percentage of completion method of accounting
based upon costs incurred as a percentage of total estimated costs. Revenue from
cancelable exclusive seismic surveys is recognized in accordance with
contractual milestones then chargeable to the customer in accordance with
contract terms. Anticipated losses on survey contracts are recognized when such
losses are determinable. The impact of applying SEC Staff Accounting Bulletin
No. 101, "Revenue Recognition," was not material to the results of operations.

Revenue from the licensing of multi-client data surveys is recognized upon
issuance of license when the Company obtains a non-cancelable commitment from
the customer.

Revenue from the Company's data processing services is recognized as the
services are performed.

Asset Impairment

In accordance with Statement of Financial Accounting Standards ("SFAS") No.
121, "Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets
To Be Disposed Of", long-lived assets and certain identifiable intangibles are
written down to their current fair value whenever events or changes in
circumstances indicate that the carrying amounts of these assets are not
recoverable. These events or changes in circumstances may include but are not
limited to a significant change to the extent in which an asset is used, a
significant decrease in the market value of the asset, or a projection or
forecast that demonstrates continuing losses associated with an asset. If an
impairment is determined, the asset is written down to its current fair value
and a loss is recognized. In 2001, based on the Company's significant recurring
losses, resizing of it's United States operations, and changes in projections of
future multi-client data sales, the Company recorded charges for asset
impairment on its goodwill, fixed assets and multi-client data library (see
Note 4).

Mobilization Cost

Transportation and other direct expenses incurred prior to commencement of
geophysical operations in an area, that would not have been incurred otherwise,
are deferred and amortized over either the lesser of the term of the related
contract or backlog of contracts in that area, or one year. If the Company were
to have a contract cancelled, any deferred amounts would have to be immediately
recognized net of any recoveries from the customer.

Goodwill

Goodwill, representing the excess of purchase price over fair value of net
assets acquired, is amortized on a straight-line basis over the expected periods
to be benefited. Accumulated amortization was approximately $4.7 million and
$6.2 million as of December 31, 2000 and 2001, respectively. The Company
assesses the recoverability of this intangible asset by determining whether the
goodwill balance is expected to be recovered through undiscounted future
operating cash flows of the acquired operation over the remaining estimated life
of the goodwill. The amount of goodwill impairment, if any, is measured based on
projected discounted future operating cash flows using a discount rate
reflective of Grant's average cost of capital. The assessment of the
recoverability of goodwill will be impacted if estimated future operating cash
flows are not achieved. Based on the fourth quarter 2001 assessment, the
remaining net book value of the goodwill created in the purchase of GGI's
assets, previously being amortized over 30 years, the goodwill created in the
acquisition of Solid State's minority interest, previously being amortized over
20 years and the goodwill created in the purchase of the remaining interest in
ISI, previously being amortized over 30 years, was fully impaired in 2001 (see
Note 4).

Foreign Exchange Gains and Losses

The United States ("U.S.") dollar is the Company's primary functional
currency in all foreign locations with the exception of its Canadian
subsidiaries. Accordingly, those foreign entities (other than Canada) translate
property and equipment (and related depreciation) and inventories into U.S.
dollars at the exchange rate in effect at the time of their acquisition while
other assets and liabilities are translated at year-end rates. Operating results
(other than depreciation) are translated at the average rates of exchange
prevailing during the year. Re-measurement gains and losses are included in the
determination of net income and are reflected in other income (expense). The
Canadian subsidiaries use the Canadian dollar as their functional currency and
translate all monetary assets and liabilities at year-end exchange rates and
operating results at average exchange rates prevailing during the year.
Adjustments resulting from the translation of Canadian assets and liabilities
are recorded in the accumulated other comprehensive loss account in
stockholders' equity.

12

YEAR ENDED DECEMBER 31, 2001 COMPARED WITH THE YEAR ENDED DECEMBER 31, 2000

Revenues. Revenues for 2001 were $93.5 million, compared with $66.2 million
for 2000. The increase is primarily due to increased Latin America data
acquisition revenues combined with the sale, on March 23, 2001, of a substantial
portion of the Company's multi-client data library, and ongoing rights thereto,
in the southern United States for $15.0 million cash.

Revenues from United States data acquisition operations decreased $0.4
million, or 2.6%, from $15.4 million in 2000 to $15.0 million in 2001. This
slight decline in data acquisition revenues is due to continued low levels of
demand for seismic services in the southern United States. Backlog for United
States data acquisition projects at December 31, 2001 was $0.3 million. The
Company has taken measures to resize its United States operations to reduced
current demand levels including reducing crew support personnel, consolidating
administrative offices and support facilities and reducing overhead. The Company
expects that revenues from United States data acquisition operations in 2002
will be decreased over levels experienced in 2000 and 2001. As of March 28,
2002, the Company has backlog for United States data acquisition projects of
$1.2 million.

Revenues from seismic data processing operations were $0.6 million for 2001
compared to $0.5 million for 2000. In January 2001, the Company opened a data
center in Quito, Ecuador to service customer requirements in South America. In
December 2001, the Company closed down its data center in Dallas, Texas and
consolidated it with the Company's Houston, Texas data center.

Revenues from Canadian data acquisition operations decreased $1.9 million,
or 14.3%, from $13.3 million in 2000 to $11.4 million in 2001. During 2000, a
range of one to five land seismic crews were operating in Canada compared to a
range of one to four in 2001.

The Company began its multi-client data acquisition activities in the
United States and Canada during 1998. Multi-client crew operations began in the
second quarter of 1998 and continued through 1999 and into 2000. During that
time, 17 projects were completed in Texas, California, Wyoming and Canada
covering a total of 1,648 square miles. Due to depressed demand for the
Company's proprietary data in 2000, an inability to secure adequate initial
customer underwriting and a lack of sufficient liquidity, the Company in the
first quarter of 2000 curtailed its strategy of building a multi-client data
library in the southern United States. Revenues associated with the underwritten
portion of multi-client data programs are recognized as a component of the data
acquisition revenues discussed above. Revenue from sales of the data library for
2001 were $20.4 million, compared to $12.6 million for 2000. On March 23, 2001,
the Company completed the sale for $15.0 million cash ($15.0 million of related
amortization) of a substantial portion of its multi-client data library in the
southern United States, retaining all of its Canadian multi-client data library
as well as several data surveys in the southern United States. The Company may
selectively continue adding to its remaining data library if adequate liquidity
exists; however, management will be very selective in its decision to
participate in projects that are not substantially underwritten by customers.

Revenues in Latin America increased $23.9 million, or 118.3%, from $20.2
million in 2000 to $44.1 million in 2001. During 2000, a range of two to five
crews operated in Latin America. During 2001, a range of two to six crews
operated in Latin America. The scope and size of 2001 projects were larger than
that of 2000 projects. As of March 28, 2002, there were five land acquisition
seismic crews operating or mobilizing in this region.

Revenues from the Far East decreased $2.2 million, or 52.4%, from $4.2
million in 2000 to $2.0 million in 2001. During 2000, the Company operated one
crew in Indonesia for approximately six months. During 2001, the Company
operated one crew in New Zealand for approximately three months.

13

Expenses. Direct operating expenses for 2001 increased $14.4 million, or
27.3%, to $67.1 million (71.8% of revenues) from $52.7 million (79.6% of
revenues) in 2000. The absolute increase in operating expenses is a result of
increased activity levels in Latin America. The large decrease in operating
expenses as a percentage of revenues from 2000 to 2001 is primarily due to the
increased amount of multi-client data sale revenues, primarily due to the sale
for $15.0 million cash ($15.0 million of related amortization) of a substantial
portion of its multi-client data library in 2001 with the associated cost
included in depreciation and amortization.

Selling, general and administrative expenses decreased $0.7 million, or
7.0%, to $9.3 million (9.9% of revenues) in 2001 from $10.0 million (15.1% of
revenues) in 2000. The absolute reduction is the result of the Company's effort
beginning during the second quarter of 2000, and continued throughout 2001, to
reduce support and overhead personnel in all of its operating regions and at the
corporate office level.

Depreciation and amortization increased $8.8 million, or 32.7%, to $35.7
million in 2001 from $26.9 million for 2000. Capital expenditures were $5.0
million and $3.5 million for 2001 and 2000, respectively. The increase is due to
the amortization associated with the sale of a substantial portion of the
Company's multi-client data library, and ongoing rights thereto, in the southern
United States for $15.0 million cash.

In March 2000, the Company completed the purchase of contractual rights held
by a broker having multiple-year marketing rights for certain of the Company's
multi-client data surveys. For financial reporting purposes, the Company
recorded a non-recurring charge to operations of $3.8 million consisting of the
monetary consideration paid of $3.0 million and the net estimated fair value of
property interests exchanged of $0.8 million.

The Company recorded charges for asset impairment of $38.5 million and $3.3
million for 2001 and 2000, respectively. The 2001 charge was related to: 1.) an
impairment recognized on the Company's goodwill of $31.3 million due to revised
estimates of future operating cash flows due to depressed exploration activity
resulting in decreased demand for the Company's data acquisition and data
processing services in the United States and Canada and 2.) a charge of $7.2
million to impair certain of the Company's fixed assets due primarily to
technological obsolescence and reductions in demand for services in the United
States as well as a charge to reduce the carrying value of the Company's
multi-client data library to net realizable value based on revised future
licensing prospects for such data in view of the ongoing reduced demand for
multi-client data in general and the Company's recent sales experience for such
data. Triggering events requiring the assessments include significant recurring
losses and the Company's decision to resize its United States operations to
reduced current demand levels. The 2000 charge was made to reduce the carrying
value of the Company's multi-client data library to net realizable value, based
on revised future licensing prospects for such data in view of the ongoing
reduced demand for multi-client data in general and the Company's recent sales
experience for such data. The impairment provision during the quarter ended
December 31, 2000 included approximately $2.5 million of book loss that would
have resulted from the March 2001 data sale for $15.0 million discussed above.
On a quarterly basis, management estimates the residual value of each survey,
and additional amortization is provided if the remaining revenues reasonably
expected to be obtained from any survey are less than the carrying value of such
survey.

Other Income (Expenses). Interest expense, net, decreased $1.0 million from
$7.6 million in 2000 to $6.6 million in 2001. The decrease is primarily due to
Elliott Associates, L.P. ("Elliott") and Elliott International, L.P. (formerly
known as Westgate International, L.P.) ("Elliott International") exchanging
$56,320,000 of 9 3/4% Senior Notes for Convertible Preferred Stock on January
19, 2000. Additionally contributing to the decrease were decreased interest
rates in 2001, reducing interest expense on the Company's variable rate debt.

Tax Provision. The income tax provision consisted of income taxes in foreign
countries for 2000 and 2001. No benefit for United States federal or Canadian
income tax loss carry-forwards was recorded in either period, given the
uncertainty of realization of such tax benefits.

YEAR ENDED DECEMBER 31, 2000 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1999

Revenues. Revenues for 2000 were $66.2 million, compared with $66.0 million
for 1999. The decrease in the price of oil and gas that occurred between the
fourth quarter of 1998 and the first quarter of 1999 significantly reduced
demand for the Company's services in 1999. Although commodity prices have since
recovered, demand for land and transition zone seismic acquisition services
remained severely depressed in 2000 over levels experienced in 1997 and 1998.
The Company is unable to predict with any certainty when and the extent to which
the market for seismic services is likely to recover.

Revenues from United States data acquisition operations decreased $12.9
million, or 45.6%, from $28.3 million in 1999 to $15.4 million in 2000. This
decrease was attributable to the Company operating two to four contract seismic
data acquisition crews from time to time in the United States during 1999,
compared with one to three crews in 2000. This sharp decline in data acquisition

14

revenues is due to reduced demand for seismic services discussed above. Backlog
for United States data acquisition projects at December 31, 2000 was $0.3
million.

Revenues from seismic data processing operations were $0.5 million for 2000
compared to $1.5 million for 1999. The Company operated seismic data processing
centers during 1999 in Midland, Dallas and Houston, Texas. These centers
processed both third-party and Company-owned multi-client data. In January 2000,
the Company completed the consolidation of its Midland center with operations in
the Houston seismic data processing center. The significant decline in revenues
from 1999 to 2000 is primarily due to reduced data acquisition activities in the
United States. In January 2001, the Company opened a data center in Quito,
Ecuador to service customer requirements in South America.

Revenues from Canadian data acquisition operations increased $3.1 million,
or 30.4%, from $10.2 million in 1999 to $13.3 million in 2000. This increase was
due to increased seismic acquisition activity in Canada beginning during the
fourth quarter of 1999 and continuing through the third quarter of 2000. During
2000 and 1999, a range of one to five land seismic crews were operating in
Canada.

The Company began its multi-client data acquisition activities in the United
States and Canada during 1998. Multi-client crew operations began in the second
quarter of 1998 and continued through 1999 and into 2000. During that time, 17
projects were completed in Texas, California, Wyoming and Canada covering a
total of 1,648 square miles. There were 1,027 square miles completed in 1999.
The cost of these projects was $41.3 million with approximately $18.4 million,
or 44.5%, underwritten by third parties. There were 122 square miles completed
in 2000. The cost of 2000 projects was $ 3.8 million with $2.9 million, or 76%,
underwritten by a third party. Due to depressed demand for the Company's
proprietary data in 2000, an inability to secure adequate initial customer
underwriting and a lack of sufficient liquidity, the Company in the first
quarter of 2000 curtailed its strategy of building a multi-client data library
in the southern United States. Revenues associated with the underwritten portion
of multi-client data programs are recognized as a component of the data
acquisition revenues discussed above. Revenue from sales of the data library for
2000 were $12.6 million, compared to only $3.5 million for 1999. On March 23,
2001, the Company completed the sale for $15 million cash of a substantial
portion of its multi-client data library in the southern United States,
retaining all of its Canadian multi-client data library as well as several data
surveys in the southern United States. The Company may selectively add to its
remaining data library; however, management will be very selective in its
decision to participate in projects only partially funded by customers.

Revenues in Latin America increased $5.1 million, or 34.0%, from $15.1
million in 1999 to $20.2 million in 2000. During 1999 and 2000, a range of two
to five crews operated in Mexico, Ecuador, Brazil and Colombia; however the
scope and size of 2000 projects were larger than that of 1999. In March 2001,
there were four land acquisition seismic crews operating or mobilizing in this
region.

Revenues from the Far East decreased $3.3 million, or 44.0%, from $7.5
million in 1999 to $4.2 million in 2000. During 1999, the Company operated a
range of one to two crews, primarily in Indonesia, while only one crew operated
in Indonesia through the first half of 2000. In March 2001, there was one
transition zone acquisition seismic crew operating in this region.

Expenses. Direct operating expenses for 2000 decreased $1.8 million, or
3.3%, to $52.7 million (79.6% of revenues) from $54.5 million (82.5% of
revenues) in 1999. The absolute decrease in operating expenses is a result of
reduced operations in the southern United States and a cost reduction program
initiated during the second quarter of 2000. The large decrease in operating
expenses as a percentage of revenues from 1999 to 2000 is primarily due to the
increased amount of multi-client data sale revenues in 2000 with the associated
cost included in depreciation and amortization.

Selling, general and administrative expenses decreased $3.5 million, or
25.9%, to $10.0 million (15.1% of revenues) in 2000 from $13.5 million (20.5% of
revenues) in 1999. The absolute reduction is the result of the Company's effort
beginning during the second quarter of 2000 to reduce support and overhead
personnel in all of its operating regions and at the corporate office level.

Depreciation and amortization increased $0.8 million, or 3.0%, to $26.9
million in 2000 from $26.1 million for 1999. Capital expenditures were $3.5
million and $9.5 million for 2000 and 1999, respectively.

In March 2000, the Company completed the purchase of contractual rights held
by a broker having multiple-year marketing rights for certain of the Company's
multi-client data surveys. For financial reporting purposes, the Company
recorded a non-recurring charge to operations of $3.8 million consisting of the
monetary consideration paid of $3.0 million and the net estimated fair value of
property interests exchanged of $0.8 million.

15

The Company recorded charges for asset impairment of $3.3 million and $5.0
million for 2000 and 1999, respectively. The 2000 and 1999 charges were made to
reduce the carrying value of the Company's multi-client data library to net
realizable value, based on revised future licensing prospects for such data in
view of the ongoing reduced demand for multi-client date in general and the
Company's recent sales experience for such data. The impairment provision during
the quarter ended December 31, 2000 included approximately $2.5 million of book
loss that would have resulted from the March 2001 data sale for $15 million
discussed above. On a quarterly basis, management estimates the residual value
of each survey, and additional amortization is provided if the remaining
revenues reasonably expected to be obtained from any survey are less than the
carrying value of such survey.

Other Income (Expenses). Interest expense, net, decreased $4.4 million from
$12.0 million in 1999 to $7.6 million in 2000. The decrease is primarily due to
Elliott Associates, L.P. ("Elliott") and Elliott International, L.P. (formerly
known as Westgate International, L.P.) ("Elliott International") exchanging
$56,320,000 of 9 3/4% Senior Notes for Convertible Preferred Stock on January
19, 2000.

Tax Provision. The income tax provision consisted of income taxes in foreign
countries for 1999 and 2000. No benefit for United States federal or Canadian
income tax loss carry-forwards was recorded in either period, given the
uncertainty of realization of such tax benefits.

LIQUIDITY AND CAPITAL RESOURCES

The liquidity of the Company should be considered in light of the cyclical
nature of demand for land and transition zone seismic services. These
fluctuations have rapidly impacted the Company's liquidity as supply and demand
factors directly affect pricing.

The Company's ability to meet its debt service and other obligations depends
on its future performance, which in turn is subject to general economic
conditions, activity levels in the oil and gas exploration sector, and other
factors beyond the Company's control. While management believes there has been a
recent improvement in market conditions for seismic services, especially in
Latin America, funds to finance operations are expected to remain limited
through 2002 and may not permit the Company to continue its operations in the
ordinary course. As previously discussed, the Company has in the past relied on
its majority stockholder, Elliott, to provide credit support and interim
funding. Through April 15, 2002, $11.7 million of working capital has been
provided to the Company by Elliott in the form of a factoring arrangement for
certain foreign receivables, which represents the maximum amount allowed under
the agreement (see Note 9).

The Company is currently in default of certain non-financial covenants in
its credit facility (the "Foothill/Elliott Credit Facility"), with Foothill
Capital Corporation ("Foothill") and Elliott. Accordingly, the Company has
classified $17.8 million of otherwise long-term debt as current in the Company's
financial statements for the fiscal year ended December 31, 2001. While
Foothill has not taken any steps to accelerate the maturity of amounts
outstanding under the Foothill/Elliott Credit Facility, it could do so at any
time. Also, Foothill could refuse to advance additional amounts to the Company
under the revolving credit portion of the Foothill/Elliott Credit Facility. If
Foothill were to accelerate amounts due under the Foothill/Elliott Credit
Facility, the trustee under the indenture for the Company's 9 3/4% Senior Notes
due 2008 could take the steps necessary to cause that debt to become
immediately due and payable. Accordingly, the Company has classified $43.5
million of otherwise long-term debt as current in the Company's financial
statements for the fiscal year ended December 31, 2001. If any of the Company's
debt was accelerated, it would be unlikely that the Company would be able to
continue its operations without seeking protection from its creditors under the
federal bankruptcy code.

There are currently no additional committed sources of financing available
to the Company and no availability under existing facilities. Even if business
conditions substantially improve and cost control initiatives are successful
during 2002, the Company will require substantial cash flow to continue
operations on a satisfactory basis, fund capital expenditures and meet its
principal and interest requirements with respect to the 9 3/4% Senior Notes,
Foothill/Elliott Credit Facility and other indebtedness as those amounts become
due.

Management is currently negotiating with Elliott and Foothill to obtain
waivers to loan covenants and to provide additional financing to fund its
operations through 2002. However, there can be no assurance that additional
financing commitments or waivers to loan covenants can be obtained or that the
terms of financing arrangements will be acceptable and the amounts will be
sufficient to meet the company's needs. Additionally, the Company has taken
measures to reduce costs through consolidation of certain locations, resizing
its United States operations to reduced current demand levels, and reductions in
overhead personnel. Should such measures be unsuccessful, and should the Company
not receive waivers from Foothill or get additional support from Elliott, there
would be substantial doubt about the Company's ability to continue as a going
concern. The accompanying financial statements do not include any adjustments
that might result from the outcome of those uncertainties.

The Company's ongoing capital requirements arise primarily from its need to
service debt, fund cash requirements primarily to support its international
projects and to acquire, maintain or improve equipment. During 2001, $2.0
million was provided by operating activities, a significant decrease from last
year when the Company generated $9.5 million from operating activities. This
decrease in funds generated from operating activities was principally due to a
$5.8 million increase in accounts payable and a $5.2 million increase in
accounts receivable, primarily related to Latin American operations. During
2001, $0.7 million was provided by financing activities. This compares to 2000
when $5.5 million was used in financing activities, which was due to a $5.0
million net reduction of debt. During 2001, $3.3 million was used in investing
activities, primarily due to $5.0 million of capital expenditures, $1.9 million
of which is financed and will be paid in 2002 and beyond. This compares to $3.0
million used in investing activities in 2000, which was due principally to $4.2
million used to fund capital expenditures and multi-client data acquisitions,
offset in part by $1.1 million of asset sales.

The Company has incurred significant operating losses during each of the
past three years and has operated with working capital deficits during this
period. As a result, the Company's capital requirements during 2001 were funded
primarily through $4.9 million in funds provided by Elliott pursuant to a
depository agreement and a factoring arrangement, the $15.0 million cash sale
of a substantial portion of the Company's multi-client data library in the
southern United States, and close management of the Company's accounts
receivable and payables.

16

The Company will need to attain profitable operating levels in order to
provide sufficient cash flow to service its debt, maintain its operations and
fund capital expenditures. While the Company reduced its 2001 operating loss
before giving effect to non-cash charges, the overcapacity in the seismic
service industry and the Company's increasing reliance on international
operations, will require that the Company continue to closely manage its
available cash resources. Because of the high costs associated with equipping
and operating crews outside of North America and the time generally required to
process billings and receive payments, the Company expects to require
significant amounts of liquidity to support its international projects.

In 2001, Elliott advanced approximately $4.9 million to the Company through
a depository agreement and a factoring arrangement, as discussed below, and as
of December 31, 2001, $4.0 million remained outstanding. Already in 2002,
Elliott has advanced an additional $7.7 million to the Company under the
factoring arrangement representing the maximum advance allowed under this
arrangement. The depository agreement was initially entered into by Elliott
and the Company in November 2000, when Elliott made cash deposits aggregating
$1.0 million with the Company to be applied toward the purchase of an undivided
mineral interest and related seismic data in a prospect developed by the
Company during 2000. In January 2001, this depository agreement was amended to
increase the amount to $1.9 million, which has been retired in its entirety as
discussed below. In August 2001, Elliott and the Company entered into a
factoring arrangement for certain foreign receivables, when Elliott advanced
$4.0 million to the Company, which remained outstanding at December 31, 2001.
At March 28, 2002, the amount outstanding under this arrangement was $11.7
million and all amounts become due and payable on September 30, 2002. The
Company does not expect to be able to retire these amounts from its operating
cash flows. In order to avoid a default under this agreement, the Company will
either need to reach an accommodation with Elliott about the payment of these
amounts or obtain additional financing to refinance the amount payable to
Elliott.

In March 2001, the Company sold a substantial portion of its multi-client
data library in the southern United States to a third party seismic data broker
for $15.0 million. The sales proceeds from the March 2001 sale were used to
retire $9.4 million cash advanced by Elliott in 2000 and 2001, including $1.9
million advanced under the depository agreement, plus accrued preferred return
thereon with the balance used to reduce outstanding borrowings under the Credit
Facility. Subsequent to the sale, the Company wrote down the remaining portion
of its multi-client data library to $0.6 million. As a result, the Company does
not expect that any additional potential sales of its multi-client data library
will result in significant amounts of proceeds that can fund operating
activities.

Capital expenditures for 2001 were approximately $5.0 million and were used
primarily to upgrade and expand the Company's seismic data acquisition and
recording equipment. The Company's 2002 business plan contemplates up to $8.3
million of capital expenditures primarily to upgrade and replace seismic data
acquisition and recording equipment. Actual capital expenditures will, however,
be limited to an amount that can be funded from available cash and any
equipment financing provided by manufacturers.

In 2001, the Company also spent approximately $0.4 million on multi-client
data acquisition projects. Initial customer commitments for those projects were
59% of the project costs in 2001. The Company no longer expects to participate
in multi-client data projects where customers do not underwrite substantially
all of the project. Any multi-client acquisition projects will only be
undertaken to the extent the Company has adequate liquidity to service its debt
and fund its other customer projects.

As of December 31, 2001, the Company's had approximately $72.0 million of
indebtedness consisting of $43.5 million principal amount of the Senior Notes,
$20.8 million outstanding borrowings under its credit facility (the "Credit
Facility") with Foothill Capital Corporation and Elliott, $4.0 million payable
under the Elliott factoring arrangement and $3.7 million of loans and
capitalized leases primarily incurred to fund capital expenditures. The
following table summarizes the Company's payment obligations with respect to
these long-term liabilities as well as the Company's operating leases over the
next five years (dollars in thousands):

--------------
(1) See Note 9 of Notes to Consolidated Financial Statements regarding the
classification of the Foothill/Elliott credit facility and the 9 3/4%
Senior Notes.

17

The Company has approximately $134.0 million of debt and preferred stock
outstanding at December 31, 2001. Currently, the Company's highly leveraged
capital structure negatively impacts and will continue to negatively impact its
profitability and operating cash flow. If the Company is not able to
significantly improve its operations or obtain additional financing, either from
Elliott or other sources, a financial restructuring will be required to allow
the Company to be a viable entity on a long-term basis.

EFFECT OF INFLATION

Current economic conditions indicate that the costs of exploration and
production for oil and gas are increasing. The oil and gas industry historically
has experienced periods of rapid cost increases within short periods of time as
demand for drilling rigs, drilling pipe and other materials and supplies
increases. Increases in exploration and production costs over increases in
commodity prices of oil and natural gas could lead to a decrease in such
activities by oil and gas exploration and production companies, which would have
an adverse effect on the demand for the Company's services.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133 "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards requiring that every derivative financial
instrument be recorded in the balance sheet as either an asset or a liability
measured at its fair value, with changes in fair value recognized currently in
earnings. On July 7, 1999, the FASB delayed the effective date of SFAS No. 133
for one year. The delay, published as SFAS No. 137, applies to quarterly and
annual financial statements. SFAS No. 133, as revised by SFAS No. 137, is
effective for all fiscal quarters of all fiscal years beginning after June 15,
2000. The Company adopted SFAS 133 on January 1, 2001. Adoption of this
statement did not result in a material impact on the Company's financial
position, results of operations or cash flows.

On December 3, 1999, the United States Securities and Exchange Commission
("SEC") released Staff Accounting Bulletin ("SAB") No. 101, Revenue Recognition,
to provide guidance on the recognition, presentation and disclosure of revenue
in financial statements. The Company adopted the provisions of SAB No. 101 on
January 1, 2000. Adoption of this statement did not result in a material impact
or change to the Company's revenue recognition policies.

In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Standards ("SFAS") No. 141, "Business Combinations," that
requires all business combinations initiated after June 30, 2001 to be accounted
for as purchases. The Company adopted SFAS No. 141 as required on July 1, 2001.
The adoption did not have a material impact on the Company's financial position
or results of operations.

In July 2001, the FASB also issued SFAS No. 142, "Goodwill and Other
Intangible Assets," requiring that all intangible assets without a contractual
life no longer be amortized but reviewed annually, or as warranted by triggering
events, for impairment in accordance with specific determination and measurement
provisions. The Company has adopted SFAS No. 142 when required to do so on
January 1, 2002; however, goodwill and intangible assets acquired subsequent to
June 30, 2001, were subject immediately to the provisions of this standard. The
Company's amortization expense related to goodwill for the year ending December
31, 2001 was $1.5 million. Due to impairments recorded in 2001, the Company has
no remaining goodwill at December 31, 2001.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets" was issued. SFAS No. 144 supersedes SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets
to be Disposed of" and Accounting Principles Board Opinion ("APB") No. 30,
"Reporting the Results of Operations - Reporting the Effects of the Disposal of
a Segment Business and Extraordinary, Unusual and Infrequently Occurring Events
and Transactions." SFAS No. 144 establishes a single accounting model for assets
to be disposed of by sale whether previously held and used or newly acquired.
SFAS No. 144 retains the provisions of APB No. 30 for presentation of
discontinued operations in the income statement, but broadens the presentation
to include a component of an entity. SFAS No. 144 is effective for fiscal years
beginning after December 15, 2001,

18

and the interim periods within. The Company has adopted SFAS No. 144 on January
1, 2002 and does not believe that the adoption of SFAS No. 144 will have a
material impact on it's financial position, results of operations or cash flows.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

INTEREST RATE RISK

The Company's debt consists of both fixed-interest and variable-interest
rate debt; consequently, the Company's earnings and cash flows, as well as the
fair values of its fixed-rate debt instruments, are subject to interest-rate
risk.

The Company has performed sensitivity analyses to assess the impact of this
risk based on a hypothetical ten-percent increase in market interest rates.
Market rate volatility is dependent on many factors that are impossible to
forecast, and actual interest rate increases could be more severe than the
hypothetical ten-percent increase.

The Company estimates that if prevailing market interest rates had been ten
percent higher throughout 2000 and 2001, and all other factors affecting the
Company's debt remained the same, the operating losses before taxes would have
been increased by $0.5 million in 2000 and in 2001. With respect to the fair
value of the Company's fixed-interest rate debt, if prevailing market interest
rates had been ten percent higher at year-end 2001, and all other factors
affecting the Company's debt remained the same, the fair value of the Company's
fixed-rate debt, as determined on a present-value basis, would have been lower
by approximately $2.7 million at December 31, 2001. Given the composition of
the Company's debt structure, the Company does not hedge its interest rate risk.

CURRENCY RISK

The Company conducts a substantial portion of its business in currencies
other than the U.S. or Canadian dollars, particularly various Latin American
currencies, and its international operations are subject to fluctuations in
foreign currency exchange rates. Accordingly, the Company's international
contracts could be significantly affected by fluctuations in exchange rates.
International contracts requiring payment in currency other than U.S. or
Canadian dollars typically are indexed to inflationary tables and generally are
used for local expenses. The Company attempts to structure the majority of its
international contracts to be billed and paid at a favorable U.S. dollar
conversion rate.

The Company's operating results were negatively impacted by foreign exchange
loss of approximately $1,600,000 and positively impacted by foreign exchange
gains of approximately $48,000 and $351,000 for the years ended December 31,
2001, 2000 and 1999, respectively.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The response to this item is submitted in a separate section of this report
following the signature page.

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

None.

19

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The name, age and current principal position of each director and executive
officer of the Company at April 26, 2002 are as follows:

Executive officers are elected by and serve at the discretion of the Board
of Directors until their successors are duly elected and qualified. There are no
family relationships between or among any directors or executive officers of the
Company. See "Certain Relationships and Related Transactions" for a description
of certain other relationships between or among directors and executive officers
of the Company.

James Devine has served as a director of the Company and Chairman of the
Board since December 2000. Mr. Devine has been a commercial consultant to the
oil and gas industry since 1996. He served as Corporate Vice President and
General Counsel of Colflexip Stena Offshore Group, S.A. from 1994 to 1996. Mr.
Devine has served as Chairman of the Board of Directors of Horizon Offshore,
Inc., an offshore marine construction company, since October 1999.

Richard F. Miles has served as President, Chief Executive Officer (CEO) and
director of the Company since February 2001. Mr. Miles served as Executive Vice
President of Sercel Inc. from December 15, 1999 until January of 2001 after
GeoScience/Syntron was merged with CGG/Sercel. Prior to the merger, Mr. Miles
was Chairman, President and CEO of Syntron, Inc., which he joined in January
1990. Syntron was a provider of geophysical acquisition equipment, and a
subsidiary of GeoScience, of which Mr. Miles was also President and CEO from its
formation in 1996 until the merger in December 1999. GeoScience, with its other
subsidiaries, Cogniseis and Symtronix, provided data loading, formatting
services and data processing and interpretation software for the oil exploration
industry. Prior to 1990, Mr. Miles was involved in seismic data acquisition and
processing in various management positions with continually increasing positions
of responsibility.

Russell P. Dueck has served as Chief Financial Officer of the Company since
February 2002. For the past 6 years, Mr. Dueck has been employed by the
Company's subsidiary, Solid State Geophysical, in various management positions,
most recently as Vice President - Finance. Prior to joining Solid State, Mr.
Dueck was employed in the upstream, downstream and marketing areas of the oil &
gas industry in Calgary. Mr. Dueck is a Certified Management Accountant in
Canada.

Narciso M. Chiquillo has served as Vice President - Latin America since
August 1999. For the previous 10 years, Mr. Chiquillo was employed with the
Company with varying levels of increasing management responsibility for Latin
American operations.

William H. Freeman has served as Treasurer since February 2000. For the
previous 6 years, Mr. Freeman was employed by the Company in various financial
management positions of increasing responsibility. He was an Area Controller for
Halliburton Geophysical prior to joining Grant. Mr. Freeman is a Certified
Public Accountant.

Jonathan D. Pollock has served as a director of the Company since September
30, 1997 and as Chairman of its Board of Directors from September 1997 until
April 1998. Mr. Pollock has served for more than five years as a Portfolio
Manager with Elliott Management Corporation. Mr. Pollock is also a director of
Prime Natural Resources, Inc., a director of Horizon Offshore, Inc., and
Chairman of the Board of Odyssea Marine, Inc.

20

ITEM 11. EXECUTIVE COMPENSATION.

The following table summarizes information concerning the compensation of
the Company's Chief Executive Officer and all other executive officers for 2001
(the "Named Executive Officers"). No bonuses or restricted stock awards were
awarded for 2001.

SUMMARY COMPENSATION TABLE

- ----------

(1) Mr. Miles' employment as President and Chief Executive Officer began in
February 2001.

(2) Mr. Easley's employment as Executive Vice President - Finance and
Administration began in February 2000 and terminated in February 2002.

The following table sets forth additional information with respect to stock
options granted in 2001 under the Company's Incentive Plan to the Named
Executive Officers. No stock appreciation rights were granted in 2001.

OPTION GRANTS IN 2001

The following table sets forth information with respect to the unexercised
options to purchase shares of common stock which were granted in 2001 or a prior
year under the Company's 1997 Equity and Performance Incentive Plan to the Named
Executive Officers and held by them at December 31, 2001. None of the Named
Executive Officers exercised any stock options during 2001.

AGGREGATED OPTION EXERCISES IN 2001
AND 2001 YEAR-END OPTION VALUES

21

- ----------

(1) There is no trading market for the Common Stock.

(2) Options have lapsed pursuant to terms of Plan due to termination.

EMPLOYMENT AGREEMENTS

Effective February 7, 2000, the Company entered into an employment agreement
with Thomas L. Easley, pursuant to which Mr. Easley agreed to serve as Executive
Vice President -- Finance & Administration of the Company. Mr. Easley's
employment agreement had an initial term through February 7, 2002, and provided
for an annual base salary of $225,000. Mr. Easley also agreed not to compete
against the Company throughout the term of his employment and for two years
thereafter, and not to disclose any confidential information during and after
the term of his employment. Mr. Easley's employment terminated in February 2002
and the Company has satisfied its obligation under the employment agreement by
making payments to Mr. Easley through the initial term of the agreement.

Effective February 5, 2001, the Company retained Richard F. Miles to serve
as President and Chief Executive Officer of the Company for an annual base
salary of $250,000. The Company entered into an agreement effective August 1,
2001 with Mr. Miles. The agreement has an initial term through July 31, 2004
provided, however, that on August 1 of each year, commencing August 1, 2003, the
agreement is automatically renewed for successive one-year periods unless either
party provides the other with written notice of non-renewal prior to June 30 of
that year. Mr. Miles also agreed not to compete against the Company throughout
the term of his employment and for one year thereafter, and not to disclose any
confidential information during and after the term of his employment.

1997 EQUITY AND PERFORMANCE INCENTIVE PLAN

The 1997 Equity and Performance Incentive Plan (the "Incentive Plan") was
adopted by the Board of Directors and approved by Grant's stockholders in
December 1997. The Incentive Plan currently provides for issuance of 2,750,000
shares. The Incentive Plan provides for the grant to officers (including
officers who are also directors), employees, consultants and non-employee
directors of Grant and its subsidiaries. These individuals may be granted awards
of "incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code of 1986, non-statutory stock options, stock appreciation rights and
restricted shares and deferred shares of Grant common stock.

The Board of Directors, or a committee of the Board of Directors consisting
of at least two non-employee directors, is required to administer the Incentive
Plan. The Board of Directors currently administers the Incentive Plan and
decides to whom awards may be granted, the type of award to be granted and
determine, as applicable, the number of shares to be subject to each award, the
exercise price and the vesting. In making such determinations, the Board of
Directors will take into account the employee's present and potential
contributions to the Company's success and other relevant factors. As of
December 31, 2001, the Board of Directors had granted outstanding awards
covering 2,342,400 shares. In addition, as of March 28, 2002, a total of 57,000
restricted shares (36,000 in 1998, 18,000 in 1999, and 3,000 in 2000) were
granted to non-employee directors, with 54,000 of such shares being
unrestricted, subject to the satisfaction of conditions set forth under the
Incentive Plan.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock at March 28, 2002 by (i) each person
known to the Company to own beneficially more than 5% of the outstanding shares
of the Common Stock, (ii) each current director and executive officer and (iii)
all current executive officers and directors as a group, including persons
deemed to share voting and investment power.

22

- ----------

* Less than 1%.

(1) Paul E. Singer and Elliott Capital Advisors L.P., which is controlled by Mr.
Singer, are the general partners of Elliott. The business address of Elliott
is 712 Fifth Avenue, 36th Floor, New York, New York 10019.

(2) Hambledon, Inc., which is controlled by Mr. Singer, is the sole general
partner of Elliott International. Elliott Capital Advisors, Inc., which is
controlled by Mr. Singer, is the investment manager for Elliott
International. Hambledon, Inc. and Elliott Capital Advisors expressly
disclaim beneficial ownership of any shares of Common Stock. The business
address of Elliott International is c/o Midland Bank Trust Corporation
(Cayman) Limited, P.O. Box 1109, Mary Street, Grand Cayman, Cayman Islands,
British West Indies.

(3) Includes 13,242,834 shares that could be obtained through conversion of its
397,285 shares of 8% convertible preferred stock.

(4) Includes 7,431,067 shares that could be obtained through conversion of its
222,932 shares of 8% convertible preferred stock.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

On March 22, 2001, the Company completed modification of the Loan and
Security Agreement with Foothill and Elliott whereby the credit facility was
modified and extended through May 11, 2005. On June 28, 2001, the Company
completed further modifications to the Foothill/Elliott Credit Facility whereby
the credit facility was decreased from $29.0 million to $28.0 million by means
of decreasing the original commitment under the term loan. The original term
loan of $11.5 million, which had been reduced through periodic payments to $6.1
million, was increased to an outstanding balance of $10.5 million. Additional
modifications were made to the agreement to revise the payback period on the
Foothill term loan. Under the amended agreement, the final principal payment on
the term loan will be made in January 2005. At December 31, 2001, $7.5 million
and $9.3 million were outstanding under the Elliott term loan and the Foothill
term loan, respectively, and $4.1 million was outstanding under the Foothill
revolving credit line. Based on the Company's borrowing base at December 31,
2001, these amounts represent the maximum amount then allowable at such date
under the respective facilities.

In August 2000, the Company entered into an agreement with Elliott to
assign, from time to time, a net revenue interest in certain geological and
geophysical data included in the U.S. multi-client data library for an amount up
to $7.5 million. Proceeds from net revenue interest sales, together with a
computed preferred return of 1% per month are payable from future sales of
multi-client data. In November 2000, the Company entered into a depository
agreement with Elliott whereby Elliott made cash deposits aggregating $1,000,000
with an amendment in January 2001 to increase the amount to $1,850,000 with the
Company to be applied toward the purchase of an undivided mineral interest and
related seismic data in a prospect developed by the Company during 2000. These
obligations were fully paid on March 23, 2001 from a portion of the proceeds
from the sale of a substantial portion of the Company's multi-client data
library in the southern United States.

On August 3, 2001, the Company completed an agreement with Elliott
International, L.P. for the sale, with recourse retained, of certain of its
foreign accounts receivable. The agreement allows the Company to sell, at its
election, both billed and unbilled receivables arising out of data acquisition
and processing services rendered by Grant's branch operations in Ecuador and
Colombia. The maximum amount available for Elliott International L.P. to
purchase was $4.0 million and the agreement extended through February 2002, with
all repayments to Elliott required by that time. As of December 31, 2001, the
company's obligation under the agreement was $4.0 million. The agreement was
amended on January 7, 2002 to increase the maximum amount available under the
agreement to $5.25 million and to extend the agreement through September 30,
2002 with all payments required by that time.

23

Additional amendments were completed February 5, 2002, March 5, 2002 and March
21, 2002 to increase the maximum amount available under the agreement to $7.5
million, $10.9 million, and $11.7 million, respectively. Additionally, the
March 21, 2002 amendment expanded the scope of the agreement to include
receivables for all of the Company's South American locations (see Note 21). As
of March 28, 2002, $11.7 million was outstanding under the agreement.

During 2001, the Company performed data acquisition and processing services
for an affiliated oil and gas exploration and production company, Prime Natural
Resources, Inc. Revenues for these services were approximately $1.5 million for
2001 and related accounts receivables outstanding at December 31, 2001 was $0.2
million. In 2001, the Company sold a license in one of its multi-client data
library surveys to Prime Natural Resources, Inc. for $0.2 million. Management of
the Company believes such operations were conducted under terms and conditions
at least as favorable to the Company as could have been obtained from
third-party customers.

During 2001, payment in kind stock dividends aggregating 30,254 shares and
16,977 shares of Convertible Preferred Stock were issued to Elliott and Elliott
International, respectively.

PART IV

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

(a) The following financial statements are filed as part of this report:

1. Financial Statements

2. Financial Statement Schedules

Other schedules have not been included because they are not applicable,
immaterial or the information has been included in the financial statements or
notes thereto.

3. Exhibits

See Index to Exhibits on page 50. The Company will furnish to any eligible
stockholder, upon written request, a copy of any exhibit listed, upon payment of
a reasonable fee equal to our expenses in furnishing such exhibit.

(b) Reports on Form 8-K:

None

24

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 3rd day of
May 2002.

GRANT GEOPHYSICAL, INC.

By: /s/ RICHARD F. MILES
--------------------------------------------
Richard F. Miles
President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on the 3rd day of May 2002.

25

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of
Grant Geophysical, Inc.:

We have audited the accompanying consolidated balance sheets of Grant
Geophysical, Inc. and subsidiaries (a Delaware corporation) as of December 31,
2001 and 2000, and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for each of the two years in the
period ended December 31, 2001. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Grant Geophysical, Inc. and subsidiaries as of December 31, 2001 and 2000, and
the consolidated results of their operations and their cash flows for each of
the two years in the period ended December 31, 2001 in conformity with
accounting principles generally accepted in the United States.

The accompanying consolidated financial statements h