EXHIBIT 99.1

Report of Independent Registered Public Accounting Firm

The Board of Directors of INOVA Geophysical Equipment Limited

     We have audited the accompanying consolidated balance sheet of INOVA Geophysical Equipment Limited and subsidiaries at December 31, 2010, and the related consolidated statements of operations, cash flows, and owners’ equity and comprehensive loss for the period from March 26, 2010 to December 31, 2010. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

     We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of INOVA Geophysical Equipment Limited and subsidiaries at December 31, 2010, and the consolidated results of their operations and their cash flows for the period from March 26, 2010 to December 31, 2010, in conformity with U.S. generally accepted accounting principles.

Ernst and Young LLP
Chartered Accountants

Calgary, Alberta
June 17, 2011

INOVA GEOPHYSICAL EQUIPMENT LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
As at December 31, 2010
(In thousands)

ASSETS
Current assets:
Cash and cash equivalents		$	10,329
Accounts receivable from third parties, net			16,177
Accounts receivable from related parties			16,477
Notes receivable			6,671
Inventories			74,487
Prepaid expenses and other current assets			5,300
Total current assets			129,441
Property, plant and equipment, net			19,020
Seismic rental equipment, net			42,146
Goodwill			25,148
Intangible assets, net			35,100
Total assets		$	250,855
LIABILITIES AND OWNERS’ EQUITY
Current liabilities:
Current maturities of long-term debt		$	4,019
Accounts payable			10,635
Accrued expenses			13,421
Accounts payable to related parties			4,618
Deferred revenue			2,313
Total current liabilities			35,006
Long term debt, net of current maturities (related party — $10,000)			23,164
Related party loan guarantee			1,000
Total liabilities			59,170
Commitments and contingencies
Owners’ equity:
Owners’ investment			241,810
Accumulated deficit			(51,107	)
Accumulated other comprehensive income			982
Total owners’ equity			191,685
Total liabilities and owners’ equity		$	250,855

See accompanying Notes to Consolidated Financial Statements.

INOVA GEOPHYSICAL EQUIPMENT LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
Period from March 26, 2010 to December 31, 2010
(In thousands)

Revenues from third parties		$	70,164
Revenues from related parties			22,924
Net revenues			93,088
Cost of sales (including excess and obsolete inventory charge of $20,238)			103,516
Gross profit (loss)			(10,428	)
Operating expenses:
Research, development and engineering			17,178
Marketing and sales			7,062
General and administrative			11,012
Costs charged by a related party			2,492
Costs incurred by a related party for the benefit of INOVA			510
Total operating expenses			38,254
Loss from operations			(48,682	)
Interest expense, net			(2,126	)
Other income			1,170
Loss before income taxes			(49,638	)
Income tax expense			1,469
Net loss		$	(51,107	)

See accompanying Notes to Consolidated Financial Statements.

INOVA GEOPHYSICAL EQUIPMENT LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Period from March 26, 2010 to December 31, 2010
(In thousands)

Cash flows from operating activities:
Net loss		$	(51,107	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			20,608
Excess & obsolete inventory expense			20,238
Bad debt expense			629
Amortization of debt premium			(397	)
Costs incurred by a related party for the benefit of INOVA			510
Profits and (gains) losses on sale of property, plant, equipment and seismic rental equipment			(9,308	)
Purchase of seismic rental equipment			(710	)
Proceeds from sale of seismic rental equipment			17,819
Change in operating assets and liabilities:
Accounts and notes receivable			3,090
Inventories			16,670
Accounts payable and accrued expenses			(7,150	)
Deferred revenue			(304	)
Due to/from related parties			(11,860	)
Other assets and liabilities			(3,137	)
Net cash used in operating activities			(4,409	)
Cash flows from investing activities:
Purchase of property, plant and equipment			(2,839	)
Cash from acquired business			4,552
Net cash provided by investing activities			1,713
Cash flows from financing activities:
Borrowings under revolving credit facility			20,000
Repayments under revolving credit facility			(10,000	)
Borrowings from owners			11,500
Repayments to owners			(11,500	)
Payments on secured equipment financing			(2,331	)
Repayment of capital lease obligations			(2,369	)
Net cash provided by financing activities			5,300
Effect of change in foreign currency exchange rates on cash and cash equivalents			1,460
Net increase in cash and cash equivalents			4,064
Cash and cash equivalents at beginning of period			6,265
Cash and cash equivalents at end of period		$	10,329
Non-cash items from investing and financing activities:
Net non-cash assets contributed by owners		$	226,371
INOVA assumption of BGP guarantee of ION debt		$	1,000
Costs incurred by BGP for the benefit of INOVA		$	510
Property, plant and equipment additions from prepaid expenses		$	1,180
Supplemental disclosure of cash flow information:
Interest paid, net		$	1,643
Income taxes received		$	199

See accompanying Notes to Consolidated Financial Statements.

INOVA GEOPHYSICAL EQUIPMENT LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OWNERS’ EQUITY AND
COMPREHENSIVE LOSS
Period from March 26, 2010 to December 31, 2010
(In thousands)

														Accumulated
														Other				Total
		Owners’ Investment								Accumulated				Comprehensive				Owners’
		BGP				ION				Deficit				Income				Equity
Balance at March 25, 2010		$	11,377			$	—			$	—			$	—			$	11,377
Owners’ contributions			112,196				118,727				—				—				230,923
INOVA assumption of BGP guarantee of ION debt			(1,000	)			—				—				—				(1,000	)
BGP costs incurred for benefit of INOVA			510				—				—				—				510
Comprehensive loss:
Net loss			—				—				(51,107	)			—				(51,107	)
Translation adjustment			—				—				—				982				982
Total comprehensive loss																			(50,125	)
Balance at December 31, 2010		$	123,083			$	118,727			$	(51,107	)		$	982			$	191,685

See accompanying Notes to Consolidated Financial Statements.

INOVA GEOPHYSICAL EQUIPMENT LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) 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 Beijing, China. The consolidated statements of operations, cash flows and owners’ equity and comprehensive loss reflect all net assets and operations contributed to INOVA by both BGP and ION for the period from March 26, 2010 to December 31, 2010.

     Overview of Formation of INOVA

     On March 24, 2010, BGP and ION entered into a Share Purchase Agreement (the “Share Purchase Agreement”), under which ION agreed to sell to BGP a 51% interest in an entity created by ION. Subsequently, ION contributed certain land seismic assets, liabilities and operations (the “ION Assets”) into this entity in exchange for cash consideration of $108.5 million and a 49% interest in a Chinese entity containing certain assets and operations being contributed by BGP (the “BGP Assets”). BGP and ION then contributed their respective interests in the entity containing the BGP Assets into the entity containing the ION Assets to form INOVA. These formation steps were completed on March 25, 2010.

     The net assets contributed by BGP and ION included land seismic recording systems technologies, inventory, fixed assets, certain intellectual property rights and contract rights necessary to or principally used in the conduct or operation of the land equipment businesses as conducted or operated by BGP and ION, respectively, prior to closing. INOVA combines ION’s land seismic equipment business and related technologies with BGP’s expertise and experience in land seismic operations thereby creating a new enterprise with the resources, technologies and experience required to provide advanced products and services on a global basis.

     For further discussion regarding accounting for the formation of INOVA and the assets and liabilities contributed by BGP and ION, see Note 2 “— INOVA Formation”.

     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 relevant market information. 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, accounts receivable, notes receivable, 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.

     Accounts and Notes Receivable

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

note to be impaired when it is probable that the Company will be unable to collect all amounts due according to the contractual terms. When a note receivable is considered impaired, the amount of the impairment is measured based on the present value of expected future cash flows or the fair value of collateral. Impairment losses (recoveries) are included in the allowance for doubtful accounts and notes through an increase (decrease) in bad debt expense.

     Notes receivable are generally collateralized by the products sold and bear interest at contractual rates of up to 11.5% per year. If a note receivable was deemed impaired, cash receipts would be applied to reduce the principal amount of such notes until the principal has been recovered and are recognized as interest income thereafter. The Company records interest income on notes receivable on the accrual basis of accounting. The Company does not accrue interest on impaired loans where collection of interest according to the contractual terms is considered doubtful. Among the factors the Company considers in making an evaluation of the collectability of interest are: (i) the status of the loan; (ii) the fair value of the underlying collateral; (iii) the financial condition of the borrower; and (iv) anticipated future events.

     Inventories

     Inventories are stated at the lower of cost (primarily 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 products and market conditions.

     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			3-15
Buildings			5-20
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 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. There were no significant impairment charges with respect to the Company’s property, plant, equipment and seismic rental equipment during 2010.

     Financial Instruments

     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 and notes receivable, and accounts payable approximate their fair values at those dates. The fair market value of the Company’s outstanding non-related party long-term debt was determined to be $18.5 million at December 31, 2010 compared to a carrying value of $17.2 million. The difference in the carrying value and fair value of the Company’s outstanding non-related party long-term debt relates to secured equipment financing, the fair value for which was calculated using an estimated interest rate for unsecured debt. The carrying value of the Company’s related party long term debt and loan guarantee are $10.0 million and $1.0 million, respectively.

     Goodwill and Other Intangible Assets

     Goodwill is allocated to reporting units, which are either the operating segment or one reporting level below the operating segment. For purposes of performing the impairment test for goodwill as required by Accounting Standards Codification (“ASC”) 350 “Intangibles — Goodwill and Other,” (“ASC 350”) the Company established the following reporting units: Canada, U.S.A, and China. To determine the fair value of these reporting units, the Company primarily uses a discounted future returns valuation method supplemented by comparison analysis of relevant market participants.

     The reporting units established by management represent the geographic locations from which the manufacture and sale and rental of separate and distinct land seismic technologies occurs. Specifically, the Canada reporting unit contains the Company’s ARIES land seismic system technology and related assets and operations; the U.S.A. reporting unit contains the Company’s Scorpion and Firefly land seismic systems technologies and vibrator and vibrator related technologies and related assets and operations; and, the China reporting unit contains the land seismic technologies and related assets and operations contributed with the BGP Assets.

     In accordance with ASC 350, the Company is required to evaluate 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 for each of its reporting units. If the carrying value of a reporting unit of an entity 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 carrying value of goodwill. The next step is to measure the difference between the carrying value of goodwill and the implied carrying value of goodwill, and, if the implied carrying value of goodwill is less than the carrying value of goodwill, an impairment loss is recorded equal to the difference. Refer to Note 6 “— Goodwill” for further discussion.

     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. Following the guidance of ASC 360 “Accounting for the Impairment and Disposal of Long-Lived Assets,” 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 to its carrying value. Refer to Note 7 “— Intangible Assets” for further discussion.

     Intangible assets amortized on a straight-line basis are:

		Estimated Useful Life
		(Years)
Trademarks			12-14
Patents			5-14

     Fair Value Measurements

     ASC 820-10, “Fair Value Measurements,” defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. This standard establishes a fair value hierarchy based on whether the inputs to valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s own assumptions about the assumptions market participants would use, which are broken out into three levels. Level 1 inputs are quoted prices from active markets for identical assets and liabilities at the measurement date, while Level 2 inputs are inputs other than quoted prices that are observable, either directly or indirectly. Level 3 inputs are unobservable and relate to assets and liabilities whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques reflecting the Company’s own assumptions and requiring significant management judgment.

     INOVA Formation — As discussed in Note 2 “— INOVA Formation”, the formation of INOVA has been accounted for as an acquisition of the majority interest in INOVA by BGP wherein the Company performed a valuation to determine the fair value of the ION Assets (refer to “Overview of Formation of INOVA” above). This valuation was performed primarily using a discounted cash flow model, which included a variety of Level 3 inputs. The key inputs to the model included operational five-year forecasts and market discount factors.

     Goodwill — In September 2010, the Company performed its annual goodwill impairment test. This 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 factor and the forecasted cash flows related to each reporting unit. The forecasted operational and cash flow amounts were determined using the current activity levels in the Company as well as the current

and expected short-term market conditions. Refer to Note 6 “— Goodwill” for further discussion.

     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. Refer to Note 10 “— Guarantee of ION Credit Facility” for further discussion.

     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 follows the requirements of ASC 605-10 “Revenue Recognition” and 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 and other 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.

     Multi-element Arrangements — When separate elements (such as an acquisition system and/or other seismic equipment) are contained in a single sales arrangement, or in related arrangements with the same customer, the Company follows the requirements of ASC 605-25 “Accounting for Multiple-Element Revenue Arrangement” (“ASC 605-25”). The multiple element arrangements guidance codified in ASC 605-25 was modified as a result of the final consensus reached in Accounting Standards Update (“ASU”) 2009-13, “Revenue Arrangements with Multiple Deliverables.” The Company elected to early adopt this new guidance in 2010.

     This guidance eliminated the residual method of allocation for multiple-deliverable revenue arrangements and requires that arrangement consideration be allocated at the inception of an arrangement to all deliverables using the relative selling price method. Per the provisions of this guidance, the Company allocates arrangement consideration to each deliverable qualifying as a separate unit of accounting in an arrangement based on its relative selling price. The Company determines its selling price using vendor specific objective evidence (“VSOE”), if it exists, or otherwise third-party evidence (“TPE”). If neither VSOE nor TPE of selling price exists for a unit of accounting, the Company uses estimated selling price (“ESP”). The Company generally expects that it will not be able to establish TPE due to the nature of the markets in which the Company competes, and, as such, the Company typically will determine its selling price using VSOE or, if not available, ESP. VSOE is generally limited to the price charged when the same or similar product is sold on a standalone basis. If a product is seldom sold on a standalone basis, it is unlikely that the Company can determine VSOE for the product.

     The objective of ESP is to determine the price at which the Company would transact if the product were sold by the Company on a standalone basis. The Company’s determination of ESP involves a weighting of several factors based on the specific facts and circumstances of the arrangement. Specifically, the Company will consider the anticipated margin on the particular deliverable, the selling price and profit margin for similar products and the Company’s ongoing pricing strategy and policies.

     A typical arrangement might involve the sale of various products of the Company’s acquisition systems and other seismic equipment. Products under these arrangements are often delivered to the customer within the same period, but in certain situations, depending upon product availability and the customer’s delivery requirements, the products could be delivered to the customer at different times. In these situations, the Company considers its products to be separate units of accounting provided the delivered product has value to the customer on a standalone basis. The Company considers a deliverable to have standalone value if the product is sold separately by the Company or another vendor or could be resold by the customer. Further, the Company’s revenue arrangements generally do not include a general right of return relative to the delivered products.

     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 as a charge to costs of sales at the time of sale.

     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.

     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 11“— Income Taxes” for further discussion.

     Comprehensive Net Loss

     Comprehensive net loss, consisting of net loss and foreign currency translation adjustments is presented in the Consolidated Statements of Owners’ Equity and Comprehensive Loss. The balance in Accumulated Other Comprehensive Income as shown in the Consolidated Balance Sheet as at December 31, 2010, consists of foreign currency translation adjustments.

     Foreign Currency Gains and Losses

     Management has determined that the Company’s functional 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 were $1.0 million for the period from March 26, 2010 to December 31, 2010.

     Concentration of Credit and Foreign Sales Risks

     Sales to BGP (a related party) and Tesla Exploration and certain of their respective subsidiary or affiliated entities represented approximately 23.4% and 11.8% of the Company’s consolidated net revenues for the period from March 26, 2010 to December 31, 2010, respectively. The loss of these significant 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.

     For the period from March 26, 2010 to December 31, 2010, the Company recognized $31.7 million of sales to customers in North America, $25.6 million of sales to customers in Asia Pacific, $24.3 million of sales to customers in Africa and the Middle East, $7.7 million of sales to customers in the Commonwealth of Independent States, or former Soviet Union (CIS), $1.9 million of sales to customers in Latin American countries and $1.9 million of sales to customers in Europe. The majority of the Company’s sales are denominated in U.S. dollars. For a number of years, the CIS and certain Latin American countries have experienced economic problems and uncertainties. Political and economic instability have also plagued many countries in Africa and the Middle East. 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.

     Recent Accounting Pronouncements

     In January 2010, the Financial Accounting Standards Board issued ASU No. 2010-06, “Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements” (“ASU 2010-06”). ASU 2010-06 amends the disclosure guidance with respect to fair value measurements. Specifically, the new guidance requires disclosure of amounts transferred in and out of Levels 1 and 2 fair value measurements, a reconciliation presented on a gross basis rather than a net basis of activity in Level 3 fair value measurements, greater disaggregation of the assets and liabilities for which fair value measurements are presented and more robust disclosure of the valuation techniques and inputs used to measure Level 2 and 3 fair value measurements. ASU 2010-06 is

effective for reporting periods beginning after December 15, 2009, with the exception of the new guidance around the Level 3 activity reconciliations, which is effective for fiscal years beginning after December 15, 2010. The adoption of ASU 2010-06 did not have a material impact to the Company’s financial position, results of operation or cash flows.

(2) INOVA Formation

     As discussed at Note 1 “— Summary of Significant Accounting Policies — Overview of Formation of INOVA”, on March 25, 2010, BGP purchased a 51% equity interest in the ION Assets for cash consideration of $108.5 million and BGP transferred to ION a 49% equity interest in a Chinese entity containing the BGP Assets. This Chinese entity was then jointly contributed to INOVA by BGP and ION. As part of these transactions, INOVA assumed certain liabilities related to the businesses contributed by ION. Among these liabilities was $18.4 million relating to the secured equipment financing also contributed to INOVA by ION as well as a $2.4 million in capital lease obligation (refer to Note 9 “— Long-Term Debt” for further discussion).

     The acquisition of the majority interest in INOVA by BGP has been accounted for using the purchase method following the guidance of ASC 805 “Business Combinations” (“ASC 805”). The purchase price was allocated to the fair value of assets purchased and liabilities assumed. The allocation of the purchase price for the acquisition is as follows (in thousands):

Fair values of assets and liabilities:
Net current assets		$	126,482
Property, plant, equipment and seismic rental equipment			64,292
Net other long-term assets			238
Intangible assets (trademarks and patents)			37,100
Goodwill			25,102
Secured equipment financing and capital lease liability			(22,291	)
Total allocated purchase price			230,923
Less cash of acquired business			(4,552	)
Owners’ investment contributed, net of cash acquired		$	226,371

     Following the guidance of ASC 805, BGP is considered the acquiring entity. As such, the BGP Assets were recorded on the date of INOVA’s formation on March 25, 2010 using BGP’s historical carrying values for those assets which were comprised of approximately $6.8 million relating to cash and other current assets and approximately $4.6 million relating to property and equipment. These assets and their respective carrying amounts are excluded from the above purchase price allocation.

     Goodwill recognized on acquisition of the ION Assets relates to operational synergies and other intangible benefits resulting from combining the assets, technologies and operations contributed by ION with the assets and experience contributed by BGP the effect of which do not meet the criteria for separate accounting under ASC 805. No amount of this goodwill is expected to be deductible for tax purposes.

     The fair value of net current assets recognized on formation of INOVA includes inventory step-downs of approximately $20.0 million resulting primarily from the write-off of inventory deemed to be excessive based on the five-year revenue forecasts used in determining the fair value of the ION assets.

     The fair value of property, plant, equipment and seismic rental equipment recognized on formation of INOVA includes fair value step-ups of $10.1 million resulting from $6.0 million increases to the carrying value of seismic rental equipment to reflect market values attributed to sales of comparable used land seismic equipment and $4.1 million relating to other property, plant and equipment to reflect the cost to replace equipment of similar composition and utility.

     The fair value of the secured equipment financing recognized on formation of INOVA includes a fair value step-up of $1.5 million resulting from the use of an estimated market interest rate of 11% compared to the 15% under the ICON loan agreement. Refer to Note 9 “— Long-Term Debt” for further discussion.

(3) Accounts and Notes Receivable

     A summary of accounts receivable as at December 31, 2010 is as follows (in thousands):

Accounts receivable, principally trade		$	16,769
Less allowance for doubtful accounts			(592	)
Accounts receivable, net		$	16,177

     The activity in the allowance for doubtful accounts for the period from March 26, 2010 to December 31, 2010 is as follows (in thousands):

Balance at March 25, 2010		$	—
Additions charged to bad debt expense			(629	)
Write-offs charged against the allowance			37
Balance at December 31, 2010		$	(592	)

     As at December 31, 2010, the allowance for doubtful notes receivable is $NIL.

(4) Inventories

     A summary of inventories as at December 31, 2010 is as follows (in thousands):

Raw materials and subassemblies		$	48,402
Work-in-process			4,422
Finished goods			41,825
Reserve for excess and obsolete inventories			(20,162	)
Total		$	74,487

     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 period from March 26, 2010 to December 31, 2010 includes inventory obsolescence and excess inventory charges of approximately $20.2 million relating primarily to technological developments occurring subsequent to the formation of INOVA which resulted in the write-off of certain excess raw materials and subassemblies.

(5) Property, Plant, Equipment and Seismic Rental Equipment

     A summary of property, plant, equipment and seismic rental equipment as at December 31, 2010 is as follows (in thousands):

Land		$	25
Buildings			1,110
Machinery and equipment			12,751
Seismic rental equipment			63,563
Furniture and fixtures			981
Other			376
Total			78,807
Less accumulated depreciation			(17,641	)
Property, plant, equipment and seismic rental equipment, net		$	61,166

     Total depreciation expense for the period from March 26, 2010 to December 31, 2010 was $18.4 million.

(6) Goodwill

     On September 30, 2010, the Company completed its annual test of the carrying value of goodwill in the Canada and U.S.A. reporting units and noted no impairments. The annual impairment test for 2010 indicated that the fair value of these two reporting units exceeded their carrying values. However, if the estimates or related projections associated with the reporting units significantly change in the future, the Company may be required to record impairment charges. An interim impairment test at December 31, 2010 was not required.

     The following is a summary of the changes in the carrying amount of goodwill for the period from March 26, 2010 to December 31, 2010 (in thousands):

		Canada				U.S.A.				Total
Balance at March 25, 2010		$	—			$	—			$	—
Goodwill acquired during the year			1,863				23,239				25,102
Impact of foreign currency translation adjustments			46				—				46
Balance at December 31, 2010		$	1,909			$	23,239			$	25,148

(7) Intangible Assets

     A summary of intangible assets, net, as at December 31, 2010 is as follows (in thousands):

		Weighted
		Average
		Amortization				Gross				Accumulated
		Period				Amount				Amortization				Net
Trademarks			13			$	15,802			$	(890	)		$	14,912
Patents			12				21,530				(1,342	)			20,188
Total			13			$	37,332			$	(2,232	)		$	35,100

     Total amortization expense for intangible assets for the period from March 26, 2010 to December 31, 2010 was $2.2 million. A summary of the estimated amortization expense for the next five years is as follows (in thousands):

Years Ended December 31,
2011		$	2,956
2012		$	2,956
2013		$	2,956
2014		$	2,956
2015		$	2,881

(8) Accrued Expenses

     A summary of accrued expenses as at December 31, 2010 is as follows (in thousands):

Compensation, including compensation-related taxes and commissions		$	3,480
Accrued taxes (primarily income taxes)			6,118
Product warranty			2,497
Other			1,326
Total accrued expenses		$	13,421

     The Company generally warrants that all 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 as a charge to cost of sales at 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) 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). A summary of warranty activity for the period from March 26, 2010 to December 31, 2010 is as follows (in thousands):

Balance at March 25, 2010		$	—
Warranty obligations acquired during the period			2,573
Accruals (expirations) for warranties issued/expired during the period			116
Settlements made (in cash or in kind) during the period			(192	)
Balance at December 31, 2010		$	2,497

(9) Long-term Debt

     A summary of long-term debt as at December 31, 2010 is as follows (in thousands)

$40.0 million related party revolving credit facility		$	10,000
Secured equipment financing			16,047
Unamortized non-cash debt premium			1,136
Total			27,183
Current portion of long-term debt			(4,019	)
Non-current portion of long-term debt		$	23,164

     Revolving Credit Facility

     On August 6, 2010, INOVA’s Luxembourg subsidiary, INOVA Exploration Holdings S.à r.l. (“INOVA Sàrl”) entered into the credit facility (the “Credit Facility”) with CNPC Finance (HK) Limited (“CNPC Finance”). The terms of the Credit Facility are set forth in a credit agreement dated as of August 6, 2010 (the “Credit Agreement”), between INOVA Sàrl and CNPC Finance. The obligations of INOVA under the Credit Facility are guaranteed by BGP. CNPC Finance is a wholly owned subsidiary of BGP’s parent company, China National Petroleum Corporation (“CNPC”). 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 Credit Facility, up to $40.0 million is available for revolving line of credit borrowings to fund the working capital needs of INOVA and its subsidiaries for a duration of thirty-six months from the first draw down date. The first draw down under the Credit Facility occurred on August 9, 2010, and as such, the Credit Facility matures on August 9, 2013. Interest on the 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. As at December 31, 2010, INOVA had $10.0 million indebtedness outstanding under the revolving line of credit. The effective interest rate, including fees paid to BGP as discussed above, was 3.6% as at December 31, 2010. Total interest expense recognized during the period from March 26, 2010 to December 31, 2010 relating to the Credit Facility amounted to $0.2 million all of which was paid prior to December 31, 2010.

     The Credit Agreement contains customary events of default provisions which result in penalties of 30% to 50% additional interest calculated based on LIBOR plus 160 basis points in the event of failure to make interest or principal payments or use of the credit facility for purposes other than funding working capital requirements.

     Secured Equipment Financing

     In conjunction with the acquisition of the ION Assets on March 25, 2010, the Company assumed from ION the outstanding principal balance ($18.4 million) of a secured equipment financing. 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 INOVA: (i) ARAM Rentals Corporation, a Nova Scotia unlimited company (“ARC”), and (ii) ARAM Seismic Rentals, Inc., a Texas corporation (“ASRI”). All indebtedness under the ICON Loan Agreements is scheduled to mature on July 31, 2014.

     The indebtedness under the ICON Loan Agreements is secured by first-priority liens in (a) certain seismic rental equipment owned by ARC or ASRI 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 ARC or ASRI 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 accrues at a fixed interest rate of 15% per annum calculated monthly, and is payable monthly on the first day of each month. Principal and interest are payable, commencing on September 1, 2009, in 60 monthly installments until the maturity date, when all remaining outstanding principal and interest will be due and payable. Pursuant to the ICON Loan Agreements, ICON will receive 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 may 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 may 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 ARC and ASRI under the ICON Loan Agreements were guaranteed by ION under a Guarantee dated as of June 29, 2009 (the “Guarantee”). ION remains liable on its Guarantee, however, certain INOVA subsidiaries

have entered into back-up guarantees in favor of ION from the Company with respect to any defaults on this transferred indebtedness for which ION is 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.

     Capital Lease Obligations

     In connection with the acquisition of the ION Assets on March 25, 2010, the Company assumed from ION the outstanding principal balance ($2.4 million) of certain capital lease obligations. All indebtedness under these obligations was repaid in full prior to December 31, 2010.

(10) 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. INOVA’s guarantee of ION’s credit facility is in the form of a $215 million standby letter of credit with CMB. A liability of $1.0 million is reflected on the balance sheet as at December 31, 2010 in respect of this guarantee.

     The ION Credit Agreement provides ION with a revolving line of credit of up to $100 million in borrowings (including borrowings for letters of credit) and a term loan of $106.3 million. As of December 31, 2010, ION had no indebtedness outstanding under the revolving line of credit and $103.3 million indebtedness under the term loan.

     ION’s credit indebtedness and term loan indebtedness under the ION Credit Agreement are each scheduled to mature on March 24, 2015. The $106.3 million original principal amount under the term loan is subject to scheduled quarterly amortization payments, commencing on June 30, 2010, of $1.0 million per quarter until the maturity date, with the remaining unpaid principal amount of the term loan due upon the maturity date. The indebtedness under the Credit Facility may mature sooner on a date that is 18 months after the earlier of (i) any dissolution of INOVA, or (ii) the administrative agent determining in good faith that INOVA is unable to perform its obligations under its guarantee.

     The ION Credit Agreement requires compliance with certain financial covenants, including requirements commencing on June 30, 2011 and for each fiscal quarter thereafter for ION and its U.S. subsidiaries to:

	•		Maintain a minimum fixed charge coverage ratio in an amount equal to at least 1.125 to 1;
	•		Not exceed a maximum leverage ratio of 3.25 to 1; and
	•		Maintain a minimum tangible net worth of at least 60% of ION’s tangible net worth as of March 31, 2010, as defined.

     ION’s fixed charge coverage ratio is defined as the ratio of (i) ION’s consolidated EBITDA less cash income tax expense and non-financed capital expenditures, to (ii) the sum of scheduled payments of lease payments and payments of principal indebtedness, interest expense actually paid and cash dividends, in each case for the four consecutive fiscal quarters most recently ended. ION’s leverage ratio is defined as the ratio of total funded consolidated debt, capital lease obligations and issued letters of credit (net of cash collateral) to consolidated EBITDA of ION for the four consecutive fiscal quarters most recently ended. These financial covenants become effective on June 30, 2011.

     The ION Credit Agreement contains customary event of default provisions (including a “change of control” event affecting ION), the occurrence of which could lead to an acceleration of ION’s obligations under the ION Credit Agreement. The ION Credit

Agreement also provides that certain acts of bankruptcy, insolvency or liquidation of INOVA would constitute additional events of default under the ION Credit Facility.

(11) Income Taxes

     The sources of loss before income taxes for the period from March 26, 2010 to December 31, 2010 are as follows (in thousands):

Domestic (China)		$	(4,883	)
Foreign			(44,755	)
Total		$	(49,638	)

     Income tax expense for the period from March 26, 2010 to December 31, 2010 of $1.5 million is comprised of $1.6 million taxes payable in Canada less $0.1 million of net income tax recoveries from various jurisdictions. A reconciliation of the expected income tax expense on loss before income taxes using the statutory China income tax rate of 25% to income tax expense for the period from March 26, 2010 to December 31, 2010 is as follows (in thousands):

Expected income tax benefit at 25%		$	(12,410	)
Foreign taxes (tax rate differential and foreign tax differences)			(6,127	)
Nondeductible expenses and other			(225	)
Deferred tax asset valuation allowance:
Deferred tax asset valuation allowance on operations			20,231
Total income tax expense		$	1,469

     The tax effects of the cumulative temporary differences are as follows (in thousands):

Current deferred:
Deferred income tax assets:
Accrued expenses		$	929
Allowance accounts			278
Inventory			7,445
Total current deferred income tax asset			8,652
Valuation allowance			(8,652	)
Net current deferred income tax asset		$	—
Non-current deferred:
Deferred income tax assets:
Net operating loss carry-forward		$	36,117
Basis in research and development			23,167
Tax credit carry-forwards and other			794
Total non-current deferred income tax asset			60,078
Valuation allowance			(52,064	)
Net non-current deferred income tax asset			8,014
Deferred income tax liabilities:
Basis in identified intangibles			(2,515	)
Basis in property, plant, equipment and seismic rental equipment			(5,499	)
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 calculated in accordance with the provisions of ASC 740-10, “Accounting for Income Taxes,” which requires that a valuation allowance be established or maintained when 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 $60.7 million until there is sufficient evidence to warrant reversal. At December 31, 2010, the Company had net operating loss carry-forwards of approximately $122 million, the majority of which expire beyond 2027.

     As of December 31, 2010, 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 2007 and subsequent years remain subject to examination by tax authorities.

     Income taxes have not been provided on the cumulative undistributed earnings of the Company’s foreign subsidiaries in the amount of approximately $0.4 million as it is the Company’s intention to reinvest such earnings indefinitely. These foreign earnings could become subject to additional tax if remitted, or deemed remitted as a dividend; however, it is not practicable to estimate the additional amount of taxes payable.

(12) Operating Leases

     The Company leases certain offices and warehouse space under non-cancelable operating leases. Rental expense was $2.0 million for the period from March 26, 2010 to December 31, 2010. 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,
2011		$	3,183
2012			1,868
2013			1,510
2014			1,266
2015			1,270
Total		$	9,097

(13) Benefit Plans

     The Company has a 401(k) retirement savings plan, which covers certain employees of its US businesses. Employees may voluntarily contribute up to 60% of their compensation, as defined, to the plan. Effective March 26, 2010, the Company adopted a company matching contribution to the 401(k) plan. The Company matched 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 during the period from March 26, 2010 to December 31, 2010.

(14) 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.

(15) Certain Relationships and Related Party Transactions

     The Company has 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 terms of these arrangements provide for the Company to pay approximately $0.3 million per month (beginning in April 2010) for services and to reimburse third-party and lease costs incurred by ION directly related to the administrative support of the Company. The terms of these agreements are for two years and will automatically renew for one-year periods, unless either party provides notice of its intent to terminate the agreement. During the period from March 26, 2010 to December 31, 2010 the Company recorded $2.5 million relating to these administrative services provided by ION and approximately $3.0 million for third party cost reimbursements to ION. At December 31, 2010, the Company owed approximately $1.1 million to ION under these support and transition agreements and has reflected this liability in accounts payable to related parties on the consolidated balance sheet.

     The Company receives certain administrative services including information technology, accounting and administration services from BGP. These services are provided at no cost to INOVA. The Company has estimated the value of these services to be $0.5 million

for the period from March 26, 2010 to December 31, 2010 and has reflected this charge as an increase in BGP contributed owners’ equity.

     In April 2010, BGP advanced $5.0 million to the Company for its short-term capital purposes under a short-term promissory note. The note was scheduled to mature on July 31, 2010 and accrued interest at an annual rate equal to the London Interbank Offered Rate (“LIBOR”) plus 350 basis points. The Company repaid the outstanding balance on this note of $5.0 million in July 2010.

     In April 2010, ION advanced $5.0 million to the Company for its short-term capital purposes under a short-term promissory note. The note was scheduled to mature on August 31, 2010 and accrued interest at an annual rate equal to the London Interbank Offered Rate (“LIBOR”) plus 350 basis points. The Company repaid the outstanding balance on this note of $5.0 million in July 2010.

     In May 2010, the Company entered into a second promissory note arrangement with ION providing for potential borrowings up to $4.5 million, under which the Company borrowed $1.5 million. This note matured on July 30, 2010 and accrued interest at an annual rate equal to LIBOR plus 350 basis points. The Company repaid the outstanding balance on this note of $1.5 million in July 2010. The purpose of these advances was to provide the Company with short-term capital prior to obtaining a line of credit, which the Company obtained in August 2010.

     In conjunction with the formation of INOVA, ION contributed to INOVA cash of $1.5 million which is to be used to purchase the shares of a Russian legal entity containing certain land seismic assets with ascribed value $1.5 million as at March 25, 2010 under the Share Purchase Agreement. INOVA 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 in this amount is included in accounts payable to related parties on the consolidated balance sheet.

     During the period from March 26, 2010 to December 31, 2010, INOVA purchased certain materials and services from BGP and reimbursed BGP for certain costs incurred on behalf of INOVA. These purchases, services and cost reimbursements amounted to $1.8 million and have been recorded at their respective exchange amounts. Accounts payable to related parties includes $1.6 million owing to BGP for these purchases and reimbursements.

     During the period from March 26, 2010 to December 31, 2010 INOVA purchased certain land seismic equipment from ION for resale to INOVA’s customers. These purchases amounted to approximately $1.6 million and have been recorded at the exchange amount. Accounts payable to related parties includes $0.4 million owing to ION for these purchases as at December 31, 2010.

     During the period from March 26, 2010 to December 31, 2010, the Company recorded revenues from wholly owned subsidiaries of BGP and ION of $21.5 million and $1.4 million, respectively. Accounts receivable from related parties of $16.5 million represents the amount owing from BGP and ION for these revenues as at December 31, 2010.

     In conjunction with the formation of INOVA, the company is obligated to pay construction costs for certain office and manufacturing facilities in China not to exceed $5.8 million.