Edgar Filing: OMNI ENERGY SERVICES CORP

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K/A
No. 3
(MARK ONE)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003.

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

COMMISSION FILE NUMBER 0-23383

OMNI ENERGY SERVICES CORP.
(Exact name of registrant as specified in our charter)

LOUISIANA 72-1395273
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

4500 NE EVANGELINE THWY
CARENCRO, LOUISIANA 70520
(Address of principal executive offices) (Zip Code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(337) 896-6664

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

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $0.01 PAR VALUE PER SHARE

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

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

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [ ] No [X]

The aggregate market value of the voting stock held by non-affiliates of
the registrant at June 30, 2003 was $9,207,452.

The number of shares of the Registrant's common stock, $0.01 par value per
share, outstanding at March 26, 2004 was 10,908,199.

DOCUMENTS INCORPORATED BY REFERENCE

None

OMNI ENERGY SERVICES CORP.
ANNUAL REPORT ON FORM 10-K FOR
THE FISCAL YEAR ENDED DECEMBER 31, 2003

TABLE OF CONTENTS

PAGE
----

PART I
Items 1 and 2. Business and Properties................................................................. 2
Item 3. Legal Proceedings....................................................................... 13
Item 4. Submission of Matters To a Vote of Security Holders..................................... 13

PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters.................... 14
Item 6. Selected Financial Data................................................................. 15
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations... 16
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.............................. 26
Item 8. Financial Statements and Supplementary Data............................................. 26

PART IV
SIGNATURES .......................................................................................... 55
Exhibit Index ....................................................................................... 56

EXPLANATORY STATEMENT

We are filing this Amendment No. 3 to our Annual Report on Form 10-K for the
year ended December 31, 2003 to restate our financial statements to correct the
presentation of Net Income Applicable to Common and Common Stock Equivalents,
Net Income and Earnings Per Share in the Consolidated Statements of Operations,
the footnotes to the Consolidated Financial Statements and Management's
Discussion and Analysis of Financial Condition and Results of Operations. The
restatement affects the twelve months ended December 31, 2003 and the quarterly
periods ended September 30, and December 31, 2003.

Except as noted below, this Amendment speaks as of the original filing date of
our Annual Report on Form 10-K and has not been updated to reflect events
occurring subsequent to the original filing date. For the convenience of the
reader, we have restated Items 1 through 8 of our Annual Report on Form 10-K/A
in its entirety.

PART I

ITEMS 1 AND 2. BUSINESS AND PROPERTIES

GENERAL

OMNI Energy Services Corp. is a leading oilfield service company
specializing in providing an integrated range of (i) onshore seismic drilling,
permitting, survey and helicopter support services to geophysical companies
operating in logistically difficult and environmentally sensitive terrain and
(ii) helicopter transportation services to oil and gas companies operating
primarily in the shallow waters of the Gulf of Mexico. We operate in two
business divisions - Seismic Drilling and Aviation Services

The principal market of our Seismic Drilling division is the marsh, swamp,
shallow water and contiguous dry land areas along the U.S. Gulf Coast (the
"Transition Zone"), primarily in Louisiana and Texas, where we are the leading
provider of seismic drilling support services. In 1997, we commenced operations
in the mountainous regions of the Western United States. In 2003, we initiated
seismic drilling activities in various Transition Zone regions of Mexico. We
previously operated in Canada and South America but, in 1999, we ceased these
international operations pending improvements in these specific markets.

We own and operate a fleet of specialized seismic drilling and
transportation equipment for use in the Transition Zone. We believe we are the
only company that currently can both provide an integrated range of seismic
drilling, permitting, survey and helicopter support services in all of the
varied terrain of the Transition Zone and simultaneously support operations for
multiple, large-scale seismic projects. In February 2002, we acquired all of the
assets of AirJac Drilling, a division of Veritas Land DGC. This acquisition
created the largest domestic provider of seismic drilling services to
geophysical companies.

We operate a fleet of 29 company-owned, leased and customer-owned
helicopters, and one fixed-wing aircraft, from bases or heliports located in the
Gulf Coast regions of Louisiana and Texas. Our land-based aviation customers are
primarily geophysical companies operating in various regions of the United
States. Our offshore aviation customers include oil and gas companies operating
primarily in the shallow waters of the Gulf of Mexico. We maintain and operate
certain customer-owned aircraft providing air medical transportation services
for hospitals and medical programs in various counties of East Texas. The
aircraft dedicated to this operation are specifically outfitted to accommodate
emergency patients and emergency medical equipment. We also maintain an
inventory of aviation maintenance parts, turbine engines and other miscellaneous
flight equipment used in connection with providing aviation services to our
customers. In November 2003, we acquired American Helicopters, Inc. ("AHI")
establishing us as a leading provider of helicopter transportation services in
the Gulf of Mexico.

We were founded in 1987, as OMNI Drilling Corporation, to provide drilling
services to the geophysical industry. In July 1996, OMNI Geophysical, L.L.C.
acquired substantially all of the assets of OMNI Geophysical Corporation, the
successor to the business of OMNI Drilling Corporation. OMNI Energy Services
Corp. ("OMNI") was formed as a Louisiana corporation on September 11, 1997.

INDUSTRY OVERVIEW

SEISMIC DRILLING. Seismic data generally consists of computer-generated
three-dimensional ("3-D") images or two-dimensional ("2-D") cross sections of
subsurface geologic formations and is used in the exploration of new hydrocarbon
reserves and as a tool for enhancing production from existing reservoirs.
Onshore seismic data is acquired by recording subsurface seismic waves produced
by an energy source, usually dynamite, at various points ("source points") at a
project site. Historically, 2-D surveys were the primary technique used to
acquire seismic data. However, advances in computer technology have made 3-D
seismic data, which provides a more comprehensive geophysical image, a practical
and capable oil and gas exploration and development tool. 3-D seismic data has
proven to be more accurate and effective than 2-D data at identifying potential
hydrocarbon-bearing geological formations. The use of 3-D seismic data to
identify locations to drill both exploration and development wells has improved
the economics of finding and producing oil and gas reserves, which in turn has
created increased demand for 3-D seismic surveys and seismic support services.

Oil and gas companies generally contract with independent geophysical
companies to acquire seismic data. Once an area is chosen for seismic analysis,
permits and landowner consents are obtained, either by us, by the geophysical
company or by special permitting agents. The geophysical company, then,
determines the layout of the source and receiving points. For 2-D data, the
typical configuration of source and receiving points is a straight line with a
source point and small groups of specialized sensors ("geophones") or geophone
stations placed evenly every few hundred feet along the line. For 3-D data, the
configuration is generally a grid of perpendicular lines spaced a few hundred to
a few thousand feet apart, with geophone stations spaced evenly every few
hundred feet along one set of parallel lines, and source points spaced evenly
every few hundred feet along the perpendicular lines. This configuration is
designed by the geophysical company to provide the best imaging of the targeted
geological structures while taking into account surface obstructions such as
water wells, oil and gas wells, pipelines and areas where landowner consents
cannot be obtained. A survey team, then, marks the source points and geophone
locations, and the source points are drilled and loaded with dynamite.

After the source points have been drilled and loaded and the network of
geophones and field recording boxes deployed over a portion of the project area,
the dynamite is detonated at a source point. Seismic waves generated by the
blast move through the geological formations under the project area and are
reflected by various subsurface strata back to the surface where they are
detected by geophones. The signals from the geophones are collected and
digitized by recording boxes and transmitted to a central recording system. In
the case of 2-D data, the geophones and recording devices from one end of the
line are then shuttled, or "rolled forward," to the other end of the line and
the process is repeated. In the case of 3-D data, numerous source points,
typically located between the first two lines of a set of three or four parallel
lines of geophone stations, are activated in sequence. The geophone stations and
recording boxes from the first of those lines are then rolled forward to form
the next line of geophone stations. The process is repeated, moving a few
hundred feet at a time, until the entire area to be analyzed has been covered.

After the raw seismic data has been acquired, it is sent to a data
processing facility. The processed data can then be manipulated and viewed on
computer workstations by geoscientists to map the subsurface structures to
identify formations where hydrocarbons are likely to have accumulated and to
monitor the movement of hydrocarbons in known reservoirs. Domestically, seismic
drilling and survey services are typically contracted to companies, such as
OMNI, as geophysical companies have found it more economical to outsource these
services and focus their efforts and capital on the acquisition and
interpretation of seismic data.

AVIATION SERVICES. We provide equipment and personnel transportation
services to (i) geophysical companies working in various regions of the United
States and (ii) oil and gas companies operating principally in the shallow
waters of the Gulf of Mexico. Our aviation revenues are dependent upon the
demand for our services, which is impacted by the pricing and terms of our
contracts. Demand for helicopter services is measured in flight hours flown. The
level of demand for helicopter services is also dependent upon domestic
geophysical activity, oil and gas exploration and development and production
activities. Customer budgets for these activities are influenced by actual and
anticipated commodity prices for oil and gas.

Helicopter contracts are for varying periods (generally one year) and
permit the customer to cancel the charter before the end of the contract term
for a variety of reasons, including safety violations and non-performance. At
the expiration of the contract, customers typically negotiate renewal terms for
the next contract period. Sometimes customers solicit new bids at the expiration
of a contract. Contracts are generally awarded based on a number of factors,
including price, quality of service, equipment availability and record of
safety. An incumbent operator has a competitive advantage in the bidding process
based on its relationship with the customer, its knowledge of the site
characteristics and its understanding of the cost structure for the operations.

DESCRIPTION OF OPERATIONS

We provide an integrated range of services including (i) onshore seismic
drilling, operational support, permitting, surveying and helicopter support to
geophysical companies operating in logistically difficult and environmentally
sensitive terrain in the United States and (ii) helicopter transportation
services to oil and gas companies operating primarily in the shallow waters of
the Gulf of Mexico.

SEISMIC DRILLING. Our primary activity is the drilling and loading of
source points for seismic analysis. Once the geophysical company has plotted the
various source points and a survey crew has marked their locations, our drill
crews are deployed to drill and load the source points.

In the Transition Zone, we use water pressure rotary drills mounted on
various types of vehicles to drill the source holes. The nature, accessibility
and environmental sensitivity of the terrain surrounding the source point
determine the type of vehicle used. Transition Zone source holes are generally
drilled to depths of 40 to 180 feet, depending on the nature of the terrain and
the needs of the geophysical company, using ten-foot sections of drill pipe,
which are carried with the drilling unit. Our Transition Zone vehicles are
typically manned with a driver and one or two helpers. The driver is responsible
for maneuvering the vehicle into position and operating the drilling unit, while
the helper sets and guides the drill into position, attaches the drilling unit's
water source, if drilling in dry areas, and loads the drill pipe sections used
in the drilling process. Once the hole has been drilled to the desired depth, it
is loaded with dynamite, which is carried onboard our vehicles in special
containers. The explosive charge is set at the bottom of the drill hole and then
tested to ensure that the connection has remained intact. Once the charge has
been tested, the hole is plugged in accordance with local, state and federal
regulations and marked so that the geophysical company can identify it for
detonation at a later date. This process is repeated throughout the survey area
until all source points have been drilled and loaded.

In Seismic Rock Drilling, we use compressed air rotary/hammer drills to
drill holes that are typically shallower than Transition Zone holes. Rock drills
are manned by a two-man or three-man crew and are transported to and from
locations by hand, surface vehicle or helicopter. Once the hole has been drilled
to the desired depth, it is loaded with explosives, which are delivered to the
job site in an explosive magazine carried by hand, vehicle or helicopter.

Operational Support. We are able to coordinate a variety of related
services to customers performing 3-D seismic data acquisition projects that
produce significant economies and value. Our substantial base of experience
gained from years of work supporting 3-D seismic projects enables us to provide
significant pre-job planning information to the customer during job design
analysis. Typical 3-D seismic data acquisition projects in the field involve
large amounts of equipment, personnel and logistics coordination. Coordination
of movements between permitting, drilling, survey and recording crews is of
critical importance to timely, safe and cost effective execution of the job. We
have a pool of senior field supervisors, who have broad seismic industry
experience and are able to coordinate the activities of drill crews, permit
agents and survey teams with the recording crews to achieve improved results.
These personnel also have the ability to recommend changes to the customer field
representatives in the manner of executing the job in the field to improve
performance and reduce costs. By having the ability to perform significant field
coordination, we are able to streamline field decision making and information
flow and reduce customer overhead costs that otherwise would be required to
perform these supervisory tasks. We also have one of the industry's leading
Health, Safety and Environmental ("HSE") programs. The involvement of our
experienced personnel monitoring HSE field practices greatly reduces customer
involvement in this area. By offering the only integrated combination of seismic
drilling, permit acquisition, seismic survey and operational support, in
addition to an equipment fleet that is one of the largest in terms of number of
units and most diverse in the industry, we provide significant operational
advantages to the customer.

Permitting. In November 2000, we created a "Geophysical Permit Acquisition
Division." Our staff of contract permit agents first conducts research in public
land title records to determine ownership of the lands located in the seismic
projects. The permit agents then contact, negotiate and acquire permits and
landowner consents for the survey, drilling and recording crews to conduct their
operations. Throughout the seismic data acquisition process, the permit agents
assist the crews in the field with landowner relations and permit restrictions
in order to reduce field-crew downtime for noncompliance with landowner
requests. Our permit services are enhanced with the assistance of a proprietary
database software program specifically designed for efficient management of
seismic projects.

Currently, we have 25 permit agents under contract conducting services
throughout the Gulf Coast States. These agents have significant experience in
the permit acquisition and management process.

Survey. Once all permits and landowner consents for a seismic project have
been obtained and the geophysical company has determined the placement of source
and receiving points, survey crews are sent into the field to plot each source
and receiving point prior to drilling. We employ both GPS (global positioning
satellite) equipment, which is more efficient for surveying in open areas, and
conventional survey equipment, which is generally used to survey wooded areas.
We have successfully integrated both types of equipment in order to complete
projects throughout the varied terrain of the Transition Zone and elsewhere. In
addition, the survey crews have access to our extensive fleet of specialized
transportation equipment, as opposed to most other survey companies, which must
rent this equipment.

Helicopter Support. Working in concert with our Aviation Services
division, we provide helicopter support throughout the continental United States
to geophysical companies and certain federal and state governmental agencies
when needed. We use long-line helicopters to shuttle geophones and recorders
used to collect seismic data between receiving points. Once seismic data has
been acquired from a portion of the project site, the geophones and recorders
must be moved into position to collect data from the next area to be analyzed.
By using helicopters, we are able to reduce delays in completing stages of a
seismic project by transporting the geophones and recording boxes to the next
receiving points in the survey area, in an efficient manner, and with minimal
environmental impact. Our helicopters are also used to transport heli-portable
drilling units and their crews into remote, or otherwise inaccessible terrain,
in an efficient and environmentally sensitive manner. Currently, two of our
fleet of 29 helicopters are used exclusively to support our seismic drilling
operations.

International Operations. We commenced line cutting and survey services in
South America in July 1998, in conjunction with the formation of our joint
venture, OMNI International Energy Services -- South America, Ltd. During 1999,
we removed a portion of our equipment from South America and reduced operating
levels to a minimum pending improvements in market conditions. In 2003, we sold
our remaining assets in South America. We have commenced limited seismic
drilling operations in various Transition Zone regions of Mexico.

Fabrication and Maintenance. At our Carencro facilities, we perform all
routine repairs and maintenance for our Transition Zone and highland drilling
equipment. We design and fabricate aluminum marsh all terrain vehicles (ATV's),
a number of our support boats and pontoon boats, and the drilling units we use
on all of our Transition Zone equipment. We purchase airboats directly from the
manufacturer and then modify the airboats to install the drilling equipment. We
have also designed and built a limited number of highland drilling units by
installing our drilling equipment on tractors bought directly from the
manufacturer. We also fabricate rock-drilling equipment and have the capability
of fabricating other key equipment, such as swamp ATV's. Because of our ability
to fabricate and maintain much of our equipment, we do not believe that we are
dependent on any one supplier for our drilling equipment or parts.

AVIATION SERVICES. Currently, we operate 29 helicopters and one fixed-wing
aircraft. Our offshore helicopters derive revenue from the transport of our
customers' workers and equipment to platforms, drilling rigs and other offshore
structures. Oil and gas exploration and production companies and other offshore
service companies use our aviation services primarily for routine offshore
transportation, to transport personnel during medical and safety emergencies,
and to evacuate personnel during the threat of hurricanes and other adverse
weather conditions. Most of our customers have entered into contracts for
transportation services for a term of one year or longer, although some do hire
us on an "ad hoc" or "spot" basis.

Many of our aircraft are available for hire by any customer, but 17 are
dedicated to individual customers. We operate helicopters that have flying
ranges up to 150 miles from shore, but we maintain various offshore re-fueling
locations to increase the helicopters range and the amount of time a helicopter
can operate offshore. Our pilots, several of whom are Airline Transport Pilots,
Certified Flight Instructors, Certified Flight & Instrument Instructors and are
commercially licensed, have an average of approximately 11,000 flight hours. We
perform all routine maintenance on our aircraft at our primary repair and
hangers facilities in Carencro, Louisiana and Angleton, Texas.

FACILITIES AND EQUIPMENT

FACILITIES - SEISMIC DRILLING. Our corporate headquarters, fabrication
facility and primary maintenance facility are situated in two buildings located
on approximately 34 acres of land in Carencro, Louisiana. The buildings,
constructed in 1998, provide approximately 20,000 square feet of office space
and 32,000 square feet of covered maintenance and fabrication space.

During part of 2002, we leased an operations base in Loveland, Colorado to
support our rock-drilling operations. The lease expired in 2002, at which point,
we decided to consolidate our equipment into our primary maintenance facility in
Carencro, Louisiana. We owned an office and warehouse facility in Santa Cruz,
Bolivia, but it was sold in 2003 in connection with discontinuing our operations
in South America.

From 1999 to 2001, we leased from an affiliate two additional buildings
adjacent to our main headquarters. The buildings provided approximately 2,500
square feet of office space and 19,000 square feet of covered maintenance,
fabrication and warehouse space. We used these buildings for the storage and
maintenance of a portion of our survey and aviation assets. The lease on these
facilities expired in 2001, at which point, we moved the remaining assets and
personnel into our primary maintenance facility.

FACILITIES - AVIATION SERVICES. Our primarily Eastern Gulf of Mexico
regional hangar and repair facility is located within our maintenance facility
in Carencro, Louisiana. Our primary Western Gulf of Mexico regional hanger and
repair facility is located on property leased from the Brazoria County Airport
Commission in Angleton, Texas. The lease covers 2.5 acres and two buildings,
with an aggregate of approximately 19,300 square feet. The monthly rent paid by
us is $5,700. The lease for this facility expires in 2006 and contains a three
(3) year renewal option following the expiration date. Both regional facilities
house our aviation operational, executive and administrative offices and the
primary repair and maintenance facility.

In March 2004, we acquired approximately 13 acres of land and improvements
located in Intracoastal City, Louisiana. We plan to consolidate into
Intracoastal City, Louisiana, all of our primary aviation repair, maintenance,
administration and hangar facilities from their current locations in Carencro,
Louisiana and Angleton, Texas.

We also lease property for five additional bases to service the oil and
gas industry offshore Louisiana and Texas. Those bases in which we have made a
significant investment in leasehold improvements include: Grand Chenier,
Abbeville, Patterson and Fourchon, Louisiana, and Port Lavaca, Texas.

Our Air Emergency Operation-related facilities include Lufkin, Port Arthur
and Beaumont, Texas.

At the customer's request, we also operate from offshore platforms that
are provided, without charge, by the owners of the platforms. In certain
instances, we are required to indemnify the owners of these platforms against
loss in connection with our use thereof.

TRANSITION ZONE TRANSPORTATION AND DRILLING EQUIPMENT. Because of the
varied terrain throughout the Transition Zone and the prevalence of
environmentally sensitive areas, we employ a wide variety of drilling vehicles.
We believe that we are the only company currently operating in the Transition
Zone that owns and operates all of the following types of equipment:

NUMBER OF UNITS AS
TYPES OF EQUIPMENT OF DECEMBER 31, 2003
-------------------------------------------------------------------------------- --------------------

Highland Drilling Units (1)..................................................... 79
Water Buggies................................................................... 60
Aluminum Marsh ATV's............................................................ 23
Steel Marsh ATV's (2)........................................................... 8
Airboat Drilling Units.......................................................... 40
Swamp ATV's..................................................................... 30
Pullboats....................................................................... 21
Pontoon Boats................................................................... 15
Jack-Up Rigs.................................................................... 1
Skid-Mounted Drilling Units..................................................... 20

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(1) Twenty of these drilling units are currently dedicated to seismic
rock drilling operations outside of the Transition Zone

(2) These drilling units are currently held for sale (see Note 4 to the
Consolidated Financial Statements).

Because of our extensive fleet of Transition Zone transportation and
seismic drilling equipment, much of which we fabricated, we believe that we are
the only company that currently can provide an integrated range of seismic
drilling and survey services in all of the varied terrain of the Transition Zone
and simultaneously support operations for multiple, large-scale seismic
projects.

HIGHLAND DRILLING UNITS AND WATER BUGGIES. We currently own and operate 79
highland drilling units for seismic drilling in dry land areas, 20 of which are
currently dedicated to our seismic rock drilling operations outside of the
Transition Zone. These units generally consist of a tractor-like vehicle with a
drilling unit mounted on the rear of the vehicle. This highland drilling unit
can be driven over land from point to point and is accompanied by a unit
referred to as a "water buggy"(of which we own 60) that carries water required
for water pressure rotary drills. This type of vehicle is used around the world
for this type of terrain.

MARSH ATV'S. The environmentally sensitive wetlands along the U.S. Gulf
Coast containing water grasses on dry land and in shallow water and areas mixed
with open water are referred to as marsh areas. When there is a minimum amount
of water in these areas, marsh ATV's, which are amphibious vehicles supported by
pontoons that are surrounded by tracks, are used to provide seismic drilling
services. The pontoons enable the marsh ATV to float while the tracks propel the
vehicle through the water and over dry marsh areas. Each marsh ATV is equipped
with a drilling unit and a small backhoe for digging a small hole to collect
water necessary for drilling.

Some marsh areas have sufficient surrounding water to support drilling
without an external water source, but often water must be pumped into the area
from a remote water source or a portable supply must be carried by the marsh
ATV.

We own and operate 31 marsh ATV's, of which eight are made of stainless
steel and 23 are made of aluminum. All of the stainless steel marsh ATV's are
currently held for sale. The aluminum ATV's are lighter than steel vehicles and
are specifically designed for the environmentally sensitive areas typically
found in marsh terrain. Landowner consents will often require the use of
aluminum ATV's in an effort to reduce the environmental impact of seismic
drilling. The aluminum marsh ATV is the most widely accepted marsh vehicle for
drilling operations in all Louisiana, state and federal refuges. We fabricated
our own aluminum marsh ATV's at our facilities in Carencro, Louisiana.

AIRBOAT DRILLING UNITS. We own and operate 40 airboat drilling units. An
airboat-drilling unit consists of a drilling unit fabricated and installed on a
large, three-engine airboat. Because of their better mobility, airboat-drilling
units are used in shallow waters and all marsh areas where sufficient water is
present.

SWAMP ATV'S AND PULLBOATS. Wooded lowlands typically covered with water
are referred to as the "swamp areas" of the Transition Zone. Our swamp ATV's are
used to provide drilling services in these areas. Swamp ATV's are smaller,
narrower versions of the marsh ATV's. The smaller unit is needed in swamp areas
due to the dense vegetation typical in the terrain. Because of its smaller size,
the swamp ATV uses a skid-mounted drilling unit installed in a pullboat, a
non-motorized craft towed behind the swamp ATV. We own and operate 30 swamp
ATV's and 21 pullboats. Swamp ATV's are also used in connection with survey
operations in swamp areas.

PONTOON BOATS. We own and operate 15 pontoon boats that are used in
shallow or protected inland bays and lakes and shallow coastal waters. Each
pontoon boat uses a skid-mounted drilling unit installed on board.

JACK-UP RIGS. When a seismic survey requires source points to be drilled
in deeper inland bays or lakes or in deeper coastal waters, we use jack-up rigs
equipped with one of our skid-mounted drilling units. Seismic activity in water
deeper than approximately 20 feet is generally conducted by using offshore
seismic techniques that do not include the drilling and loading of source
points. We currently have one jack-up rig.

SKID-MOUNTED DRILLING UNITS. A skid-mounted drilling unit is a drilling
unit mounted on I-beam supports, which allows the drilling unit to be moved
easily between pullboats, pontoon boats, jack-up rigs and other equipment we
operate based on customer needs. We manufacture our skid-mounted drilling units
at our facilities in Carencro, Louisiana and we own 20 of these units, one of
which is located outside of the Transition Zone.

MISCELLANEOUS. We own and operate 88 single engine airboats and 21
outboard powered boats, which we use to ferry personnel and supplies to
locations throughout the Transition Zone. We also maintain a fleet of seven
tractor-trailer trucks and numerous other trucks, trailers and vehicles to move
our equipment and personnel to projects throughout the Transition Zone.

HELI-PORTABLE AND SEISMIC ROCK DRILLING EQUIPMENT. We have 20
heli-portable and man-portable drilling units and 24 highland drilling units
dedicated to seismic rock drilling. We also have the ability to manufacture our
own heli-portable and man-portable seismic rock-drilling units, and often export
and provide servicing of heli-portable and man-portable drilling units.

AVIATION EQUIPMENT. The following table sets forth the type and number of
aircraft that are operated by our Aviation division:

NUMBER OF
HELICOPTERS AIRCRAFT
------------------------------------------------------------------------ ---------

Sikorsky 76-A.......................................................... 1(1)
Bell 407............................................................... 4(1)
Bell Long Ranger 206L-III.............................................. 11
Bell Jet Ranger 206B-III............................................... 8
Bell UH-1H............................................................. 1
Eurocopter BO-105...................................................... 3
Hughes MD 500 E........................................................ 1
FIXED WING AIRCRAFT
King Air 90............................................................ 1

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(1) Includes one Sikorsky 76 and one Bell 407 acquired after December
31, 2003.

MATERIALS AND EQUIPMENT

The principal materials and equipment used in our seismic drilling
operations, which include drills, heli-portable and man-portable drills, drill
casings, drill bits, engines, gasoline and diesel fuel, dynamite, aluminum and
steel plate, welding gasses, trucks and other vehicles, are currently in
adequate supply from many sources. We do not depend upon any single supplier or
source for such materials.

For aircraft maintenance and repairs, we carry an inventory of aircraft
parts. Many of these inventory items are parts that have been removed from
aircraft, refurbished according to manufacturers' and Federal Aviation
Administration ("FAA") specifications, and returned to inventory. There are
currently adequate supplies of replacement parts from many sources, including
the original equipment manufacturer; however, we sometimes experience extended
lead times for deliveries. We use systematic procedures to estimate valuation of
these used parts, which includes consideration of their condition and continuing
utility. These valuation estimates sometimes impact the carrying values of
inventory reported in our financial statements.

SAFETY AND QUALITY ASSURANCE

We maintain a stringent safety assurance program to reduce the possibility
of accidents. Our HSE department establishes guidelines to ensure compliance
with all applicable state and federal safety regulations and provides training
and safety education through orientations for new employees, which include first
aid and CPR training. Our HSE manager reports directly to our Chief Executive
Officer and supervises five HSE field advisors and one instructor who provide
Occupational Safety and Health Act ("OSHA") mandated training. We believe that
our safety program and commitment to quality are vital to attracting and
retaining customers and employees.

Each drilling crew is supervised at the project site by a field supervisor
and, depending on the project's requirements, an assistant supervisor and
powderman who is in charge of all explosives. For large projects or when
required by a customer, a separate advisor from our HSE department is also
located at the project site. Management is provided with daily updates for each
project and believes that our daily review of field performance together with
the on-site presence of supervisory personnel helps ensure high quality
performance for all of our projects.

Our pilots are trained to the FAA Federal Aviation Regulation ("FAR") 135
(non-scheduled commercial passenger) or 133 (external load) standards and must
satisfy annual FAA check-rides. Licensed maintenance personnel are deployed to
each project site at which aircraft are used. The operation of helicopters
inherently involves risk. Hazards such as aircraft accidents, collisions, fire
and adverse weather are hazards, which must be managed and may result in loss of
life, serious injury to employees or third parties and loss of equipment and
revenues.

Our aviation safety record is very favorable in comparison to the record
of United States operators. A favorable safety record is one of the primary
factors a customer reviews in selecting an aviation provider. We place
significant emphasis on safety and it is an important factor affecting daily
operations.

CUSTOMERS; MARKETING; CONTRACTING

CUSTOMERS. Historically, our customers have primarily been geophysical
companies, although in many cases the oil and gas company participates in
determining which drilling, permitting, survey or aviation company will be used
on our seismic projects. A few customers have, historically, generated a large
portion of our seismic drilling revenue. For example, our largest customers
(those which individually accounted for more than 10% of revenue in a given
year, listed alphabetically) collectively accounted for 71% (Grant Geophysical,
Quantum Geophysical and Western Geophysical), 84% (Veritas DGC and Western
Geophysical) and 71% (Quantum Geophysical, Seismic Exchange, and Veritas DGC) of
revenue for fiscal 2001, 2002 and 2003, respectively. While we expect oil and
gas companies utilizing our aviation services will eventually comprise a greater
share of our revenue base, we currently derive a significant amount of our
revenue from a small number of large geophysical companies and independent oil
and gas operators. Our loss of one of these significant customers, if not offset
by sales to new or other existing customers, could have a material adverse
effect on our business and operations.

The majority of our customers are engaged in the oil and gas industry.
This concentration of customers may impact our overall exposure to credit risk,
either positively or negatively, in that customers may be similarly affected by
changes in economics and industry conditions. We do not generally require
collateral in support of trade receivables, but we do maintain reserves for
credit losses. Actual losses have historically been within expectations.

MARKETING. Our Seismic Drilling services have traditionally been marketed
by our principal executive officers. We believe that this marketing approach
helps us preserve long-term relationships established by our executive officers.
Even as our geographical and service capabilities expand, we intend to continue
implementing these marketing efforts in both the Transition Zone and in the
Rocky Mountain region from our principal offices in Carencro, Louisiana.

Our Aviation Services are marketed from offices in Louisiana and Texas by
two marketing representatives with more than fifty years combined experience in
providing helicopter transportation services.

CONTRACTING -- SEISMIC DRILLING. We generally contract with our customers
for seismic drilling services on a unit-price basis, either on a "per hole" or
"per foot" basis. These contracts are often awarded after a competitive bidding
process. We price our contracts based on detailed project specifications
provided by the customer, including the number, location and depth of source
holes and the project's completion schedule. As a result, we are generally able
to make a relatively accurate determination prior to pricing a contract of the
type and amount of equipment required to complete the contract on schedule.

Because of unit-price contracting, we sometimes bear a portion of the risk
of production delays that are beyond our control, such as those caused by
adverse weather. We often bill the customer standby charges if our operations
are delayed due to delays in permitting or surveying or for other reasons within
the geophysical company's control.

CONTRACTING -- PERMITTING SERVICES. We contract with our customers for
permitting services on a day rate or per project basis. Under the per project
basis, revenue is recognized when certain percentages of the permitting process
are completed. Contracts are often awarded to us only after competitive bidding.
In the case of the per project basis, we determine the price after we have taken
into account such factors as the number of permit agents, the number of permits
and the detailed project specification provided by the customer.

CONTRACTING -- SURVEY SERVICES. We contract with our customers for seismic
survey services on a day rate or per mile basis. Under the per mile basis,
revenue is recognized when the source or receiving point is marked by one of our
survey crews. Contracts are often awarded to us only after competitive bidding.
In each case, the price is determined after we have taken into account such
factors as the number of surveyors and other personnel, the type of terrain and
transportation equipment, and the precision required for the project based on
detailed project specifications provided by the customer.

AVIATION SERVICES. Exploration and development activities generally use
medium size and larger aircraft on which we generally earn higher margins.
Production related activities are generally less sensitive to variances in
commodity prices and accordingly, provide a more stable activity base for our
flight operations. A majority of our operating revenue is related to production
activities of the oil and gas companies.

Helicopter contracts are generally based on a two-tier rate structure
consisting of a daily or monthly fixed fee plus, additional fees for each hour
flown. We also provide services to customers on an "ad hoc" basis, which
generally entails a shorter notice period or shorter duration. Our charges for
"ad hoc" services are generally based on an hourly rate or a daily or monthly
fixed fee plus, additional fees for each hour flown. Generally, "ad hoc"
services have a higher margin than other helicopter contracts due to supply and
demand dynamics.

COMPETITION

SEISMIC DRILLING SERVICES. The principal competitive factors for seismic
drilling services are price and the ability to meet customer schedules, although
other factors including safety, capability, reputation and environmental
sensitivity are also considered by customers when deciding upon a provider of
seismic drilling services. We have numerous competitors in the Transition Zone
and, in particular, in the highland areas in which we operate. We believe that
no other company operating in the Transition Zone owns a fleet of Transition
Zone seismic drilling equipment as varied or as large as ours. Our extensive and
diverse equipment base allows us to provide drilling services to our customers
throughout the Transition Zone with the most efficient and environmentally
appropriate equipment. We believe there are numerous competitors offering rock
and heli-portable drilling in the Rocky Mountain region and internationally.

PERMITTING SERVICES. Our competitors include a number of larger,
well-established companies with a number of permit agents comparable to us.

SURVEY SERVICES. Our competitors include a number of larger,
well-established companies with a number of crews comparable to us.

HELICOPTER SUPPORT SERVICES. We have numerous competitors that provide
helicopter support services to geophysical companies operating in the Transition
Zone. We believe, however, that we are the only company offering both seismic
drilling and long-line support services in the Transition Zone. We believe that
there are numerous companies offering helicopter services in rock drilling and
other mountain areas, as well as internationally. Some of these companies have
greater experience in these areas and several operate more aircraft than we do
in these areas.

The market to provide offshore transportation services in the Gulf of
Mexico is extremely competitive. Many of our contracts are awarded only after
competitive bidding. The principal aspects of competition are safety, price,
reliability, availability and service. There are two major and several smaller
and like-size competitors operating in the Gulf of Mexico. Some of these
competitors are much larger, have more aircraft and have greater experience than
we do in this area.

SEASONALITY AND WEATHER RISKS

Our Seismic Drilling operations are subject to seasonal variations in
weather conditions and daylight hours. Since our activities take place outdoors,
the average number of hours worked per day, and therefore the number of holes
drilled or surveyed per day, generally is less in winter months than in summer
months, due to an increase in rainy, foggy and cold conditions and a decrease in
daylight hours. Furthermore, demand for seismic data acquisition activity by oil
and gas companies at the end of the fourth quarter and in the first quarter is
generally lower than at other times of the year. As a result, our revenue and
gross profit during the fourth quarter and the first quarter of each year are
typically low as compared to the other quarters. Operations may also be affected
by the rainy weather, lightning, hurricanes and other storms prevalent along the
Gulf Coast throughout the year and by seasonal climatic conditions in the Rocky
Mountain area. In addition, prolonged periods of dry weather result in slower
drill rates in marsh and swamp areas as water in the quantities needed to drill
is more difficult to obtain and equipment movement is impeded. Adverse weather
conditions and dry weather can also increase maintenance costs for our equipment
and decrease the number of vehicles available for operations.

Three types of weather-related or seasonal occurrences impact our aviation
business: poor weather conditions, tropical storm season in the Gulf of Mexico,
and the number of hours of daylight.

In the Gulf of Mexico, the months of December through February have more
days of adverse weather conditions than the other months of the year. Also in
the Gulf of Mexico, June through November is tropical storm season. When a
tropical storm is about to enter or begins developing in the Gulf of Mexico,
flight activity may increase because of evacuations of offshore workers.
However, during tropical storms, we are unable to operate in the area of the
storm. In addition, since most of our bases are located along the Gulf of
Mexico, tropical storms may cause substantial damage to our property, including
helicopters. Additionally, we incur cost in evacuating our aircraft and bases
during tropical storms.

Since fall and winter months have fewer hours of daylight, flight hours
are generally lower at these times, which typically results in a reduction in
operating revenues during these months. We currently operate 24 helicopters in
our oil and gas operations, two helicopters in our seismic drilling operations
and three helicopters in our Air Emergency Services operations.

Our operating results may, and usually do, vary from quarter to quarter,
depending on factors outside of our control. As a result, full year results are
not likely to be a direct multiple of any particular quarter or combination of
quarters.

BACKLOG

Our backlog represents those seismic drilling and survey projects for
which a customer has hired us and has scheduled a start date for the project.
Projects currently included in our backlog are subject to termination or delay
without penalty at the option of the customer, which could substantially reduce
the amount of backlog currently reported.

As of December 31, 2003, our backlog was approximately $36.3 million
compared to $33.3 million at December 31, 2002. Backlog at December 31, 2003
includes seismic drilling and survey projects in the Transition Zone, in
addition to, seismic rock drilling projects. Our aviation and permitting
divisions, historically, have not measured backlog due to the nature of our
business and our contracts, which are generally cancelable by either party with
thirty days written notice.

GOVERNMENTAL REGULATION

SEISMIC DRILLING. Our operations and properties are subject to and
affected by various types of governmental regulation, including laws and
regulations governing the entry into and restoration of wetlands, the handling
of explosives and numerous other federal, state and local laws and regulations.
To date our cost of complying with such laws and regulations has not been
material, but because such laws and regulations are changed frequently, it is
not possible for us to accurately predict the cost or impact of such laws and
regulations on our future operations.

Furthermore, we depend on the demand for our services by the oil and gas
industry and are affected by tax legislation, price controls and other laws and
regulations relating to the oil and gas industry generally. The adoption of laws
and regulations curtailing exploration and development drilling for oil and gas
in our areas of operations for economic, environmental or other policy reasons
would adversely affect our operations by limiting demand for our services. We
cannot determine to what extent our future operations and earnings may be
affected by new legislation, new regulations or changes in existing regulations.

AVIATION SERVICES. As a commercial operator of small aircraft, we are
subject to regulations pursuant to the Federal Aviation Administration
Authorization Act of 1994, as amended (the "Federal Aviation Act"), and other
statutes. The FAA regulates our flight operations, and in this respect,
exercises jurisdiction over personnel, aircraft, ground facilities and other
aspects of our operations. We require a Air Taxi Certificate, granted by the
FAA, to transport personnel and property in our helicopters. This certificate
contains operating specifications that allow us to conduct our present
operations, but this certificate is potentially subject to amendment, suspension
and revocation in accordance with procedures set forth in the Federal Aviation
Act. We are not required to file tariffs showing rates, fares and other charges
with the FAA. The FAA is responsible for ensuring that we comply with all FAA
regulations relating to the operation of our aviation business. The FAA conducts
regular inspections regarding safety, training and general regulatory compliance
of our domestic aviation operations. Additionally, we are required to file with
the FAA, reports confirming our continued compliance.

We carry persons and property in our aircraft pursuant to authority
granted by the FAA. Under the Federal Aviation Act it is unlawful to operate
certain aircraft for hire within the United States unless such aircraft are
registered with the FAA and the FAA has issued the operator of such aircraft an
operating certificate. We have all FAA certificates required to conduct our
helicopter and aviation operations, and all of our aircraft are registered with
the FAA.

Generally, aircraft may be registered under the Federal Aviation Act only
if the aircraft is owned or controlled by one or more citizens of the United
States and operated pursuant to an operating certificate, which may be granted
only to a citizen of the United States. For purposes of these requirements, a
corporation is deemed to be a citizen of the United States only if, among other
things, at least 75% of the voting interest therein is owned or controlled by
United States citizens. In the event that persons other than United States
citizens should come to own or control more than 25% of the voting interest in
us, we have been advised that our aircraft may be subject to deregistration
under the Federal Aviation Act and loss of the privilege of operating within the
United States. None of our aircraft are currently owned, in whole or in part, by
a foreign entity. Our Articles of Incorporation and bylaws include provisions
that are designed to ensure compliance with this requirement.

We also are subject to the Communications Act of 1934, because of our
ownership and operation of a radio communications flight following network
throughout the Gulf of Mexico.

Numerous other federal statutes and rules regulate our offshore operations
and the operations of our customers, pursuant to which the government has the
ability to suspend, curtail, or modify certain or all offshore operations. A
suspension or substantial curtailment of offshore oil and gas operations for any
prolonged period of time would have an immediate and materially adverse impact
on us. A substantial modification of current offshore operations could adversely
affect the economics of such operations and result in reduced demand for our
helicopter services.

EXPLOSIVES. Because we load the holes that are drilled with dynamite, we
are subject to various local, state and federal laws and regulations concerning
the handling and storage of explosives and are specifically regulated by the
Bureau of Alcohol, Tobacco and Firearms of the U.S. Department of Justice. We
must take daily inventories of the dynamite and blasting caps that we keep for
our seismic drilling and are subject to random checks by state and federal
officials. We are licensed by the Louisiana State Police as an explosives
handler. Any loss or suspension of these licenses would result in a material
adverse effect on our results of operations and financial condition. We believe
that we are in compliance with all material laws and regulations with respect to
our handling and storage of explosives.

ENVIRONMENTAL. Our operations and properties are subject to a wide variety
of increasingly complex and stringent federal, state and local environmental
laws and regulations, including those governing discharges into the air and
water, the handling and disposal of solid and hazardous wastes, the remediation
of soil and groundwater contaminated by hazardous substances and the health and
safety of employees. In addition, certain areas where we operate are federally
protected or state-protected wetlands or refuges where environmental regulation
is particularly strict. These laws may provide for "strict liability" for
damages to natural resources and threats to public health and safety, rendering
a party liable for environmental damage without regard to negligence or fault on
the part of such party. Sanctions for noncompliance may include revocation of
permits, corrective action orders, administrative or civil penalties and
criminal prosecution. Certain environmental laws provide for strict, joint and
several liability for remediation of spills and other releases of hazardous
substances, as well as damage to natural resources. In addition, we may be
subject to claims alleging personal injury or property damage as a result of
alleged exposure to hazardous substances. Such laws and regulations may also
expose us to liability for the conduct of, or conditions caused by, others, or
for our acts that were in compliance with all applicable laws at the time such
acts were performed.

The Comprehensive Environmental Response, Compensation, and Liability Act
of 1980, as amended, and similar laws provide for responses to and liability for
releases of hazardous substances into the environment. Additionally, the Clean
Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, the
Safe Drinking Water Act, the Emergency Planning and Community Right to Know Act,
each as amended, and similar state or local counterparts to these federal laws,
regulate air emissions, water discharges, hazardous substances and wastes, and
require public disclosure related to the use of various hazardous substances.
Compliance with such environmental laws and regulations may require the
acquisition of permits or other authorizations for certain activities and
compliance with various standards or procedural requirements. We believe that
our facilities are in substantial compliance with current regulatory standards.

WORKER SAFETY. Laws and regulations relating to workplace safety and
worker health, primarily OSHA and regulations promulgated thereunder, govern our
operations. In addition, various other governmental and quasi-governmental
agencies require us to obtain certain permits, licenses and certificates with
respect to our operations. The kind of permits, licenses and certificates
required in our operations depend upon a number of factors. We believe that we
have all permits, licenses and certificates necessary to the conduct of our
existing business.

INSURANCE

SEISMIC DRILLING. Our operations are subject to the inherent risks of
inland marine activity, heavy equipment operations and the transporting and
handling of explosives, including accidents resulting in personal injury, the
loss of life or property, environmental mishaps, mechanical failures and
collisions. We maintain insurance coverages against certain of these risks,
which we believe are reasonable and customary in the industry. We also maintain
insurance coverage against property damage caused by fire, flood, explosion and
similar catastrophic events that may result in physical damage or destruction to
our equipment or facilities. All policies are subject to deductibles and other
coverage limitations. We believe our insurance coverage is adequate.
Historically, we have not experienced an insured loss in excess of our policy
limits; however, there can be no assurance that we will be able to maintain
adequate insurance at rates which we consider commercially reasonable, nor can
there be any assurance such coverage will be adequate to cover all claims that
may arise.

AVIATION SERVICES. We maintain hull and liability insurance on our
aircraft, which insures us against physical loss of, or damage to, our aircraft
and against certain legal liabilities to others. In some instances, we are
covered by indemnity agreements with certain customers in lieu of, or in
addition to our insurance. Our aircraft are not insured for loss of use. While
we believe we are adequately covered by insurance and indemnification
agreements, the loss of, or severe damage to, a significant number of our
aircraft could adversely affect revenues and profits.

EMPLOYEES

As of December 31, 2003, we had 269 employees, including 223 operating
personnel and 46 corporate, administrative and management personnel. These
employees are not unionized or employed pursuant to any collective bargaining
agreement or any similar agreement. We believe our relations with our employees
are generally good.

EXECUTIVE OFFICERS OF THE REGISTRANT

The name, age and offices held by each of the executive officers as of
March 26, 2004 are as follows:

NAME AGE POSITION
------------------------------------------------------ --- -------------------------------------

James C. Eckert....................................... 54 President and Chief Executive Officer
G. Darcy Klug......................................... 52 Chief Financial Officer

JAMES C. ECKERT was appointed our President and Chief Executive Officer in
March 2001. He served as Vice-President for Business Development of Veritas DGC
Land Inc. from 1998 to 2000. Prior to 1998, Mr. Eckert supervised the highland
and transition seismic acquisitions of Veritas DGC Land Inc. Prior to 1992, he
served as President of GFS Company, a company that he co-founded in 1985, until
its acquisition in 1992 by Digicon, Inc., a predecessor by merger to Veritas,
Inc. Mr. Eckert graduated from University of Southern Mississippi in 1971.

G. DARCY KLUG is our Chief Financial Officer. He joined us in May 2001,
after being involved in private investments since 1987. Between 1983 and 1987,
Mr. Klug held various positions with a private oil and gas fabrication company,
including the position of Chief Operating Officer and Chief Financial Officer.
Prior to 1983, he held various financial positions with Galveston-Houston
Company, a manufacturer of oil and gas equipment listed for trading on the New
York Stock Exchange. Between 1973 and 1979, he was a member of the audit staff
of Pricewaterhouse Coopers. Mr. Klug is a graduate of Louisiana State University
and is a member of the Louisiana State Board of Certified Public Accountants.

ITEM 3. LEGAL PROCEEDINGS

We are involved in various legal and other proceedings that are incidental
to the conduct of our business. We believe that none of these proceedings, if
adversely determined, would have a material effect on our financial condition,
results of operations or cash flows.

On February 13, 2004, we commenced litigation against a former director,
Advantage Capital Partners ("ACP") and their respective insurers in the Civil
District Court for the Parish of Orleans in the State of Louisiana. The suit
requests the court to determine our right under the Company's Articles of
Incorporation, as amended, to redeem the Series A 8% Convertible Preferred Stock
rather than to convert the shares into common stock. Furthermore, to the extent
the court determines we did not have a right to redeem, rather than convert, the
Series A Preferred Stock, the suit requests the court to determine that the
Unanimous Consent of the Board of Directors entered into on November 7, 2000
which, among other things, reduced the conversion price of the Series A
Preferred Stock from $2.50 to $0.75, is null and void and without effect because
it was accomplished by the defendants in violation of fiduciary duties and/or
public policy and Louisiana law.

Prior to the commencement of this litigation by us, we were notified,
through our counsel, that ACP claimed our redemption of the shares of Series A
8% Convertible Preferred Stock was "a breach of OMNI's obligations to ACP under
those provisions of its corporate charter that govern the conversion and
redemption of the Preferred Stock, as well as a breach of fiduciary duty to ACP,
violation of the Louisiana Blue Sky law and the federal securities laws, the
Louisiana Business Corporation law and other provisions of Louisiana law."

We are not currently aware of an actual lawsuit or counterclaim filed by
Advantage Capital Partners to our action. If we are served with any lawsuit or
counterclaim, we will vigorously defend against such allegations.

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

None

PART II

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

Our Common Stock is listed for quotation on the Nasdaq National Market
under the symbol "OMNI". At March 26, 2004, we had 1,730 stockholders of record
of Common Stock. The following table sets forth the range of high and low sales
prices of our Common Stock as reported by the Nasdaq National Market for the
periods indicated, giving retroactive effect to the one for three reverse stock
split effective July 3, 2002.

HIGH LOW
-------- --------

2002

First quarter................................................. $ 3.63 $ 1.80
Second quarter................................................ $ 2.64 $ 1.00
Third quarter................................................. $ 2.38 $ 1.29
Fourth quarter................................................ $ 1.37 $ 0.74

2003

First quarter................................................. $ 1.14 $ 0.75
Second quarter................................................ $ 1.98 $ 0.81
Third quarter................................................. $ 2.80 $ 1.49
Fourth quarter................................................ $ 7.48 $ 2.19

We have never paid cash dividends on our Common Stock. We intend to retain
future earnings, if any, to meet our working capital requirements and to finance
the future operations of our business. Therefore, we do not plan to declare or
pay cash dividends to holders of our Common Stock in the foreseeable future. In
addition, certain of our credit arrangements contain provisions that limit our
ability to pay cash dividends on our Common Stock.

EQUITY COMPENSATION PLAN INFORMATION

The following table gives information about our Common Stock that may be
issued upon the exercise of options, warrants and rights under all of our
existing equity compensation plans as of December 31, 2003:

(C)
NO. OF SECURITIES
(A) REMAINING
NUMBER OF AVAILABLE FOR
SECURITIES TO BE FUTURE ISSUANCE
ISSUED UPON THE (B) UNDER EQUITY
EXERCISE OF WEIGHTED AVERAGE COMPENSATION
OUTSTANDING EXERCISE PRICE OF PLANS (EXCLUDING (D)
OPTIONS, OUTSTANDING SECURITIES TOTAL OF SECURITIES
WARRANTS AND OPTIONS, WARRANTS REFLECTED IN REFLECTED IN
PLAN CATEGORY RIGHTS AND RIGHTS COLUMNS (A) & (B) COLUMNS (A) & (C)
----------------------------------------------- ---------------- ----------------- ----------------- -------------------

Equity Compensation Plans Approved by
Stockholders................................. 1,337,730 $ 2.74 162,270 1,500,000
Equity Compensation Plans Not Approved by
Stockholders................................. 94,565 $ 2.70 5,435 100,000
------------ ------- --------- -----------
Total...................................... 1,432,295 $ 2.74 167,705 1,600,000
============ ======= ========= ===========

PLAN NOT APPROVED BY STOCKHOLDERS

In January 1999, we approved the Amended OMNI Energy Services Corp. 1999
Stock Option Plan (the "Option Plan") to provide for the grant of options to
purchase shares of our Common Stock to non-officer employees of our company and
our subsidiaries in lieu of year-end cash bonuses. The Option Plan is intended
to increase shareholder value and advance our interests by providing an
incentive to employees and by increasing employee awareness of us in the
marketplace. Under the Option Plan, we may grant options to any of our employees
with the exception of our officers. The options become exercisable immediately
with respect to one-half of

the shares, and the remaining one-half shall be exercisable one year following
the date of the grant. The exercise price of any stock option granted may not be
less than the fair market value of the Common Stock on the effective date of the
grant. A total of 100,000 shares of Common Stock are authorized, of which 5,435
remain available for issuance at December 31, 2003.

ITEM 6. SELECTED FINANCIAL DATA

The selected financial data as of and for the five years ended December
31, 2003 are derived from our audited consolidated financial statements. The
following information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements and notes thereto included elsewhere in
this Annual Report. The per share data gives retroactive effect to the one for
three reverse stock split effective July 3, 2002.

The financial statements for the years ended December 31, 1999 through
2001, were audited by Arthur Andersen LLP ("Andersen"), who has ceased
operations. A copy of the report previously issued by Andersen on our financial
statements as of December 31, 2000 and 2001, and for each of the three years in
the period ended December 31, 2001, is included elsewhere in this Form 10-K.
Such report has not been reissued by Andersen.

YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
2003 2003
AS PREVIOUSLY AS
1999 2000 2001 2002 REPORTED RESTATED
-------- -------- -------- -------- ------------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

INCOME STATEMENT DATA:
Operating revenue ................................ $ 32,687 $ 16,563 $ 23,686 $ 27,796 $ 37,055 $ 37,055
Operating expense ................................ 35,443 20,212 20,893 22,142 28,741 28,741
-------- -------- -------- -------- -------- --------
Gross profit ..................................... (2,756) (3,649) 2,793 5,654 8,314 8,314
General and administrative expense ............... 12,344 5,999 3,126 3,771 4,820 4,820
Asset impairment and other charges ............... 10,336 11,284 632 -- -- --
-------- -------- -------- -------- -------- --------
Operating income (loss) .......................... (25,436) (20,932) (965) 1,883 3,494 3,494
Interest expense ................................. 2,989 3,012 1,300 1,079 999 999
Other expense (income), net ...................... 150 1,846 (7,929) (4) 245 245
-------- -------- -------- -------- -------- --------
Income (loss) before income taxes ................ (28,575) (25,790) 5,664 808 2,250 2,250
Income tax expense (benefit) ..................... (1,275) -- -- (400) (1,600) (1,600)
-------- -------- -------- -------- -------- --------
Income (loss) before minority interest ........... (27,300) (25,790) 5,664 1,208 3,850 3,850
Minority interest and income (loss) of
Subsidiaries ................................... (362) (17) -- -- -- --
-------- -------- -------- -------- -------- --------
Net income (loss) from continuing operations ..... (26,938) (25,773) 5,664 1,208 3,850 3,850
Discontinued operations .......................... -- -- -- -- (367) (367)
-------- -------- -------- -------- -------- --------
Net income (loss) ....... ....................... (26,938) (25,773) 5,664 1,208 3,483 3,483
Accretion of preferred stock and preferred
stock dividends ................................ -- -- (726) (484) (484) (484)
-------- -------- -------- -------- -------- --------
Net income (loss) applicable to common and
common equivalent shares........................ $(26,938) $(25,773) $ 4,938 $ 724 $ 2,999 $ 2,999
======== ======== ======== ======== ======== ========
Basic Income (loss) per common share:
Income from continuing operations ............ $ (5.07) $ (4.43) $ 0.55 $ 0.08 $ 0.44 $ 0.38
(Loss) from discontinued operations ......... -- -- -- -- (0.04) (0.04)
Net Income applicable to common and common
equivalent shares .......................... $ (5.07) $ (4.43) $ 0.55 $ 0.08 $ 0.34 $ 0.34
Diluted Income (loss) per common share:
Income from continuing operations ............ $ (5.07) $ (4.43) $ 0.50 $ 0.08 $ 0.44 $ 0.34
(Loss) from discontinued operations .......... -- -- -- -- $ (0.04) $ (0.03)
Net Income applicable to common and common
equivalent shares ........................... $ (5.07) $ (4.43) $ 0.50 $ 0.08 $ 0.34 $ 0.31
Number of Weighted Average Shares Basic .......... 5,323 5,819 9,015 8,739 8,772 8,772
Diluted ...................................... 5,323 5,819 9,844 8,745 8,828 11,362

AS OF DECEMBER 31,
--------------------------------------------------------------
1999 2000 2001 2002 2003
---------- ---------- ---------- ---------- ----------

BALANCE SHEET DATA:
Total assets.................................... $ 51,021 $ 34,624 $ 38,448 $ 41,325 $ 50,289
Long-term debt, less current maturities......... 1,186 8,500 9,289 8,340 9,624

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

Management's Discussion and Analysis of Financial Condition and Results of
Operations contains certain "forward looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), which reflect management's best judgment based on factors currently
known. Actual results could differ materially from those anticipated in these
"forward looking statements" as a result of a number of factors, including but
not limited to those discussed under the heading "Cautionary Statements."
"Forward looking statements" provided by us pursuant to the safe harbor
established by the federal securities laws should be evaluated in the context of
these factors.

This discussion and analysis should be read in conjunction with our
consolidated financial statements and notes thereto.

RECENT DEVELOPMENTS

Subsequent to December 31, 2003, we issued $10.0 million of 6.5%
Subordinated Convertible Debentures (the "Debentures") maturing in February
2007. The proceeds were used to redeem our Series A 8% Preferred Stock and a
portion of our Series B 8% Preferred Stock. Under the terms of the agreement,
the holders of the Debentures will also have the right to require the repayment
or conversion of up to $8.75 million (plus accrued and unpaid interest) of the
Debentures earlier than maturity ("Put Option"). The Put Option can be exercised
in ten consecutive and equal monthly installments commencing the first full
month following the date on which a registration statement filed with the
Securities and Exchange Commission to register the underlying common shares is
declared effective. Upon receipt by OMNI of the debenture holders' intent to
exercise the Put Option, the Company will have the irrevocable option to deliver
cash or common stock with respect to the Put Option. If the Company elects to
pay the Put Option with common stock, the underlying shares will be valued at a
12.5% discount to the average trading price of OMNI common stock for the
applicable pricing period, as defined by the agreement.

The Company also issued (i) Series A Warrants representing the right to
purchase in the aggregate 700,000 shares of common stock with an exercise price
of $7.15 per share (subject to adjustment as provided therein), and (ii) Series
B Warrants representing the right to purchase in the aggregate 390,000 shares of
common stock with an exercise price of $8.50 per share (subject to adjustment as
provided therein). The Series A Warrants and Series B Warrants cannot be
exercised at any time before the date that is six months and one day after the
date the warrants were issued. The Series A Warrants are exercisable for one
year after they become exercisable. The Series B Warrants are exercisable for
five years after they become exercisable.

Subsequent to December 31, 2003, we entered into a five-year contract to
provide offshore transportation services to approximately 90 manned and unmanned
offshore transportation platforms, primarily in the shallow, offshore waters of
the Gulf of Mexico. The contract is expected to generate for us, in excess of,
$7 million in annual revenue.

In March 2004, we acquired 13.6 acres of real estate near Intracoastal
City, Louisiana, which will serve as our primary operating aviation base and
facilitate the consolidation of our principal aviation maintenance and repair
facilities. We expect to commence operations from this new facility during the
third quarter of 2004.

GENERAL

Demand. We receive our revenues from customers in the energy industry.
Demand for our services is principally impacted by conditions affecting
geophysical companies engaged in the acquisition of 3-D seismic data and oil and
gas companies operating primarily in the shallow waters of the Gulf of Mexico.
The level of activity for our services is primarily influenced by the level of
capital expenditures by oil and gas companies.

A number of factors affect the decision of oil and gas companies to pursue
the acquisition of seismic data, including (i) prevailing and expected oil and
gas demand and prices; (ii) the cost of exploring for, producing and developing
oil and gas reserves; (iii) the discovery rate of new oil and gas reserves; (iv)
the availability and cost of permits and consents from landowners to conduct
seismic activity; (v) local and international political and economic conditions;
(vi) governmental regulations; and (vii) the availability and cost of capital.
The ability to finance the acquisition of seismic data in the absence of oil and
gas companies' interest in obtaining the information is also a factor, as some
geophysical companies will acquire seismic data on a speculative basis.

During 1999, with the reduction in the price of oil and gas, we began to
experience a decrease in demand for our services. In 2001, the market
experienced a rebound. For the years ended December 31, 2001, 2002 and 2003, our
operating revenues were $23.7 million, $27.8 million, and $37.1 million,
respectively.

Seasonality and Weather Risks. Our operations are subject to seasonal
variations in weather conditions and daylight hours. Since our activities take
place outdoors, on average, fewer hours are worked per day and fewer holes are
generally drilled or surveyed per day in winter months than in summer months due
to an increase in rainy, foggy, and cold conditions and a decrease in daylight
hours.

RESULTS OF OPERATIONS

The following discussion provides information related to the results of
our operations.

YEAR ENDED DECEMBER 31, 2002 COMPARED TO THE YEAR ENDED DECEMBER 31, 2003
(IN THOUSANDS):

YEAR ENDED
DECEMBER 31, DECEMBER 31,
2002 2003
------------- ------------

Operating revenue....................................................... $ 27,796 $ 37,055
Operating expense....................................................... 22,142 28,741
------------ ------------
Gross profit............................................................ 5,654 8,314
General and administrative expenses..................................... 3,771 4,820
------------ ------------
Operating income........................................................ 1,883 3,494
Interest expense........................................................ 1,079 999
Other (income) expense.................................................. (4) 245
------------ ------------
Income before taxes..................................................... 808 2,250
Income tax benefit...................................................... 400 1,600
------------ ------------
Net income from continuing operations................................... 1,208 3,850
Loss from discontinued operations....................................... -- (367)
------------ ------------
Net income applicable to common and common equivalent shares............ 1,208 3,483
Accretion of preferred stock and preferred stock dividends.............. (484) (484)
------------ ------------
Net income.............................................................. $ 724 $ 2,999
============ ============

Operating revenues increased 33%, or $9.3 million, from $27.8 million to
$37.1 million for the years ended December 31, 2002 and 2003, respectively. This
increase was due primarily to improved market conditions in the geophysical
industry in 2003. As a result, drilling revenues increased from $24.5 million
for the year ended December 31, 2002 to $30.1 million for the year ended
December 31, 2003. Aviation revenues increased from $3.1 million for the year
ended December 31, 2002 to $5.1 million for the year ended December 31, 2003, as
we continued to concentrate on the more profitable offshore market and, to a
limited extent in the fourth quarter, our acquisition of AHI. Our permitting
division reported revenues of $1.8 million for the year ended December 31, 2003
as compared to $0.2 million for the same period of 2002. Survey revenues
remained constant at zero for the years ended December 31, 2002 and 2003 as we
continued to concentrate our personnel, equipment and available working capital
on other core segments of our business. Operating revenues are expected to
increase in 2004, as the demand for, and range of, our services continue to
improve.

Operating expenses increased 30%, or $6.6 million, from $22.1 million in
2002 to $28.7 million in 2003. Operating payroll expense increased $2.4 million
from $9.2 million to $11.6 million for the years ended December 31, 2002 and
2003, respectively. Also, as a result of the increased activity levels in 2003
as compared to 2002, explosives expenses, repairs and maintenance expenses, and
fuel and oil expenses increased $1.6 million, $1.4 million and $0.5 million,
respectively. Due to the increase in revenue-producing assets between the
periods ended December 31, 2002 and 2003, depreciation expense and insurance
expense increased $0.2 million and $0.3 million, respectively. While operating
expenses are expected to continue to increase in 2004 as operating revenues
increase, we expect these expenses to remain in line with revenues.

Gross profit increased 46%, or $2.6 million, from $5.7 million to $8.3
million, for the years ended December 31, 2002 and 2003, respectively. Further,
our gross profit margin improved from 20.3% in 2002 to 22.4% in 2003. The
increase in gross profit margin is a result of increased business activity in
our more profitable business segments, improved utilization of our equipment and
personnel for the services provided and more stringent controls over operating
expenses.

General and administrative expenses increased $1.0 million from $3.8
million for 2002 to $4.8 million for 2003. Amortization expense increased by
$0.3 million resulting from a one time amortization expense due to the
refinancing of a more favorable senior credit facility, revolving line of credit
and equipment term loan. In addition, other general and administrative expense
increased by $0.7 million due to realized savings in 2002 from renegotiated
lease and vendor agreements and legal expenses offset by the receipt of $0.4
million in cash received as a result of our agreement to facilitate the private
placement of approximately 1,650,000 shares owned by an affiliate and certain
investors. General and administrative expenses are expected to increase slightly
in 2004 due to our acquisition of AHI, however, we expect to take advantage of
synergies relating to this acquisition, as well as, maintain stringent controls
of these costs.

Interest expense was $1.0 million for the year ended December 31, 2003
compared to $1.1 million for the year ended December 31, 2002. The decrease was
principally attributable to decreased interest rates between the periods. We
expect to manage our senior debt facility as we explore strategic business
opportunities, but are currently positioned to reduce debt with excess cash
flow.

Other expense increased $0.2 million, primarily as a result of an increase
in sales discounts on customer contracts.

In 2003, the Company reversed $1.6 million of the net operating loss
carry-forwards previously reserved compared to $0.4 million in of this related
reserve reversed in 2002.

In 2003, the Company incurred $0.4 million in expenses related to the
discontinuation of the South American operations with no corresponding expense
recorded in 2002.

Accretion of preferred stock and preferred stock dividends remained
constant at $0.5 million for the years ended December 31, 2002 and 2003.

YEAR ENDED DECEMBER 31, 2001 COMPARED TO THE YEAR ENDED DECEMBER 31, 2002

YEAR ENDED
DECEMBER 31, DECEMBER 31,
2001 2002
------------ ------------

Operating revenue....................................................... $ 23,686 $ 27,796
Operating expense....................................................... 20,893 22,142
----------- ------------
Gross profit............................................................ 2,793 5,654
General and administrative expenses..................................... 3,126 3,771
Asset impairment and other charges...................................... 632 --
----------- ------------
Operating (income) loss................................................. (965) 1,883
Interest expense........................................................ 1,300 1,079
Other (income).......................................................... (7,929) (4)
----------- ------------
Income before taxes..................................................... 5,664 808
Income tax benefit...................................................... -- 400
----------- ------------
Net income applicable to common and common equivalent shares............ 5,664 1,208
Accretion of preferred stock............................................ (726) (484)
----------- ------------
Net income.............................................................. $ 4,938 $ 724
=========== ============

Operating revenues increased 17%, or $4.1 million, from $23.7 million to
$27.8 million for the years ended December 31, 2001 and 2002, respectively. This
increase was due primarily to the aforementioned acquisition of the assets of
AirJac Drilling and improved market conditions in the geophysical industry in
2002. As a result, drilling revenues increased from $18.0 million for the year
ended December 31, 2001 to $24.5 million for the year ended December 31, 2002.
The increase in drilling revenues was partially offset by a decline in revenues
in our other divisions. Our newly formed permitting division reported revenues
of $0.2 million for the year ended December 31, 2002 as compared to $1.5 million
for the same period of 2001. Survey revenues decreased from $0.6 million for the
year ended December 31, 2001 to zero for the year ended December 31, 2002. This
decline is attributable to our decision to concentrate our personnel, equipment
and available working capital on other core segments of our business. Aviation
revenues decreased from $3.7 million for the year ended December 31, 2001 to
$3.1 million for the year ended December 31, 2002 as we continued to reduce our
seismic aviation fleet in order to concentrate on the more profitable offshore
market. Operating revenues are expected to increase in 2003 as demand for our
services continues to improve.

Operating expenses increased 6%, or $1.2 million, from $20.9 million in
2001 to $22.1 million in 2002. Operating payroll expense increased $0.8 million
from $8.4 million to $9.2 million for the years ended December 31, 2001 and
2002, respectively. The increase in seismic activity resulted in a corresponding
increase in the amount of personnel employed. The average number of field
employees was 185 in 2002 and 172 in 2001. Also, as a result of the increased
activity levels in 2002 as compared to 2001, explosives expenses and repairs and
maintenance expenses increased $0.5 million and $0.9 million, respectively.
These increases were partially offset by a $1.2 million decrease in rental
expense and related insurance expense on leased aviation equipment from 2001 to
2002. The decrease in rental expense resulted from the refinancing of our
aviation fleet in December 2001. Our aviation fleet was previously operated
under an operating lease. Insurance expense declined as we reduced the size of
our aviation fleet dedicated solely to support our seismic drilling operations.
While operating expenses are expected to continue to increase in 2003 as
operating revenues increase, we expect these expenses to remain in line with
revenues.

Gross profit increased 104%, or $2.9 million, from $2.8 million to $5.7
million, for the years ended December 31, 2001 and 2002, respectively. Further,
our gross profit margin improved from 11.8% in 2001 to 20.9% in 2002. The
increase in gross profit margin is a result of increased business activity in
our more profitable business segments, improved utilization of our equipment and
personnel for the services provided and more stringent controls over operating
expenses.

General and administrative expenses increased $0.7 million, or 23%, from
$3.1 million for 2001 compared to $3.8 million for 2002. Payroll expenses
accounted for $0.4 million of this increase as administrative payroll costs
increased from $1.2 million for the year ended December 31, 2001 to $1.6 million
for the year ended December 31, 2002. This increase is principally attributable
to an increase in the average number of administrative employees between the
periods. During 2001 we realized savings in certain general

and administrative costs by renegotiating lease and vendor agreements with more
favorable terms than those in preceding years. General and administrative
expenses are expected to increase slightly in 2003 due to increased business
activity.

During 2001, we recorded asset impairment charges of $0.6 million (See
Note 4) compared to $0.0 million in 2002.

Interest expense was $1.1 million for the year ended December 31, 2002
compared to $1.3 million for the year ended December 31, 2001. The decrease was
principally attributable to increased debt levels in 2001 resulting from our
decision to acquire our aviation fleet in December 2001 that was previously
operated through an operating lease.

Other income decreased $7.9 million between the year ended December 31,
2001 and the year ended December 31, 2002. The decrease was primarily
attributable to the receipt of $7.5 million in proceeds from a key-man life
insurance policy in 2001 procured on the life of our founder and former CEO. He
was killed in a private aircraft accident in February 2001.

For the year ended December 31, 2001, losses incurred by us generated an
additional net operating loss carryforward for which a reserve has been provided
(see Note 9), resulting in income tax expense of $0.0. In 2002 the Company
reversed $0.4 million of this related reserve due to the Company's expectation
of generating income in fiscal 2003.

Accretion of preferred stock decreased $0.2 million from $0.7 million for
the year ended December 31, 2001 to $0.5 million for the year ended December 31,
2002. The decrease is due to the accretion of dividends at 8% during the free
dividend period from April 2001 through June 30, 2002.

LIQUIDITY AND CAPITAL RESOURCES

During 2001, we privately placed a total of $1.5 million in subordinated
debentures with an affiliate, which brought our total placement with them to
$12.4 million. The debentures accrued interest at 12% per annum or a rate
commencing at 12% per annum and escalating over the life of the note to a
maximum of 20% per annum. The debentures matured five years from the date of
their issuance with interest payable quarterly. Detachable from these
debentures, were warrants to purchase 1,912,833 shares of our common stock. The
warrants vested over four years and with exercise prices from ranging from $2.25
to $15.00. We recorded each warrant at its relative fair value at date of
issuance.

As of December 2002, we have received $0.8 of $1.0 million in factored
trade receivables of a major customer with an affiliate. The remaining $0.2
million is classified as amounts due to affiliate. In addition, we borrowed $0.5
million from this affiliate during 2002. As of December 31, 2002, $0.1 million
remained outstanding. The loan is secured by the amounts due from certain
customers.

During the fourth quarter of 2000 and the first quarter of 2001, we
dramatically improved our financial position with the successful raise of $5.1
million of new equity and the receipt of $7.5 million in proceeds from a key-man
life insurance policy. With the proceeds we repaid approximately $2.0 million of
senior secured indebtedness. Further, we reached an agreement to eliminate all
of the remaining subordinated debt to an affiliate by the payment of
approximately $1.0 million to satisfy $2.0 million of the indebtedness and the
issuance of shares of Series B Preferred Stock for the remaining outstanding
balance. We extended the maturity dates for all of our senior secured
indebtedness; and negotiated a 1.5% fixed interest rate reduction on
approximately $6.9 million of our senior secured debt.

On February 10, 2001, our founder and then CEO, was killed in a private
aircraft accident. As a result, we received $7.5 million in insurance proceeds
from the key man insurance policy purchased in connection with a private
placement in 2000. The private placement stockholders waived their right to
"put" their stock back to us. In connection with the receipt of these waivers,
we also obtained commitments from our senior secured lenders to modify the then
existing credit agreements. Under the terms of these revised commitments, the
maturity dates were extended and interest rates were reduced from prime plus 3%
to prime plus 1.5%. With the proceeds we paid $2.0 million of our senior secured
term indebtedness and we reached an agreement with an affiliate, the holder of
our outstanding subordinated debt to convert our remaining outstanding
subordinated debt into $4.6 million of Series B Preferred Stock. Under the terms
of this agreement, we paid the holder of our outstanding subordinated debt, $1.0
million in satisfaction of $2.0 million of indebtedness and issued 4,600 shares
of Series B Preferred Stock in full satisfaction of the remaining unpaid
subordinated debentures.

In September 2002, we refinanced our working capital revolving line of
credit and certain equipment term indebtedness with a $10.5 million senior
credit facility including a $7.0 million revolving line of credit and a $3.5
million equipment term loan.

In August 2003, we completed a new $1.65 million real estate loan with a
bank. The proceeds were used to repay the existing real estate loan, the
principal balance of which totaled $1.7 million. The gain on the early
extinguishment of the then existing real estate debt was recognized as income in
the second quarter of 2003. The new real estate loan is payable in 240 equal
monthly installments plus interest accruing at the prime interest rate plus 1.5%
and is secured by our corporate office, real estate and fabrication and
maintenance facilities. Further, under the terms of the new real estate credit
agreement, a principal payment of $0.2 million is due in July 2008.

In December 2003, we entered into a $11.0 million senior credit facility
with a bank including a $8.0 million working capital revolving line of credit
(the "Line") and a $3.0 million term loan. The proceeds were used to repay term
debt, refinance our revolving line of credit and provide working capital.

At December 31, 2003, we had approximately $0.6 million in cash on hand as
compared to approximately $0.7 million at December 31, 2002. At December 31,
2003, we had working capital of approximately $6.9 million as compared to
approximately $3.0 million at December 31, 2002. The increase in working capital
is due to increased profitability, improved cash flow generated by our
operations and the impact of our debt restructuring efforts.

Cash provided by operating activities was $5.7 million and $5.0 million in
the years ended December 31, 2003 and 2002, respectively. Income provided from
our operations was the single largest contributing factor in both years.

Availability under the Line is the lower of: (i) $8.0 million or (ii) the
sum of 85% of eligible accounts receivable, plus the lessor of: $2.0 million or
80% of the appraised orderly liquidation value of eligible inventory of parts
and supplies. The Line accrues interest at the prime interest rate plus 1.5%
(5.5% at December 31, 2003) and matures on December 31, 2006. The Line is
collateralized by accounts receivable and inventory and is subject to certain
customer concentration limitations. As of December 31, 2003 we had $4.6 million
outstanding under the Line and additional borrowing availability of $1.1
million. The weighted-average interest rate on borrowings under our revolving
lines of credit was 6.2% and 5.7% for the years ended December 31, 2002 and
2003, respectively.

At December 31, 2003, we also had outstanding approximately $11.7 million
in other senior secured debt, including approximately $1.1 million with an
equipment finance company. This loan amortizes over seven years bears interest
at LIBOR plus 5.0%, is secured by seismic drilling equipment and matures in July
2006. Further, at December 31, 2003 we had approximately $1.8 million
outstanding to an aviation equipment finance company. This loan is secured by
the aviation fleet, amortizes over ten years, accrues interest at 8% per annum
and matures January 2007. Included in the $11.7 million in senior debt was the
assumption of $0.2 million in equipment debt at an interest rate of 10.25%, we
acquired in our acquisition of AHI, secured by an aircraft. Additionally, we had
$3.4 million in capital leases on four helicopters payable to a finance company.
Our real estate is financed with a bank with payments amortized over 20 years,
bears interest at prime plus 1.5% and matures in August 2024 with a principal
payment of $0.2 million due in July 2008. At December 31, 2003, the balance
outstanding under our real estate loan was $1.6 million.

Historically, our capital requirements have primarily related to the
purchase or fabrication of new seismic drilling equipment and related support
equipment, additions to our aviation fleet and new business acquisitions. In
2002, we acquired the assets of AirJac Drilling (See Notes 12 and 14) and
approximately $0.4 million of new vehicles accounted for as a capital lease. In
2003, we acquired the assets of American Helicopters, Inc. (Note 11) for $4.6
million cash and the assumption of certain long-term debt. In 2004, we plan to
continue to explore strategic business opportunities.

CONTRACTUAL COMMITMENTS

We have the following contractual obligations as of December 31, 2003:

PAYMENTS DUE BY PERIOD
----------------------------------------------------
LESS THAN 1-3 AFTER
TOTAL 1 YEAR YEARS 4 YEARS
------------ ----------- ------------- ---------

Long-term debt............................................... $ 7,823 $ 1,338 $ 5,014 $ 1,471
Capital lease obligations.................................... 3,852 713 1,781 1,358
------------ ----------- ------------- ---------
Total Contractual Cash..................................... $ 11,675 $ 2,051 $ 6,795 $ 2,829

In addition to the obligations described above, we also have a revolving
line of credit, which is secured by our accounts receivable and inventory. The
line of credit matures in December 2006. The balance outstanding on the line of
credit was $4.6 million at December 31, 2003.

We periodically finance insurance policies on a short-term basis. As of
December 31, 2003, $2.3 million was outstanding for various polices financed
with maturity dates ranging from August 2004 to November 2004.

We believe that cash flow generated from operations in 2004 will be
sufficient to fund our working capital needs, satisfy our debt service
requirements and contractual commitments, and fulfill our capital expenditure
requirements for at least the next twelve months.

CAUTIONARY STATEMENTS

Certain statements included in this Annual Report and in the documents
that we have incorporated by reference are not historical facts and are intended
to be "forward-looking statements." Forward-looking statements in this Annual
Report are made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements may include
statements that relate to:

- our business plans or strategies, and projected or anticipated
benefits or other consequences of such plans or strategies;

- our objectives;

- projected and anticipated benefits from future or past acquisitions;
and

- projections involving anticipated capital expenditures or revenues,
earnings or other aspects of capital projects or operating results.

Forward-looking statements generally can be identified by the use of words
such as "may," "will," "expect," "intend," "estimate," "anticipate" or "believe"
or similar language.

Forward-looking statements are not guarantees of future performance and
all phases of our operations are subject to a number of uncertainties, risks and
other influences, many of which are beyond our control. Any one of such
influences, or a combination, could materially affect the results of our
operations and the accuracy of the forward-looking statements that we make.

You are cautioned that all forward-looking statements involve risks
associated with our dependence on activity in the oil and gas industry, labor
shortages, international expansion, dependence on significant customers,
seasonality and weather risks, competition, technological evolution and other
risks detailed in the Company's filings with the Securities and Exchange
Commission. Additional important factors that could cause actual results to
differ materially from the anticipated results or other expectations expressed
in our forward-looking statements are discussed under the caption "Risk Factors"
below. You are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date that they are made. We undertake no
obligation to publicly update our forward-looking statements.

RISK FACTORS

You should carefully consider the following risk factors, in addition to the
other information set forth or incorporated by reference herein. Each of these
risk factors could adversely affect our business, operating results and
financial condition, and also adversely affect the value of an investment in our
common stock.

INDUSTRY VOLATILITY MAY ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.

The demand for our services depends on the level of capital expenditures
by oil and gas companies for developmental construction and these expenditures
are critical to our operations. The levels of such capital expenditures are
influenced by:

- oil and gas prices and industry perceptions of future price
levels;

- the cost of exploring for, producing and delivering oil and
gas;

- the ability of oil and gas companies to generate capital;

- the sale and expiration dates of leases in the United States;

- the availability of current geophysical data;

- the discovery rate of new oil and gas reserves; and

- local and international political and economic conditions.

The cyclical nature of the oil and gas industry has a significant effect
on our revenues and profitability. Historically, prices of oil and gas, as well
as the level of exploration and developmental activity, have fluctuated
substantially. This has, in the past, and may, in the future, adversely affect
our business. We are unable to predict future oil and gas prices or the level of
oil and gas industry activity. A prolonged low level of activity in the oil and
gas industry will likely depress development activity, adversely affecting the
demand for our products and services and our financial condition and results of
operations.

OUR GROWTH AND GROWTH STRATEGY INVOLVES RISKS.

We have grown over the last several years through internal growth and
acquisitions of other companies. It will be important for our future success to
manage our rapid growth and this will demand increased responsibility for
management personnel. The following factors could present difficulties to us:

- the lack of sufficient executive-level personnel;

- the successful integration of the operations of American
Helicopters, Inc. including the integration of a management
team with no history of working together;

- increased administrative burdens; and

- increased logistical problems of large, expansive operations.

If we do not manage these potential difficulties successfully, they could
have a material adverse effect on our financial condition and results of
operations.

WE HAVE INCURRED NET LOSSES IN PREVIOUS YEARS.

Our past financial history reflects annual net losses. Our more recent
history, however, reflects annual net incomes. While we hope to continue to
generate increased revenues and profitability, any such increase may not be
sustainable or indicative of future results of operations. We do intend to
continue investing in internal expansion, infrastructure, integration of
acquired companies into our operations and our marketing and sales efforts.

THE DANGERS INHERENT IN OUR OPERATIONS AND THE POTENTIAL LIMITS ON INSURANCE
COVERAGE FOR CERTAIN RISKS COULD EXPOSE US TO POTENTIALLY SIGNIFICANT LIABILITY
COSTS.

Our seismic operations are subject to risks or injury to personnel and
loss of equipment. Our crews often conduct operations in extreme weather, in
difficult terrain that is not easily accessible, and under other hazardous
conditions. In addition, our aviation operations are subject to numerous hazards
inherent in the operation of helicopters and airplanes. These hazards include
adverse weather conditions, crashes, explosions, collisions and fires, all of
which may result in injury to personnel or loss of equipment. We maintain what
we believe is prudent insurance protection. However, we cannot assure that our
insurance will be sufficient or effective under all circumstances. A successful
claim for which we are not fully insured may have a material adverse effect on
our revenues and profitability. We do not carry business interruption insurance
with respect to our operations.

WE OPERATE IN A HIGHLY COMPETITIVE INDUSTRY.

We compete with several other providers of seismic drilling, helicopter
support, permitting and survey services. Competition among seismic contractors
historically has been and will continue to be intense. Competitive factors have
in recent years included price, crew experience, equipment availability,
technological expertise and reputation for quality and dependability. Our
revenues and earnings may be affected by the following factors:

- changes in competitive prices;

- fluctuations in the level of activity and major markets;

- general economic conditions; and

- Governmental regulation.

Additionally, in certain geographical areas, some of our competitors
operate more crews than we do and have substantially greater financial and other
resources. These operators could enjoy an advantage over us if the competitive
environment for contract awards shifts to one characterized principally by
intense price competition.

SEASONALITY AND ADVERSE WEATHER CONDITIONS IN THE REGIONS IN WHICH WE OPERATE
MAY ADVERSELY AFFECT OUR OPERATIONS.

Our operations are directly affected by the weather conditions in the Gulf
of Mexico. Due to seasonal differences in weather patterns, we may operate more
days in the spring, summer and fall periods and less in the winter months. The
seasonality of oil and gas industry activity in the Gulf Coast region also
affects our operations. Due to exposure to weather, we generally experience
higher drilling activity in the spring, summer and fall months with the lowest
activity in winter months, especially with respect to our

operations in the mountainous regions of the Western United States. The rainy
weather, hurricanes and other storms prevalent in the Gulf of Mexico and along
the Gulf Coast throughout the year may also affect our operations. As a result,
full-year results are not likely to be a direct multiple of any particular
quarter or combination of quarters.

WE ARE DEPENDENT ON KEY PERSONNEL.

Our success depends on, among other things, the continued active
participation of our executive officers and certain of our other key operating
personnel. Our officers and personnel have extensive experience in the domestic
and international oilfield supply industry. The loss of the services of any one
of these persons could impact adversely our ability to implement our expansion
strategy.

WE MAY INCUR ADDITIONAL EXPENDITURES TO COMPLY WITH GOVERNMENTAL REGULATIONS.

Our seismic and aviation operations are subject to extensive governmental
regulation, violations of which may result in civil and criminal penalties,
injunctions and cease and desist orders. These laws and regulations govern,
among other things, operations in wetlands, the handling of explosives and the
operation of commercial aircraft. Although our cost of compliance with such laws
has to date been immaterial, such laws are changed frequently. Accordingly, it
is impossible to predict the cost or impact of such laws on our future
operations. We are also required by various governmental agencies to obtain
certain permits, licenses and certificates. To date, we believe that we possess
all permits, licenses and certificates material to the operation of our
business. The loss by us of any of the licenses required for our operation could
have a material adverse effect on our operations.

We depend on demand for our services from the oil and gas industry, and
this demand may be affected by changing tax laws and oil and gas regulations. As
a result, the adoption of laws that curtail oil and gas production in our areas
of operation may adversely affect us. We cannot determine to what extent our
operations may be affected by any new regulations or changes in existing
regulations.

FUTURE TECHNOLOGICAL ADVANCES COULD IMPAIR OPERATING ASSETS OR REQUIRE
SUBSTANTIAL UNBUDGETED CAPITAL EXPENDITURES.

We compete in providing services in a capital intensive business. The
development of seismic data acquisition and processing equipment has been
characterized by rapid technological advancements in recent years, and this
trend may continue. Manufacturers of seismic equipment may develop new systems
that have competitive advantages over systems now in use that could render our
current equipment obsolete or require us to make significant unplanned capital
expenditures to maintain our competitive position. Under such circumstances,
there can be no assurance that we would be able to obtain necessary financing on
favorable terms.

WE DEPEND ON A FEW SIGNIFICANT CUSTOMERS.

We derive a significant amount of our revenue from a small number of
geophysical companies. Our inability to continue to perform services for a
number of our large existing customers, if not offset by sales to new or other
existing customers could have a material adverse effect on our business and
operations. For example, our largest customers (those which individually
accounted for more than 10% of revenue in a given year, listed alphabetically)
collectively accounted for 71% (Grant Geophysical, Quantum Geophysical and
Western Geophysical), 84% (Veritas DGC and Western Geophysical) and 71% (Quantum
Geophysical, Seismic Exchange, and Veritas DGC) of revenue for fiscal 2001, 2002
and 2003, respectively.

RELATED PARTY TRANSACTIONS

During the year ended December 31, 2001, we leased a facility from an
affiliate. Lease payments totaled approximately $0.1 million, which approximated
market value. The lease was terminated in July 2001 (See Notes 5 and 8 for
transactions with our affiliates).

As of December 31, 2002, we were liable to an affiliate for approximately
$0.2 million from the factoring of trade receivables of a major customer. In
addition, we borrowed $0.5 million from this affiliate during 2002. As of
December 31, 2002, $0.1 million remained outstanding. The loan was secured by
the amounts due from certain customers.

During the years ended December 31, 2000 and 2001, we privately placed
with an affiliate subordinated debentures totaling $3.4 million and $1.5
million, respectively. The debentures matured five years from their date of
issue and accrued interest at various rates ranging from a fixed rate of 12% per
annum to a variable rate of interest starting at 12% per annum and escalating to
20% per annum. In October 2000, we agreed to convert $4.6 million of the
subordinated debentures into our Series A Preferred Stock. In May 2001, we
agreed to pay the affiliate $3.0 million cash plus issue to the affiliate $4.6
million of the Company's Series B Preferred Stock in satisfaction of all of the
remaining outstanding subordinated debentures including accrued interest of $1.8
million. This transaction resulted in the affiliate agreeing to forgive $1.0
million of indebtedness, which has been reflected as a capital contribution from
the affiliate rather than as income in the accompanying financial statements
(See Note 8 regarding the accounting for preferred stock).

In connection with the original issuance of the subordinated debentures,
we issued to the affiliate detachable warrants to purchase 1,912,833 shares of
our common stock. As of December 31, 2003, 761,110 warrants outstanding are all
exercisable with an exercise price of $2.25 per share. Subsequent to December
31, 2003, the affiliate exercised all of these warrants.

During 2003, we entered into an agreement to facilitate the private
placement of approximately 1,650,000 shares of our common stock owned by an
affiliate and certain investors. The sale of the stock covered by this agreement
closed in the fourth quarter of 2003, resulting in our receipt of $0.4 million
cash which is reflected as a reduction in our general and administrative
expenses in the accompanying Financial Statements.

In order to facilitate a settlement of ongoing litigation between certain
of our affiliates, we agreed to re-price and extend the maturity dates of
certain warrants owned by the defendant affiliates but transferred in settlement
of the litigation to the plaintiff affiliates. The exercise prices of the
transferred warrants ranged from $2.25 - $6.00 per share. The maturity dates of
the transferred warrants ranged from November 1, 2004 to July 1, 2005. The
transferred warrants were re-priced at $1.54 per share and the maturity dates
were extended to November 1, 2006. Our statement of operations includes a
non-recurring charge of approximately $0.1 million representing the differences
in the fair market value of the originally issued warrants and the re-priced
warrants. Subsequent to December 31, 2003, all re-priced warrants were
exercised.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The discussion and analysis of financial condition and results of
operation are based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and
liabilities. We evaluate our estimates on an on-going basis, based on historical
experience and on various other assumptions that we believe to be reasonable
under the circumstances. Actual results may differ from these estimates under
different assumptions or conditions.

We believe the following critical accounting policies affect our more
significant judgments and estimates used in the preparation on our consolidated
financial statements.

We extend credit to customers and other parties in the normal course of
business. We regularly review outstanding receivables, and provide for estimated
losses through an allowance for doubtful accounts. In evaluating the level of
established reserves, we make judgments regarding the parties' ability to make
required payments, economic events and other factors. As the financial condition
of these parties change, circumstances develop or additional information becomes
available, adjustments to the allowance for doubtful account may be required.
Due to the nature of our industry, we have a concentration of credit risks. As a
result, adjustments to the allowance for doubtful accounts may be significant.

We have made significant investments in inventory to service our
equipment. On a routine basis, we use judgments in determining the level of
reserves required to state inventory at the lower of cost or market.
Technological innovations, market activity levels and the physical condition of
products primarily influence our estimates. Changes in these or other factors
may result in adjustments to the carrying value of inventory.

Deferred tax assets and liabilities are recognized for differences between
the book basis and tax basis of our net assets. In providing for deferred taxes,
we consider current tax regulations, estimates of future taxable income and
available tax planning strategies. We have established reserves to reduce our
net deferred tax assets to estimated realizable value. If tax regulations
change, operating results or the ability to implement tax planning strategies
vary, adjustments to the carrying value of our net deferred tax assets and
liabilities may be required. In making this determination, we have considered
future income in assessing the ultimate recoverability of the recognized net
deferred tax asset.

We record liabilities for environmental obligations when remedial efforts
are probable and the costs can be reasonably estimated. Our estimates are based
on currently enacted laws and regulations. As more information becomes available
or environmental laws and regulations change, such liabilities may be required
to be adjusted. Additionally, in connection with acquisitions, we obtain
indemnifications from the seller related to environmental matters. If the
indemnifying parties do not fulfill their obligations, adjustments of recorded
amounts may be required.

We maintain insurance coverage for various aspects of our business and
operations. We retain a portion of losses that occur through the use of
deductibles and self-funded insurance programs. We regularly review estimates of
reported and unreported claims and provide for losses through insurance
reserves. As claims develop and additional information becomes available,
adjustments to loss reserves may be required.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Effective January 1, 2002, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 142 "Goodwill and Other Intangible Assets."
Under SFAS 142, goodwill and indefinite-lived intangible assets are no longer
amortized, but are reviewed for impairment annually, or more frequently if
circumstances indicate potential impairment. Separable intangible assets that
are not deemed to have an indefinite life will continue to be amortized over
their useful lives. For goodwill and indefinite-lived intangible assets acquired
prior to July 1, 2001, goodwill continued to be amortized through 2001, at which
time, amortization ceased and a transitional goodwill impairment test was
performed. Any impairment charges resulting from the initial application of the
new rules were classified as a cumulative change in accounting principle. The
initial transition evaluation was completed by June 30, 2002, which is within
the six-month transition period allowed by the new standard. Our goodwill
balances were determined not to be impaired. Goodwill amortization for the year
ended December 31, 2001 was $103,000. There was no goodwill amortization for
each of the years ended December 31, 2003 or 2002.

PRO FORMA
UNAUDITED
DECEMBER 31, 2001
-----------------

Net income (loss), as reported....................... $ 4,938
Amortization of goodwill............................. 103
-----------------
Net income (loss), as adjusted....................... $ 5,041
=================
Earnings (loss) per common share:
Basic.............................................. $ 0.56
Diluted............................................ $ 0.51
Number of weighted average shares
Basic.............................................. 9,015
Diluted............................................ 9,844

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." SFAS 145 requires that gains or losses recorded from the
extinguishment of debt that do not meet the criteria of Accounting Principles
Board ("APB") Opinion No. 30 should not be presented as extraordinary items.
This statement is effective for fiscal years beginning after May 15, 2002 as it
relates to the reissued FASB Statement No. 4, with earlier application
permitted. Any gain or loss on extinguishment of debt that was classified as an
extraordinary item in prior periods presented that does not meet the criteria in
APB No. 30 for classification as an extraordinary item should be reclassified.
SFAS 145 has no impact on our financial statements.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS No. 146 nullifies Emerging
Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity," under which
a liability for an exit cost was recognized at the date of an entity's
commitment to an exit plan. SFAS No. 146 requires that a liability for a cost
associated with an exit or disposal activity be recognized at fair value when
the liability is incurred. The provisions of this statement are effective for
exit or disposal activities that are initiated after December 31, 2002. SFAS 146
has no impact on our financial statements.

In November 2002, the FASB issued FASB Interpretation ("FIN") 45
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others," which elaborates on the
disclosures to be made by a guarantor in its interim and annual financial
statements about its obligations under certain guarantees that it has issued. It
also clarifies that a guarantor is required to recognize, at the inception of
the guarantee, a liability for the fair value of the obligation undertaken in
issuing the guarantee. The initial recognition and initial measurement
provisions of this Interpretation are applied prospectively to guarantees issued
or modified after December 31, 2002. The adoption of these recognition
provisions will result in recording liabilities associated with certain
guarantees provided by us. The disclosure requirements of this Interpretation
are effective for financial statements of interim or annual periods ending after
December 15, 2002. FIN 45 has no impact on our financial statements

In December 2002, SFAS No. 148, "Accounting for Stock-Based Compensation
-- Transition and Disclosure -- An Amendment of FASB Statement No. 123," was
issued by the FASB and amends FASB Statement No. 123, "Accounting for
Stock-Based Compensation." This Statement provides alternative methods of
transition for an entity that voluntarily changes to the fair value based method
of accounting for stock-based employee compensation and amends the disclosure
provisions of SFAS No. 123 to require prominent disclosure about the effects on
reported net income of an entity's accounting policy decisions with respect to
stock-based employee compensation. Additionally, this Statement amends APB
Opinion No. 28, "Interim Financial Reporting," to require disclosure about those
effects in interim financial information. The transition method provisions of
this Statement are effective for fiscal years ending after December 15, 2002.
The interim financial reporting requirements of this Statement are effective for
financial reports containing condensed financial statements for interim periods
beginning after December 15, 2002. We will continue to account for this
compensation in accordance with APB No. 25. Disclosure required by SFAS 148 is
included in the accompanying financial statements.

In January 2003, the FASB issued FIN 46 "Consolidation of Variable
Interest Entities," which clarifies the application of Accounting Research
Bulletin ("ARB") 51, Consolidated Financial Statements, to certain entities
(called variable interest entities) in which equity investors do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. The disclosure requirements
of this Interpretation are effective for all financial statements issued after
January 31, 2003. The consolidation requirements apply to all variable interest
entities created after January 31, 2003. In addition, public companies must
apply the consolidation requirements to variable interest entities that existed
prior to February 1, 2003 and remain in existence as of the beginning of annual
or interim periods beginning after June 15, 2003. FIN 46 has no impact on our
financial statements.

In May 2003, SFAS No. 150 "Accounting for Certain Financial Instruments
with Characteristics of Both Liabilities and Equity," was issued to establish
new standards for how an entity classifies and measures certain financial
"instruments with characteristics of both liabilities and equity. It requires
that an entity classify a financial instrument that is within its scope as a
liability (or an asset in some circumstances). Many of these instruments were
previously classified as equity. This statement was effective when issued for
financial instruments entered into or modified after May 31, 2003, and otherwise
is effective for calendar year public companies for the third quarter of 2003.
SFAS 150 did not have an impact on the financial statements in 2003.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

INTEREST RATE RISK

We are exposed to interest rate risk due to changes in interest rates,
primarily in the United States. Our policy is to manage interest rates through
the use of a combination of fixed and floating rate debt. We currently do not
use any derivative financial instruments to manage our exposure to interest rate
risk. The table below provides information about the future maturities of
principal for outstanding debt instruments at December 31, 2003. All instruments
described are non-traded instruments and approximated fair value.

2004 2005 2006 2007 2008+
-------- ------ -------- ------ --------
(DOLLARS IN THOUSANDS)

Long-term debt
Fixed Rate.................... $ 512 $ 555 $ 603 $ 351 $ 224
Average interest rate....... 8.2% 8.2% 8.2% 8.3% 8.2%
Variable Rate................. $ 826 $ 829 $ 2,626 $ 50 $ 1,247
Average interest rate....... 5.8% 5.8% 5.9% 5.5% 5.5%
Short-term debt

Fixed Rate.................... $ 2,314 -- -- -- --
Average interest rate....... 4.1% -- -- -- --
Variable Rate................. -- -- -- -- --
Average interest rate....... -- -- -- -- --

FOREIGN CURRENCY RISKS

Our transactions are in U.S. dollars. Previously, we had one subsidiary,
which conducted our operations in Canadian dollars. However, those operations
were closed in July 1999. The South American joint venture and Mexican
operations transacted all of their activity in U.S. dollars. Operations in South
America have been curtailed pending future developments in that market.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

PAGE
----

Report of Independent Registered Public Accounting Firm......................................................... 27
Report of Independent Registered Public Accounting Firm......................................................... 28
Report of Independent Public Accountants........................................................................ 29
Consolidated Balance Sheets as of December 31, 2002 and 2003.................................................... 30
Consolidated Statements of Operations for the Years Ended December 31, 2001, 2002 and 2003...................... 31
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2001, 2002 and 2003............... 32
Consolidated Statements of Cash Flows for the Years Ended December 31, 2001, 2002 and 2003...................... 34
Notes to Consolidated Financial Statements...................................................................... 35

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Omni Energy Services Corp.
Carencro, Louisiana

We have audited the accompanying consolidated balance sheet of Omni Energy
Services Corp. as of December 31, 2003, and the related consolidated statements
of income, comprehensive income, retained earnings and cash flows for the year
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (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
audit provides a reasonable basis for our opinion.

As described in Note 8 to the financial statements, the Company has restated its
2003 financial statements to include the effect of the potential conversion of
its preferred stock on the computation of diluted earnings per share for the
portion of 2003 for which a waiver prohibiting conversion was not in effect.

In our opinion, the 2003 consolidated financial statements referred to above, as
restated, present fairly, in all material respects, the financial position of
Omni Energy Services Corp. as of December 31, 2003, and the results of its
operations and its cash flows for the year then ended in conformity with U.S.
generally accepted accounting principles.

/s/ Fitts, Roberts & Co., P.C.

Houston, Texas
March 12, 2004, except for Note 8
as to which the date is September 13, 2004

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders OMNI Energy Services Corp.

We have audited the accompanying consolidated balance sheet of OMNI Energy
Services Corp. as of December 31, 2002, and the related consolidated statements
of operations, changes in equity and comprehensive loss, and cash flows for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit. The financial statements of OMNI Energy
Services Corp. for the year ended December 31, 2001, were audited by other
auditors who have ceased operations and whose report dated March 14, 2002,
expressed an unqualified opinion on those statements before the restatement
adjustments and transitional disclosures described in Note 1.

We conducted our audit in accordance with the standards of the Public
Accounting Oversight Board (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 audit provides a
reasonable basis for our opinion.

In our opinion, the 2002 financial statements referred to above present
fairly, in all material respects, the consolidated financial position of OMNI
Energy Services Corp. at December 31, 2002, and the consolidated results of its
operations and its cash flows for the year then ended in conformity with
United States generally accepted accounting principles.

As discussed in Note 1 to the financial statements, effective January 1,
2002, the Company adopted Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets" ("FAS 142").

As discussed above, the financial statements of OMNI Energy Services Corp.
for the year ended December 31, 2001, were audited by other auditors who have
ceased operations. As described in Note 1, these financial statements have been
revised. The Company's board of directors approved a one-for-three reverse stock
split, and all references to number of shares and per-share information in the
financial statements have been adjusted to reflect the reverse stock split on a
retroactive basis. We audited the adjustments that were applied to restate the
number of shares and per-share information reflected in the 2001 financial
statements. Our procedures included (a) agreeing the authorization for the
one-for-three reverse stock split to the Company's underlying records obtained
from management, and (b) testing the mathematical accuracy of the restated
number of shares, basic and diluted earnings per-share, and other applicable
disclosures such as stock options. We also applied audit procedures with respect
to the disclosures in Note 1 pertaining to financial statement revisions to
include the transitional disclosures required by FAS 142. In our opinion, the
restatement adjustments for the reverse stock split for 2001 described in Note 1
are appropriate and have been properly applied and the FAS 142 transitional
disclosures for 2001 in Note 1 are appropriate. However, we were not engaged to
audit, review, or apply any procedures to the 2001 financial statements of the
Company other than with respect to such restatement adjustments and transitional
disclosures and, accordingly, we do not express an opinion or any other form of
assurance on the 2001 financial statements taken as a whole.

/s/ Ernst & Young LLP

New Orleans, Louisiana
March 27, 2003

THIS IS A COPY OF THE AUDIT REPORT PREVIOUSLY ISSUED BY ARTHUR ANDERSEN LLP IN
CONNECTION WITH OMNI'S FILING ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER
31, 2001. THIS AUDIT REPORT HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN LLP IN
CONNECTION WITH THIS FILING ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31,
2002. FOR FURTHER DISCUSSION, SEE EXHIBIT 23.2 WHICH IS FILED HEREWITH AND
HEREBY INCORPORATED BY REFERENCE INTO THE FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2002 OF WHICH THIS REPORT FORMS A PART.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders and Board of Directors of OMNI Energy Services Corp.:

We have audited the accompanying consolidated balance sheets of OMNI
Energy Services Corp. and subsidiaries, a Louisiana corporation, as of December
31, 2000 and 2001, and the related consolidated statements of operations,
changes in equity and comprehensive loss and cash flows for each of the three
years in the period ended December 31, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with 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 financial statements referred to above present fairly,
in all material respects, the financial position of OMNI Energy Services Corp.
and subsidiaries as of December 31, 2000 and 2001 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001, in conformity with accounting principles generally accepted
in the United States.

ARTHUR ANDERSEN LLP
New Orleans, Louisiana March 14, 2002

OMNI ENERGY SERVICES CORP.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2002 AND 2003

2002 2003
----------- -----------
(IN THOUSANDS)

ASSETS
CURRENT ASSETS:
Cash and cash equivalents.................................................................. $ 704 $ 572
Trade receivables, net..................................................................... 4,485 7,002
Other receivables.......................................................................... 1,440 2,272
Parts and supplies inventory............................................................... 2,711 3,289
Prepaid expenses........................................................................... 2,228 3,058
Deferred tax asset......................................................................... 400 2,000
Assets held for sale....................................................................... 413 --
----------- -----------
Total current assets...................................................................... 12,381 18,193
----------- -----------

PROPERTY AND EQUIPMENT:
Land....................................................................................... 359 362
Building and improvements.................................................................. 4,530 4,636
Drilling, field and support equipment...................................................... 27,354 26,877
Aviation equipment......................................................................... 4,189 10,224
Shop equipment............................................................................. 425 425
Office equipment........................................................................... 1,535 1,573
Vehicles................................................................................... 2,590 2,476
----------- -----------
40,982 46,573
Less: accumulated depreciation............................................................. 16,559 19,463
----------- -----------
Total property and equipment, net......................................................... 24,423 27,110
----------- -----------

OTHER ASSETS:
Goodwill, net.............................................................................. 2,051 2,129
Intangible asset, net...................................................................... 1,820 1,720
Other...................................................................................... 650 1,137
----------- -----------
4,521 4,986
----------- -----------
Total assets.............................................................................. $ 41,325 $ 50,289
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

Current maturities of long-term debt....................................................... $ 2,235 $ 2,051
Insurance notes............................................................................ 1,581 2,314
Accounts payable........................................................................... 4,216 5,326
Accrued expenses........................................................................... 1,335 1,627
----------- -----------
Total current liabilities................................................................. 9,367 11,318
----------- -----------
LONG-TERM LIABILITIES:
Line of credit............................................................................. 2,978 4,633
Other long-term liabilities................................................................ 638 328
Long-term debt, less current maturities.................................................... 8,340 9,624
----------- -----------
Total long-term liabilities............................................................... 11,956 14,585
----------- -----------
MINORITY INTEREST........................................................................... 221 --
----------- -----------
COMMITMENTS AND CONTINGENCIES............................................................... -- --
----------- -----------
TOTAL LIABILITIES..................................................................... 21,544 25,903
----------- -----------

STOCKHOLDERS' EQUITY:
Preferred stock, no par value, 5,000,000 shares authorized;
12,100 shares issued and outstanding, liquidation preference of $1,000 per share.......... 12,100 12,100
Common stock, $.01 par value, 45,000,000 shares authorized; 9,101,778
and 9,569,729 issued at December 31, 2002 and 2003, respectively.......................... 91 96
Treasury stock, 361,800 shares acquired at cost............................................ (706) (706)
Preferred stock dividends declared......................................................... -- 484
Additional paid-in capital................................................................. 56,831 57,882
Accumulated other comprehensive loss....................................................... (78) (12)
Accumulated deficit........................................................................ (48,457) (45,458)
----------- -----------
Total stockholders' equity................................................................ 19,781 24,386
----------- -----------
Total liabilities and stockholders' equity................................................ $ 41,325 $ 50,289
=========== ===========

The accompanying notes are an integral part of these
consolidated financial statements.

OMNI ENERGY SERVICES CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2002 AND 2003

2003
AS 2003
PREVIOUSLY AS
2001 2002 REPORTED RESTATED
--------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Operating revenue................................................ $ 23,686 $ 27,796 $ 37,055 $ 37,055
Operating expense................................................ 20,893 22,142 28,741 28,741
---------- ---------- ---------- ----------
Gross profit..................................................... 2,793 5,654 8,314 8,314
General and administrative expense............................... 3,126 3,771 4,820 4,820
Asset impairment and other charges............................... 632 -- -- --
---------- ---------- ---------- ----------
Operating income (loss).......................................... (965) 1,883 3,494 3,494
Interest expense................................................. 1,300 1,079 999 999
Other (income) expense........................................... (7,929) (4) 245 245
---------- ---------- ---------- ----------
Income before taxes.............................................. 5,664 808 2,250 2,250
Income tax benefit............................................... -- 400 1,600 1,600
---------- ---------- ---------- ----------
Income from continuing operations................................ 5,664 1,208 3,850 3,850
Loss from discontinued operations................................ -- -- (367) (367)
---------- ---------- ---------- ----------
Net income....................................................... 5,664 1,208 3,483 3,483
Accretion of preferred stock and preferred stock dividends....... (726) (484) (484) (484)
---------- ---------- ---------- ----------
Net income applicable to common and common equivalent shares..... $ 4,938 $ 724 $ 2,999 $ 2,999
========== ========== ========== ==========
Basic income (loss) per common share:
Income from continuing operations.............................. $ 0.55 $ 0.08 $ 0.44 $ 0.38
(Loss) from discontinued operations........................... -- -- $ (0.04) $ (0.04)
Net Income applicable to common and common equivalent shares... $ 0.55 $ 0.08 $ 0.34 $ 0.34
Diluted income (loss) per common share:
Income from continuing operations.............................. $ 0.50 $ 0.08 $ 0.44 $ 0.34
(Loss) from discontinued operations........................... -- -- $ (0.04) $ (0.03)
Net Income applicable to common and common equivalent shares... $ 0.50 $ 0.08 $ 0.34 $ 0.31
Number of shares used in calculating earnings (loss) per share:
Basic.......................................................... 9,015 8,739 8,772 8,772
Diluted........................................................ 9,844 8,745 8,828 11,362

The accompanying notes are an integral part of these
consolidated financial statements.

OMNI ENERGY SERVICES CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY AND COMPREHENSIVE LOSS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2002 AND 2003

PREFERRED STOCK COMMON STOCK TREASURY
----------------------- ----------------------- STOCK
SHARES AMOUNT SHARES AMOUNT AMOUNT
--------- ----------- --------- ---------- -----------
(DOLLARS IN THOUSANDS)

BALANCE, January 1, 2001................................ 7,500 $ 7,500 8,970,529 $ 89 ---
-- issuance of common shares............................ 8,333 --- ---
-- stock option exercise................................ --- --- 119,583 1 ---
-- offering costs....................................... --- --- --- --- ---
-- conversion of subordinated debt to preferred stock... --- 3,390 --- --- ---
-- accretion of preferred stock......................... --- 726 --- --- ---
-- treasury stock....................................... --- --- --- --- (706)
Comprehensive income:
-- net income........................................... --- --- --- --- ---
-- foreign currency translation adjustments............. --- --- --- --- ---
--------- ----------- --------- ---------- -----------
Total comprehensive income.............................. --- --- --- --- ---
--------- ----------- --------- ---------- -----------
BALANCE, December 31, 2001.............................. 7,500 $ 11,616 9,098,445 $ 90 $ (706)
--------- ----------- --------- ---------- -----------
-- issuance of common shares............................ --- --- --- --- ---
-- stock option exercise................................ --- --- 3,333 1 ---
-- conversion of subordinated debt to preferred stock... 4,600 --- --- --- ---
-- accretion of preferred stock......................... --- 484 --- --- ---
Comprehensive income:
-- net income........................................... --- --- --- --- ---
-- foreign currency translation adjustments............. --- --- --- --- ---
--------- ----------- --------- ---------- -----------
Total comprehensive income.............................. --- 484 --- --- ---
--------- ----------- --------- ---------- -----------
BALANCE, December 31, 2002.............................. 12,100 $ 12,100 9,101,778 $ 91 $ (706)
--------- ----------- --------- ---------- -----------
-- issuance of common shares............................ --- --- --- --- ---
-- stock option exercise................................ --- --- 467,951 5 ---
-- preferred stock dividends............................ --- --- --- --- ---
Comprehensive income:
-- net income.......................................... --- --- --- --- ---
-- foreign currency translation adjustments............ --- --- --- --- ---
--------- ----------- --------- ---------- -----------
Total comprehensive income.............................. --- --- --- --- ---
--------- ----------- --------- ---------- -----------
BALANCE, December 31, 2003.............................. 12,100 $ 12,100 9,569,729 $ 96 $ (706)
========= =========== ========= ========== ===========

PREFERRED ACCUMULATIVE
STOCK ADDITIONAL OTHER
DIVIDEND PAID-IN COMPREHENSIVE ACCUMULATIVE
DECLARED CAPITAL LOSS DEFICIT TOTAL
---------- ----------- ------------- ------------ ----------
(DOLLARS IN THOUSANDS)

BALANCE, January 1, 2001.................................. $ 0 $ 54,586 $ (36) $ (54,121) $ 8,018
-- issuance of common shares.............................. -- 15 -- -- 15
-- stock option exercise.................................. -- 217 -- -- 218
-- offering costs......................................... -- (168) -- -- (168)
-- conversion of subordinated debt to preferred stock..... -- 2,176 -- -- 5,566
-- accretion of preferred stock........................... -- -- -- (726) --
-- treasury stock......................................... -- -- -- -- (706)
Comprehensive income:
-- net income............................................. -- -- -- 5,664 5,664
-- foreign currency translation adjustments............... -- -- (47) -- (47)
---------- ----------- -------- ----------- ---------
Total comprehensive income................................ -- -- (47) 5,664 5,617
---------- ----------- -------- ----------- ---------
BALANCE, December 31, 2001................................ $ 0 $ 56,826 $ (83) $ (49,183) $ 18,560
---------- ----------- -------- ----------- ---------
-- issuance of common shares.............................. -- -- -- -- --
-- stock option exercise.................................. -- 5 -- -- 6
-- conversion of subordinated debt to preferred stock..... -- -- -- -- --
-- accretion of preferred stock........................... -- -- -- (484) --
Comprehensive income:
-- net income............................................. -- -- -- 1,210 1,210
-- foreign currency translation adjustments............... -- -- 5 -- 5
---------- ----------- -------- ----------- ---------
Total comprehensive income................................ -- -- 5 1,210 1,215
---------- ----------- -------- ----------- ---------
BALANCE, December 31, 2002................................ $ 0 $ 56,831 $ (78) $ (48,457) $ 19,781
---------- ----------- -------- ----------- ---------
-- issuance of common shares.............................. -- -- -- -- --
-- stock option exercise.................................. -- 1,051 -- -- 1,056
-- preferred stock dividends.............................. 484 -- -- (484) --
Comprehensive income:
-- net income............................................ -- -- -- 3,483 3,483
-- foreign currency translation adjustments.............. -- -- 66 -- 66
---------- ----------- -------- ----------- ---------
Total comprehensive income................................ -- -- 66 3,483 3,549
---------- ----------- -------- ----------- ---------
BALANCE, December 31, 2003................................ $ 484 $ 57,882 $ (12) $ (45,458) $ 24,386
========== =========== ======== =========== =========

The accompanying notes are an integral part of these consolidated financial
statements.

OMNI ENERGY SERVICES CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2002 AND 2003

2001 2002 2003
---- ---- ----
(IN THOUSANDS)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................................................. $ 5,664 $ 1,208 $ 3,483
Adjustments to reconcile net income to net cash provided by
operating activities -- Depreciation ...................................... 3,197 3,584 3,802
Amortization .............................................................. 169 200 497
Gain on fixed asset dispositions .......................................... (71) (13) (108)
Compensation expense ...................................................... -- -- 124
Loss from discontinued operations ......................................... -- -- 367
Foreign currency translation adjustment ................................... -- -- 66
Provision for bad debts ................................................... 134 (134) --
Minority interest ......................................................... -- -- (221)
Asset impairment and other charges ........................................ 632 -- --
Deferred taxes ............................................................ -- (400) (1600)
Changes in operating assets and liabilities -- Decrease (increase) in
assets -- Receivables -- Trade ............................................ (1,498) (1,047) (1,152)
Receivables -- Other ..................................................... (606) 514 (832)
Inventory ................................................................ (74) 166 (380)
Prepaid expenses ......................................................... (152) 2,696 1,979
Other .................................................................... 228 (1,933) (855)
Increase (decrease) in liabilities -- Accounts payable and accrued expenses (1,443) 31 494
Due to affiliates and stockholders/members ............................... 175 143 --
------- ------- -------
Net cash provided by operating activities ............................... 6,355 5,015 5,664
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions, net of cash received ........................................ -- (2,076) (4,099)
Proceeds from disposal of fixed assets .................................... 179 1,067 435
Purchase of fixed assets .................................................. (334) (890) (494)
------- ------- -------
Net cash used in investing activities ................................... (155) (1,899) (4,158)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt .................................. 1,521 3,500 152
Principal payments on long-term debt ...................................... (4,779) (7,731) (4,375)
Loan closing costs ........................................................ -- (384)
Net borrowings/(payments) on line of credit ............................... 324 966 1,654
Purchase of treasury stock ................................................ (706) -- --
Proceeds from issuance of subordinated debt ............................... 1,500 -- --
Repayment of subordinated debt ............................................ (3,209) -- --
Proceeds from issuance of common stock .................................... 65 6 931
------- ------- -------
Net cash used in financing activities ................................... (5,284) (3,643) (1,638)
------- ------- -------
NET INCREASE (DECREASE) IN CASH FROM OPERATIONS ............................ 916 (527) (132)
CASH, at beginning of period ............................................... 317 1,233 704
------- ------- -------
CASH, at end of period ..................................................... $ 1,233 $ 704 $ 572
======= ======= =======
SUPPLEMENTAL CASH FLOW DISCLOSURES:
CASH PAID FOR INTEREST ..................................................... $ 1,300 $ 1,079 $ 978
======= ======= =======
CASH PAID FOR TAXES ........................................................ $ 50 $ -- $ --
======= ======= =======
AVIATION EQUIPMENT PURCHASE FINANCED BY NOTE PAYABLE ....................... $ 5,108 $ -- $ --
======= ======= =======
EQUIPMENT ACQUIRED UNDER CAPITAL LEASE ..................................... $ -- $ 688 $ 3,689
======= ======= =======
PREMIUM FINANCED WITH INSURANCE CARRIER .................................... $ -- $ 3,619 $ 2,908
======= ======= =======

The accompanying notes are an integral part of these
consolidated financial statements.

OMNI ENERGY SERVICES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of OMNI Energy
Services Corp., a Louisiana corporation, and subsidiaries in which we have a
greater than 50% ownership. All material intercompany accounts and transactions
have been eliminated in these financial statements. Certain prior year amounts
have been reclassified to be consistent with current year financial statement
presentation.

The consolidated financial statements and related notes thereto include
the retroactive effect of a one-for-three reverse stock split effective July 3,
2002.

RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS

The accompanying Consolidated Financial Statements for the year ended
December 31, 2003 have been restated to reflect corrections to the calculation
of diluted earnings per share presented in the CONSOLIDATED STATEMENTS OF
OPERATIONS and in related notes to the Consolidated Financial Statements. See
Note 8 for further description of the nature of the items comprising the
restatement to the diluted earnings per share presentation.

NATURE OF BUSINESS AND CURRENT OPERATING ENVIRONMENT

We are a leading oilfield service company specializing in providing an
integrated range of (i) onshore seismic drilling, permitting, survey and
helicopter support services to geophysical companies operating in logistically
difficult and environmentally sensitive terrain and (ii) helicopter
transportation services to oil and gas companies operating primarily in the
shallow waters of the Gulf of Mexico.

We operate in two business divisions - Seismic Drilling and Aviation
Services. The principal market of our Seismic Drilling division is the marsh,
swamps, shallow water and contiguous dry areas along the U.S. Gulf Coast (the
"Transition Zone"), primarily in Louisiana and Texas, where we are the leading
provider of seismic drilling support services.

Our Aviation Services division operates a fleet of company-owned, leased
and customer-owned helicopter and fixed-wing aircraft for geophysical companies
operating in various regions of the United States and oil and gas companies
operating in the shallow waters of the Gulf of Mexico.

We receive our revenues principally from customers in the energy industry.
In recent years, the seismic market has remained depressed due primarily to the
excess capacity of available seismic data in the market. This volatile market
has impacted our ability, as well as that of our customers and others in the
industry, to change their forecasts and budgets in response to future
uncertainties of commodity pricing. These fluctuations can rapidly impact our
cash flows as supply and demand factors impact the number and size of seismic
projects available.

We adjust our operations to current market conditions by downsizing, when
necessary, our operations through closure of certain operating locations,
disposing of excess equipment and reducing our corporate overhead structure (see
Note 4). Recently, we have experienced an increase in bidding activity. During
this same time we continue our efforts to renegotiate our loan agreements with
our senior lenders.

In late 2000, we completed a $4.3 million private equity offering in
exchange for 2,320,000 shares of common stock and the option to acquire an
additional 942,500 shares of common stock at an exercise price of $2.25 per
share. The private equity stockholders received the right to "put" their shares
back to us in the event of the death of our founder and then CEO. To secure the
"put" we purchased a $7.5 million key man life insurance policy. A portion of
the insurance policy was assigned to the private equity stockholders to secure
their "put." In addition, we sold to an affiliate 800 shares of Series A
preferred stock for $0.8 million cash and also converted $4.6 million in
subordinated debt into 4,550 shares of Series A preferred stock. In connection
with the completion of these capital transactions, we reached agreements with
our then existing secured lenders to extend the maturity dates of approximately
$13 million in senior secured indebtedness. The proceeds from the sale of stock
were used to repay debt, acquire Gulf Coast Resources, Inc. and provide working
capital.

On February 10, 2001, our founder and then CEO was killed in a private
plane accident. As a result of his death, we received $7.5 million of proceeds
from the aforementioned key man life insurance policy. The receipt of the
insurance proceeds is included as "other income" in the Statement of Operations.
The private equity stockholders waived their right to "put" their common shares
back to us. In connection with obtaining these waivers, we also obtained, from
our existing senior secured lenders, commitments to modify the existing loan
agreements. Under these revised agreements, the maturity dates were extended
with principal amortization remaining substantially the same. Additionally, the
interest rate on $6.9 million of the indebtedness was reduced from prime plus 3%
to prime plus 1.5%. In connection with the revised agreements, we repaid $2.0
million of the existing senior secured term indebtedness and restructured all of
the outstanding subordinated debt.

In May 2001, we reached an agreement with our affiliate, the holders of
our outstanding subordinated debt, to pay $1.0 million in full satisfaction of
$2.0 million of indebtedness. We further agreed to issue shares of Series B
Preferred Stock in satisfaction of the remaining outstanding subordinated debt,
including accrued interest (See Note 8).

In November 2001, we renegotiated, with our existing senior secured
lenders, the amortization of certain existing senior secured term indebtedness,
the maturity dates of all existing senior secured debt and a reduction in the
interest rates of certain existing senior secured debt from the prime interest
rate plus 3% to the current rate of LIBOR plus 5%.

In September 2002, we refinanced our working capital revolving line of
credit and certain equipment term indebtedness with a $10.5 million senior
credit facility, including a $7.0 million revolving line of credit and a $3.5
million equipment term loan. In December 2003, we refinanced this working
capital revolving line of credit and related equipment term indebtedness with a
$11.0 million senior credit facility, including a $8.0 million revolving line of
credit and a $3.0 million equipment term loan.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosures of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenue and expenses
during the reporting period. The more significant estimates include asset
impairment reserves, useful lives for depreciation and amortization, receivables
reserve requirements and the realizability of deferred tax assets. Actual
results could differ from those estimates.

RECENT PRONOUNCEMENTS

Effective January 1, 2002, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 142 "Goodwill and Other Intangible Assets."
Under SFAS 142, goodwill and indefinite-lived intangible assets are no longer
amortized but are reviewed for impairment annually, or more frequently if
circumstances indicate potential impairment. Separable intangible assets that
are not deemed to have an indefinite life will continue to be amortized over
their useful lives. For goodwill and indefinite-lived intangible assets acquired
prior to July 1, 2001, goodwill continued to be amortized through 2001 at which
time amortization ceased and a transitional goodwill impairment test was
performed. Any impairment charges resulting from the initial application of the
new rules were classified as a cumulative change in accounting principle. The
initial transition evaluation was completed by June 30, 2002, which is within
the six-month transition period allowed by the new standard. Our goodwill
balances were determined not to be impaired. Goodwill amortization for the year
ended December 31, 2001 was $103,000. There was no goodwill amortization for
each of the years ended December 31, 2003 or 2002. The following table presents
our net income as reported in our consolidated financial statements compared to
what would have been reported had the SFAS No. 142 been in effect as of January
1, 2001.

PRO FORMA
UNAUDITED
DECEMBER 31, 2001
-----------------

Net income (loss), as reported............................... $ 4,938
Amortization of goodwill..................................... 103
-----------
Net income (loss), as adjusted............................... $ 5,041
===========
Earnings (loss) per common share:
Basic...................................................... $ 0.56
Diluted.................................................... $ 0.51
Number of weighted average shares
Basic...................................................... 9,015
Diluted.................................................... 9,844

In December 2002, SFAS No. 148, "Accounting for Stock-Based Compensation
-- Transition and Disclosure -- An Amendment of FASB Statement No. 123," was
issued by the FASB and amends FASB Statement No. 123, "Accounting for
Stock-Based Compensation." This Statement provides alternative methods of
transition for an entity that voluntarily changes to the fair value based method
of accounting for stock-based employee compensation and amends the disclosure
provisions of SFAS No. 123 to require prominent disclosure about the effects on
reported net income of an entity's accounting policy decisions with respect to
stock-based employee compensation. Additionally, this Statement amends APB
Opinion No. 28, "Interim Financial Reporting," to require disclosure about those
effects in interim financial information. The transition method provisions of
this Statement are effective for fiscal years ending after December 15, 2002.
The interim financial reporting requirements of this Statement are effective for
financial reports containing condensed financial statements for interim periods
beginning after December 15, 2002. We will continue to account for this
compensation in accordance with APB No. 25. The disclosure required by SFAS 148
is displayed below.

IMPAIRMENT OF LONG-LIVED ASSETS

Through December 31, 2001, we evaluated our long-lived assets for
financial impairment when events or changes in circumstances indicate that the
carrying amount of such assets may not be fully recoverable. We evaluated the
recoverability of long-lived assets not held for sale by measuring the carrying
amount of the assets against the estimated undiscounted future cash flows
associated with them. At the time, such evaluations indicated that the future
undiscounted cash flows of certain long-lived assets were not sufficient to
cover the carrying value of such assets, the assets were adjusted to their
estimated fair values. Effective January 1, 2002 we adopted SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets". These new
rules on asset impairment supersede SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." The adoption
of SFAS No. 144 did not have a material effect on our financial statements for
the years ended December 31, 2002 or 2003.

REVENUE RECOGNITION

We recognize revenue as service is rendered. Revenue from our drilling
operations is recognized on a per hole basis. Once we have drilled and loaded a
source point, revenue from the drilling of such source point is recognized.
Similarly, revenue is recognized from our seismic survey operations either on a
day rate or per mile basis. Under the per mile basis, revenue is recognized when
the source or receiving point is marked by one of our survey crews. Permitting
is recognized on a per day basis as services are incurred. Our aircraft, which
are usually either chartered with a monthly guaranteed rate or for a guaranteed
minimum number of hours per day, generate revenue pursuant to a fixed hourly
rate.

CASH AND CASH EQUIVALENTS

We consider investments with an original maturity of 90 days or less to be
cash equivalents. Due to its short-term nature, the fair value of cash and cash
equivalents approximates book value.

ACCOUNTS RECEIVABLE

Trade and other receivables are stated at net realizable value. We grant
short-term credit to our customers, primarily geophysical and oil and gas
operating companies. We regularly review outstanding receivables and provide for
estimated losses through our allowance for doubtful accounts.

INVENTORIES

Inventories consist of parts and supplies used for our drilling and
aviation operations. All inventories are valued at lower of average cost or
market.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost less accumulated depreciation.
We provide for depreciation by charging operations in amounts estimated to
allocate the cost of the assets over their estimated useful lives and salvage
values as follows:

ASSET CLASSIFICATION USEFUL LIFE SALVAGE VALUE
-------------------- ----------- -------------

Buildings and improvements................................... 25 years --
Drilling, field and support equipment........................ 5-10 years 10%
Aviation equipment........................................... 10 years 10%
Shop equipment............................................... 10 years --
Office equipment............................................. 5 years --
Vehicles..................................................... 4-5 years --

Additions to property and equipment and major replacements are
capitalized. Gains and losses on dispositions, maintenance, repairs and minor
replacements are reflected in the Statement of Operations. Drilling equipment,
which is fabricated, is comprised of direct and indirect costs incurred during
fabrication. Costs include materials and labor consumed during fabrication.
Interest is also capitalized during the fabrication period. Included in property
and equipment at December 31, 2003 is approximately $650,000, which is net of
accumulated depreciation, of approximately $415,000 for vehicles purchased under
capital lease obligations and $3,400,000, net of accumulated depreciation of
$65,000, for aircraft purchased under capital lease obligations.

GOODWILL AND INTANGIBLE ASSETS

Goodwill represents the excess of the purchase price of acquisitions over
the fair value of the net assets acquired. Such excess costs were being
amortized on a straight-line basis over a twenty-five year period. Through
December 31, 2001, we periodically assessed the recoverability of the
unamortized balance based on expected future profitability and undiscounted
future cash flows of the acquisitions and their contribution to our overall
operation. Effective January 1, 2002 we adopted SFAS No. 142, "Goodwill and
Other Intangible Assets." Under SFAS No. 142, goodwill and intangible assets
with indefinite lives are no longer amortized but are reviewed annually (or more
frequently if impairment indicators arise) for impairment. Separable intangible
assets that are not deemed to have indefinite lives will continue to be
amortized over their useful lives (but with no maximum life). The amortization
provisions of SFAS No. 142 apply to goodwill and intangible assets acquired
after June 30, 2001. As of December 31, 2001, 2002, and 2003, accumulated
goodwill amortization totaled approximately $123,811. (See Note 4 for impairment
charges related to goodwill.) As of December 31, 2001, 2002, and 2003, we have
goodwill of $2.0 million, $1.9 million and $2.1 million respectively. We
recognized approximately $103,000 in goodwill amortization expense for the year
ended December 31, 2001. No goodwill amortization expense was recorded in the
years ended December 31, 2002 or 2003. We recorded $100,000 in amortization
expense related to the customer intangible asset for each of the years ended
December 31, 2002 and 2003.

INCOME TAXES

We provide for deferred taxes in accordance with SFAS No. 109, "Accounting
for Income Taxes," which requires an asset and liability approach for measuring
deferred taxes and liabilities due to temporary differences existing at year-end
using currently enacted rates. (See Note 9)

FOREIGN CURRENCY TRANSLATION

Our Canadian subsidiary maintained its accounting records in the local
currency (Canadian Dollar) before this operation was closed in July 1999. The
currency was converted to United States dollars, with the effect of the foreign
currency translation reflected as a component of stockholders' equity in
accordance with SFAS No. 52, and SFAS No. 130, "Reporting Comprehensive Income."
Currently, all other international activity is transacted in United States
Dollars. Foreign currency transaction gains or losses are credited or charged to
income and such amounts are insignificant for the periods presented.

STOCK OPTIONS

At December 31, 2003, we had two stock-based employee compensation plans,
which are described more fully in Note 8. We account for these plans under the
recognition and measurement principles of APB Opinion No. 25, "Accounting for
Stock Issued to Employees," and related Interpretations. No stock-based employee
compensation cost is reflected in net income, as all options granted under those
plans have an exercise price equal to the market value of the underlying common
stock on the date of grant. The following table illustrates the effect on net
income and earnings per share if we had applied the fair value recognition
provisions of FASB Statement No. 123, "Accounting for Stock-Based Compensation,"
to stock-based employee compensation:

YEAR ENDED DECEMBER 31,
--------------------------------------------
2003
AS 2003
PREVIOUSLY AS
2001 2002 REPORTED RESTATED
---------- ------- ---------- --------

Net income available to common and common equivalent shares................... $ 4,938 $ 724 $ 2,999 $ 2,999
Less: Total stock-based employee compensation expense determined
under fair value based method for all awards, net of related tax effects.... 365 67 416 416
---------- ------- -------- --------
Pro forma net income.......................................................... $ 4,569 $ 657 $ 2,583 $ 2,583
========== ======= ======== ========
Basic income per common share:
As reported................................................................. $ 0.55 $ 0.08 $ 0.34 $ 0.34
========== ======= ======== ========
Pro forma................................................................... $ 0.51 $ 0.08 $ 0.29 $ 0.29
========== ======= ======== ========
Diluted income per common share:
As reported................................................................. $ 0.50 $ 0.08 $ 0.34 $ 0.31
========== ======= ======== ========
Pro forma................................................................... $ 0.46 $ 0.08 $ 0.29 $ 0.27
========== ======= ======== ========

OVERHAUL AND REPAIR COSTS

Major overhaul of component parts for our owned aircraft are capitalized
as prepaid items, as incurred, and amortized over service hours flown. Major
overhauls to bring leased aircraft to specifications required at the termination
of our operating leases are accrued on the basis of hours flown. Routine repairs
and maintenance are expensed, as incurred.

2. VALUATION ALLOWANCE ACCOUNTS

The allowance for uncollectible accounts consists of the following (in
thousands):

BALANCE AT ADDITIONS WRITE-OFF OF
BEGINNING OF CHARGED TO UNCOLLECTIBLE BALANCE AT END
DESCRIPTION PERIOD EXPENSE AMOUNTS OF PERIOD
---------------------------------------------- ------------ ---------- ------------- --------------

December 31, 2003
Allowance for uncollectible accounts......... $ 45 $ -- $ -- $ 45
========== ========== =========== ===========
December 31, 2002
Allowance for uncollectible accounts......... $ 1,174 $ 27 $ (1,156) $ 45
========== ========== =========== ===========
December 31, 2001
Allowance for uncollectible accounts......... $ 1,238 $ 134 $ (198) $ 1,174
========== ========== =========== ===========

The accrual to bring leased aircraft back to repair specifications at the
termination of the operating lease is as follows (in thousands):

BALANCE AT BALANCE
BEGINNING OF REPAIR AT END
DESCRIPTION PERIOD ADDITIONS CHARGES OF PERIOD
---------------------------------------------- ------------ ---------- ------------ -----------

December 31, 2003
Operating lease repair accrual............... $ -- $ -- $ -- $ --
============ ========== ============ ===========
December 31, 2002
Operating lease repair accrual............... $ 117 $ -- $ (117) $ --
============ ========== ============ ===========
December 31, 2001
Operating lease repair accrual............... $ 1,633 $ 1,247 $ (2,763) $ 117
============ ========== ============ ===========

3. LONG-TERM DEBT AND LINE OF CREDIT

Long-term debt consists of the following (dollars in thousands):

DECEMBER 31,
----------------
2002 2003
---- ----

Notes payable to a finance company, variable interest rate at LIBOR plus 5.0%
(6.12% at December 31, 2003) maturing July 31, 2006, secured by
various property and equipment ................................................ $ 1,454 $1,145
Notes payable to a bank with interest payable at Prime plus 1.5% (5.5% at
December 31, 2003) maturing July 31, 2023, secured by real estate ............. 1,767 1,633
Notes payable to a bank with interest payable at Prime plus 1.75% (5.75% at
December 31, 2003) maturing December 31, 2006, secured by various
property and equipment ........................................................ 3,312 3,000
Notes payable to a finance company with interest at 8% maturing January 1, 2007,
secured by various aircraft ................................................... 3,345 1,838
Notes payable to a finance company with interest at 10.25% maturing May 15, 2008,
secured by an aircraft ........................................................ -- 207
Capital lease payable to a leasing company secured by vehicles .................. 596 491
Capital lease payable to a finance company secured by various aircraft .......... -- 3,361
Capital lease payable to a vendor secured by equipment .......................... 101 --
------- -------
Total ......................................................................... 10,575 11,675
Less: Current maturities ........................................................ 2,235 2,051
------- -------
Long-term debt, less current maturities ......................................... $ 8,340 $ 9,624
======= =======

Annual maturities of long-term debt during each of the following years ended
December 31 are as follows (in thousands):

2004 $ 2,051
2005 2,007
2006 3,812
2007 976
2008 2,829
----------
$ 11,675
==========

The estimated fair value of long-term debt, based on borrowing rates
currently available to us for notes with similar terms and average maturities,
approximated the carrying value as of December 31, 2002 and 2003.

We have a working capital revolving line of credit agreement (the "Line")
with a bank. Availability under the Line is the lower of: (i) $8.0 million or,
(ii) the sum of 85% of eligible accounts receivable, plus the lessor of: $2.0
million or 80% of the appraised orderly liquidation value of eligible inventory
of parts and supplies. The Line accrues interest at the prime interest rate plus
1.5% (5.5% at December 31, 2003) and matures on December 31, 2006. The Line is
collateralized by accounts receivable and inventory and is subject to certain
customer concentration limitations. As of December 31, 2003 we had $4.6 million
outstanding under the Line and additional borrowing availability of $1.1
million. The weighted-average interest rate on borrowings under our revolving
lines of credit was 6.2% and 5.7% for the years ended December 31, 2002 and
2003, respectively.

The senior secured credit agreements restrict the payment of dividends and
contain customary financial covenants requiring, among other things, minimum
levels of EBITDA, working capital, tangible net worth and debt to EBITDA ratios.
As of December 31, 2003 we were in compliance with all of these covenants.

4. ASSET IMPAIRMENT AND OTHER NON-RECURRING CHARGES

During 1997 and the first half of 1998, we experienced significant growth
through a series of strategic acquisitions, and increasing demand for our
services. Due to a significant decrease in the price of oil and gas and the
resultant impact on drilling activity, we experienced a sharp decline in the
demand for our services during the second half of 1998 through 2000. This
decline in customer demand materialized quickly from the previous growth period
and caused us to reassess our overall operations. This change in our market and
reassessment of operations resulted in our recording of the following charges to
asset impairment during 2001, 2002, and 2003 (in thousands):

2001 2002 2003
--------- -------- --------

Impairment of drilling, field equipment and inventory.............. $ 632 $ -- $ --
Write-down of other assets......................................... -- -- --
Write-down of goodwill (net)....................................... -- -- --
--------- -------- --------
$ 632 $ -- $ --
========= ======== ========

In 2001, we revalued the tractors being held for sale to prices that more
closely approximated their fair market values. In doing so, we recognized asset
impairment charges of $0.2 million for the year ended December 31, 2001. By the
end of 2001, all of the tractors were sold at prices that approximated their
newly assigned values. We also revalued the steel marsh buggies being held for
sale to their appraised fair market values as of December 31, 2001. This
revaluation resulted in an additional $0.4 million charge to asset impairment
for the year ended December 31, 2001.

In 2002, we collected $0.1 million of rent on facilities located in South
America, which was applied as a reduction of the value of these assets held for
sale. In 2003, we revalued the remaining South American assets at amounts
approximating their revised values which resulted in a one-time charge of $0.4
million, which is reflected as a loss from discontinued operations.

As of December 31, 2003, assets held for sale include 8 steel marsh
buggies. These assets are valued at approximate fair market value of $0.1
million, which is included in "Other Assets" in the accompanying balance sheet
as of December 31, 2003. We expect to dispose of these assets during 2004.

5. RELATED PARTY TRANSACTIONS

During the year ended December 31, 2001, we leased a facility from an
affiliate at a total lease expense of $0.1 million, which approximated market
value. We remained under this lease contract for a portion of 2001.

In July 2000, we entered into a series of transactions with this same
affiliate that enabled us to factor, with recourse, approximately $1.0 million
of the trade receivable of a major customer. This receivable had become
ineligible under the terms of our then existing revolving line of credit. As of
December 31, 2003, we were liable to the affiliate for approximately $0.2
million related to this agreement. In addition, we borrowed $0.5 million from
this affiliate during 2002. As of December 31, 2003, $0.1 million remained
outstanding.

We also placed certain subordinated debt with this affiliate, which was
subsequently converted to preferred stock (See Note 8).

During 2003, we entered into an agreement to facilitate the private
placement of approximately 1,650,000 shares of our common stock owned by an
affiliate and certain investors. The sale of the stock covered by this agreement
closed in the fourth quarter of 2003 and resulted in our receipt of $0.4 million
cash, which is reflected as a reduction in our general and administrative
expense.

In order to facilitate a settlement of ongoing litigation between certain
affiliates, we agreed to re-price and extend the maturity dates of 293,055
warrants owned by the defendant affiliates but transferred in settlement of the
litigation to the plaintiff affiliates. The exercise prices of the transferred
warrants ranged from $2.25 - $6.00 per share. The maturity dates of the
transferred warrants ranged from November 1, 2004 to July 1, 2005. The
transferred warrants were re-priced at $1.54 per share and the maturity dates
were extended to November 1, 2006. Our statement of operations includes a
non-recurring charge of approximately $0.1 million representing the differences
if the fair market value of the originally issued warrants and the re-priced
warrants. As of December 31, 2003, all 293,055 re-priced warrants remained
outstanding.

6. CUSTOMER AND CREDIT CONCENTRATION

During the year ended December 31, 2001, three customers accounted for 71%
(43%, 16% and 12%, respectively) of our total revenues. Included in accounts
receivable as of December 31, 2001, are amounts owed from these customers
totaling approximately 74% (7%, 34% and 33%, respectively) of total accounts
receivable.

During the year ended December 31, 2002, two customers accounted for 84%
(58% and 26%, respectively) of our total revenues. Included in accounts
receivable as of December 31, 2002, are amounts owed from these customers
totaling approximately 68% (67% and 1%, respectively) of total accounts
receivable.

During the year ended December 31, 2003, three customers accounted for 71%
(43%, 16% and 12%, respectively) of our total revenues. Included in accounts
receivable as of December 31, 2003, are amounts owed from these customers
totaling approximately 60% (20%, 7% and 33%, respectively) of total accounts
receivable

7. COMMITMENTS AND CONTINGENCIES

LEASES

During 1999, we entered into a sale-leaseback transaction with our
aviation fleet. We received $8.0 million upon sale of the aircraft and entered
into an operating lease for a period of 10 years. Monthly rental payments under
the lease were approximately $80,000. In December 2001, we exercised our option
to acquire this leased aviation fleet resulting in a $4.7 million note payable
at December 31, 2001 (See Note 3). Future payments under this agreement will be
recorded as a reduction in principal of the debt.

In connection with the September 2002 completion of a certain senior
secured credit facility, we negotiated with a financing institution for the
acquisition of certain drilling equipment and the early termination of the lease
of certain seismic aviation equipment previously accounted for as non-cancelable
operating leases.

Total rental expense was $1,558,767, $489,517 and $382,797 for the years
ended December 31, 2001, 2002 and 2003, respectively. At December 31, 2003 there
were no material non-cancelable operating leases.

INSURANCE

Management is not aware of any significant workers' compensation claims or
any significant claims incurred but not reported as of December 31, 2003.

LITIGATION

On February 13, 2004, we commenced litigation against a former director,
Advantage Capital Partners ("ACP") and their respective insurers in the Civil
District Court for the Parish of Orleans in the State of Louisiana. The suit
requests the court to determine our right under the Company's Articles of
Incorporation, as amended, to redeem the Series A 8% Convertible Preferred Stock
rather than to convert the shares into common stock. Furthermore, to the extent
the court determines we did not have a right to redeem, rather than convert, the
Series A Preferred Stock, the suit requests the court to determine that the
Unanimous Consent of the Board of Directors entered into on November 7, 2000
which, among other things, reduced the conversion price of the Series A
Preferred Stock from $2.50 to $0.75 (pre-split), is null and void and without
effect because it was accomplished by the defendants in violation of fiduciary
duties and/or public policy and Louisiana law.

In the normal course of our business, we become involved in various
litigation matters including, among other things, claims by third parties for
alleged property damages, personal injuries and other matters. While we believe
we have meritorious defenses against these claims, management has used estimates
in determining our potential exposure and has recorded reserves in our financial
statements related thereto where appropriate. It is possible that a change in
our estimates of that exposure could occur, but we do not expect such changes in
estimate costs will have a material effect on our financial position or results
of operations.

EMPLOYMENT AGREEMENTS

The term of Mr. Eckert's employment agreement is from March 31, 2001 to
March 31, 2004. The agreement provides that Mr. Eckert will serve as our
Chairman of the Board, during such term, at a base salary of $100,000, $125,000
and $150,000 for the twelve month periods ended March 31, 2002, 2003 and 2004,
respectively; and that Mr. Eckert's employment can be terminated at any time by
us for cause or for breach of the agreement by Mr. Eckert.

We have agreed in principle with certain executive officers to enter into
a restricted stock agreement. The final terms are still under negotiation and
are subject to third party review, Board and shareholder approval. These
agreements could have an effect on our 2004 net income, the magnitude of which,
if any, is not yet determined.

The Board is also having on-going negotiations on possible employment and
incentive compensation agreements with various executive officers and key
employees, which will be subject to Board approval and, possibly, shareholder
approval. These agreements could have an effect on our 2004 net income, the
magnitude of which, if any, is not yet determined.

8. STOCKHOLDERS' EQUITY

PREFERRED STOCK

During the years ended December 31, 1999, 2000 and 2001, we privately
placed with an affiliate subordinated debentures totaling $7.5 million, $3.4
million and $1.5 million, respectively. The debentures matured five years from
their date of issue and accrued interest at various rates ranging from a fixed
rate of 12% per annum to a variable rate of interest starting at 12% per annum
and escalating to 20% per annum. In October 2000, we agreed to convert $4.6
million of the subordinated debentures into our Series A Preferred Stock. In May
2001, we agreed to pay the affiliate $3.0 million cash plus issue to the
affiliate $4.6 million of the Company's Series B Preferred Stock in full
satisfaction of all of the remaining outstanding subordinated debentures
including accrued interest of $1.8 million. This transaction resulted in the
affiliate agreeing to forgive $1.0 million of indebtedness, which has been
reflected as a capital contribution from the affiliate, rather than as income in
the accompanying financial statements.

In connection with the original issuance of the subordinated debentures,
we issued to the affiliate detachable warrants to purchase 1,912,833 shares of
our common stock. As of December 31, 2003, 761,110 warrants outstanding are all
exercisable with an exercise price of $2.25 per share. Subsequent to 12/31/03,
the affiliate exercised all of these warrants.

At December 31, 2003, we had a total of 7,500 shares of Series A Preferred
Stock and 4,600 shares of Series B Preferred Stock, at a total liquidation value
of $12.1 million.

The Series A Preferred Stock has an 8% cumulative dividend rate, is
convertible into our common stock with a conversion rate of $2.25, is redeemable
at our option at $1,000 per share plus accrued dividends, contains a liquidation
preference of $1,000 per share plus accrued dividends, has voting rights on all
matters submitted to a vote of our stockholders, has separate voting rights with
respect

to matters that would affect the rights of the holders of the Preferred Stock,
and has aggregate voting rights of the affiliate limited to 49% of our total
outstanding common and preferred shares with voting rights. In respect to the
Series A Preferred Stock, the affiliate has agreed to waive its conversion
rights until our EBITDA (as defined) reaches a mutually agreed upon level.
Pursuant to an agreement with the preferred stockholders, dividends did not
accrue on the outstanding stock from April 2001 through June 2002. Dividends
were accreted at 8% during the free dividend period. As of September 2003, there
were approximately $0.3 million dividends in arrears relating to these
outstanding shares of Series A Preferred Stock. The affiliate previously agreed
that dividends would not accrue after June 30, 2002, until our EBITDA reached a
mutually agreed upon level. During the third quarter of 2003, we agreed with the
holders of the preferred stock that our EBITDA had reached an acceptable level
for the resumption of conversion rights and the accrual of dividends. Pursuant
to our senior secured credit agreements, the dividends will be paid "in kind"
(in shares of like preferred stock) rather than in cash. Subsequent to December
31, 2003, we issued $10 million of 6.5% Subordinated Convertible Debentures. The
proceeds were used to redeem $8.2 million of the Series A Preferred Stock,
including accrued dividends paid in cash. (See Note 7)

In May 2001, we committed to issue 4,600 shares of Series B Preferred
Stock to an affiliate of ours in satisfaction of all outstanding principal and
interest owed under the subordinated debt agreements (See Note 3). These shares
were issued in March 2002. The Series B Preferred Stock has an 8% cumulative
dividend rate, is convertible into our common stock with an initial conversion
rate of $3.75, is redeemable at our option at $1,000 per share plus accrued
dividends, contains a liquidation preference of $1,000 per share plus accrued
dividends and has no voting rights until such time as it becomes convertible.
The Series B Preferred Stock does not have conversion rights until our EBITDA
(as defined) reaches a mutually agreed upon level, and until all shares of
Series A Preferred Stock become convertible. Pursuant to an agreement with the
preferred stockholders, dividends did not accrue on the outstanding stock from
April 2001 through June 2002. Dividends were accreted at 8% during the free
dividend period. The affiliate previously agreed that dividends would not accrue
after June 30, 2002 until our EBITDA reached a mutually agreed upon level.
During the third quarter of 2003 we agreed with the holders of the preferred
stock that our EBITDA had reached an acceptable level for the resumption of
conversion rights and the accrual of dividends. Pursuant to our senior secured
credit agreements, the dividends will be paid "in kind" (in shares of like
preferred stock) rather than in cash. Subsequent to December 31, 2003, we
redeemed approximately $2.3 million of the Series B Stock, including accrued
dividends paid in cash. (See Note 7)

STOCK OPTIONS

In September 1997, we adopted and our sole shareholder approved the Stock
Incentive Plan (the "Incentive Plan") to provide long-term incentives to our key
employees, officers, directors who are our employees, and our consultants and
advisors and non-employee directors ("Eligible Persons"). Under the incentive
plan, we may grant incentive stock options, non-qualified stock options,
restricted stock, other stock-based awards, or any combination thereof to
Eligible Persons. Options generally vest over a four-year period and expire if
unused after ten years. The exercise price of any stock option granted may not
be less than the fair market value of the common stock on the date of grant. A
total of 1,500,000 shares of common stock have been authorized under the
Incentive Plan, of which 162,270 remain available for issuance at December 31,
2003.

In January 1999, we approved the Stock Option Plan (the "Option Plan") to
provide for the grant of options to purchase shares of our common stock to
non-officer employees of our company and our subsidiaries in lieu of year-end
cash bonuses. The Option Plan is intended to increase shareholder value and
advance our interests by providing an incentive to employees and by increasing
employee awareness of us in the marketplace. Under the Option Plan, we may grant
options to any of our employees with the exception of our officers. The options
become exercisable immediately with respect to one-half of the shares, and the
remaining one-half shall be exercisable one year following the date of the
grant. The exercise price of any stock option granted may not be less than the
fair market value of the common stock on the effective date of the grant. A
total of 100,000 shares of common stock are authorized, of which 5,435 remain
available for issuance at December 31, 2003.

We account for employee stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board (APB) Opinion No. 25,
"Accounting for Stock Issued to Employees". Accordingly, the affect of the
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," to our
reported results of operations on a pro forma basis are presented below.

Had compensation cost been determined based on the fair value at the grant
date consistent with the provisions of SFAS No. 123, our net income and earnings
per common share would have approximated the pro forma amounts below:

FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------
2001 2002 2003 AS PREVIOUSLY REPORTED
----------------------------- ---------------------------- -----------------------------
AS
AS COMPEN- PRO AS COMPEN- PRO PREVIOUSLY COMPEN- PRO
REPORTED SATION(1) FORMA REPORTED SATION(1) FORMA REPORTED SATION(1) FORMA
-------- --------- ------- -------- --------- ------- -------- --------- -------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

Net income (loss) available to common
and common equivalent shares........ $ 4,938 $ (369) $ 4,569 $ 724 $ (67) $ 657 $ 2,999 $ (416) $ 2,583
Basic income per share............... $ 0.55 -- $ 0.51 $ 0.08 -- $ 0.08 $ 0.34 -- $ 0.29
Diluted income per share............. $ 0.50 -- $ 0.46 $ 0.08 -- $ 0.08 $ 0.34 -- $ 0.29

FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------
2003 AS RESTATED
-----------------------------------------------
AS COMPEN- PRO
RESTATED SATION(1) FORMA
------------- --------- ---------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

Net income (loss) available to common
and common equivalent shares........ $ 2,999 $ (416) $ 2,583
Basic income per share............... $ 0.34 $ --- $ 0.29
Diluted income per share............. $ 0.31 $ --- $ 0.27

-----------
(1) Represents stock based employee compensation expense determined
under fair value based method for all awards, net of tax.

The weighted average fair value at date of grant for options granted
during 2001 was $1.98 per option. The fair value of options granted is estimated
on the date of grant using the Black-Scholes option-pricing model with the
following assumptions: (a) dividend yield of 0.00%; (b) expected volatility 94%;
(c) average risk-free interest rate of 4.17%; and (d) expected life of 6.5
years.

The weighted average fair value at date of grant for options granted
during 2002 was $1.94 per option. The fair value of options granted is estimated
on the date of grant using the Black-Scholes option-pricing model with the
following assumptions: (a) dividend yield of 0.00%; (b) expected volatility of
150%; (c) average risk-free interest rate of 3.11%; and (d) expected life of 6.5
years.

The weighted average fair value at date of grant for options granted
during 2003 was $2.26 per option. The fair value of options granted is estimated
on the date of grant using the Black-Scholes option-pricing model with the
following assumptions: (a) dividend yield of 0.00%; (b) expected volatility of
148%; (c) average risk-free interest rate of 2.51%; and (d) expected life of 9.2
years.

A summary of our employee stock options as of December 31, 2001, 2002 and
2003, and changes during the years then ended, which give retroactive effect to
the one for three reverse stock split effective July 3, 2002, are presented
below:

WEIGHTED AVERAGE INCENTIVE OTHER
EXERCISE PRICE PLAN OPTIONS OPTIONS
---------------- ------------ -------

Balance at December 31, 2000....................... $ 10.38 535,650 3,333
---------------- ------------ -------
Granted.......................................... 2.67 723,000 --
Exercised........................................ 1.89 122,901 --
Forfeited........................................ 3.75 (473,216) --
---------------- ------------ -------
Balance at December 31, 2001....................... $ 3.40 908,335 3,333
---------------- ------------ -------
Granted.......................................... 1.94 75,000 --
Exercised........................................ 1.87 (3,333) --
Forfeited........................................ 5.05 (125,510) (3,333)
---------------- ------------ -------
Balance at December 31, 2002....................... $ 3.03 854,492 --
---------------- ------------ -------
Granted.......................................... 2.31 489,500 --
Exercised........................................ 1.88 (119,998) --
Forfeited........................................ 5.80 (54,854) --
---------------- ------------ -------
Balance at December 31, 2003....................... $ 2.74 1,169,140 --
================ ============ =======

The following table summarizes information about employee stock options
outstanding as of December 31, 2003:

OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------------- ----------------------------
WGTD. AVG.
NUMBER REMAINING WGTD. AVG. NUMBER WGTD. AVG.
EXERCISE PRICES OUTSTANDING CONTR. LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
----------------------- ----------- ----------- -------------- ----------- --------------

$1.30 - $5.21.......... 1,155,516 7.6 $ 2.38 585,105 $ 2.39
$5.22 - $10.42......... 1,332 5.7 $ 9.00 1,332 $ 9.00
$10.43 - $15.64........ 1,461 0.1 $ 15.00 1,461 $ 15.00
$15.65 - $36.48........ 7,499 0.7 $ 33.00 7,499 $ 33.00
$36.49 - $52.12........ 3,332 0.3 $ 52.12 3,332 $ 52.12
----------- ----------- -------------- ----------- --------------
1,169,140 7.5 $ 2.74 598,729 $ 3.10
=========== =========== ============== =========== ==============

Additionally, at December 31, 2003, there were 170,000 outstanding options
held by affiliates to purchase shares of common stock at a price of $2.25 a
share. At December 31, 2003, there were 1,339,140 total options outstanding at
exercise prices ranging from $1.30 - $52.13, of which 593,729 were exercisable.
There were also 1,773,709 warrants outstanding and exercisable at exercise
prices ranging from $1.54 - $2.25.

COMMON STOCK

The consolidated financial statements and related notes thereto include
the retroactive effect of a one for three reverse stock split effective July 3,
2002. We currently have 45,000,000 shares of our $0.01 par value common stock
authorized; of these authorized shares, there were 9,101,778 and 9,569,729
issued at December 31, 2002 and 2003, respectively. In November 2000, 1,302,489
new shares were issued in conjunction with the acquisition of Gulf Coast
Resources, Inc. (See Note 11) and 2,320,000 were issued in conjunction with the
private placement (See Note 1). In 2001, we repurchased 361,800 shares, which
are classified as treasury shares.

EARNINGS PER SHARE, RESTATED

Basic EPS excludes dilution and is determined by dividing income available
to common stockholders by the weighted average number of shares of common stock
outstanding during the period. Diluted EPS reflects the potential dilution that
could occur if options and other contracts to issue shares of common stock were
exercised or converted into common stock. Giving retroactive effect the one for
three reverse stock split effective July 3, 2002, we had 371,698, 985,615 and
193,146 options outstanding in the years ended December 31, 2001, 2002 and 2003,
respectively, that were excluded from the calculation of diluted EPS as
antidilutive. In addition, warrants to purchase up to 184,722, 2,121,662 shares
of common stock were also excluded for the years ended December 31, 2001 and
2002, respectively. There were no warrants excluded in the calculation of
diluted EPS for the year ended December 31, 2003.

There were 12,100 shares of preferred stock outstanding during the entire
twelve months ended December 31, 2003. The affiliate agreed to waive its
conversion rights until a certain earnings bench mark had reached a mutually
agreeable level. This was achieved on July 1, 2003 and accordingly the shares
became convertible on that date. The earnings per share calculation was
previously reported (1) excluding the preferred stock along with the related
preferred stock dividends under the "if converted" method under Financial
Accounting Standards Board (FASB) No. 128, Earnings Per Share, in calculating
net income (loss) applicable to common and common stock equivalents in the
calculation of diluted earnings per share for the quarters ended September 30,
2003 and December 31, 2003; and (2) using weighted average price to calculate
shares for options and warrants in each quarter and for the full year verses
averaging the number of shares in the four quarters of 2003. The effect of this
restatement and modified presentation is shown below.

The following table sets forth the computation of basic and diluted
weighted average shares for the years ended December 31, 2001, 2002 and 2003, as
reported and as restated (in thousands):

2003
AS PREVIOUSLY 2003
2001 2002 REPORTED AS RESTATED
-------------- -------------- -------------- --------------

Shares:
Basic shares outstanding........................ 9,015 8,739 8,772 8,772
-------------- -------------- -------------- --------------
Effect of dilutive securities:
Stock options................................. 225 6 11 111
Warrants...................................... 604 --- 45 199
Preferred Stock............................... --- --- --- 2,280
-------------- -------------- -------------- --------------
Dilutive shares outstanding..................... 9,844 8,745 8,828 11,362
============== ============== ============== ==============

TWELVE MONTHS ENDED DECEMBER 31, 2003
-------------------------------------
AS PREVIOUSLY
REPORTED RESTATED
------------- -----------

INCOME STATEMENT DATA
Net income................................... $ 3,483 $ 3,483
Net income applicable to common and common
stock equivalents.......................... $ 2,999 $ 2,999
Basic income (loss) per common share:
Income from continuing operations.......... $ 0.44 $ 0.38
(Loss) from discontinued operations....... $ (0.04) $ (0.04)
Net Income applicable to common and
common equivalent shares.................. $ 0.34 $ 0.34
Diluted income (loss) per common share:
Income from continuing operations.......... $ 0.44 $ 0.34
(Loss) from discontinued operations....... $ (0.04) $ (0.03)
Net Income applicable to common and
common equivalent shares.................. $ 0.34 $ 0.31
Number of shares used in calculating EPS
Basic..................................... 8,772 8,772
Diluted................................... 8,828 11,362

The net income applicable to common and common equivalent shares for the
basic EPS calculation is $2,999. After adding back the preferred stock dividends
of $484, the net income applicable to common and common equivalent shares for
the diluted EPS calculation is $3,483.

9. INCOME TAXES

The components of deferred tax assets and liabilities as of December 31,
2002 and 2003 are as follows (in thousands):

2002 2003
---------- ----------

Deferred Tax Assets:
Allowance for doubtful accounts.............. $ 17 $ 17
Foreign taxes................................ 147 --

Goodwill..................................... 1,812 0
Net operating loss carryforward.............. 13,799 12,453
---------- ----------
Total deferred tax assets.................. 15,775 12,470
Deferred Tax Liabilities:
Property and equipment....................... (5,337) (4,887)
Customer intangible............................ (674) (337)
Less: Valuation Allowance...................... (9,364) (5,246)
---------- ----------
Net Deferred Tax Asset......................... $ 400 $ 2,000
========== ==========

The income tax expense (benefit) for the years ended December 31, 2001,
2002 and 2003 consisted of the following (in thousands):

2001 2002 2003
-------- ---------- ----------

Current benefit........................ $ (928) $ (884) --
Deferred (benefit) expense............. 285 1,713 $ 2,518
Less: change in valuation allowance.... 643 (1,229) (4,118)
-------- ---------- ----------
Total tax benefit.................... $ -- $ (400) $ (1,600)
======== ========== ==========

The reconciliation of Federal statutory and effective income tax rates for
the years ended December 31, 2001, 2002 and 2003 is shown below:

2001 2002 2003
---- ---- ----

Statutory federal rate.............................. 34% 34% 34%
State taxes......................................... 3 3 3
Goodwill............................................ -- -- --
Life insurance proceeds............................. (49) -- --
Valuation allowance................................. 16 (87) (83)
Other............................................... (4) -- --
---- ---- ----
Total............................................. 0% (50)% (46)%
==== ==== ====

As of December 31, 2003, for tax purposes, we had net operating loss
carryforwards (NOLs) of approximately $34.0 million. The NOLs will expire
commencing 2019. We account for income taxes under the provision of SFAS No.
109, which requires recognition of future tax benefits (NOLs and other temporary
differences), subject to a valuation allowance based on the likelihood of a
concept of "more-likely-than-not" of realizing such benefit. In determining
whether it is "more-likely-than-not" that we will realize such benefits, SFAS
No. 109 requires that all negative and positive evidence be considered (with
more weight given to evidence that is "objective and verifiable") in making the
determination. SFAS No. 109 indicated that "forming a conclusion that a
valuation allowance is not needed is difficult when there is negative evidence
such as cumulative losses in recent years"; therefore we determined that it was
required by the provision of SFAS No. 109 to maintain a valuation allowance of
$6.0 million for all of the recorded net deferred tax assets. In 2002 and 2003,
the Company reversed $0.4 million and $1.6 million, respectively of this related
reserve due to the Company's expectation of generating income in fiscal 2003 and
2004. In 2003, the Company reversed an additional $1.6 million of this related
reserve. Future favorable adjustments to the valuation allowance may be required
if and when circumstances change.

10. SEGMENT INFORMATION

SFAS No. 131, "Disclosures About Segments of an Enterprise and Related
Information," which requires that companies disclose segment data based on how
management makes decisions about allocating resources to segments and measuring
their performance. Currently, we conduct our operations principally in four
segments, which operate in North America. All remaining assets also are located
in North America.

Drilling revenue is derived primarily from drilling and loading of the
source points for seismic analysis. Aviation revenue is derived through
transport of geophones and recorders used to collect the seismic data between
receiving points. Helicopters are also

used to transport heli-portable drilling units into remote or otherwise
inaccessible terrain, as well as to transport people and equipment to offshore
oil rigs. Survey revenue is recorded after the customer has determined the
placement of source and receiving points, and after survey crews are sent into
the field to plot each source and receiving point prior to drilling. Permitting
revenue is derived from services provided in conjunction with obtaining permits
from landowners. The following shows industry segment information for the years
ended December 31, 2001, 2002 and 2003:

2001 2002 2003
---------- ---------- ----------
(THOUSANDS OF DOLLARS)

OPERATING REVENUES:
Drilling.............................................. $ 17,971 $ 24,477 $ 30,117
Aviation.............................................. 3,644 3,066 5,117
Survey................................................ 611 -- --
Permitting............................................ 1,460 253 1,821
---------- ---------- ----------
Total............................................... $ 23,686 $ 27,796 $ 37,055
========== ========== ==========
GROSS PROFIT (LOSS):
Drilling.............................................. $ 2,121 $ 4,990 $ 7,227
Aviation.............................................. 1,084 1,273 1,217
Survey................................................ (177) (111) (62)
Permitting............................................ 177 30 352
Other................................................. (412) (528) (420)
---------- ---------- ----------
Total............................................... 2,793 5,654 8,314
General and administrative expenses..................... 3,126 3,771 4,820
Asset impairment and other charges...................... 632 -- --
Other (income) expense, net............................. (6,629) 1,075 1,244
---------- ---------- ----------
Income before taxes..................................... $ 5,664 $ 808 $ 2,250
========== ========== ==========
IDENTIFIABLE ASSETS:
Drilling(1)........................................... $ 21,045 $ 24,309 $ 21,428
Aviation(2)........................................... 6,993 6,096 15,795
Survey................................................ 1,516 1,050 1,129
Other................................................. 8,894 9,870 11,937
---------- ---------- ----------
Total............................................... $ 38,448 $ 41,325 $ 50,289
========== ========== ==========
CAPITAL EXPENDITURES:
Drilling (1)(3)....................................... $ 271 $ 625 $ 99
Aviation(2)(3)........................................ -- 25 358
Survey................................................ -- -- --
Other................................................. 63 35 38
---------- ---------- ----------
Total............................................... $ 334 $ 685 $ 495
========== ========== ==========

------------
(1) In September 2002, we acquired certain drilling equipment previously
under lease obligation.

(2) In December 2001, we exercised our purchase option to acquire the
aviation fleet previously under lease obligation.

(3) Net of assets obtained in acquisitions (See Note 11).

11. ACQUISITION

On January 18, 2002, we acquired the assets of AirJac Drilling (AirJac), a
division of Veritas DGC Land, Inc. (Veritas), a seismic drilling support company
headquartered in New Iberia, Louisiana. The aggregate acquisition cost was $4.2
million, including $2.0 million cash, acquisition costs, assumption of a capital
lease and a commitment valued at $1.9 million to discount future work to be
performed for Veritas over a four year period. In this acquisition, we acquired
inventory, vehicles, shop equipment and drilling, field and support equipment.
The acquisition resulted in the recognition of a $1.9 million customer
relationship intangible asset. We established a liability for these future
minimum discounts which will be recognized as work is performed. The results of
AirJac's operations have been included in our consolidated financial statements
since the acquisition date. The following summarized

unaudited data reflects our consolidated pro forma results of operations as if
the AirJac transaction had taken place on January 1, 2001 (in thousands):

PRO FORMA UNAUDITED RESULTS

TWELVE MONTHS ENDED
DECEMBER 31, 2001
-------------------

INCOME STATEMENT DATA
Revenue............................................. $ 35,712
Gross Profit........................................ $ 3,498
Net income.......................................... $ 5,475
Basic earnings per share............................ $ 0.61
Diluted earnings per share.......................... $ 0.56

The following table summarizes the estimated fair values of the assets
acquired and liabilities assumed at the date of acquisition (amounts in
thousands):

UNAUDITED FINANCIAL DATA:

BALANCE SHEET DATA
Current assets....................................... $ 154
Property, plant, and equipment....................... 2,101
Customer relationship................................ 1,920
Capital lease obligation assumed..................... (179)
Obligation for future discounts.................... (1,920)
----------
Cash purchase price.............................. $ 2,076
==========

The amount assigned to the customer relationship intangible will be
amortized over a twenty year period and will not result in any residual value.
The amortization expense related to this amount is expected to be $0.5 million
over the next five years.

On November 20, 2003, we purchased American Helicopters, Inc. for $4.6
million cash and the assumption of certain long-term debt. American Helicopters,
Inc. operated 17 helicopters from base locations in Louisiana and Texas and is
headquartered in Angleton, Texas. The infrastructure received through this
acquisition, significantly increased our ability to provide aviation services to
oil and gas companies operating in the offshore waters in the Gulf of Mexico.
The following summarized unaudited data reflects our consolidated pro forma
results of operations as if the American Helicopters, Inc. transaction had taken
place January 1, 2002. (in thousands):

PRO FORMA
UNAUDITED RESULTS
----------------------------------------------
TWELVE MONTHS ENDED TWELVE MONTHS ENDED
TWELVE MONTHS ENDED DECEMBER 31, 2003 DECEMBER 31, 2003
DECEMBER 31, 2002 AS PREVIOUSLY REPORTED AS RESTATED
------------------- ----------------------- -------------------

INCOME STATEMENT DATA
Revenue...................................... $ 36,611 $ 46,654 $ 46,654
Gross Profit................................. $ 7,948 $ 11,496 $ 11,496
Net income applicable to common and common
stock equivalents.......................... $ 1,299 $ 4,744 $ 4,744
Basic income (loss) per common share:
Income from continuing operations.......... $ 0.15 $ 0.58 $ 0.58
(Loss) from discontinued operations....... -- $ (0.04) $ (0.04)
Net Income applicable to common and common
equivalent shares......................... $ 0.15 $ 0.54 $ 0.54
Diluted income (loss) per common share:
Income from continuing operations.......... $ 0.15 $ 0.58 $ 0.49
(Loss) from discontinued operations....... -- $ (0.04) $ (0.03)
Net Income applicable to common and common
equivalent shares......................... $ 0.15 $ 0.48 $ 0.46

UNAUDITED FINANCIAL DATA:

BALANCE SHEET DATA
Current assets........................................................................... $ 2,129
Property, plant, and equipment......................................................... 3,322
Current Liabilities.................................................................... (598)
Long-term liabilities.................................................................. (213)
---------
Cash purchase price.................................................................. $ 4,640
=========

12. SUMMARIZED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

QUARTER ENDED (AS PREVIOUSLY REPORTED)
--------------------------------------
2003 MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
---- -------- ------- ------------ -----------

Operating revenues......................................... $ 6,207 $ 10,409 $ 10,218 $ 10,221
Gross profit (loss)........................................ 1,049 2,872 2,601 1,792
Net operating income (loss)................................ (11) 1,640 1,511 354
Net income (loss) from continuing Operations............... (115) 1,542 1,439 984
Loss from discontinued operations.......................... --- --- --- (367)
Net Income (loss).......................................... (115) 1,542 1,439 617
Accretion of preferred stock............................... --- --- (242) (242)
--------------- -------------- -------------- ------------
Net earnings (loss) applicable to common and common
equivalent shares........................................ $ (115) $ 1,542 $ 1,197 $ 375
=============== ============== ============== ============
Basic income (loss) per common share:
Income(loss) from continuing operations................ $ (0.01) $ 0.18 $ 0.16 $ 0.11
=============== ============== ============== ============
(Loss) from discontinued operations................... $ --- $ --- $ --- $ (0.04)
=============== ============== ============== ============
Net Income (loss)...................................... $ (0.01) $ 0.18 $ 0.16 $ 0.07
=============== ============== ============== ============
Net Income(loss) applicable to common and common equivalent
shares................................................ $ (0.01) $ 0.18 $ 0.14 $ 0.04
=============== ============== ============== ============
Diluted income (loss) per common share:
Income(loss) from continuing operations................ $ (0.01) $ 0.18 $ 0.16 $ 0.08
=============== ============== ============== ============
(Loss) from discontinued operations................... $ --- $ --- $ --- $ (0.03)
=============== ============== ============== ============
Net Income (loss)...................................... $ (0.01) $ 0.18 $ 0.16 $ 0.05
=============== ============== ============== ============
Net Income(loss) applicable to common and common equivalent
shares................................................ $ (0.01) $ 0.18 $ 0.14 $ 0.03
=============== ============== ============== ============

QUARTER ENDED (AS RESTATED(1))
------------------------------
2003 MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
---- -------- ------- ------------ -----------

Operating revenues......................................... $ 6,207 $ 10,409 $ 10,218 $ 10,221
Gross profit (loss)........................................ 1,049 2,872 2,601 1,792
Net operating income (loss)................................ (11) 1,640 1,511 354
Net income (loss) from continuing operations............... (115) 1,542 1,439 984
Loss from discontinued operations.......................... --- --- --- (367)
Net Income (loss) ......................................... (115) 1,542 1,439 617
Accretion of preferred stock............................... --- --- (242) (242)
--------------- -------------- -------------- ------------
Net income (loss) applicable to common and common
stock equivalent shares................................ $ (115) $ 1,542 $ 1,197 $375
=============== ============== ============== ============
Basic income (loss) per common share:
Income(loss)from continuing operations................. $ (0.01) $ 0.18 $ 0.14 $ 0.08
=============== ============== ============== ============
(Loss) from discontinued operations................... $ --- $ --- $ --- $ (0.04)
=============== ============== ============== ============
Net Income(loss) applicable to common and common equivalent
shares................................................ $ (0.01) $ 0.18 $ 0.14 $ 0.04
=============== ============== ============== ============
Diluted income (loss) per common share:
Income (loss) from continuing operations............... $ (0.01) $ 0.18 $ 0.11 $ 0.07
=============== ============== ============== ============
(Loss) from discontinued operations................... $ --- $ --- $ --- $ (0.03)
=============== ============== ============== ============
Net Income(loss)applicable to common and common equivalent
shares................................................ $ (0.01) $ 0.18 $ 0.11 $ 0.04
=============== ============== ============== ============

(1) The earnings per share calculation was previously reported (1) excluding the
preferred stock along with the related preferred stock dividends under the
"if converted" method under Financial Accounting Standards Board (FASB)
No. 128, Earnings Per Share, in calculating net income (loss) applicable to
common and common stock equivalents, in the calculation of diluted earnings
per share for the quarters ended September 30, 2003 and December 31, 2003;
and (2) using weighted average price to calculate shares for options and
warrants in each quarter and for the full year verses averaging the number
of shares in the four quarters of 2003.

QUARTER ENDED
-------------
2002 MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
---- -------- ------- ------------ -----------

Operating revenues..................................... $ 4,614 $ 9,059 $ 7,732 $ 6,391
Gross profit (loss).................................... 809 2,214 1,952 678
Net operating income (loss)............................ 301 1,416 948 (782)
Net income (loss)...................................... 65 1,142 630 (629)
Accretion of preferred stock........................... (242) (242) --- ---
-------------- -------------- ------------ -------------
Net earnings (loss) applicable to common and common
equivalent shares.................................... $ (177) $ 900 $ 630 $ (629)
============== ============== ============ =============
Net income (loss) per common share:
Basic income (loss) per common share................... $ (0.02) $ 0.10 $ 0.07 $ (0.07)
============== ============== ============ =============
Diluted income (loss) per common share................. $ (0.02) $ 0.10 $ 0.07 $ (0.07)
============== ============== ============ =============

QUARTER ENDED
-------------
2001 MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
---- -------- ------- ------------ -----------

Operating revenues..................................... $ 4,212 $ 5,985 $ 9,180 $ 4,309
Gross profit (loss)(2)................................. (585) 760 1,568 1,050
Net operating income (loss)............................ (1,620) 302 1,003 (650)
Net income (loss)...................................... 5,254 196 994 (780)
Accretion of preferred stock(3)........................ --- (242) (242) (242)
-------------- -------------- ------------ -------------
Net earnings (loss) applicable to common and common
equivalent shares(3)................................. $ 5,254 $ (46) $ 752 $ (1,022)
============== ============== ============ =============
Net income (loss) per common share:
Basic income (loss) per common share(3)................ $ 0.59 $ (0.01) $ 0.08 $ (0.11)
============== ============== ============ =============
Diluted income (loss) per common share(3).............. $ 0.43 $ (0.00) $ 0.08 $ (0.11)
============== ============== ============ =============

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

(1) The fourth quarter of 2003 includes a provision for discontinued
operations in South American of $0.4 million.

(2) The fourth quarter of 2001 includes an insurance premium receivable
recorded of approximately $0.3 million and an inventory book to
physical adjustment of approximately $0.4 million.

(3) The second and third quarters of 2001 have been restated to record
accretion of preferred stock (See Note 8).

13. SUBSEQUENT EVENTS

Subsequent to December 31, 2003, we entered into a five year contract to
provide offshore transportation services to approximately 90 manned and unmanned
offshore transportation platforms, primarily in the shallow, offshore waters of
the Gulf of Mexico. The contract is expected to generate for us, in excess of,
$7 million in annual revenue.

In March, 2004, we acquired 13.6 acres of real estate near Intracoastal
City, Louisiana, which will serve as our primary operating aviation base and
facilitate the consolidation of our principal aviation maintenance and repair
facilities. We expect to commence operations from this new facility during the
third quarter of 2004.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) The following financial statements, schedules and exhibits are filed
as part of this Report:

(1) Financial Statements. Reference is made to Item B hereof.

(2) Financial Statement Schedules: None.

(3) Exhibits. See Index to Exhibits on page E-1. We will furnish
to any eligible shareholder, upon written request of such
shareholder, a copy of any exhibit listed upon the payment of
a reasonable fee equal to our expenses in furnishing such
exhibit.

(b) Reports on Form 8-K.

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
our behalf by the undersigned, thereunto duly authorized.

OMNI ENERGY SERVICES CORP. (REGISTRANT)

By: /s/ JAMES C. ECKERT
----------------------------------------------------------
James C. Eckert
President and Chief Executive Officer (Principal Executive
Officer)
Date: September 14, 2004

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 and on the dates indicated.

SIGNATURE TITLE DATE
--------- ----- ----

/s/ JAMES C. ECKERT President, Chief Executive September 14, 2004
------------------------------------------------- Officer, Chairman of the Board
James C. Eckert

/s/ DEBORAH C. DEROUEN Chief Accounting Officer September 14, 2004
------------------------------------------------- (Principal Financial Officer)
Deborah C. DeRouen

/s/ MICHAEL G. DEHART Director September 14, 2004
-------------------------------------------------
Michael G. DeHart

/s/ DAVID A. MELMAN Director September 14, 2004
-------------------------------------------------
David A. Melman

/s/ MARSHALL G. WEBB Director September 14, 2004
-------------------------------------------------
Marshall G. Webb

/s/ RICHARD C. WHITE Director September 14, 2004
-------------------------------------------------
Richard C. White

OMNI ENERGY SERVICES CORP.
EXHIBIT INDEX

EXHIBIT NUMBER
--------------

3.1 (9) Composite Articles of Incorporation of OMNI Energy Services Corp.(as of November 7, 2000).(7)

3.2 (9) Form of Articles of Amendment -- Articles of Incorporation(8)

3.3 (9) Bylaws of OMNI, as amended.(5)

4.1 (9) See Exhibit 3.1 and 3.2 for provisions of our Articles of Incorporation and By-laws defining the rights of
holders of Common Stock.

4.2 (9) Specimen Common Stock Certificate.(2)

*10.1 (9) Form of Indemnity Agreement by and between us and each of our directors and executive officers.(2)

*10.2 (9) Stock Incentive Plan.(2)

*10.3 (9) Form of Stock Option Agreements under our Stock Incentive Plan.(2)

10.6 (9) Third Amended and Restated Loan Agreement by and among us, certain of our subsidiaries and Hibernia National
Bank, dated October 30, 2001.(6)

21.1 (9) Subsidiaries of OMNI Energy Services Corp.(9)

23.1 Consent of Fitts Roberts & Co., P.C.

23.2 Consent of Ernst & Young

23.3 Notification regarding consent of Arthur Andersen LLP.

31.1 Section 302 Certification of Chief Executive Officer

31.2 Section 302 Certification of Chief Accounting Officer

32.1 Section 906 Certification of Chief Executive Officer

32.2 Section 906 Certification of Chief Accounting Officer

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

* Management contract or compensation plan or arrangement

(1) Incorporated by reference to our Annual Report on Form 10-K for the
fiscal year ended December 31, 1997

(2) Incorporated by reference to our Registration Statement on Form S-1
(Registration Statement No. 333-36561).

(3) Incorporated by reference to our Quarterly Report on Form 10-Q for
the quarter ended September 30, 1999.

(4) Incorporated by reference to our Quarterly Report on Form 10-Q for
the quarter ended June 30, 1999.

(5) Incorporated by reference to our Quarterly Report on Form 10-Q for
the quarter ended June 30, 2001.

(6) Incorporated by reference to our Quarterly Report on Form 10-Q for
the quarter ended September 30, 2001.

(7) Incorporated by reference to our Annual Report on Form 10-K for the
fiscal year ended December 31, 2000.

(8) Incorporated by reference to our Annual Report on Form 10-K for the
fiscal year ended December 31, 2001.

(9) Previously filed.