Amended Annual Report (10-k/a)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-K/A

Amendment No.1

(Mark One)



T	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Fiscal Year Ended December 31, 2014



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

Commission file number 1-12691

ION Geophysical Corporation

(Exact Name of Registrant as Specified in Its Charter)



Delaware		22-2286646
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

2105 CityWest Blvd

Suite 400

Houston, Texas 77042-2839

(Address of Principal Executive Offices, Including Zip Code)

(281) 933-3339

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:



Title of Each Class		Name of Each Exchange on Which Registered
Common Stock, $0.01 par value		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No T

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act Yes ¨ No T

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 T No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes T 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. T

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer x	Accelerated filer ¨	Non-accelerated filer ¨	Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No T

As of June 30, 2014 (the last business day of the registrant’s second quarter of fiscal 2014), the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $649.8 million based on the closing sale price per share ($4.22) on such date as reported on the New York Stock Exchange.

As of January 30, 2015, the number of shares of common stock, $0.01 par value, outstanding was 164,484,095 shares.

DOCUMENTS INCORPORATED BY REFERENCE



Document		Parts Into Which Incorporated
None.

TABLE OF CONTENTS




Explanatory Note		3
PART IV		4
SIGNATURES		9
EXHIBIT INDEX		10
EX-23.3
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-99.1

Explanatory Note

This Amendment No. 1 to Annual Report on Form 10-K/A amends the Annual Report on Form 10-K for the year ended December 31, 2014 of ION Geophysical Corporation (“ION”), which was filed with the Securities and Exchange Commission (“SEC”) on February 17, 2015. This Form 10-K/A is being filed for the purpose of providing separate financial statements of INOVA Geophysical Equipment Limited in accordance with Rule 3-09 of Regulation S-X. The INOVA Geophysical Equipment Limited (“INOVA Geophysical”) audited financial statements as of December 31, 2014, and for the year then ended, unaudited financial statements as of December 31, 2013, and for the years ended December 31, 2013 and 2012, and the Report of Independent Auditors, are filed as Exhibit 99.1 and are included as financial statement schedules in Item 15. “Exhibits and Financial Statement Schedules” of this Form 10-K/A. ION owns a noncontrolling equity interest (49%) in INOVA Geophysical, which ION accounts for under the equity method of accounting, and the financial statements of INOVA Geophysical as of and for the year ended December 31, 2014 were not available at the time that ION filed its Annual Report on Form 10-K in February 2015.

Rule 3-09 of Regulation S-X provides that if a 50%-or-less-owned person accounted for by the equity method meets the first or third condition of the significant subsidiary tests set forth in Rule 1-02(w) of Regulation S-X, substituting 20% for 10%, separate financial statements for that 50%-or-less-owned person shall be filed. The significance tests are calculated as of the end of each of ION’s fiscal years and with respect to each fiscal year.

INOVA Geophysical met the significant subsidiary tests described above as of and with respect to ION’s fiscal year and period ended December 31, 2014, and ION has therefore included in this Form 10-K/A the required financial statements for INOVA Geophysical.

The consent of Grant Thornton for INOVA Geophysical Equipment Limited is also filed as an exhibit to this Amendment No. 1 to Annual Report on Form 10-K/A. In addition, this Form 10-K/A includes an updated exhibit index in respect thereof and certifications under Sections 302 and 906 of the Sarbanes-Oxley Act of 2002.

Except as described above, this Amendment No. 1 on Form 10-K/A is not intended to update or modify any other information presented in ION’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, as originally filed. This Amendment No. 1 does not update or modify in any way the financial position, results of operations, cash flows or related disclosures in ION’s Annual Report on Form 10-K, and does not reflect events occurring after the Form 10-K’s original filing date of February 17, 2015. Accordingly, this Form 10-K/A should be read in conjunction with ION’s other filings made with the SEC subsequent to the filing of its Annual Report on Form 10-K for the year ended December 31, 2014.

PART IV

Item 15. Exhibits and Financial Statement Schedules



(a)	List of Documents Filed

	(1)	Financial Statements

	The financial statements were previously filed with the Annual Report on Form 10-K for the year ended December 31, 2014, filed on February 17, 2015.

	(2)	Financial Statement Schedules

	The following financial statement schedule was previously filed with the Annual Report on Form 10-K for the year ended December 31, 2014, filed on February 17, 2015.

	Schedule II — Valuation and Qualifying Accounts

	The following financial statement schedule is included in this Amendment No. 1 to Annual Report on Form 10-K/A pursuant to Rule 3-09 of Regulation S-K:

	INOVA Geophysical Equipment Limited Financial Statements as of and for the periods ended December 31, 2014 (Audited), 2013 (Unaudited) and 2012 (Unaudited).

	All other schedules are omitted because they are not applicable or the requested information is shown in the financial statements or noted therein.

	(3)	Exhibits

3.1	—	Restated Certificate of Incorporation dated September 24, 2007 filed on September 24, 2007 as Exhibit 3.4 to the Company’s Current Report on Form 8-K and incorporated herein by reference.
3.2	—	Amended and Restated Bylaws of ION Geophysical Corporation filed on September 24, 2007 as Exhibit 3.5 to the Company’s Current Report on Form 8-K and incorporated herein by reference.
3.3	—	Certificate of Ownership and Merger merging ION Geophysical Corporation with and into Input/Output, Inc. dated September 21, 2007, filed on September 24, 2007 as Exhibit 3.1 to the Company’s Current Report on Form 8-K and incorporated herein by reference.
4.1	—	Certificate of Rights and Designations of Series D-1 Cumulative Convertible Preferred Stock, dated February 16, 2005 and filed on February 17, 2005 as Exhibit 3.1 to the Company’s Current Report on Form 8-K and incorporated herein by reference.
4.2	—	Certificate of Elimination of Series B Preferred Stock dated September 24, 2007, filed on September 24, 2007 as Exhibit 3.2 to the Company’s Current Report on Form 8-K and incorporated herein by reference.
4.3	—	Certificate of Elimination of Series C Preferred Stock dated September 24, 2007, filed on September 24, 2007 as Exhibit 3.3 to the Company’s Current Report on Form 8-K and incorporated herein by reference.
4.4	—	Certificate of Designation of Series D-2 Cumulative Convertible Preferred Stock dated December 6, 2007, filed on December 6, 2007 as Exhibit 3.1 to the Company’s Current Report on Form 8-K and incorporated herein by reference.
4.5	—	Certificate of Designations of Series A Junior Participating Preferred Stock of ION Geophysical Corporation effective as of December 31, 2008, filed on January 5, 2009 as Exhibit 3.1 to the Company’s Current Report on Form 8-K and incorporated herein by reference.
4.6	—	Certificate of Elimination of Series A Junior Participating Preferred Stock dated February 10, 2012, filed on February 13, 2012 as Exhibit 3.1 to the Company’s Current Report on Form 8-K and incorporated herein by reference.
4.7	—	Indenture, dated May 13, 2013, among ION Geophysical Corporation, the subsidiary guarantors named therein, Wilmington Trust, National association, as trustee, and U.S. Bank National Association, as collateral agent, filed on May 13, 2013 as Exhibit 4.1 to the Company's Current Report on Form 8-K and incorporated herein by reference,
4.8	—	Registration Rights Agreement, dated May 13, 2013 among ION Geophysical Corporation, the subsidiary guarantors named therein and Citigroup Global Markets Inc. and Wells Fargo Securities, LLC, as representatives of the initial purchasers named therein, filed on May 13, 2013 as Exhibit 4.2 to the Company's Current Report on Form 8-K and incorporated herein by reference,
4.9	—	Certificate of Elimination of Series D-1 Cumulative Convertible Preferred Stock dated September 30, 2013, filed on September 30, 2013 as Exhibit 3.1 to the Company's Current Report on Form 8-K and incorporated herein by reference,



4.10	—	Certificate of Elimination of Series D-2 Cumulative Convertible Preferred Stock dated September 30, 2013, filed on September 30, 2013 as Exhibit 3.2 to the Company's Current Report on Form 8-K and incorporated herein by reference.
**10.1	—	Amended and Restated 1990 Stock Option Plan, filed on June 9, 1999 as Exhibit 4.2 to the Company’s Registration Statement on Form S-8 (Registration No. 333-80299), and incorporated herein by reference.
10.2	—	Office and Industrial/Commercial Lease dated June 2005 by and between Stafford Office Park II, LP as Landlord and Input/Output, Inc. as Tenant, filed on March 31, 2006 as Exhibit 10.2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005, and incorporated herein by reference.
10.3	—	Office and Industrial/Commercial Lease dated June 2005 by and between Stafford Office Park District as Landlord and Input/Output, Inc. as Tenant, filed on March 31, 2006 as Exhibit 10.3 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005, and incorporated herein by reference.
**10.4	—	Input/Output, Inc. Amended and Restated 1996 Non-Employee Director Stock Option Plan, filed on June 9, 1999 as Exhibit 4.3 to the Company’s Registration Statement on Form S-8 (Registration No. 333-80299), and incorporated herein by reference.
**10.5	—	Amendment No. 1 to the Input/Output, Inc. Amended and Restated 1996 Non-Employee Director Stock Option Plan dated September 13, 1999 filed on November 14, 1999 as Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended August 31, 1999 and incorporated herein by reference.
**10.6	—	Input/Output, Inc. Employee Stock Purchase Plan, filed on March 28, 1997 as Exhibit 4.4 to the Company’s Registration Statement on Form S-8 (Registration No. 333-24125), and incorporated herein by reference.
**10.7	—	Fifth Amended and Restated - 2004 Long-Term Incentive Plan, filed as Appendix A to the definitive proxy statement for the 2010 Annual Meeting of Stockholders of ION Geophysical Corporation, filed on April 21, 2010, and incorporated herein by reference.
10.8	—	Registration Rights Agreement dated as of November 16, 1998, by and among the Company and The Laitram Corporation, filed on March 12, 2004 as Exhibit 10.7 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2003, and incorporated herein by reference.
**10.9	—	Input/Output, Inc. 1998 Restricted Stock Plan dated as of June 1, 1998, filed on June 9, 1999 as Exhibit 4.7 to the Company’s Registration Statement on S-8 (Registration No. 333-80297), and incorporated herein by reference.
**10.10	—	Input/Output Inc. Non-qualified Deferred Compensation Plan, filed on April 1, 2002 as Exhibit 10.14 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001, and incorporated herein by reference.
**10.11	—	Input/Output, Inc. 2000 Restricted Stock Plan, effective as of March 13, 2000, filed on August 17, 2000 as Exhibit 10.27 to the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2000, and incorporated herein by reference.
**10.12	—	Input/Output, Inc. 2000 Long-Term Incentive Plan, filed on November 6, 2000 as Exhibit 4.7 to the Company’s Registration Statement on Form S-8 (Registration No. 333-49382), and incorporated by reference herein.
**10.13	—	Employment Agreement dated effective as of March 31, 2003, by and between the Company and Robert P. Peebler, filed on March 31, 2003 as Exhibit 10.1 to the Company’s Current Report on Form 8-K and incorporated herein by reference.
**10.14	—	First Amendment to Employment Agreement dated September 6, 2006, between Input/Output, Inc. and Robert P. Peebler, filed on September 7, 2006, as Exhibit 10.1 to the Company’s Current Report on Form 8-K, and incorporated herein by reference.
**10.15	—	Second Amendment to Employment Agreement dated February 16, 2007, between Input/Output, Inc. and Robert P. Peebler, filed on February 16, 2007 as Exhibit 10.1 to the Company’s Current Report on Form 8-K, and incorporated herein by reference.
**10.16	—	Third Amendment to Employment Agreement dated as of August 20, 2007 between Input/Output, Inc. and Robert P. Peebler, filed on August 21, 2007 as Exhibit 10.2 to the Company’s Current Report on Form 8-K and incorporated herein by reference.
**10.17	—	Fourth Amendment to Employment Agreement, dated as of January 26, 2009, between ION Geophysical Corporation and Robert P. Peebler, filed on January 29, 2009 as Exhibit 10.1 to the Company’s Current Report on Form 8-K and incorporated herein by reference.
**10.18	—	Employment Agreement dated effective as of June 15, 2004, by and between the Company and David L. Roland, filed on August 9, 2004 as Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2004, and incorporated herein by reference.



**10.19	—	GX Technology Corporation Employee Stock Option Plan, filed on August 9, 2004 as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2004, and incorporated herein by reference.
10.20	—	Concept Systems Holdings Limited Share Acquisition Agreement dated February 23, 2004, filed on March 5, 2004 as Exhibit 2.1 to the Company’s Current Report on Form 8-K, and incorporated herein by reference.
10.21	—	Registration Rights Agreement by and between ION Geophysical Corporation and 1236929 Alberta Ltd. dated September 18, 2008, filed on November 7, 2008 as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q and incorporated herein by reference.
**10.22	—	Form of Employment Inducement Stock Option Agreement for the Input/Output, Inc. — Concept Systems Employment Inducement Stock Option Program, filed on July 27, 2004 as Exhibit 4.1 to the Company’s Registration Statement on Form S-8 (Reg. No. 333-117716), and incorporated herein by reference.
**10.23	—	Form of Employee Stock Option Award Agreement for ARAM Systems Employee Inducement Stock Option Program, filed on November 14, 2008 as Exhibit 4.4 to the Company’s Registration Statement on Form S-8 (Registration No. 333-155378) and incorporated herein by reference.
**10.24	—	Input/Output, Inc. 2003 Stock Option Plan, dated March 27, 2003, filed as Appendix B of the Company’s definitive proxy statement filed with the SEC on April 30, 2003, and incorporated herein by reference.
**10.25	—	Form of Employment Inducement Stock Option Agreement for the Input/Output, Inc. — GX Technology Corporation Employment Inducement Stock Option Program, filed on April 4, 2005 as Exhibit 4.1 to the Company’s Registration Statement on Form S-8 (Reg. No. 333-123831), and incorporated herein by reference.
**10.26	—	ION Stock Appreciation Rights Plan dated November 17, 2008, filed as Exhibit 10.47 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, and incorporated herein by reference.
10.27	—	Canadian Master Loan and Security Agreement dated as of June 29, 2009 by and among ICON ION, LLC, as lender, ION Geophysical Corporation and ARAM Rentals Corporation, a Nova Scotia corporation, filed on August 6, 2009 as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2009, and incorporated herein by reference.
10.28	—	Master Loan and Security Agreement (U.S.) dated as of June 29, 2009 by and among ICON ION, LLC, as lender, ION Geophysical Corporation and ARAM Seismic Rentals, Inc., a Texas corporation, filed on August 6, 2009 as Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2009, and incorporated herein by reference.
10.29	—	Registration Rights Agreement dated as of October 23, 2009 by and between ION Geophysical Corporation and BGP Inc., China National Petroleum Corporation filed on March 1, 2010 as Exhibit 10.54 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, and incorporated herein by reference.
10.30	—	Stock Purchase Agreement dated as of March 19, 2010, by and between ION Geophysical Corporation and BGP Inc., China National Petroleum Corporation, filed on March 31, 2010 as Exhibit 10.1 to the Company’s Current Report on Form 8-K, and incorporated herein by reference.
10.31	—	Investor Rights Agreement dated as of March 25, 2010, by and between ION Geophysical Corporation and BGP Inc., China National Petroleum Corporation, filed on March 31, 2010 as Exhibit 10.2 to the Company’s Current Report on Form 8-K, and incorporated herein by reference.
10.32	—	Share Purchase Agreement dated as of March 24, 2010, by and among ION Geophysical Corporation, INOVA Geophysical Equipment Limited and BGP Inc., China National Petroleum Corporation, filed on March 31, 2010 as Exhibit 10.3 to the Company’s Current Report on Form 8-K, and incorporated herein by reference.
10.33	—	Joint Venture Agreement dated as of March 24, 2010, by and between ION Geophysical Corporation and BGP Inc., China National Petroleum Corporation, filed on March 31, 2010 as Exhibit 10.4 to the Company’s Current Report on Form 8-K, and incorporated herein by reference.
**10.34	—	Fifth Amendment to Employment Agreement dated June 1, 2010, between ION Geophysical Corporation and Robert P. Peebler, filed on June 1, 2010 as Exhibit 10.1 to the Company’s Current Report on Form 8-K, and incorporated herein by reference.
**10.35	—	Employment Agreement dated August 2, 2011, effective as of January 1, 2012, between ION Geophysical Corporation and R. Brian Hanson, filed on November 3, 2011 as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2011, and incorporated herein by reference.
**10.36	—	Employment Agreement dated effective as of November 28, 2011, between ION Geophysical Corporation and Gregory J. Heinlein, filed on December 1, 2011 as Exhibit 10.1 to the Company’s Current Report on Form 8-K, and incorporated herein by reference.



**10.37	—	First Amendment to Credit Agreement and Loan Documents dated May 29, 2012, filed on May 29, 2012 as Exhibit 10.1 to the Company’s Current Report on Form 8-K, and incorporated herein by reference.
**10.38	—	Consulting Services Agreement dated January 1, 2013, between ION Geophysical Corporation and The Peebler Group LLC, filed on January 4, 2013 as Exhibit 10.1 to the Company’s Current Report on Form 8-K, and incorporated herein by reference.
**10.39	—	2013 Long-Term Incentive Plan, filed as Exhibit 1 to the definitive proxy statement for the 2013 Annual Meeting of Stockholders of ION Geophysical Corporation, filed on April 16, 2013, and incorporated herein by reference.
10.40	—	Purchase Agreement, dated May 8, 2013, among ION Geophysical Corporation, the subsidiary guarantors named therein and Citigroup Global Markets Inc. and Wells Fargo Securities, LLC, as representatives of the initial purchasers named therein, filed on May 13, 2013 as Exhibit 10.1 to the Company’s Current Report on Form 8-K and incorporated herein by reference.
10.41	—	Second Lien Intercreditor Agreement by and among China Merchants Bank Co., Ltd., New York Branch, as administrative agent, first lien representative for the first lien secured parties and collateral agent for the first lien secured parties, Wilmington Trust Company, National Association, as trustee and second lien representative for the second lien secured parties, and U.S. Bank National Association, as collateral agent for the second lien secured parties, and acknowledged and agreed to by ION Geophysical Corporation and the other grantors named therein, filed on May 13, 2013 as Exhibit 10.2 to the Company’s Current Report on Form 8-K and incorporated herein by reference.
10.42	—	Revolving Credit and Security Agreement dated as of August 22, 2014 among PNC Bank, National Association, as agent for lenders, the lenders from time to time party thereto, as lenders, and PNC Capital Markets LLC, as lead arranger and bookrunner, with ION Geophysical Corporation, ION Exploration Products (U.S.A.), Inc., I/O Marine Systems, Inc. and GX Technology Corporation, as borrowers, filed on November 6, 2014 as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2014, and incorporated herein by reference.
**10.43	—	Transition and Separation Agreement dated effective as of October 30, 2014, by and between ION Geophysical Corporation and Gregory J. Heinlein.
**10.44	—	Employment Agreement dated effective as of November 13, 2014, between ION Geophysical Corporation and Steve Bate.
*21.1	—	Subsidiaries of the Company.
*23.1	—	Consent of Grant Thornton LLP.
*23.2	—	Consent of Ernst & Young LLP.
†23.3	—	Consent of Grant Thornton.
*24.1	—	The Power of Attorney is set forth on the signature page hereof.
25.1	—	Registration Statement (Form S-4 No. 333-194110) of ION Geophysical Corporation, and incorporated herein by reference.
†31.1	—	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a).
†31.2	—	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a).
†32.1	—	Certification of Chief Executive Officer Pursuant to 18 U.S.C. §1350.
†32.2	—	Certification of Chief Financial Officer Pursuant to 18 U.S.C. §1350.
†99.1	—	INOVA Geophysical Equipment Limited Financial Statements for the periods ended December 31, 2014 (Audited), 2013 (Unaudited) and 2012 (Unaudited).
***101	—	The following materials are formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets at December 31, 2014 and 2013, (ii) Consolidated Statements of Operations for the years ended December 31, 2014, 2013 and 2012, (iii) Comprehensive Income (Loss) for the years ended December 31, 2014, 2013 and 2012, (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2013 and 2012, (v) Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2014, 2013 and 2012, (vi) Footnotes to Consolidated Financial Statements and (vii) Schedule II – Valuation and Qualifying Accounts.

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



*	Filed with ION Geophysical Corporation’s Annual Report on Form 10-K for the year ended December 31, 2014, as filed with the Securities and Exchange Commission on February 17, 2015.

**	Management contract or compensatory plan or arrangement.

†	Filed herewith.

***	All of the interactive files have been previously furnished with ION Geophysical Corporation’s Annual Report on Form 10-K for the year ended December 31, 2014, as filed with the Securities and Exchange Commission on February 17, 2015.

(b)	Exhibits required by Item 601 of Regulation S-K.

	Reference is made to subparagraph (a) (3) of this Item 15, which is incorporated herein by reference.

(c)	Financial statement schedules.

	The financial statements of INOVA Geophysical Equipment Limited referred to in subparagraph (a) (2) of this Item 15, are being filed herewith as financial statement schedules to this Amendment No. 1 to Annual Report on Form 10-K/A, in accordance with Rule 3-09 of Regulation S-X.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Houston, State of Texas, on April 24, 2015.



	ION GEOPHYSICAL CORPORATION

	By		/s/ R. Brian Hanson
			R. Brian Hanson
			President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Form 10-K/A (Amendment No. 1 to Annual Report on Form 10-K) has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.




Name	Capacities	Date
/S/ R. BRIAN HANSON	President, Chief Executive Officer and Director (Principal Executive Officer)	April 24, 2015
R. Brian Hanson

/S/ STEVEN A. BATE	Executive Vice President and Chief Financial Officer (Principal Financial Officer)	April 24, 2015
Steven A. Bate

/S/ SCOTT SCHWAUSCH	Vice President and Corporate Controller (Principal Accounting Officer)	April 24, 2015
Scott Schwausch

/S/ JAMES M. LAPEYRE, JR.	Chairman of the Board of Directors and Director	April 24, 2015
James M. Lapeyre, Jr.	Chairman of the Board of Directors and Director

/S/ DAVID H. BARR	Director	April 24, 2015
David H. Barr	Director

/S/ HAO HUIMIN	Director	April 24, 2015
Hao Huimin	Director

/S/ MICHAEL C. JENNINGS	Director	April 24, 2015
Michael C. Jennings	Director

/S/ FRANKLIN MYERS	Director	April 24, 2015
Franklin Myers	Director

/S/ S. JAMES NELSON, JR.	Director	April 24, 2015
S. James Nelson, Jr.	Director

/S/ JOHN N. SEITZ	Director	April 24, 2015
John N. Seitz	Director




*By:		/s/ R. Brian Hanson
		R. Brian Hanson
		Attorney-in-fact

EXHIBIT INDEX



3.1	—	Restated Certificate of Incorporation dated September 24, 2007 filed on September 24, 2007 as Exhibit 3.4 to the Company’s Current Report on Form 8-K and incorporated herein by reference.
3.2	—	Amended and Restated Bylaws of ION Geophysical Corporation filed on September 24, 2007 as Exhibit 3.5 to the Company’s Current Report on Form 8-K and incorporated herein by reference.
3.3	—	Certificate of Ownership and Merger merging ION Geophysical Corporation with and into Input/Output, Inc. dated September 21, 2007, filed on September 24, 2007 as Exhibit 3.1 to the Company’s Current Report on Form 8-K and incorporated herein by reference.
4.1	—	Certificate of Rights and Designations of Series D-1 Cumulative Convertible Preferred Stock, dated February 16, 2005 and filed on February 17, 2005 as Exhibit 3.1 to the Company’s Current Report on Form 8-K and incorporated herein by reference.
4.2	—	Certificate of Elimination of Series B Preferred Stock dated September 24, 2007, filed on September 24, 2007 as Exhibit 3.2 to the Company’s Current Report on Form 8-K and incorporated herein by reference.
4.3	—	Certificate of Elimination of Series C Preferred Stock dated September 24, 2007, filed on September 24, 2007 as Exhibit 3.3 to the Company’s Current Report on Form 8-K and incorporated herein by reference.
4.4	—	Certificate of Designation of Series D-2 Cumulative Convertible Preferred Stock dated December 6, 2007, filed on December 6, 2007 as Exhibit 3.1 to the Company’s Current Report on Form 8-K and incorporated herein by reference.
4.5	—	Certificate of Designations of Series A Junior Participating Preferred Stock of ION Geophysical Corporation effective as of December 31, 2008, filed on January 5, 2009 as Exhibit 3.1 to the Company’s Current Report on Form 8-K and incorporated herein by reference.
4.6	—	Certificate of Elimination of Series A Junior Participating Preferred Stock dated February 10, 2012, filed on February 13, 2012 as Exhibit 3.1 to the Company’s Current Report on Form 8-K and incorporated herein by reference.
4.7	—	Indenture, dated May 13, 2013, among ION Geophysical Corporation, the subsidiary guarantors named therein, Wilmington Trust, National association, as trustee, and U.S. Bank National Association, as collateral agent, filed on May 13, 2013 as Exhibit 4.1 to the Company's Current Report on Form 8-K and incorporated herein by reference,
4.8	—	Registration Rights Agreement, dated May 13, 2013 among ION Geophysical Corporation, the subsidiary guarantors named therein and Citigroup Global Markets Inc. and Wells Fargo Securities, LLC, as representatives of the initial purchasers named therein, filed on May 13, 2013 as Exhibit 4.2 to the Company's Current Report on Form 8-K and incorporated herein by reference,
4.9	—	Certificate of Elimination of Series D-1 Cumulative Convertible Preferred Stock dated September 30, 2013, filed on September 30, 2013 as Exhibit 3.1 to the Company's Current Report on Form 8-K and incorporated herein by reference,
4.10	—	Certificate of Elimination of Series D-2 Cumulative Convertible Preferred Stock dated September 30, 2013, filed on September 30, 2013 as Exhibit 3.2 to the Company's Current Report on Form 8-K and incorporated herein by reference.
**10.1	—	Amended and Restated 1990 Stock Option Plan, filed on June 9, 1999 as Exhibit 4.2 to the Company’s Registration Statement on Form S-8 (Registration No. 333-80299), and incorporated herein by reference.
10.2	—	Office and Industrial/Commercial Lease dated June 2005 by and between Stafford Office Park II, LP as Landlord and Input/Output, Inc. as Tenant, filed on March 31, 2006 as Exhibit 10.2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005, and incorporated herein by reference.
10.3	—	Office and Industrial/Commercial Lease dated June 2005 by and between Stafford Office Park District as Landlord and Input/Output, Inc. as Tenant, filed on March 31, 2006 as Exhibit 10.3 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005, and incorporated herein by reference.
**10.4	—	Input/Output, Inc. Amended and Restated 1996 Non-Employee Director Stock Option Plan, filed on June 9, 1999 as Exhibit 4.3 to the Company’s Registration Statement on Form S-8 (Registration No. 333-80299), and incorporated herein by reference.
**10.5	—	Amendment No. 1 to the Input/Output, Inc. Amended and Restated 1996 Non-Employee Director Stock Option Plan dated September 13, 1999 filed on November 14, 1999 as Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended August 31, 1999 and incorporated herein by reference.



**10.6	—	Input/Output, Inc. Employee Stock Purchase Plan, filed on March 28, 1997 as Exhibit 4.4 to the Company’s Registration Statement on Form S-8 (Registration No. 333-24125), and incorporated herein by reference.
**10.7	—	Fifth Amended and Restated - 2004 Long-Term Incentive Plan, filed as Appendix A to the definitive proxy statement for the 2010 Annual Meeting of Stockholders of ION Geophysical Corporation, filed on April 21, 2010, and incorporated herein by reference.



10.8	—	Registration Rights Agreement dated as of November 16, 1998, by and among the Company and The Laitram Corporation, filed on March 12, 2004 as Exhibit 10.7 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2003, and incorporated herein by reference.
**10.9	—	Input/Output, Inc. 1998 Restricted Stock Plan dated as of June 1, 1998, filed on June 9, 1999 as Exhibit 4.7 to the Company’s Registration Statement on S-8 (Registration No. 333-80297), and incorporated herein by reference.
**10.10	—	Input/Output Inc. Non-qualified Deferred Compensation Plan, filed on April 1, 2002 as Exhibit 10.14 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001, and incorporated herein by reference.
**10.11	—	Input/Output, Inc. 2000 Restricted Stock Plan, effective as of March 13, 2000, filed on August 17, 2000 as Exhibit 10.27 to the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2000, and incorporated herein by reference.
**10.12	—	Input/Output, Inc. 2000 Long-Term Incentive Plan, filed on November 6, 2000 as Exhibit 4.7 to the Company’s Registration Statement on Form S-8 (Registration No. 333-49382), and incorporated by reference herein.
**10.13	—	Employment Agreement dated effective as of March 31, 2003, by and between the Company and Robert P. Peebler, filed on March 31, 2003 as Exhibit 10.1 to the Company’s Current Report on Form 8-K and incorporated herein by reference.
**10.14	—	First Amendment to Employment Agreement dated September 6, 2006, between Input/Output, Inc. and Robert P. Peebler, filed on September 7, 2006, as Exhibit 10.1 to the Company’s Current Report on Form 8-K, and incorporated herein by reference.
**10.15	—	Second Amendment to Employment Agreement dated February 16, 2007, between Input/Output, Inc. and Robert P. Peebler, filed on February 16, 2007 as Exhibit 10.1 to the Company’s Current Report on Form 8-K, and incorporated herein by reference.
**10.16	—	Third Amendment to Employment Agreement dated as of August 20, 2007 between Input/Output, Inc. and Robert P. Peebler, filed on August 21, 2007 as Exhibit 10.2 to the Company’s Current Report on Form 8-K and incorporated herein by reference.
**10.17	—	Fourth Amendment to Employment Agreement, dated as of January 26, 2009, between ION Geophysical Corporation and Robert P. Peebler, filed on January 29, 2009 as Exhibit 10.1 to the Company’s Current Report on Form 8-K and incorporated herein by reference.
**10.18	—	Employment Agreement dated effective as of June 15, 2004, by and between the Company and David L. Roland, filed on August 9, 2004 as Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2004, and incorporated herein by reference.
**10.19	—	GX Technology Corporation Employee Stock Option Plan, filed on August 9, 2004 as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2004, and incorporated herein by reference.
10.20	—	Concept Systems Holdings Limited Share Acquisition Agreement dated February 23, 2004, filed on March 5, 2004 as Exhibit 2.1 to the Company’s Current Report on Form 8-K, and incorporated herein by reference.
10.21	—	Registration Rights Agreement by and between ION Geophysical Corporation and 1236929 Alberta Ltd. dated September 18, 2008, filed on November 7, 2008 as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q and incorporated herein by reference.
**10.22	—	Form of Employment Inducement Stock Option Agreement for the Input/Output, Inc. — Concept Systems Employment Inducement Stock Option Program, filed on July 27, 2004 as Exhibit 4.1 to the Company’s Registration Statement on Form S-8 (Reg. No. 333-117716), and incorporated herein by reference.
**10.23	—	Form of Employee Stock Option Award Agreement for ARAM Systems Employee Inducement Stock Option Program, filed on November 14, 2008 as Exhibit 4.4 to the Company’s Registration Statement on Form S-8 (Registration No. 333-155378) and incorporated herein by reference.
**10.24	—	Input/Output, Inc. 2003 Stock Option Plan, dated March 27, 2003, filed as Appendix B of the Company’s definitive proxy statement filed with the SEC on April 30, 2003, and incorporated herein by reference.



**10.25	—	Form of Employment Inducement Stock Option Agreement for the Input/Output, Inc. — GX Technology Corporation Employment Inducement Stock Option Program, filed on April 4, 2005 as Exhibit 4.1 to the Company’s Registration Statement on Form S-8 (Reg. No. 333-123831), and incorporated herein by reference.
**10.26	—	ION Stock Appreciation Rights Plan dated November 17, 2008, filed as Exhibit 10.47 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, and incorporated herein by reference.
10.27	—	Canadian Master Loan and Security Agreement dated as of June 29, 2009 by and among ICON ION, LLC, as lender, ION Geophysical Corporation and ARAM Rentals Corporation, a Nova Scotia corporation, filed on August 6, 2009 as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2009, and incorporated herein by reference.
10.28	—	Master Loan and Security Agreement (U.S.) dated as of June 29, 2009 by and among ICON ION, LLC, as lender, ION Geophysical Corporation and ARAM Seismic Rentals, Inc., a Texas corporation, filed on August 6, 2009 as Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2009, and incorporated herein by reference.
10.29	—	Registration Rights Agreement dated as of October 23, 2009 by and between ION Geophysical Corporation and BGP Inc., China National Petroleum Corporation filed on March 1, 2010 as Exhibit 10.54 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, and incorporated herein by reference.
10.30	—	Stock Purchase Agreement dated as of March 19, 2010, by and between ION Geophysical Corporation and BGP Inc., China National Petroleum Corporation, filed on March 31, 2010 as Exhibit 10.1 to the Company’s Current Report on Form 8-K, and incorporated herein by reference.
10.31	—	Investor Rights Agreement dated as of March 25, 2010, by and between ION Geophysical Corporation and BGP Inc., China National Petroleum Corporation, filed on March 31, 2010 as Exhibit 10.2 to the Company’s Current Report on Form 8-K, and incorporated herein by reference.
10.32	—	Share Purchase Agreement dated as of March 24, 2010, by and among ION Geophysical Corporation, INOVA Geophysical Equipment Limited and BGP Inc., China National Petroleum Corporation, filed on March 31, 2010 as Exhibit 10.3 to the Company’s Current Report on Form 8-K, and incorporated herein by reference.
10.33	—	Joint Venture Agreement dated as of March 24, 2010, by and between ION Geophysical Corporation and BGP Inc., China National Petroleum Corporation, filed on March 31, 2010 as Exhibit 10.4 to the Company’s Current Report on Form 8-K, and incorporated herein by reference.
**10.34	—	Fifth Amendment to Employment Agreement dated June 1, 2010, between ION Geophysical Corporation and Robert P. Peebler, filed on June 1, 2010 as Exhibit 10.1 to the Company’s Current Report on Form 8-K, and incorporated herein by reference.
**10.35	—	Employment Agreement dated August 2, 2011, effective as of January 1, 2012, between ION Geophysical Corporation and R. Brian Hanson, filed on November 3, 2011 as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2011, and incorporated herein by reference.
**10.36	—	Employment Agreement dated effective as of November 28, 2011, between ION Geophysical Corporation and Gregory J. Heinlein, filed on December 1, 2011 as Exhibit 10.1 to the Company’s Current Report on Form 8-K, and incorporated herein by reference.
**10.37	—	First Amendment to Credit Agreement and Loan Documents dated May 29, 2012, filed on May 29, 2012 as Exhibit 10.1 to the Company’s Current Report on Form 8-K, and incorporated herein by reference.
**10.38	—	Consulting Services Agreement dated January 1, 2013, between ION Geophysical Corporation and The Peebler Group LLC, filed on January 4, 2013 as Exhibit 10.1 to the Company’s Current Report on Form 8-K, and incorporated herein by reference.
**10.39	—	2013 Long-Term Incentive Plan, filed as Exhibit 1 to the definitive proxy statement for the 2013 Annual Meeting of Stockholders of ION Geophysical Corporation, filed on April 16, 2013, and incorporated herein by reference.
10.40	—	Purchase Agreement, dated May 8, 2013, among ION Geophysical Corporation, the subsidiary guarantors named therein and Citigroup Global Markets Inc. and Wells Fargo Securities, LLC, as representatives of the initial purchasers named therein, filed on May 13, 2013 as Exhibit 10.1 to the Company’s Current Report on Form 8-K and incorporated herein by reference.
10.41	—	Second Lien Intercreditor Agreement by and among China Merchants Bank Co., Ltd., New York Branch, as administrative agent, first lien representative for the first lien secured parties and collateral agent for the first lien secured parties, Wilmington Trust Company, National Association, as trustee and second lien representative for the second lien secured parties, and U.S. Bank National Association, as collateral agent for the second lien secured parties, and acknowledged and agreed to by ION Geophysical Corporation and the other grantors named therein, filed on May 13, 2013 as Exhibit 10.2 to the Company’s Current Report on Form 8-K and incorporated herein by reference.



10.42	—	Revolving Credit and Security Agreement dated as of August 22, 2014 among PNC Bank, National Association, as agent for lenders, the lenders from time to time party thereto, as lenders, and PNC Capital Markets LLC, as lead arranger and bookrunner, with ION Geophysical Corporation, ION Exploration Products (U.S.A.), Inc., I/O Marine Systems, Inc. and GX Technology Corporation, as borrowers, filed on November 6, 2014 as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2014, and incorporated herein by reference.
**10.43	—	Transition and Separation Agreement dated effective as of October 30, 2014, by and between ION Geophysical Corporation and Gregory J. Heinlein.
**10.44	—	Employment Agreement dated effective as of November 13, 2014, between ION Geophysical Corporation and Steve Bate.
*21.1	—	Subsidiaries of the Company.
*23.1	—	Consent of Grant Thornton LLP.
*23.2	—	Consent of Ernst & Young LLP.
†23.3	—	Consent of Grant Thornton.
*24.1	—	The Power of Attorney is set forth on the signature page hereof.
25.1	—	Registration Statement (Form S-4 No. 333-194110) of ION Geophysical Corporation, and incorporated herein by reference.
†31.1	—	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a).
†31.2	—	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a).
†32.1	—	Certification of Chief Executive Officer Pursuant to 18 U.S.C. §1350.
†32.2	—	Certification of Chief Financial Officer Pursuant to 18 U.S.C. §1350.
†99.1	—	INOVA Geophysical Equipment Limited Financial Statements for the periods ended December 31, 2014 (Audited), 2013 (Unaudited) and 2012 (Unaudited).
***101	—	The following materials are formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets at December 31, 2014 and 2013, (ii) Consolidated Statements of Operations for the years ended December 31, 2014, 2013 and 2012, (iii) Comprehensive Income (Loss) for the years ended December 31, 2014, 2013 and 2012, (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2013 and 2012, (v) Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2014, 2013 and 2012, (vi) Footnotes to Consolidated Financial Statements and (vii) Schedule II – Valuation and Qualifying Accounts.

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



*	Filed with ION Geophysical Corporation’s Annual Report on Form 10-K for the year ended December 31, 2014, as filed with the Securities and Exchange Commission on February 17, 2015.

**	Management contract or compensatory plan or arrangement.

†	Filed herewith.

***	All of the interactive files have been previously furnished with ION Geophysical Corporation’s Annual Report on Form 10-K for the year ended December 31, 2014, as filed with the Securities and Exchange Commission on February 17, 2015.

Exhibit 23.3

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our report dated April 24, 2015, with respect to the consolidated financial statements of INOVA Geophysical Equipment Limited and subsidiaries as of December 31, 2014, and for the year then ended, included in the Form 10-K/A — Amendment No. 1 to Annual Report on Form 10-K of ION Geophysical Corporation for the year ended December 31, 2014. We hereby consent to the incorporation by reference of said report in the following Registration Statements of ION Geophysical Corporation and subsidiaries:


1.	Registration Statement (Form S-8 No. 33-54394) pertaining to the Input/Output, Inc. Amended 1990 Stock Option Plan and Amended and Restated 1991 Outside Directors’ Stock Option Plan,


2.	Registration Statement (Form S-8 No. 33-46386) pertaining to the Input/Output, Inc. 1990 Restricted Stock Plan, 1990 Stock Option Plan and 1991 Directors’ Stock Option Plan,


3.	Registration Statement (Form S-8 No. 33-85304) pertaining to the Input/Output, Inc. Amended 1990 Stock Option Plan and the Input/Output, Inc. Amended and Restated 1991 Outside Directors Stock Option Plan,


4.	Registration Statement (Form S-8 No. 333-14231) pertaining to the Input/Output, Inc. 1996 Non-Employee Director Stock Option Plan,


5.	Registration Statement (Form S-8 No. 333-24125) pertaining to the Input/Output, Inc. Employee Stock Purchase Plan,


6.	Registration Statement (Form S-8 No. 333-80297) pertaining to the Input/Output, Inc. 1998 Restricted Stock Plan,


7.	Registration Statement (Form S-8 No. 333-36264) pertaining to the Input/Output, Inc. 2000 Restricted Stock Plan,


8.	Registration Statement (Form S-8 No. 333-49382) pertaining to the Input/Output, Inc. 2000 Long-Term Incentive Plan,


9.	Registration Statement (Form S-8 No. 333-60950) pertaining to the Input/Output, Inc. Non-Employee Directors’ Retainer Plan,


10.	Registration Statement (Form S-8 No. 333-112677) pertaining to the Input/Output, Inc. 2003 Employee Stock Option Plan,


11.	Registration Statement (Form S-8 No. 333-116355) pertaining to the GX Technology Corporation Employee Stock Option Plan,


12.	Registration Statement (Form S-8 No. 333-117716) pertaining to the Input/Output, Inc. Concept Systems Employment Inducement Stock Option Program,


13.	Registration Statement (Form S-8 No. 333-123831) pertaining to the Input/Output, Inc. GX Technology Corp. Employment Inducement Stock Option Program and the Input/Output, Inc. April 2005 Inducement Equity Program,


14.	Registration Statement (Form S-8 No. 333-125655) pertaining to the Input/Output, Inc. 2004 Long-Term Incentive Plan,


15.	Registration Statement (Form S-8 No. 333-135775) pertaining to the Input/Output, Inc. Second Amended and Restated Input/Output, Inc. 2004 Long-Term Incentive Plan,


16.	Registration Statement (Form S-3 No. 333-112263) of Input/Output, Inc.,


17.	Registration Statement (Form S-3 No. 333-123632) of Input/Output, Inc.,


18.	Registration Statement (Form S-8 No. 333-145274) pertaining to the Third Amended and Restated Input/Output, Inc. 2004 Long-Term Incentive Plan,


19.	Registration Statement (Form S-8 No. 333-155378) pertaining to the Fourth Amended and Restated 2004 Long-Term Incentive Plan and the ARAM Systems Employee Inducement Stop Options Program,


20.	Registration Statement (Form S-3 No. 333-159898) of ION Geophysical Corporation,


21.	Registration Statement (Form S-8 No. 333-167943) pertaining to the Fifth Amended and Restated 2004 Long-Term Incentive Plan and the ION Geophysical Corporation Employee Stock Purchase Plan,


22.	Registration Statement (Form S-3 No. 333-166200) of ION Geophysical Corporation,


23.	Registration Statement (Form S-8 No. 333-176046) pertaining to the Sixth Amended and Restated 2004 Long-Term Incentive Plan,


24.	Registration Statement (Form S-8 No. 333-190474) pertaining to the 2013 Long-Term Incentive Plan, and


25.	Registration Statement (Form S-4 No. 333-194110) of ION Geophysical Corporation.

/s/ GRANT THORNTON

Xiamen, People's Republic of China

April 24, 2015

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO RULE 13a-14(a) OR RULE 15d-14(a)

I, R. Brian Hanson, certify that:


1.	I have reviewed this Annual Report on Form 10-K/A for the period ended December 31, 2014, of ION Geophysical Corporation;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: April 24, 2015		/s/ R. Brian Hanson
		R. Brian Hanson
		President and Chief Executive Officer

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO RULE 13a-14(a) OR RULE 15d-14(a)

I, Steven A. Bate, certify that:


1.	I have reviewed this Annual Report on Form 10-K/A for the period ended December 31, 2014, of ION Geophysical Corporation;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: April 24, 2015		/s/ Steven A. Bate
		Steven A. Bate
		Executive Vice President and Chief Financial Officer

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. §1350

In connection with the Annual Report of ION Geophysical Corporation (the “Company”) on Form 10-K/A for the period ended December 31, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, R. Brian Hanson, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge that:


1.	The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and


2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Date: April 24, 2015		/s/ R. Brian Hanson
		R. Brian Hanson
		President and Chief Executive Officer

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. §1350

In connection with the Annual Report of ION Geophysical Corporation (the “Company”) on Form 10-K/A for the period ended December 31, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Steven A. Bate, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:


1.	The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and


2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Date: April 24, 2015		/s/ Steven A. Bate
		Steven A. Bate
		Executive Vice President and Chief Financial Officer

Report of Independent Certified Public Accountants

The Board of Directors of INOVA Geophysical Equipment Limited

We have audited the accompanying consolidated financial statements of INOVA Geophysical Equipment Limited and subsidiaries, which comprise the consolidated balance sheet as of December 31, 2014, and the related consolidated statements of operations and comprehensive income (loss), owners’ equity and cash flows for the year then ended, and the related notes to the consolidated financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence that we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of INOVA Geophysical Equipment Limited and subsidiaries as of December 31, 2014, and the results of their operations and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Grant Thornton

Xiamen, People’s Republic of China

April 24, 2015

INOVA GEOPHYSICAL EQUIPMENT LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)



	December 31,
	2014			2013
				(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	11,343		$	21,156
Restricted cash	2,171			1,013
Accounts receivable from third parties, net	2,611			10,313
Accounts receivable from related parties	16,417			14,401
Inventories	62,350			73,222
Prepaid expenses and other current assets	2,002			6,730
Total current assets	96,894			126,835
Long-term receivable	193			3,161
Property, plant and equipment, net	9,589			11,612
Seismic rental equipment, net	11,243			25,854
Goodwill	25,084			25,244
Intangible assets, net	13,015			15,201
Other assets	613			263
Total assets	$	156,631		$	208,170
LIABILITIES AND OWNERS’ EQUITY
Current liabilities:
Current maturities of long-term debt (related party 2014 - $49,950; 2013 - $48,500)	$	49,950		$	52,154
Accounts payable to third parties	11,270			28,799
Accounts payable to related parties	10,901			3,066
Accrued expenses	17,818			19,540
Deferred revenue	1,489			4,217
Total current liabilities	91,428			107,776
Lease inducements	1,044			1,655
Long term debt, net of current maturities	5,283			—
Related party loan guarantee	—			875
Total liabilities	97,755			110,306
Commitments and contingencies
Owners’ equity:
Owners’ investment	242,810			241,935
Accumulated deficit	(180,952		)	(143,419		)
Accumulated other comprehensive loss	(2,982		)	(652		)
Total owners’ equity	58,876			97,864
Total liabilities and owners’ equity	$	156,631		$	208,170

See accompanying Notes to Consolidated Financial Statements.

INOVA GEOPHYSICAL EQUIPMENT LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands)



	Years Ended December 31,
	2014			2013			2012
				(Unaudited)			(Unaudited)
Revenues from third parties	$	55,085		$	74,394		$	104,685
Revenues from related parties	41,183			89,742			84,272
Net revenues	96,268			164,136			188,957
Cost of sales (including excess and obsolete inventory charge of 2014 - $2,905; 2013 - $10,278; 2012 - $1,079)	91,356			173,614			151,279
Gross profit (loss)	4,912			(9,478		)	37,678
Operating expenses:
Research, development and engineering	13,108			16,191			16,925
Marketing and sales	6,534			8,381			7,591
General and administrative	17,273			13,912			14,993
Costs charged by a related party	—			—			1,692
Total operating expenses	36,915			38,484			41,201
Loss from operations	(32,003		)	(47,962		)	(3,523		)
Interest expense, net	1,741			2,471			1,993
Foreign exchange gains (losses) and other income (losses)	(3,306		)	578			1,060
Loss before income taxes	(37,050		)	(49,855		)	(4,456		)
Income tax expense (benefit)	483			5,043			(4,677		)
Net income (loss)	$	(37,533	)	$	(54,898	)	$	221

INOVA GEOPHYSICAL EQUIPMENT LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(In thousands)



	Years Ended December 31,
	2014			2013			2012
				(Unaudited)			(Unaudited)
Net income (loss)	$	(37,533	)	$	(54,898	)	$	221
Other comprehensive income (loss):
Foreign currency translation adjustments	(2,330		)	(3,084		)	1,290
Comprehensive income (loss)	$	(39,863	)	$	(57,982	)	$	1,511

See accompanying Notes to Consolidated Financial Statements.

INOVA GEOPHYSICAL EQUIPMENT LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)



	Years Ended December 31,
	2014			2013			2012
				(Unaudited)			(Unaudited)
Cash flows from operating activities:
Net income (loss)	$	(37,533	)	$	(54,898	)	$	221
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization	11,856			39,420			19,941
Excess & obsolete inventory expense	2,905			10,278			1,079
Bad debt expense	7,245			3			3
Amortization of debt premium	(53		)	(232		)	(372		)
Amortization of lease inducements	(650		)	(685		)	(406		)
Gain on sale or disposal of property, plant and equipment	(150		)	(158		)	—
Change in operating assets and liabilities:
Restricted cash	(1,158		)	(503		)	—
Accounts and notes receivable	3,456			757			(48		)
Inventories	4,131			(24,619		)	(30,715		)
Seismic rental equipment, net of depreciation	7,183			5,518			1,816
Accounts payable and accrued expenses	(17,962		)	14,868			2,403
Deferred revenue excluding related party amounts	(2,696		)	2,259			(2,083		)
Due to/from related parties including related party deferred revenues	5,819			6,207			(15,174		)
Other assets and liabilities	2,474			215			496
Net cash used in operating activities	(15,133		)	(1,570		)	(22,839		)
Cash flows from investing activities:
Purchase of property, plant and equipment	(1,394		)	(2,433		)	(3,982		)
Proceeds from the sale of property, plant and equipment	195			319			—
Net cash used in investing activities	(1,199		)	(2,114		)	(3,982		)
Cash flows from financing activities:
Borrowings under USD revolving credit facility	1,500			9,500			43,500
Repayments under USD revolving credit facility	—			(6,000		)	(21,500		)
Borrowings under RMB revolving credit facility	8,125			8,206			3,177
Repayments under RMB revolving credit facility	—			(8,206		)	(3,177		)
Repayments to BGP who repaid RMB revolving credit facility as guarantor	(488		)	—			—
Borrowings from owners	—			20,000			—
Repayments to owners	(2,000		)	(10,000		)	—
Cash received for lease inducement	—			—			750
Payments on secured equipment financing	(3,601		)	(4,772		)	(4,122		)
Net cash provided by financing activities	3,536			8,728			18,628
Effect of change in foreign currency exchange rates on cash and cash equivalents	2,983			781			20
Net increase (decrease) in cash and cash equivalents	(9,813		)	5,825			(8,173		)
Cash and cash equivalents at beginning of period	21,156			15,331			23,504
Cash and cash equivalents at end of period	$	11,343		$	21,156		$	15,331
Non-cash items from investing and financing activities:
Reduction in fair value of ION loan guarantee	$	—		$	—		$	(125	)
Release of ION loan guarantee	$	(875	)	$	—		$	0
Repayment of BGP loan by reducing receivables from BGP	$	(404	)	$	—		$	—
Supplemental disclosure of cash flow information:
Interest paid, net	$	2,132		$	2,542		$	2,096
Income taxes paid (received), net	$	(1,428	)	$	(804	)	$	90

See accompanying Notes to Consolidated Financial Statements.

INOVA GEOPHYSICAL EQUIPMENT LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OWNERS’ EQUITY

(In thousands)



	Owners' Investment				Accumulated Deficit			Accumulated Other Comprehensive Income			Total Owners' Equity
	BGP		ION		Accumulated Deficit			Accumulated Other Comprehensive Income			Total Owners' Equity
Balance at January 1, 2012 (unaudited)	$	123,083	$	118,727	$	(88,742	)	$	1,142		$	154,210
Net income (unaudited)	—		—		221			—			221
Translation adjustment (unaudited)	—		—		—			1,290			1,290
Reduction in fair value of loan guarantee (unaudited)	125		—		—			—			125
Balance at December 31, 2012 (unaudited)	123,208		118,727		(88,521		)	2,432			155,846
Net loss (unaudited)	—		—		(54,898		)	—			(54,898		)
Translation adjustment (unaudited)	—		—		—			(3,084		)	(3,084		)
Balance at December 31, 2013 (unaudited)	123,208		118,727		(143,419		)	(652		)	97,864
Net income	—		—		(37,533		)	—			(37,533		)
Translation adjustment	—		—		—			(2,330		)	(2,330		)
Release of ION loan guarantee	875		—		—			—			875
Balance at December 31, 2014	$	124,083	$	118,727	$	(180,952	)	$	(2,982	)	$	58,876

See accompanying Notes to Consolidated Financial Statements.

INOVA GEOPHYSICAL EQUIPMENT LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

All 2013 and 2012 Amounts Included in Notes to Financial Statements are Unaudited

(1) Liquidity Matters

The Company's cash requirements are primarily to meet working capital requirements, operating expenditures and interest and principal payments under current indebtedness. The Company has a $40.0 million loan with CPF Dubai (defined below) with a maturity date of August 8, 2015. For additional details on this debt, refer to Note 10 “Long-term debt.” BGP has provided a guarantee, which also expires on August 8, 2015.

Although there are no assurances that the Company’s plans will be realized, management believes that the Company will have sufficient capital resources to meet projected cash flow requirements for the next twelve months from the date these financial statements are issued.

(2) Summary of Significant Accounting Policies

General Description and Principles of Consolidation

INOVA Geophysical Equipment Limited and its wholly owned subsidiaries offer products and services for land seismic data acquisition for the petroleum industry worldwide. The consolidated financial statements include the accounts of INOVA Geophysical Equipment Limited and its wholly-owned subsidiaries (collectively referred to as the “Company” or “INOVA”) and are in accordance with U.S. generally accepted accounting principles. Inter-company balances and transactions have been eliminated.

INOVA was formed on March 25, 2010, and is 51% owned by BGP Inc., China National Petroleum Corporation (“BGP”) and 49% owned by ION Geophysical Corporation (“ION”) and is governed by a 30 year renewable agreement. The Company is headquartered and incorporated in Tianjin, China.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates are made at discrete points in time based on historical experience and relevant market information we believe are reasonable under the circumstances. These estimates may be subjective in nature and involve uncertainties and matters of judgment and, therefore, cannot be determined with precision. Areas involving significant estimates include, but are not limited to, the allowance for doubtful accounts, inventory valuation, goodwill and intangible asset valuation, property, plant, equipment and seismic rental equipment valuation, deferred taxes and accrued warranty costs. Actual results could materially differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash balances of $2.2 million and $1.0 million at December 31, 2014 and 2013, respectively, that are restricted as to withdrawal or usage are included in restricted cash.

Accounts Receivable

Accounts receivable are recorded at the invoiced amount, less the related allowance for doubtful accounts. The Company considers current information and events regarding the customers’ ability to repay their obligations when evaluating the collectability of accounts receivable such as the length of time the receivable balance is outstanding, the customers’ credit worthiness and historical collection experience.

Inventories

Inventories are stated at the lower of cost (first-in, first-out method) or market. Cost of inventories include the cost of materials and component parts and labor and overhead costs related to the production of finished products. The Company provides reserves for estimated obsolescence or excess inventory equal to the difference between cost of inventory and its estimated market value based upon assumptions about future demand for the Company’s product, market conditions and the risk of obsolescence driven by new product introductions.

INOVA GEOPHYSICAL EQUIPMENT LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

All 2013 and 2012 Amounts Included in Notes to Financial Statements are Unaudited

Property, Plant, Equipment and Seismic Rental Equipment

Property, plant, equipment and seismic rental equipment are stated at cost. Depreciation expense is provided on a straight-line basis over the following estimated useful lives:



	Years
Machinery and equipment	3-10
Buildings and leasehold improvements	5-20
Furniture & fixtures	3-10
Seismic rental equipment	2-7
Leased equipment and other	3-5

Expenditures for renewals and betterments are capitalized; repairs and maintenance are charged to expense as incurred. The cost and accumulated depreciation of assets sold or otherwise disposed of are removed from the accounts and any gain or loss is reflected in operating expenses.

The Company evaluates the recoverability of long-lived assets, including property, plant, equipment and seismic rental equipment when indicators of impairment exist, relying on a number of factors including operating results, business plans, economic projections, and anticipated future cash flows. Impairment in the carrying value of an asset held for use is recognized whenever anticipated future cash flows (undiscounted) from an asset (or group of assets) are estimated to be less than its carrying value. The amount of the impairment recognized is the difference between the carrying value of the asset and its fair value.

Financial Instruments

The Company’s financial instruments include cash and cash equivalents, accounts receivables, accounts payable, loan guarantee and long-term debt. Fair value estimates are made at discrete times based on relevant market information. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. The Company believes that the carrying amount of its cash and cash equivalents, accounts receivable, and accounts payable approximate their fair values at those dates due to the highly liquid nature of these instruments. The fair market value of the Company’s non-related party debt was determined to be $3.7 million compared to a carrying value of $3.65 million at December 31, 2013. The difference in the carrying value and fair value of the Company’s non-related party debt relates to secured equipment financing, the fair value for which was calculated using a published yield curve for unsecured debt (Level 2 input). The Company paid off the non-related party debt on February 1, 2014.

Goodwill and Other Intangible Assets

Goodwill is allocated to reporting units, which are either the operating segment or one level below the operating segment. For purposes of performing the impairment test for goodwill, the Company has determined that it has one reporting unit. To determine the fair value of the reporting unit, the Company primarily uses a discounted future returns valuation model, which includes a variety of Level 3 inputs, supplemented by comparison analysis of relevant market participants. The key inputs to the model included an operational five-year forecast for the Company and the then current market discount rate.

The Company evaluates the carrying value of its goodwill at least annually for impairment, or more frequently if facts and circumstances indicate that it is more likely than not impairment has occurred. The Company formally evaluates the carrying value of its goodwill for impairment as of September 30th. If the carrying value of a reporting unit that includes goodwill is determined to be more than the fair value of the reporting unit, there exists the possibility of impairment of goodwill. Impairment of goodwill is measured in two steps by first allocating the fair value of the reporting unit to the net assets and liabilities including recorded and unrecorded other intangible assets to determine the implied fair value of goodwill. The next step is to measure the difference between the carrying value of goodwill and the implied fair value of goodwill, and, if the implied fair value of goodwill is less than the carrying value of goodwill, an impairment loss is recorded equal to the difference.

Intangible assets other than goodwill relate to patents and trademarks that are amortized over the estimated periods of benefit (ranging from 5 to 14 years). Costs to renew or extend these patents and trademarks are expensed as incurred. The Company reviews the carrying values of these intangible assets for impairment if events or changes in the facts and circumstances indicate that their carrying value may not be recoverable. Any impairment determined is recorded in the current period and is measured by comparing the fair value of the related asset (or group of assets) to its carrying value.

INOVA GEOPHYSICAL EQUIPMENT LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

All 2013 and 2012 Amounts Included in Notes to Financial Statements are Unaudited

Intangible assets amortized on a straight-line basis are:



	Estimated Useful Life (Years)
Trademarks	8
Patents	5-14

Fair Value Measurements

Goodwill — The Company’s annual goodwill impairment test was performed using a discounted cash flow model, which included a variety of Level 3 inputs. The key inputs for the model included the operational five-year forecast for the Company, the current market discount rate and the forecasted cash flows related to the Company’s reporting unit. The forecasted operational cash flow amounts were determined using the current activity levels in the Company as well as the current and expected short-term market conditions.

ION Loan Guarantee — Upon assumption by the Company of BGP’s guarantee of ION’s credit facility, the Company performed a valuation of the guarantee using Level 3 inputs. The fair value was estimated using weighted probabilities of payouts, which included a variety of inputs. The key inputs for the analysis included estimated payouts and respective probabilities of occurrence as determined by the contractual terms of the guarantee and an analysis of ION’s financial position.

Revenue Recognition

The Company derives revenue from the sale and rental of acquisition systems and other seismic equipment.

Sale of Acquisition Systems and Other Seismic Equipment — For the sales of acquisition systems and other seismic equipment, the Company recognizes revenue when (a) evidence of an arrangement exists; (b) the price to the customer is fixed and determinable; (c) collectability is reasonably assured; and (d) the acquisition system or other seismic equipment is delivered to the customer and risk of ownership has passed to the customer, or, in the limited case where a substantive customer-specified acceptance clause exists in the contract, the later of delivery or when the customer-specified acceptance is obtained.

Rental of Acquisition Systems and Other Seismic Equipment — The Company receives rental income from the rental of seismic equipment. These rentals are in the form of operating leases under which the lease terms range from a couple of days to several months. Rental revenue is recognized on a straight-line basis over the term of the operating lease.

Product Warranty — The Company generally warrants that its manufactured equipment will be free from defects in workmanship, materials and parts. Warranty periods generally range from six months to two years from the date of original purchase, depending on the product. The Company provides for estimated warranty costs as a charge to costs of sales at the time of sale, which is when estimated future expenditures associated with such contingencies become probable and reasonably estimable. However, new information may become available, or circumstances (such as applicable laws and regulations or warranty claim experience ) may change, thereby resulting in an increase or decrease in the amount required to be accrued for such matters (and therefore a decrease or increase in reported net income in the period of such change).

Research, Development and Engineering

Research, development and engineering costs primarily relate to activities that are intended to improve the quality of the subsurface image and overall acquisition economics of the Company’s customers. The costs associated with these activities are expensed as incurred. These costs include prototype material and field testing expenses, along with the related salaries, facility costs, consulting fees, tools and equipment usage, and other miscellaneous expenses associated with these activities.

Government Research and Development Funding

The Company accounts for government grants in the period in which there is reasonable assurance that the conditions for receipt of such grants are met and that the grants will be received. Funding received during the years ended December 31, 2014, 2013 and 2012 under the National Program is accounted for as a reduction of Research and Development expense. Refer to Note 17“— National Program Research and Development Funding” for further discussion.

INOVA GEOPHYSICAL EQUIPMENT LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

All 2013 and 2012 Amounts Included in Notes to Financial Statements are Unaudited

Income Taxes

Income taxes are accounted for under the liability method. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss and tax credit carry-forwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company reserves for all of its net deferred tax assets and will continue to do so until there is sufficient evidence to warrant reversal. Refer to Note 12“— Income Taxes” for further discussion.

Foreign Currency Gains and Losses

Management has determined that the Company’s reporting currency is U.S. dollars. Assets and liabilities of the Company’s subsidiaries operating in a functional currency other than U.S. dollars have been translated to U.S. dollars using the exchange rate in effect at the balance sheet date. Results of foreign operations have been translated using the average exchange rate during the periods of operation. Resulting translation adjustments have been recorded as a component of Accumulated Other Comprehensive Income. Foreign currency transaction gains and losses are included in the Consolidated Statement of Operations as they occur. Total foreign currency transaction gains (losses) were $(3.4) million, $(0.2) million and $0.6 million for the years ended December 31, 2014, 2013 and 2012, respectively.

Concentration of Credit and Foreign Sales Risks

Sales to BGP (a related party) represented approximately 42%, 55% and 44% of the Company’s consolidated net revenues for the years ended December 31, 2014, 2013 and 2012, respectively. Sales to one of our third-party customers represented 14% of the Company’s consolidated net revenues for the year ended December 31, 2012. No third-party customers represented greater than 10% of our net revenues for the years ended December 31, 2014 and 2013. The loss of these customers or deterioration in the Company’s relationship with these customers could have a material adverse effect on the Company’s results of operations and financial condition. Accounts receivable from significant customers amounted to $10.9 million and $11.9 million, at December 31, 2014 and 2013, respectively.

A summary of net revenues by geographic area follows (in thousands):



	Years Ended December 31,
	2014		2013		2012
Asia Pacific	$	46,604	$	91,635	$	91,331
North America	35,702		29,543		62,476
Africa and the Middle East	1,338		18,691		6,449
Commonwealth of Independent States and Europe	5,100		14,753		20,018
Central and South America	5,873		4,210		2,025
Other	1,651		5,304		6,658
Total	$	96,268	$	164,136	$	188,957

Net revenues are attributed to geographic areas on the basis of the ultimate destination of the equipment or service, if known. If the ultimate destination of such equipment is not known, net revenues are attributed to the geographic area of initial shipment.

The majority of the Company’s sales are denominated in U.S. dollars. For a number of years, African, Middle Eastern and CIS countries have experienced economic problems and uncertainties. To the extent that world events or economic conditions negatively affect the Company’s future sales to customers in these and other regions of the world or the collectability of the Company’s existing receivables, the Company’s future results of operations, liquidity, and financial condition would be adversely affected.

Long Term Incentive Plan

Certain of the Company’s incentive compensation plans base the determination of compensation to be paid in the future on the share price of certain publicly traded peer companies. Expenses related to these plans are recorded as a liability and charged to income over the period in which the amounts are earned, based on a current estimate of amounts that will be paid in the future.

INOVA GEOPHYSICAL EQUIPMENT LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

All 2013 and 2012 Amounts Included in Notes to Financial Statements are Unaudited

(3) Accounts Receivable

Accounts receivable consist of the following at December 31, 2014 and 2013 (in thousands):



	2014			2013
Accounts receivable, principally trade	$	11,542		$	11,946
Less allowance for doubtful accounts	(8,931		)	(1,633		)
Accounts receivable, net	$	2,611		$	10,313

(4) Inventories

A summary of inventories at December 31, 2014 and 2013 is as follows (in thousands):



	2014		2013
Raw materials and subassemblies	$	12,614	$	14,078
Work-in-process	5,495		6,755
Finished goods	44,241		52,389
Total	$	62,350	$	73,222

The Company provides for estimated obsolescence or excess inventory equal to the difference between the cost of inventory and its estimated market value based upon assumptions about future demand for the Company’s products and market conditions. Cost of sales for the years ended December 31, 2014, 2013 and 2012 include inventory obsolescence and excess inventory charges of approximately $2.9 million, $10.3 million and $1.1 million, respectively, relating primarily to technological developments occurring subsequent to the formation of INOVA which resulted in the revaluation of certain finished goods and the write-off of certain excess raw materials and subassemblies.


(5)	Seismic Rental Equipment

A summary of seismic rental equipment at December 31, 2014 and 2013 is as follows (in thousands):



	2014			2013
Seismic rental equipment	$	48,408		$	50,609
Less accumulated depreciation	(37,165		)	(24,755		)
Seismic rental equipment, net	$	11,243		$	25,854

Total depreciation expense relating to seismic rental equipment for the years ended December 31, 2014, 2013 and 2012 was $6.9 million, $19.5 million and $12.5 million, respectively.

In 2013, the transition from our previous generation products to our current line of products resulted in impairment charges on seismic rental equipment of $10.3 million, which is included in depreciation expense within Cost of sales on the Statement of Operations. The Company determined the fair value of the impaired assets using internally developed, unobservable inputs based on the projected cash flows of the respective asset groups.

INOVA GEOPHYSICAL EQUIPMENT LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

All 2013 and 2012 Amounts Included in Notes to Financial Statements are Unaudited


(6)	Property, Plant and Equipment

A summary of property, plant and equipment at December 31, 2014 and 2013 is as follows (in thousands):



	2014			2013
Buildings and leasehold improvements	$	4,944		$	5,380
Machinery and equipment	15,798			16,612
Furniture and fixtures	573			605
Construction in progress	374			185
Land	422			422
Total	22,111			23,204
Less accumulated depreciation	(12,522		)	(11,592		)
Property, plant and equipment, net	$	9,589		$	11,612

Total depreciation expense relating to property, plant and equipment for the years ended December 31, 2014, 2013 and 2012 was $3.1 million, $6.5 million and $4.4 million, respectively.

As the result of certain organizational changes in the year ended December 31, 2013, asset impairment charges of $1.9 million were recorded for machinery and equipment. The Company determined the fair value of the impaired assets using internally developed, unobservable inputs based on the projected cash flows of the asset group.

(7) Goodwill

The Company completed its annual test of the carrying value of goodwill as of September 30, 2014. The Company’s impairment test indicated that its goodwill was not impaired. There have been no impairment charges related to goodwill since the formation of the Company. Changes in the carrying amount of goodwill for the years ended December 31, 2014, 2013 and 2012 are the result of foreign currency translation adjustments.

(8) Intangible Assets

A summary of intangible assets, net, at December 31, 2014 and 2013 is as follows (in thousands):



	December 31, 2014
	Weighted Average Amortization Period	Gross Amount		Accumulated Amortization			Net
Trademarks	8	$	4,141	$	(3,657	)	$	484
Patents	12	20,686		(8,155		)	12,531
Total		$	24,827	$	(11,812	)	$	13,015



	December 31, 2013
	Weighted Average Amortization Period	Gross Amount		Accumulated Amortization			Net
Trademarks	8	$	4,502	$	(3,870	)	$	632
Patents	12	21,147		(6,578		)	14,569
Total		$	25,649	$	(10,448	)	$	15,201

INOVA GEOPHYSICAL EQUIPMENT LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

All 2013 and 2012 Amounts Included in Notes to Financial Statements are Unaudited

Total amortization expense for intangible assets was $1.8 million, $13.4 million and $3.1 million for the years ended December 31, 2014, 2013 and 2012, respectively. A summary of the estimated amortization expense for the next five years is as follows (in thousands):



Years Ended December 31,
2015	$	1,800
2016	$	1,775
2017	$	1,775
2018	$	1,775
2019	$	1,775

In 2013, the transition from our previous generation products to our current line of products resulted in impairment charges on trademarks of $10.7 million, which is included in amortization expense within Cost of sales on the Statement of Operations. The Company determined the fair value of the impaired assets using internally developed, unobservable inputs based on the projected cash flows of the respective asset groups.

(9) Accrued Expenses

A summary of accrued expenses at December 31, 2014 and 2013 is as follows (in thousands):



	2014		2013
Compensation, including compensation-related taxes and commissions	$	2,081	$	3,712
Accrued taxes	8,216		7,714
Product warranty	3,841		3,080
Volume purchase rebate	2,445		3,011
Other	1,235		2,023
Total accrued expenses	$	17,818	$	19,540

A summary of warranty activity for the years ended December 31, 2014, 2013 and 2012 is as follows (in thousands):



	2014			2013			2012
Balance at the beginning of the period	$	3,080		$	3,966		$	2,608
Accruals for warranties issued during the period	4,414			3,076			3,716
Expiries of warranties during the period	(930		)	(1,402		)	(1,202		)
Settlements made during the period	(2,723		)	(2,560		)	(1,156		)
Balance at the end of the year	$	3,841		$	3,080		$	3,966


(10)	Long-term Debt

A summary of long-term debt at December 31, 2014 and 2013 is as follows (in thousands):



	2014			2013
$40.0 million related party revolving credit facility	$	40,000		$	38,500
Loan with BGP	7,233			—
Related party promissory notes	8,000			10,000
Secured equipment financing	—			3,601
Unamortized non-cash debt premium	—			53
Total	55,233			52,154
Current portion of long-term debt	(49,950		)	(52,154		)
Non-current portion of long-term debt	$	5,283		$	—

INOVA GEOPHYSICAL EQUIPMENT LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

All 2013 and 2012 Amounts Included in Notes to Financial Statements are Unaudited

USD Revolving Credit Facility

On August 6, 2010, the Company’s Luxembourg subsidiary, INOVA Exploration Holdings S.à r.l. (“INOVA Sàrl”) entered into a credit facility (the “USD Credit Facility”) with CNPC Finance (HK) Limited (“CNPC Finance”). The terms of the USD Credit Facility are set forth in a credit agreement dated as of August 6, 2010 (the “Credit Agreement”), between INOVA Sàrl and CNPC Finance. CNPC Finance is a wholly owned subsidiary of BGP’s parent company, China National Petroleum Corporation (“CNPC”). The obligations of the Company under the USD Credit Facility are guaranteed by BGP. In return for this guarantee, the Company is obligated to pay BGP fees at a rate of 1.4% per annum of the outstanding Credit Facility payable semi-annually on June 21^st and December 21^st of each year.

Under the USD Credit Facility, up to $40 million is available for revolving line of credit borrowings to fund the working capital needs of the Company and its subsidiaries for a duration of thirty-six months from the first draw down date. The first draw down under the USD Credit Facility occurred on August 9, 2010, and as such, the USD Credit Facility matured on August 9, 2013. Interest on the USD Credit Facility is calculated based on the London Interbank Offered Rate (“LIBOR”) plus 160 basis points and is payable semi-annually on June 21^st and December 21^st of each year.

In 2013, the USD Credit Facility was amended to extend the maturity date for a period of one year such that the maturity date is August 9, 2014. In addition, the interest rate was increased to LIBOR plus 210 basis points per annum. At the same time, the guarantee agreement with BGP was amended to 0.9% per annum.

On August 8, 2014 a new $40 million loan agreement between INOVA Sàrl and CPF (Dubai) Limited (“CPF Dubai”) was signed replacing the previous $40 million agreement. CPF Dubai is a wholly owned subsidiary of BGP’s parent company, CNPC. The term of the loan is from August 8, 2014 to August 8, 2015. The interest rate is LIBOR plus 210 basis points per annum. A Counter Guarantee was also signed between INOVA and BGP relating to the $40 million loan as BGP provided a guarantee to CPF Dubai. INOVA grants to BGP as collateral security all inventory. The amount of the loan may be reduced if the inventory falls below $40 million. No fee is charged by BGP for its guarantee under the new loan agreement.

From time to time, outstanding letters of credit can reduce availability under the USD Credit Facility. At December 31, 2014, no such letters of credit reduced our availability. The effective interest rate, including fees paid to BGP as discussed above, was 2.4% and 3.6% at December 31, 2014 and 2013, respectively. Total interest expense including fees paid to BGP recognized during the years ended December 31, 2014, 2013 and 2012 relating to the USD Credit Facility amounted to $1.2 million, $1.3 million and $0.8 million, respectively.

The Credit Agreement contains customary events of default provisions which result in penalties of 30% to 50% additional interest calculated based on LIBOR plus 210 basis points in the event of failure to make interest or principal payments or use of the USD Credit Facility for purposes other than funding working capital requirements.

RMB Revolving Credit Facility and Loan with BGP

On June 27, 2011, the Company entered into a credit agreement (the “RMB Credit Facility”) with China Petroleum Finance Co., Ltd. (“CPF”), the terms of which are set forth in a loan contract dated as of June 27, 2011 (the “Loan Contract”), between INOVA Geophysical Equipment Limited and CPF, a wholly owned subsidiary of BGP’s parent company, CNPC. The obligations of the Company under the RMB Credit Facility are guaranteed by BGP.

Under the RMB Credit Facility, up to RMB 50 million is available for revolving line of credit borrowings to fund the working capital needs of the Company and its Chinese subsidiaries within China only for a duration of thirty-six months commencing June 27, 2011 and expiring June 27, 2014. Interest on the RMB Credit Facility is calculated based on the People’s Republic of China Central Bank Rate and is payable on the 21^st day of the last month in each quarter. Total interest expense recognized during the years ended December 31, 2014, 2013 and 2012 for the RMB Credit Facility amounted to $0.1 million, $0.2 million and $0.03 million, respectively.

The Loan Contract contains customary events of default provisions which result in penalties ranging from 1/10,000^ths to 5/10,000^ths per day on the then outstanding loan balance in the event of failure to make interest or principal payments or use of the RMB Credit Facility for purposes other than funding working capital requirements.

On June 27, 2014, BGP, as the guarantor, paid off the outstanding balance of RMB Credit Facility for RMB 50 million. The Company is then obligated to repay BGP for RMB 50 million. According to the repayment schedule with BGP, RMB 3 million and the interest are to be repaid on the 21^st day of the last month in each quarter. Interest is calculated based on the 5 year interest rate which is launched by the People’s Republic of China Central Bank. The interest rate is 6.0% at December 31, 2014. Total interest expense amounted to $0.2 million for the year ended December 31, 2014.

INOVA GEOPHYSICAL EQUIPMENT LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

All 2013 and 2012 Amounts Included in Notes to Financial Statements are Unaudited

A summary of future principal obligations under this loan for the next five years is as follows (in thousands):



Years Ended December 31,
2015	$	1,950
2016	1,950
2017	1,950
2018	1,383

Related Party Promissory Notes

The Company entered into promissory notes (“Promissory Notes”) with each of its owners with identical terms and conditions. The Promissory Notes were issued in the second and third quarters of 2013 with a principal sum of $10 million each providing total available borrowings of $20 million. The notes were originally scheduled to mature on September 30, 2013, and the maturity date was extended to December 31, 2014. Amendments have reduced available borrowings to $4 million each, for total available borrowings of $8 million. The notes bear interest at a rate of LIBOR plus 650 basis points per annum. Total interest expense amounted to $0.6 million and $0.6 million for the years ended December 31, 2014 and 2013, respectively. The notes are currently in default.

Secured Equipment Financing

The Company assumed the outstanding principal balance of secured equipment financing on its formation. The terms of this secured equipment financing are outlined in two master loan agreements (collectively, the “ICON Loan Agreements”) dated as of June 29, 2009 originally entered into with ICON ION LLC (“ICON”), ION and two wholly owned subsidiaries of the Company: (i) INOVA Rental Corporation (formerly, “ARAM Rentals Corporation”), a Nova Scotia unlimited company (“IRC”), and (ii) INOVA Seismic Rentals, Inc. (formerly, “ARAM Seismic Rentals, Inc.”), a Texas corporation (“ISRI”). All indebtedness under the ICON Loan Agreements was scheduled to mature on July 31, 2014. On February 1, 2014, the loans were repaid in full.

The indebtedness under the ICON Loan Agreements was secured by first-priority liens in (a) certain seismic rental equipment owned by IRC or ISRI located in the United States and Canada (subject to certain exceptions), and certain additional and replacement seismic equipment owned by such subsidiaries from time to time, (b) written leases or other agreements evidencing payment obligations relating to the leasing by IRC or ISRI of this equipment to their respective customers, including their related receivables, (c) the cash or cash equivalents held by such subsidiaries and (d) any proceeds thereof.

Under both ICON Loan Agreements, interest on the outstanding principal amount accrued at a fixed interest rate of 15% per annum calculated monthly, and was payable monthly on the first day of each month. Principal and interest were payable, commencing on September 1, 2009, in 60 monthly installments of $0.5 million until the maturity date, when all remaining outstanding principal and interest was due and payable. Pursuant to the ICON Loan Agreements, ICON received an administrative fee equal to 0.5% of the aggregate principal amount of advances under the ICON Loan Agreements, payable at the end of each of the first four years during their terms.

Beginning on August 1, 2012, and continuing until January 31, 2014, the outstanding principal balances of the loans could be prepaid in full by giving ICON 30 days’ prior written notice and paying a prepayment fee equal to 3.0% of the then-outstanding principal amount of the loans. Commencing on February 1, 2014, the loans could be prepaid in full by giving ICON 30 days’ prior written notice and without any prepayment penalty or fee.

The repayment obligations of each of IRC and ISRI under the ICON Loan Agreements were guaranteed by ION under a Guarantee dated as of June 29, 2009 (the “Guarantee”). ION remained liable on its Guarantee, however, certain of the Company's subsidiaries had entered into back-up guarantees in favor of ION from the Company with respect to any defaults on this transferred indebtedness for which ION could be called upon to remedy.

In conjunction with the formation of INOVA, the Company recorded a $1.5 million premium on the ICON indebtedness. This premium reflects a fair value adjustment resulting from an estimated interest rate of 11% for a debt instrument having the same or similar characteristics as the ICON indebtedness as of March 25, 2010.

INOVA GEOPHYSICAL EQUIPMENT LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

All 2013 and 2012 Amounts Included in Notes to Financial Statements are Unaudited

(11) Guarantee of ION Credit Facility

In conjunction with the formation of INOVA, BGP and ION had originally contemplated that INOVA would be an additional guarantor or provider of credit support under ION’s Credit Agreement (the “ION Credit Agreement”), dated March 25, 2010, with China Merchant Bank, New York (“CMB”). However, due to the time required to obtain necessary Chinese governmental approvals for such credit support from INOVA, ION’s Credit Agreement instead provided that BGP enter into an agreement to guarantee the indebtedness under ION’s Credit Facility, which INOVA’s guarantee would replace when the applicable governmental approvals were obtained. In June 2010, the applicable governmental approvals were obtained and BGP was then released from its guarantee obligations, and these obligations were assumed by INOVA as originally contemplated under ION’s Credit Agreement. In addition, ION’s credit support agreement with BGP was terminated. Subsequently, INOVA’s guarantee of ION’s credit facility took the form of a $215 million standby letter of credit with CMB. The fair value of the guarantee of $1.0 million was recorded in connection with the arrangement.

In May 2012, ION amended the terms of the ION Credit Agreement to allow ION to make revolving credit borrowings up to $175 million and converted all then-outstanding term loan indebtedness to revolving credit indebtedness. This reduced the available borrowings to ION by $40 million, from $215 million, and thus reduced the guarantee provided by INOVA. As a result, the fair value of INOVA’s guarantee was reduced from $1.0 million to $0.9 million. The guarantee provided by INOVA was cancelled on August 26, 2014 as a result of the credit line between ION and CMB being terminated.

(12) Income Taxes

The sources of income (loss) before income taxes for the years ended December 31, 2014, 2013 and 2012 are as follows (in thousands):



	2014			2013			2012
Domestic (China)	$	2,405		$	(3,924	)	$	(4,068	)
Foreign	(39,455		)	(45,931		)	(388		)
Total	$	(37,050	)	$	(49,855	)	$	(4,456	)

The income tax expense for the year ended December 31, 2014 is comprised of $0.3 million taxes payable in the United States, $0.1 million of taxes payable in Canada and $0.1 million of net income tax charges in various other jurisdictions. The income tax expense for the year ended December 31, 2013 is comprised of $2.8 million taxes payable in the United States and $2.2 million of taxes payable in Canada. The income tax benefit for the year ended December 31, 2012 is comprised of a reduction of taxes payable in Canada of $4.7 million.

A reconciliation of the expected income tax (benefit) expense on loss before income taxes using the statutory China income tax rate of 25% to income tax (benefit) expense for the years ended December 31, 2014, 2013 and 2012 is as follows (in thousands):



	2014			2013			2012
Expected income tax benefit at 25%	$	(9,263	)	$	(12,464	)	$	(1,114	)
Foreign taxes (tax rate differential and foreign tax differences)	2,476			(2,336		)	7,176
Nondeductible expenses and other	(333		)	(489		)	(543		)
Deferred tax asset valuation allowance:
Deferred tax asset valuation allowance on operations	7,603			20,332			(10,196		)
Total income tax expense (benefit)	$	483		$	5,043		$	(4,677	)

INOVA GEOPHYSICAL EQUIPMENT LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

All 2013 and 2012 Amounts Included in Notes to Financial Statements are Unaudited

The tax effects of the cumulative temporary differences at December 31, 2014 and 2013 are as follows (in thousands):



	2014			2013
Current deferred:
Deferred income tax assets:
Accrued expenses	$	1,203		$	1,220
Allowance accounts	160			120
Inventory	5,197			3,153
Total current deferred income tax asset	6,560			4,493
Valuation allowance	(6,560		)	(4,493		)
Net current deferred income tax asset	$	—		$	—
Non-current deferred:
Deferred income tax assets:
Net operating loss carry-forward	$	59,895		$	56,686
Basis in research and development	19,632			21,236
Basis in property, plant, equipment and seismic rental equipment	6,630			6,233
Tax credit carry-forwards and other	2,296			2,229
Total non-current deferred income tax asset	88,453			86,384
Valuation allowance	(87,531		)	(85,235		)
Net non-current deferred income tax asset	922			1,149
Deferred income tax liabilities:
Basis in identified intangibles	(922		)	(1,149		)
Net non-current deferred income tax asset	$	—		$	—

The Company has established a valuation allowance for all of its net deferred tax assets. The valuation allowance was established as it is “more likely than not” that all or a portion of deferred tax assets will not be realized. The Company will continue to reserve for net deferred tax assets of $94.1 million until there is sufficient evidence to warrant reversal. At December 31, 2014, the Company had net operating loss carry-forwards of approximately $192 million, the majority of which expire beyond 2029.

As of December 31, 2014, the Company has no significant unrecognized tax benefits and does not expect to recognize any significant increases in unrecognized tax benefits during the next twelve month period. Interest and penalties, if any, related to unrecognized tax benefits are recorded in income tax expense.

The Company’s tax returns in various jurisdictions for 2009 and subsequent years remain subject to examination by tax authorities.

(13) Operating Leases

The Company leases certain offices and warehouse space under non-cancelable operating leases which are recognized on a straight-line basis. Rental expense was $3.8 million, $4.0 million and $3.6 million for the years ended December 31, 2014, 2013 and 2012, respectively. A summary of future rental commitments over the next five years under non-cancelable operating leases is as follows (in thousands):



Years Ended December 31,
2015	$	3,777
2016	$	2,698
2017	$	1,913
2018	$	110

INOVA GEOPHYSICAL EQUIPMENT LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

All 2013 and 2012 Amounts Included in Notes to Financial Statements are Unaudited

(14) Long-Term Incentive Plan

During 2011 the Company’s board of directors approved a Long-Term Incentive Plan (the “Plan”) under which up to 20,000,000 unit appreciation rights (“UARs”) may be granted to certain executives, officers, employees and non-employee directors of the Company. The term, vesting and base price of each UAR is determined by the Company’s compensation committee (the “Committee”) at the time of each grant, however, the term of any grant may not exceed ten years. Conditions on exercisability of a grant are also at the discretion of the Committee at the time of grant, however, all UARs are cash settled when exercised. Cash settlements on exercised UARs is calculated as the difference between the exercise date value and the grant price of the UAR multiplied by the number of UARs being exercised. The Company records compensation expense and the corresponding liability each period based on the intrinsic value of the vested UARs at the balance sheet date.

UAR activity and changes during the year ended December 31, 2014 are summarized as follows (in thousands of units):



	Outstanding		Vested
January 1, 2014	1,060		346
Granted	—		—
Vested	—		251
Forfeited	(55	)	(21	)
December 31, 2014	1,005		576

The UARs granted in the years ended December 31, 2013, 2012 and 2011 were granted at a price of $2.75 and will vest in 25% increments on each of the first, second, third and fourth anniversary dates following the date of grant. The weighted average remaining contractual life of outstanding units is 4.3 years and of vested units is 4.1 years at December 31, 2014. The formula determining the exercise date value as described in the UAR agreements results in a value below that of the grant price of all outstanding UARs at December 31, 2014, 2013 and 2012 and as such, no compensation expense has been recorded relating to UARs.

(15) Benefit Plans

The Company has a 401(k) retirement savings plan, which covers certain employees of its U.S. businesses. Employees may voluntarily contribute up to 60% of their compensation, as defined, to the plan up to the limits established by the Internal Revenue Service. The Company matches the employee contribution at a rate of 50% of the first 6% of compensation contributed to the plan. Company contributions to the plan were $0.2 million, $0.3 million and $0.3 million during the years ended December 31, 2014, 2013 and 2012, respectively.

In 2012, the Company established a registered retirement savings plan, which covers certain employees of its Canadian businesses. Employees may voluntarily contribute their compensation to the plan up to the limits established by the Canadian Revenue Authority. The Company matches the employee contribution for the first 6% of compensation contributed to the plan. Company contributions were $0.3 million, $0.4 million and $0.3 million for the years ended December 31, 2014, 2013 and 2012, respectively.

(16) Legal Matters

The Company has been named in certain lawsuits or threatened actions that are incidental to its ordinary business. Litigation is inherently unpredictable. Any claims against the Company, whether meritorious or not, could be time-consuming, cause the Company to incur costs and expenses, require significant amounts of management time and result in the diversion of significant operational resources. The results of these lawsuits and actions cannot be predicted with certainty. The Company currently believes that the ultimate resolution of these matters will not have a material adverse impact on the financial condition, results of operations or liquidity of the Company.

(17) National Program Research and Development Funding

On December 3, 2011, the Company entered into a research and development agreement with BGP (the “R&D Agreement”) which enabled the Company to access funding available under a program (the “National Program”) extended by the Ministry of Science and Technology of the People’s Republic of China. Under the National Program certain research and development milestones and expenditure requirements must be achieved each year over a five year period.

INOVA GEOPHYSICAL EQUIPMENT LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

All 2013 and 2012 Amounts Included in Notes to Financial Statements are Unaudited

The Company received funding of $0.2 million, $2.45 million and $3.1 million for the years ending December 31, 2014, 2013 and 2012, respectively, for qualifying expenditures under the National Program. These amounts have been recorded as a reduction of research, development and engineering expenses in the respective years. There are no unfulfilled conditions or other contingencies relating to the funding received, however, additional expenditures must be incurred and further milestones met in 2015 and 2016 in order to receive funding in those years.

(18) Certain Relationships and Related Party Transactions

On March 25, 2010 the Company entered into support and transition agreements with ION to receive certain administrative services including tax, legal, information technology, treasury, human resources, bookkeeping, facilities and marketing services. The Company terminated these support and transition agreements in 2012. The terms of these arrangements are such that the Company paid approximately $0.6 million for services for the year ended December 31, 2012.

The Company is also required to reimburse certain third-party and lease costs incurred by ION directly related to the administrative support of the Company. During the years ended December 31, 2014, 2013 and 2012, the Company recorded $1.4 million, $1.7 million and $2.4 million, respectively, relating to the reimbursement of administrative services and lease costs incurred by ION. At December 31, 2014 and 2013, the Company owed approximately $1.5 million and $0.4 million, respectively, to ION for reimbursement of these costs and has reflected this liability in accounts payable to related parties on the accompanying consolidated balance sheet.

In conjunction with the formation of INOVA, ION contributed $1.5 million of cash to INOVA to be used to purchase the shares of a Russian legal entity containing certain land seismic assets with ascribed value of $1.5 million at March 25, 2010 under the Share Purchase Agreement. The Company is obligated to purchase the shares of this Russian entity from ION for cash consideration of $1.5 million upon completion of certain corporate restructuring steps. A liability of $1.5 million is included in accounts payable to related parties on the accompanying consolidated balance sheet at December 31, 2013. In 2014, the Company purchased the shares of this Russian entity from ION and paid $1.5 million to ION.

During the years ended December 31, 2014, 2013 and 2012, the Company purchased certain land seismic equipment from ION for resale to the Company’s customers. These purchases amounted to approximately $0.2 million, $2.0 million and $1.1 million for the respective periods. At December 31, 2013, accounts payable to related parties included $1.0 million owed to ION for these purchases. There were no amounts payable to related parties for these purchases at December 31, 2014.

During the year ended December 31, 2014, the Company recorded revenues from wholly owned subsidiaries of BGP and ION of $40.8 million and $0.1 million, respectively. During the year ended December 31, 2013, the Company recorded revenues from wholly owned subsidiaries of BGP and ION of $89.6 million and $0.1 million, respectively. During the year ended December 31, 2012, the Company recorded revenues from wholly owned subsidiaries of BGP and ION of $82.7 million and $1.5 million, respectively. Accounts receivable from related parties at December 31, 2014 and 2013 of $10.9 million and $11.9 million, respectively, represents the amounts due from BGP and ION for these revenues.

In March 2014, the Company leased a manufacturing facility in Xi’an from BGP. The Company recorded $0.8 million of lease and related expenses for the year ended December 31, 2014. At December 31, 2014, the Company owed approximately $0.6 million to BGP for this lease and has reflected this liability in accounts payable to related parties on the accompanying consolidated balance sheet.

During the year ended December 31, 2014, the Company contracted with Baoding Beiao Special Vehicle Manufacturing Co., Ltd (“Baoding”), who is 25% owned by BGP, to build vibrators. At December 31, 2014, accounts payable to related parties included $8.6 million owed to Baoding for the purchases of vibrators built by Baoding. At December 31, 2014, accounts receivable from related parties included $5.5 million due from Baoding for the parts the Company sold to Baoding to build vibrators. The Company did not record any revenue for the parts sold to Baoding, but recorded $0.3 million of royalty revenue from Baoding for the year ended December 31, 2014.

(19) Subsequent Events

In connection with the preparation of the financial statements, the Company evaluated subsequent events after the balance sheet date of December 31, 2014, through the date the financial statements were available to be issued on April 24, 2015. Other than items disclosed in these footnotes to the financial statements, no material subsequent events have occurred since December 31, 2014.

The Company is in default with the related party promissory notes of $8 million as of April 24, 2015.

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