8-K/A

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

(Amendment No. 1)

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

Date of Report: (Date of earliest event reported): September 17, 2008

ION Geophysical Corporation

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of	1-12691 (Commission file number)	22-2286646 (I.R.S. Employer Identification No.)
incorporation)

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)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

EXPLANATORY NOTE

     This Amendment No. 1 on Form 8-K/A amends the Current Report on Form 8-K of ION Geophysical Corporation (“ION”) that was filed with the Securities and Exchange Commission (“SEC”) on September 23, 2008. ION filed the Current Report on Form 8-K to report, among other things, that ION had completed its acquisition of ARAM Systems Ltd., and its affiliated company, Canadian Seismic Rentals Inc., from their shareholders.

     The purpose of this Amendment is to provide the audited and unaudited historical financial statements of the businesses acquired as required by Item 9.01(a) of Form 8-K and the unaudited pro forma financial information required by Item 9.01(b) of Form 8-K. These financial statements and related pro forma information were not available as of the date of the original filing and were excluded pursuant to Items 9.01(a)(4) and 9.01(b)(2) of Form 8-K.

     This Amendment amends and restates in its entirety Item 9.01 of the Current Report on Form 8-K, filed with the SEC on September 23, 2008.

Item 9.01. Financial Statements and Exhibits

(a)	Financial Statements of Businesses Acquired.
	Audited combined balance sheets of the ARAM Group of Companies as of December 31, 2007 and 2006, the related audited combined statements of net income, comprehensive income and retained earnings and cash flows for the years ended December 31, 2007, 2006 and 2005, including the auditors’ report thereon, the unaudited combined balance sheet of the ARAM Group of Companies as of June 30, 2008, the related unaudited combined statements of net income, comprehensive income and retained earnings and cash flows for the six months ended June 30, 2008 and 2007 and the notes to such financial statements are filed as Exhibit 99.2 to this Form 8-K and are incorporated herein by such reference.
(b)	Pro Forma Financial Information.
	Unaudited Pro Forma Condensed Combined Financial Information: unaudited pro forma condensed combined balance sheet of ION Geophysical Corporation as of June 30, 2008, the unaudited pro forma condensed combined statements of operations of ION Geophysical Corporation for the year ended December 31, 2007 and the six months ended June 30, 2008 and the notes to unaudited pro forma financial information appear beginning on page F-1 of this Form 8-K.
(d)	Exhibits.
*2.1	Amended and Restated Share Purchase Agreement, dated as of September 17, 2008, by and among ION Geophysical Corporation, ARAM Systems Ltd., Canadian Seismic Rentals Inc. and the Sellers party thereto.
*10.1	First Amendment to Amended and Restated Credit Agreement and Domestic Security Agreement, dated as of September 17, 2008, by and among ION Geophysical Corporation, ION International S.À R.L., HSBC Bank USA, N.A., as administrative agent, joint lead arranger and joint bookrunner, ABN AMRO Incorporated, as joint lead arranger and joint bookrunner, and CitiBank, N.A., as syndication agent.
*10.2	Senior Increasing Rate Note, dated September 18, 2008, made by ION Geophysical Corporation in favor of Jefferies Finance CP Funding LLC.
*10.3	Promissory Note, dated September 18, 2008, made by 3226509 Nova Scotia Company in favor of 1236929 Alberta Ltd.

2

*10.4	Subordinated Promissory Note, dated September 18, 2008, made by 3226509 Nova Scotia Company in favor of 1236929 Alberta Ltd.
23.1	Consent of PricewaterhouseCoopers LLP.
*99.1	Press release, dated September 18, 2008, announcing the completion of the acquisition of ARAM Systems Ltd. and Canadian Seismic Rentals Inc.
99.2	Audited combined balance sheets of the ARAM Group of Companies as of December 31, 2007 and 2006, the related audited combined statements of net income, comprehensive income and retained earnings and cash flows for the years ended December 31, 2007, 2006 and 2005, including the auditors’ report thereon, the unaudited combined balance sheet of the ARAM Group of Companies as of June 30, 2008, the related unaudited combined statements of net income, comprehensive income and retained earnings and cash flows for the six months ended June 30, 2008 and 2007 and the notes to such financial statements.

* Filed with the original Current Report on Form 8-K filed on September 23, 2008.

3

SIGNATURES

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

Date: November 3, 2008	ION GEOPHYSICAL CORPORATION
	By:	/s/ DAVID L. ROLAND David L. Roland
		Senior Vice President, General Counsel and Corporate Secretary

4

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

          The following unaudited pro forma condensed combined financial statements and related information have been compiled by the application of pro forma adjustments to the historical consolidated financial statements of ION and to reflect the combination of ION’s historical consolidated financial data and the combined historical financial data of ARAM Systems Ltd., Canadian Seismic Rentals Inc. and their affiliated companies, which we sometimes refer to as the “ARAM Group of Companies” or “ARAM.” The unaudited pro forma condensed combined balance sheet of ION as of June 30, 2008 gives effect to ION’s acquisition of the shares of ARAM Systems Ltd. and Canadian Seismic Rentals Inc., and the related financing transactions in connection therewith, as if such events had occurred as of such date. The unaudited pro forma condensed combined statements of operations of ION for the year ended December 31, 2007 and for the six months ended June 30, 2008, give effect to such transactions as if such events had occurred as of January 1, 2007.

          The unaudited pro forma adjustments are based upon currently available information and assumptions that we believe to be reasonable under the circumstances. The following unaudited pro forma condensed combined financial data are for informational purposes only and do not purport to represent what our results of operations or financial position actually would have been if the transactions referred to above had occurred at any date, and should not be taken as representative of our future results of operations or financial position. The unaudited pro forma condensed combined financial statements and related information do not include any adjustments related to any restructuring charges, profit improvements, potential cost savings or one-time charges which may result from ION’s acquisition of ARAM, and the related financing transactions, or the result of final valuations of certain tangible and intangible assets and liabilities.

          The following unaudited pro forma condensed combined financial statements and related information should be read in conjunction with:

• ION’s historical audited consolidated financial statements as of and for the year ended December 31, 2007 and unaudited consolidated financial statements as of June 30, 2008 and for the six months ended June 30, 2007 and 2008, as included in ION’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007, as amended by Form 10-K/A filed with the SEC on March 4, 2008, and in ION’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2008; and

• The audited combined balance sheets of the ARAM Group of Companies as of December 31, 2007 and 2006, the related audited combined statements of net income, comprehensive income and retained earnings and cash flows for the years ended December 31, 2007, 2006 and 2005, the unaudited combined balance sheet of the ARAM Group of Companies as of June 30, 2008 and the related unaudited combined statements of net income, comprehensive income and retained earnings and cash flows for the six months ended June 30, 2008 and 2007, filed as Exhibit 99.2 to this Amendment No. 1 on Form 8-K/A, and incorporated herein by reference.

          The acquisition of ARAM has been accounted for using purchase accounting in accordance with Statement of Financial Accounting Standards, or SFAS, No. 141 “Business Combinations.” The unaudited pro forma condensed combined financial data presented, including the allocation of the purchase price, is based on preliminary estimates of the fair market values of assets acquired and liabilities assumed, available information and assumptions and will be revised as additional information becomes available. As of the date of this Amendment No. 1 on Form 8-K/A, ION has not completed the valuation studies necessary to estimate the final fair market values of the assets it has acquired and liabilities it has assumed and the related allocation of purchase price. The actual adjustments to ION’s consolidated financial statements will depend on a number of factors, many of which are not presently known. Therefore, actual adjustments will differ from the pro forma adjustments, and the differences may be material.

F-1

ION GEOPHYSICAL CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
June 30, 2008

			ARAM
	ION		Adjusted		Pro Forma			Pro Forma
	Historical		Historical (1)		Adjustments			Combined
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	18,785	$	11,941	$	(20,603	) (2)(4)(7)	$	10,123
Restricted cash		6,066		—		—			6,066
Accounts and notes receivable, net		175,217		20,330		(1,182	) (6)		194,365
Unbilled receivables		52,506		—		—			52,506
Inventories		189,197		44,665		6,042	(2)(6)		239,904
Prepaid expenses and other current assets		9,308		4,110		14,106	(2)(4)		27,524
Total current assets		451,079		81,046		(1,637	)		530,488
Non-current deferred income tax asset		2,964		841		—			3,805
Property, plant and equipment, net		38,321		28,588		—			66,909
Multi-client data library, net		82,792		—		—			82,792
Investments at cost		4,954		—		—			4,954
Goodwill		151,478		—		154,115	(2)		305,593
Intangible and other assets, net		47,144		2,904		114,326	(2)(4)(13)		164,374
Total assets	$	778,732	$	113,379	$	266,804		$	1,158,915
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Notes payable and current maturities of long-term debt	$	14,476	$	5,422	$	166,739	(4)(7)	$	186,637
Accounts payable		51,418		5,009		(714	) (7)(12)		55,713
Accrued expenses		60,736		2,114		2,541	(2)(7)(12)		65,391
Accrued multi-client data library royalties		36,352		—		—			36,352
Deferred revenue		20,835		1,239		—			22,074
Deferred income tax liability		2,792		—		1,623	(2)		4,415
Total current liabilities		186,609		13,784		170,189			370,582
Long-term debt, net of current maturities		7,965		2,734		110,938	(4)		121,637
Non-current deferred income tax liability		2,822		—		34,220	(2)		37,042
Other long-term liabilities		4,104		5,697		(5,697	) (7)		4,104
Fair value of preferred stock redemption features		1,042		—		—			1,042
Total liabilities		202,542		22,215		309,650			534,407
Cumulative convertible preferred stock		68,785		—		—			68,785
Stockholders’ equity:
Total stockholders’ equity		507,405		91,164		(42,846	) (9)		555,723
Total liabilities and stockholders’ equity	$	778,732	$	113,379	$	266,804		$	1,158,915

F-2

ION GEOPHYSICAL CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
Year Ended December 31, 2007

				ARAM
	ION			Adjusted			Pro Forma			Pro Forma
	Historical			Historical (1)			Adjustments			Combined
	(In thousands, except per share amounts)
Product revenues	$	537,691		$	128,811		$	(3,632	) (6)	$	662,870
Service revenues		175,420			—			—			175,420
Total net revenues		713,111			128,811			(3,632	)		838,290
Cost of products		390,512			68,450			8,410	(3)(6)(14)		467,372
Cost of services		119,679			—			—			119,679
Gross profit		202,920			60,361			(12,042	)		251,239
Operating expenses:
Research, development and engineering		46,302			3,779			—			50,081
Marketing and sales		43,877			3,769			—			47,646
General and administrative		48,847			13,135			—			61,982
Total operating expenses		139,026			20,683			—			159,709
Income from operations		63,894			39,678			(12,042	)		91,530
Interest expense		(6,283	)		(920	)		(24,196	) (5)(8)		(31,399	)
Interest income		1,848			1,217			—			3,065
Loss on debt conversion		(2,902	)		—			—			(2,902	)
Other income (expense)		(1,090	)		324			—			(766	)
Income before income taxes		55,467			40,299			(36,238	)		59,528
Income tax expense		12,823			13,268			(11,758	) (10)		14,333
Net income		42,644			27,031			(24,480	)		45,195
Preferred stock dividends and accretion		2,388			—			—			2,388
Net income applicable to common shares	$	40,256		$	27,031		$	(24,480	)	$	42,807
Earnings per share:
Basic net income per share	$	0.49								$	0.50
Diluted net income per share	$	0.45								$	0.46
Weighted average number of common shares outstanding:
Basic		81,941						3,629	(11)		85,570
Diluted		97,321						3,629	(11)		100,950

F-3

ION GEOPHYSICAL CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
Six Months Ended June 30, 2008

				ARAM
	ION			Adjusted			Pro Forma			Pro Forma
	Historical			Historical (1)			Adjustments			Combined
	(In thousands, except per share amounts)
Product revenues	$	197,394		$	46,446		$	(1,190	) (6)	$	242,650
Service revenues		123,430			—			—			123,430
Total net revenues		320,824			46,446			(1,190	)		366,080
Cost of products		132,254			25,533			3,650	(3)(6)(14)		161,437
Cost of services		82,155			—			—			82,155
Gross profit		106,415			20,913			(4,840	)		122,488
Operating expenses:
Research, development and engineering		24,009			1,479			—			25,488
Marketing and sales		23,378			1,670			—			25,048
General and administrative		28,997			4,328			—			33,325
Total operating expenses		76,384			7,477			—			83,861
Income from operations		30,031			13,436			(4,840	)		38,627
Interest expense		(1,139	)		(456	)		(13,552	) (5)(8)		(15,147	)
Interest income		1,077			474			—			1,551
Other income (expense)		332			(246	)		—			86
Fair value adjustment of preferred stock redemption features		173			—			—			173
Income before income taxes		30,474			13,208			(18,392	)		25,290
Income tax expense		5,583			4,003			(6,007	) (10)		3,579
Net income		24,891			9,205			(12,385	)		21,711
Preferred stock dividends and accretion		1,818			—			—			1,818
Net income applicable to common shares	$	23,073		$	9,205		$	(12,385	)	$	19,893
Earnings per share:
Basic net income per share	$	0.25								$	0.20
Diluted net income per share	$	0.24								$	0.20
Weighted average number of common shares outstanding:
Basic		94,095						3,629	(11)		97,724
Diluted		98,047						3,629	(11)		101,676

F-4

ION GEOPHYSICAL CORPORATION
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION

(1) Certain amounts reflected in the historical financial statements of the ARAM Group of Companies have been reclassified to conform to ION’s historical financial statement presentation. Also, the balances have been translated from their Canadian dollar functional currency to the U.S. dollar at an exchange rate. A reconciliation has been provided after these notes to adjust for these reclassifications and to translate the historical Canadian financial statements to the U.S. dollar.

(2) The following is the preliminary estimate of the purchase price (in thousands) for the ARAM acquisition:

Cash payment paid for ARAM shares	$	235,969
Short-term notes issued to one of the sellers		45,000
ION common stock valued at $13.49 per share		48,958
Estimated acquisition costs		6,000
Total purchase price	$	335,927

The purchase price is subject to certain working capital adjustments after closing. In addition, ION issued promissory notes in the aggregate original principal amount of $45.0 million as part of the purchase price. When ION repays these notes, $35.0 million of the cash repayment amount will be deposited into escrow for post-closing purchase price adjustments and to secure indemnification obligations of the parties.

The purchase price reflects adjustments related to the estimated unpaid (at closing) seller transaction costs and change of control payments of approximately $3.3 million (a reduction to the total cash payment for the ARAM shares); and an increase to the total cash payment for the ARAM shares related to the certain estimated pre-acquisition income tax receivables of approximately $10.7 million, for which claims for tax refunds will be filed with the appropriate taxing authorities and are anticipated to be received by ARAM subsequent to the closing date of the acquisition. This income tax receivable relates to $35 million (CAD) in total discretionary bonuses that ARAM paid to certain of its employees prior to the acquisition by ION. The payment of these bonuses was not a condition of continued employment subsequent to the acquisition.

This preliminary estimate of the purchase price has been allocated as presented below based upon a preliminary fair value assessment of the assets and liabilities of ARAM at June 30, 2008. This fair value assessment is expected to be finalized in the fourth quarter of 2008.

	Book Value of
	Assets and						Preliminary
	Liabilities			Pro forma			Purchase Price			Preliminary Fair
	at June 30, 2008			Adjustments			Allocation			Value
Current assets	$	81,046		$	456	(2)(7)	$	5,500		$	87,002
Property, plant and equipment		28,588			—			—			28,588
Other long-term and intangible assets		3,745			(2,440	) (13)		116,000			117,305
Goodwill		—			—			154,115			154,115
Current liabilities		(13,784	)		1,278	(2)(7)		(1,623	)		(14,129	)
Long-term capital lease obligations		(2,734	)		—			—			(2,734	)
Other long-term liabilities		(5,697	)		5,697	(7)		—			—
Deferred tax liability		—			—			(34,220	)		(34,220	)
	$	91,164		$	4,991		$	239,772		$	335,927

F-5

(3) To reflect pro forma adjustment to amortization expense ($14.7 million and $7.3 million for the year ended December 31, 2007 and the six months ended June 30, 2008, respectively) related to the acquired intangible assets (core technology, customer relationships, trade name and non-compete agreements). The acquired intangible assets will be amortized over their estimated useful lives ranging from 5 years to 10 years.

(4) To reflect the borrowings associated with the $125 million term loans, the revolving credit borrowings under ION’s Amended and Restated Credit Facility, borrowings under the Short-Term Bridge Loan, and the Senior Seller Note and the Subordinated Seller Note (as those terms are defined in the Form 8-K filed on September 23, 2008), which were made or entered into on September 18, 2008. The interest rate on the term loans and the revolving credit borrowings was 6.3% at September 30, 2008.

The $125 million term loans are subject to scheduled quarterly principal payments, commencing on December 31, 2008, until their maturity in September 2013. ION incurred approximately $3.5 million of costs associated with issuance of the term loans that will be amortized to maturity.

The Short-Term Bridge Loan of $40.0 million was borrowed under an unsecured senior increasing rate note in the original principal amount of $40.8 million. The Short-Term Bridge Loan was issued at a 2.0% original issue discount. The original principal amount of $40.8 million must be repaid in full on its maturity date of December 31, 2008. ION incurred approximately $1.9 million of costs associated with issuance of this loan that will be amortized to maturity. The interest rate on the Short-Term Bridge Loan was 13.6%, which is the weighted average of the set rates over the fourth quarter.

The maturity date of the Senior Seller Note in the original principal amount of $35.0 million is the earlier to occur of (x) September 18, 2009, and (y) the date that a cash amount equal to $35.0 million, plus an amount of interest accrued on the Senior Seller Note that is equal to 3.0% per annum (representing a portion of the total accrued and unpaid interest on the Senior Seller Note), is deposited into an escrow account. The Subordinated Seller Note’s original principal amount of $10.0 million and accrued interest thereon are due and payable on the date that is one day following the maturity date of the Senior Seller Note. For the Senior Seller Note, the interest rate was 9% per annum as of September 30, 2008, while the Subordinated Seller Note was at 10% per annum. Each of these notes interest rates increase over their respective terms. For the Senior Seller Note, the interest rate increases from 9% to 15% per annum, and the Subordinated Seller Note increases from 10% to 16% per annum.

Under the Amended and Restated Credit Facility, the Company is obligated by no later than December 31, 2008 to have sufficient cash on hand to repay (i) the $72.0 million borrowed under the revolving credit facility to pay a portion of the cash purchase price consideration for the ARAM acquisition and (ii) $45.0 million of aggregate unsecured indebtedness owed by the Company to one of the former shareholders of ARAM as part of the purchase price for the ARAM acquisition. It is anticipated that the Company will seek and obtain additional long-term debt financing to fund these repayment obligations on or before December 31, 2008.

ION currently expects to repay the indebtedness under the Short-Term Bridge Loan, the Senior Seller Note and the Subordinated Seller Note and pay down the $72.0 million revolving credit indebtedness under its Amended and Restated Credit Facility through proceeds from the additional debt financing. ION has entered into a commitment letter dated September 18, 2008 (the “Commitment Letter”), with Jefferies Finance LLC pursuant to which Jefferies Finance LLC has agreed, subject to the terms and upon satisfaction of the conditions contained in the Commitment Letter, to act in the capacities of sole advisor, sole administrative agent, sole collateral agent (if applicable), sole book-runner, sole lead arranger and sole syndication agent in connection with a proposed $150.0 million senior bridge loan facility. This bridge loan facility would be drawn down in the event that other types of additional debt financing, including other long-term indebtedness that ION may attempt to raise (such as high-yield note indebtedness), is not obtained. The Commitment Letter expires by its terms on December 31, 2008. Any funding under the bridge loan facility is subject to certain conditions that must be satisfied prior thereto, and no assurances can be made that ION will be successful in incurring this long-term indebtedness or any other indebtedness to refinance the Short-Term Bridge Loan, the Senior Seller Note, the Subordinated Seller Note and the $72.0 million revolving credit indebtedness under the Amended Credit Facility.

(5) To reflect the pro forma adjustment to interest expense associated with the $125 million term loans and the revolving credit borrowings under the Amended and Restated Credit Facility, the Short-Term Bridge Loan, the Senior Seller Note and the Subordinated Seller Note and the amortization impact associated with their debt costs. The interest rate on the term loans and the revolving credit borrowings under the Amended and Restated Credit

F-6

Facility as of September 30, 2008 was 6.3%. Because the interest rate is dependent on market conditions, a 1/8% change in interest rate would increase or decrease interest expense by $1.6 million for each outstanding loan.

(6) To eliminate the revenue ($3.6 million for the year ended December 31, 2007 and $1.2 million for the six months ended June 30, 2008) and costs of goods sold ($2.6 million for the year ended December 31, 2007 and $0.6 million for the six months ended June 30, 2008) associated with sales between ION and ARAM and to eliminate the balance sheet accounts associated with those activities.

(7) To reflect payments made by ARAM on the amounts due to its related parties and its former officers ($6.1 million at June 30, 2008) and its outstanding bank debt ($4.0 million at June 30, 2008). These balances were paid off by ARAM prior to the closing of the acquisition.

(8) To reflect the pro forma interest savings related to the payments made by ARAM on amounts due to its related parties and its outstanding bank debt (see Note 7). This pro forma interest savings adjustment assumes these interest-bearing obligations were paid off at the beginning of the period.

(9) To reflect the pro forma adjustments to stockholders’ equity (in thousands) as follows:

Issuance of ION common stock to fund a portion of the purchase price (3,629,211 shares valued at $13.49 per share)	$	48,958
Elimination of ARAM’s historical stockholders’ equity		(91,164	)
Entry to reflect the unrecognized profit on sales from ION to ARAM		(640	)
	$	(42,846	)

(10) To reflect the income tax benefit related to the effect of the pro forma adjustments at the applicable statutory rates.

(11) To reflect the pro forma adjustment to the weighted average number of shares outstanding resulting from the issuance of 3,629,211 shares of ION common stock.

(12) To reflect the pro forma adjustment to reduce ION’s accounts payable by $0.5 million and accrued liabilities by $0.7 million relating to the transaction costs accrued for at June 30, 2008. Because the total estimated transaction costs ($6.0 million) have been reflected as a reduction in cash, the amounts accrued for at June 30, 2008 were eliminated.

(13) To reflect a pro forma adjustment of $2.4 million to remove the cash surrender value of certain ARAM life insurance policies that were excluded from the acquisition of ARAM by ION.

(14) To reflect a pro forma adjustment ($3.7 million for the year ended December 31, 2007 and $3.1 million for the six months ended June 30, 2008) to conform ARAM’s rental pool depreciation accounting method with ION’s accounting policies. ARAM’s significant accounting policies are consistent with those of ION, with one exception: ARAM depreciates its rental equipment based upon a straight-line basis of 40% per annum (2.5 years), while ION depreciates these assets using a straight-line basis, using two to five years. Based upon ION’s initial assessment of the nature of the equipment in ARAM’s rental pool, the majority of these assets fall into the five-year category under ION’s accounting policy.

F-7

ARAM UNAUDITED COMBINED BALANCE SHEET
ADJUSTED FOR CURRENCY TRANSLATION
June 30, 2008

					ARAM
	ARAM		Exchange		Translated
	Historical		Rate (A)		Historical
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	12,162		0.9818	$	11,941
Accounts and notes receivable		20,707		0.9818		20,330
Inventories		45,493		0.9818		44,665
Prepaid expenses and other current assets		4,187		0.9818		4,110
Total current assets		82,549		0.9818		81,046
Non-current deferred income tax asset		857		0.9818		841
Property, plant and (including rental) equipment, net		29,118		0.9818		28,588
Other assets		2,958		0.9818		2,904
Total assets	$	115,482		0.9818	$	113,379
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Notes payable and current maturities of long-term debt	$	5,523		0.9818	$	5,422
Accounts payable		5,102		0.9818		5,009
Accrued expenses		2,153		0.9818		2,114
Deferred revenue		1,262		0.9818		1,239
Total current liabilities		14,040		0.9818		13,784
Capital lease obligations, net of current maturities		2,785		0.9818		2,734
Other long-term liabilities		5,803		0.9818		5,697
Total liabilities		22,628		0.9818		22,215
Stockholders’ equity:
Total stockholders’ equity		92,854		0.9818		91,164
Total liabilities and stockholders’ equity	$	115,482		0.9818	$	113,379

(A) To reflect the translation of Canadian dollar balances to U.S. dollar balances using the end of period exchange rate as of June 30, 2008.

F-8

ARAM UNAUDITED COMBINED STATEMENT OF OPERATIONS
ADJUSTED FOR CURRENCY TRANSLATION AND RECLASSIFICATIONS
Year Ended December 31, 2007

						ARAM						ARAM
	ARAM			Exchange		Translated			Reclassifications			Adjusted
	Historical			Rate (A)		Historical			(B)			Historical
						(In thousands)
Product revenues	$	137,384			0.9376	$	128,811		$	—		$	128,811
Cost of products		73,006			0.9376		68,450			—			68,450
Gross profit		64,378			0.9376		60,361			—			60,361
Operating expenses:
Selling, general and administrative		22,059			0.9376		20,683			(20,683	)		—
Interest income		(1,298	)		0.9376		(1,217	)		1,217			—
Interest and bank charges		982			0.9376		920			(920	)		—
Other expense (income)		(689	)		0.9376		(646	)		646			—
Research, development and engineering		—			0.9376		—			3,779			3,779
Marketing and sales		—			0.9376		—			3,769			3,769
General and administrative		—			0.9376		—			13,135			13,135
Total operating expenses		21,054			0.9376		19,740			943			20,683
Income from operations		43,324			0.9376		40,621			(943	)		39,678
Interest expense		—			0.9376		—			(920	)		(920	)
Interest income		—			0.9376		—			1,217			1,217
Other (expense) income		(343	)		0.9376		(322	)		646			324
Income before income taxes		42,981			0.9376		40,299			—			40,299
Income tax expense		14,151			0.9376		13,268			—			13,268
Net income	$	28,830			0.9376	$	27,031		$	—		$	27,031

(A)	To reflect the translation of Canadian dollar balances to U.S. dollar balances using the average exchange rate over the period as of December 31, 2007.
(B)	Amounts have been reclassified to conform to the ION’s historical financial statement presentation.

F-9

ARAM UNAUDITED COMBINED STATEMENT OF OPERATIONS
ADJUSTED FOR CURRENCY TRANSLATION AND RECLASSIFICATIONS
Six Months Ended June 30, 2008

						ARAM						ARAM
	ARAM			Exchange		Translated			Reclassifications			Adjusted
	Historical			Rate (A)		Historical			(B)			Historical
						(In thousands)
Product revenues	$	46,684			0.9949	$	46,446		$	—		$	46,446
Cost of products		25,664			0.9949		25,533			—			25,533
Gross profit		21,020			0.9949		20,913			—			20,913
Operating expenses:
Selling, general and administrative		7,515			0.9949		7,477			(7,477	)		—
Interest income		(476	)		0.9949		(474	)		474			—
Interest and bank charges		458			0.9949		456			(456	)		—
Other expense (income)		173			0.9949		172			(172	)		—
Research, development and engineering		—			0.9949		—			1,479			1,479
Marketing and sales		—			0.9949		—			1,670			1,670
General and administrative		—			0.9949		—			4,328			4,328
Total operating expenses		7,670			0.9949		7,631			(154	)		7,477
Income from operations		13,350			0.9949		13,282			154			13,436
Interest expense		—			0.9949		—			(456	)		(456	)
Interest income		—			0.9949		—			474			474
Other income (expense)		(74	)		0.9949		(74	)		(172	)		(246	)
Income before income taxes		13,276			0.9949		13,208			—			13,208
Income tax expense		4,024			0.9949		4,003			—			4,003
Net income	$	9,252			0.9949	$	9,205		$	—		$	9,205

(A)	To reflect the translation of Canadian dollar balances to U.S. dollar balances using the average exchange rate over the period as of June 30, 2008.
(B)	Amounts have been reclassified to conform to the ION’s historical financial statement presentation.

F-10

EXHIBIT INDEX

Exhibits	Description
23.1	Consent of PricewaterhouseCoopers LLP.
99.2	Audited combined balance sheets of the ARAM Group of Companies as of December 31, 2007 and 2006, the related audited combined statements of net income, comprehensive income and retained earnings and cash flows for the years ended December 31, 2007, 2006 and 2005, including the auditors’ report thereon, and unaudited combined balance sheet of the ARAM Group of Companies as of June 30, 2008, the related unaudited combined statements of net income, comprehensive income and retained earnings and cash flows for the six months ended June 30, 2008 and 2007, and the notes to such combined financial statements.

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the following Registration Statements:

(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. 333-80299) pertaining to the Input/Output, Inc. Amended and Restated 1990 Stock Option Plan and the Input/Output, Inc. Amended and Restated 1996 Non-Employee Director Stock Option Plan,
(8)	Registration Statement (Form S-8 No. 333-36264) pertaining to the Input/Output, Inc. 2000 Restricted Stock Plan,
(9)	Registration Statement (Form S-8 No. 333-49382) pertaining to the Input/Output, Inc. 2000 Long-Term Incentive Plan,
(10)	Registration Statement (Form S-8 No. 333-60950) pertaining to the Input/Output, Inc. Non-Employee Directors’ Retainer Plan,
(11)	Registration Statement (Form S-8 No. 333-112677) pertaining to the Input/Output, Inc. 2003 Employee Stock Option Plan,
(12)	Registration Statement (Form S-8 No. 333-116355) pertaining to the GX Technology Corporation Employee Stock Option Plan,
(13)	Registration Statement (Form S-8 No. 333-117716) pertaining to the Input/Output, Inc. Concept Systems Employment Inducement Stock Option Program,
(14)	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,
(15)	Registration Statement (Form S-8 No. 333-125655) pertaining to the Input/Output, Inc. 2004 Long-Term Incentive Plan,

E-1

(16)	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,
(17)	Registration Statement (Form S-3 No. 333-112263) of Input/Output, Inc.,
(18)	Registration Statement (Form S-3 No. 333-115345) of Input/Output, Inc.,
(19)	Registration Statement (Form S-3 No. 333-123632) of Input/Output, Inc.,
(20)	Registration Statement (Form S-8 No. 333-145274) pertaining to the Third Amended and Restated Input/Output, Inc. 2004 Long-Term Incentive Plan,
(21)	Registration Statement (Form S-3 No. 333-148235) of ION Geophysical Corporation (formerly known as Input/Output, Inc.), and
(21)	Registration Statement (Form S-3 No. 333-149458) of ION Geophysical Corporation (formerly known as Input/Output, Inc.).

of our report dated October 31, 2008, with respect to the combined balance sheets of ARAM Group of Companies as at December 31, 2007 and 2006 and the related audited combined statements of net income, comprehensive income and retained earnings and cash flows for the years ended December 31, 2007, 2006 and 2005, appearing in the current report on Form 8-K/A of ION Geophysical Corporation, filed with the Securities and Exchange Commission on November 3, 2008.

/s/ PricewaterhouseCoopers LLP

Calgary, Alberta
November 3, 2008

E-2

EX-99.2

Exhibit 99.2

ARAM Group of Companies

Combined Financial Statements
Year ended December 31, 2007, 2006 and 2005 and
Six months ended June 30, 2008 and 2007
(expressed in Canadian dollars)

CONTENTS

	Page
Auditors’ Report		F-1
Combined Balance Sheets as of June 30, 2008 (unaudited), and as of December 31, 2006 and 2007		F-2
Combined Statements of Net Income, Comprehensive Income and Retained Earnings for the years ended December 31, 2005, 2006 and 2007 and the six month periods ended June 30, 2008 and 2007 (unaudited)		F-3
Statements of Cash Flows for the years ended December 31, 2005, 2006 and 2007 and the six month periods ended June 30, 2008 and 2007 (unaudited)		F-4
Notes to Combined Financial Statements for the years ended December 31, 2005, 2006 and 2007 and the six month periods ended June 30, 2008 and 2007 (unaudited)		F-5

	PricewaterhouseCoopers LLP Chartered Accountants 111 5th Avenue SW, Suite 3100
	Calgary, Alberta
	Canada T2P 5L3
	Telephone +1 (403) 509-7500
	Facsimile +1 (403) 781-1825

October 31, 2008

Report of Independent Auditors

To the Shareholders of
ARAM Group of Companies

We have audited the combined balance sheets of ARAM Group of Companies as at December 31, 2007 and 2006 and the combined statements of net income and comprehensive income and retained earnings and cash flows for each of the years in the three year period ended December 31, 2007. These financial statements are the responsibility of the company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, these combined financial statements present fairly, in all material respects, the financial position of the company as at December 31, 2007 and 2006 and the results of its operations and its cash flows for each of the years in the three year period ended December 31, 2007 in accordance with Canadian generally accepted accounting principles.

/s/ PricewaterhouseCoopers LLP

Chartered Accountants

F-1

ARAM Group of Companies
Combined Balance Sheets

(expressed in Canadian dollars)

	June 30,		December 31,
	2008		2007		2006
	$		$		$
	(Unaudited)
Assets
Current assets
Cash and cash equivalents		12,162,666		12,695,703		45,242,927
Short-term investment		560,769		535,182		1,540,572
Accounts receivable		16,692,245		25,777,100		9,662,376
Inventory (note 3)		45,492,935		44,209,158		21,154,559
Prepaid expenses		1,197,239		1,295,930		738,486
Income taxes recoverable		2,428,802		—		—
Current portion of long-term receivables (note 4)		4,014,546		2,435,559		1,632,144
		82,549,202		86,948,632		79,971,064
Long-term receivables (note 4)		473,007		167,146		702,563
Cash surrender value of life insurance policy		2,484,489		2,442,903		2,346,152
Property, plant and equipment (note 5)		7,360,057		6,958,706		4,658,512
Rental equipment (note 6)		21,757,957		23,825,113		11,659,293
Future income taxes (note 11)		857,317		1,230,197		2,817,171
		115,482,029		121,572,697		102,154,755
Liabilities
Current liabilities
Bank debt (note 7)		4,093,679		9,214,320		587,500
Accounts payable and accrued liabilities		7,254,665		13,317,230		8,599,629
Income taxes payable		—		1,847,521		15,393,775
Deferred revenue		1,261,703		326,159		3,985,509
Current portion of long-term liabilities (note 8)		300,000		150,000		150,000
Current portion of obligation under capital lease (note 9)		853,439		853,439		—
Current portion of amounts due to related parties (note 10)		275,566		527,321		599,176
		14,039,052		26,235,990		29,315,589
Long-term liabilities (note 8)		58,333		333,333		483,333
Obligation under capital lease (note 9)		2,785,658		3,205,209		—
Amounts due to related parties (note 10)		5,745,002		6,847,534		11,147,385
		22,628,045		36,622,066		40,946,307
Non-controlling interest (note 1)		—		1,100,324		2,334,498
Shareholder’s Equity
Capital stock (note 12)		489,071		489,071		489,071
Contributed surplus (note 12)		594,780		594,780		—
Retained earnings		91,770,133		82,766,456		58,384,879
		92,853,984		83,850,307		58,873,950
		115,482,029		121,572,697		102,154,755
Commitments (note 14)
Subsequent event (note 17)

F-2

ARAM Group of Companies
Combined Statements of Net Income, Comprehensive Income and Retained Earnings

(expressed in Canadian dollars)

	Six months ended June 30,						Year ended December 31,
	2008			2007			2007			2006			2005
	$			$			$			$			$
	(Unaudited)			(Unaudited)
Revenue		46,684,299			61,791,586			137,383,865			103,337,349			52,576,549
Cost of goods sold		25,664,774			29,951,188			73,005,872			42,319,257			29,130,122
Gross Profit		21,019,525			31,840,398			64,377,993			61,018,092			23,446,427
Other expenses (income)
Selling, general and administrative		7,870,626			5,449,700			19,380,312			16,175,574			21,128,565
Bad debt (recovery)		(278,612	)		4,310			3,226,427			(717,224	)		(462,128	)
Foreign exchange loss (gain)		297,381			1,421,674			(573,795	)		(2,107,997	)		(557,989	)
Interest income		(475,844	)		(708,705	)		(1,297,963	)		(1,521,844	)		(471,915	)
Sundry income		(124,135	)		(203,405	)		(115,964	)		(251,803	)		(436,175	)
Interest and bank charges		333,824			88,656			331,099			83,917			270,387
Interest on long-term liabilities		124,121			72,803			650,967			465,062			434,766
(Gain) loss on disposal of property, plant and equipment		(51,889	)		2,774			(646,872	)		1,083,008			(557,372	)
Unrealized loss on short-term investment		(25,587	)		(218,385	)		100,212			364,604			—
		7,669,885			5,909,422			21,054,423			13,573,297			19,348,139
Income from continuing operations before income taxes and non-controlling interest		13,349,640			25,930,976			43,323,570			47,444,795			4,098,288
Provision for (recovery of) income taxes (note 11)
Current		3,704,696			7,494,021			12,714,935			16,860,925			1,822,118
Future		319,187			810,406			1,435,205			(1,111,312	)		(588,136	)
		4,023,883			8,304,427			14,150,140			15,749,613			1,233,982
Income before non-controlling interest		9,325,757			17,626,549			29,173,430			31,695,182			2,864,306
Non-controlling interest (note 1)		(73,845	)		(50,983	)		(343,315	)		(180,522	)		(511,828	)
Income from continuing operations		9,251,912			17,575,566			28,830,115			31,514,660			2,352,478
Income from discontinued operations, net of taxes (note 15)		—			—			—			7,978,868			890,001
Net income and comprehensive income for the period		9,251,912			17,575,566			28,830,115			39,493,528			3,242,479
Retained earnings — Beginning of period		82,766,456			58,384,879			58,384,879			22,184,344			18,950,301
Dividends		(248,235	)		(2,848,681	)		(4,448,538	)		(3,292,993	)		(8,436	)
Retained earnings — End of period		91,770,133			73,111,764			82,766,456			58,384,879			22,184,344

F-3

ARAM Group of Companies
Combined Statements of Cash Flows

(expressed in Canadian dollars)

	Six months ended June 30,						Year ended December 31,
	2008			2007			2007			2006			2005
	$			$			$			$			$
	(Unaudited)			(Unaudited)
Cash provided by (used in)
Operating activities
Net income for the period		9,251,912			17,575,566			28,830,115			39,493,528			3,242,479
Items not affecting cash
Depreciation and amortization		6,755,178			4,243,832			9,282,500			7,019,462			7,927,583
Bad debt (recovery)		(278,612	)		4,310			3,226,427			(717,224	)		(462,128	)
Future income taxes		319,187			810,406			1,435,205			(1,111,312	)		(588,136	)
Increase in cash surrender value of life insurance		(41,586	)		(41,325	)		(96,452	)		(110,832	)		(171,310	)
Non-controlling interest		73,845			50,983			343,315			180,522			511,828
(Gain) loss on disposal of property, plant and equipment		(51,889	)		2,774			(646,872	)		1,083,008			(557,372	)
Impairment of property, plant and equipment		—			—			22,590			160,756			146,152
Unrealized loss on of short-term investment		(25,587	)		(218,385	)		100,212			364,604			—
Gain on disposal of the processing division		—			—			—			(8,949,817	)		—
Net change in non-cash working capital balances related to operations		3,486,765			(29,259,946	)		(50,216,812	)		2,735,703			15,585,482
Net sales (collections) on long term receivables		(2,314,923	)		(1,339,324	)		(4,460,624	)		5,248,261			(1,140,071	)
		17,174,290			(8,171,109	)		(12,180,396	)		45,396,659			24,494,507
Financing activities
Advances (repayments) of bank debt		(5,120,641	)		725,000			8,626,820			(12,500	)		(5,179,167	)
Advances (repayments) of related party balances		(1,354,287	)		(1,876,839	)		(4,371,698	)		994,548			117,973
Advances (repayments) of long-term liabilities		(125,000	)		(75,000	)		(150,000	)		(3,655,000	)		2,321,000
Contribution from shareholders		—			—			594,780			—			—
Repayment of obligation under capital lease		(419,551	)		(276,776	)		(600,897	)		—			—
Dividend paid		(248,235	)		(2,848,681	)		(4,448,538	)		(3,504,113	)		(8,436	)
		(7,267,714	)		(4,352,296	)		(349,533	)		(6,177,065	)		(2,748,630	)
Investing activities
Purchase of property, plant and equipment		(1,102,953	)		(1,113,098	)		(4,702,429	)		(2,862,625	)		(3,770,395	)
Purchase of rental equipment		(11,478,277	)		(5,737,856	)		(18,169,486	)		(9,333,246	)		(14,536,580	)
Proceeds from disposal of property, plant and equipment		3,116,618			1,484,982			3,526,935			579,866			1,590,920
Proceeds from disposal of the processing division		—			—			—			10,500,000			—
Decrease (increase) in short-term investments		—			—			905,176			(905,176	)		—
Purchase of non-controlling interest		(975,001	)		(1,577,491	)		(1,577,491	)		—			—
		(10,439,613	)		(6,943,463	)		(20,017,295	)		(2,021,181	)		(16,716,055	)
(Decrease) increase in cash and cash equivalents during the period		(533,037	)		(19,466,868	)		(32,547,224	)		37,198,413			5,029,822
Cash and cash equivalents — Beginning of period		12,695,703			45,242,927			45,242,927			8,044,514			3,014,692
Cash and cash equivalents — End of period		12,162,666			25,776,059			12,695,703			45,242,927			8,044,514

F-4

ARAM Group of Companies
Notes to Combined Financial Statements
December 31, 2007, 2006 and 2005 and six months ended June 30, 2008

(expressed in Canadian dollars)

1	Basis of presentation
	The ARAM Group of Companies (the “Group or Company”) manufactures, sells and rents seismic equipment. The entities are commonly controlled and managed by a family. The combined financial statements have been prepared to present combined balance sheets, operations and cash flows of the business sold to ION Geophysical Corporation on September 18, 2008.
	As the family interest in Canadian Seismic Equipment Ltd. (“CSEL”) is less than 100%, the portion attributable to outside shareholders is reflected as a non-controlling interest. The ownership percentage at June 30, 2008 was 100% (June 30, 2007 — 88.6%, December 31, 2007 - 88.6%, December 31, 2006 — 62.3%)
	The combined financial statements have been prepared using principles similar to those used to prepare consolidated financial statements. The combined financial statements include the revenues and expenses as well as the assets, liabilities and equity of the combined entities. Intercompany transactions and balances have been eliminated.
	The financial statements have been prepared in accordance with Canadian generally accepted accounting principles. All amounts for the six month periods ended June 30, 2008 and 2007 are unaudited.
	The following entities are included in the Group combined financial statements for the following periods:

Six month periods ended

June 30,

Years ended December 31,

2008

2007

2007

2006

2005

$

$

$

$

$

ARAM Systems Ltd.

ü

ü

ü

ü

ü

Canadian Seismic Rentals Inc.

ü

(3)

ü

ü

ü

ü

Canadian Seismic Equipment Ltd.

ü

(3)

ü

ü

ü

ü

Alberta Seismic Rentals Corp.

ü

(3)

ü

ü

ü

ü

Alberta Seismic Rentals Ltd. Partnership

(1)

(1)

(1)

ü

ü

ARAM System Middle East FZE

ü

(2)

ü

(2)

(2)

ARAM System Inc. (wholly- owned)

ü

ü

ü

ü

ü

Texas Seismic Rentals Inc. (wholly-owned)

ü

ü

ü

ü

ü

Texas Seismic Rentals Ltd. Partnership

(1)

(1)

(1)

ü

ü

1	The Partnerships were wholly-owned and wound up effective January 1, 2007
2	The Company was incorporated on November 15, 2007 as a wholly-owned subsidiary of Alberta Seismic Rentals Corp.

F-5

ARAM Group of Companies
Notes to Combined Financial Statements
December 31, 2007, 2006 and 2005 and six months ended June 30, 2008

(expressed in Canadian dollars)

3 The Companies were amalgamated effective May 1, 2008 and continued operations under the name Canadian Seismic Rentals Inc.

	Interim financial information
	In the opinion of management, the accompanying unaudited interim combined financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position of ARAM Group of Companies at June 30, 2008 and the results of operations for the six months ended June 30, 2008 and 2007 and cash flows for the six months ended June 30, 2008 and 2007. The results of operations for the six month periods ended June 30, 2008 and 2007 should not necessarily be taken as indicative of the results of operations that may be expected for the entire year.
2	Significant accounting policies

a)	Cash and cash equivalents
	Cash and cash equivalents consist of cash on hand and balances with banks, as well as highly liquid short-term investments with original maturities of three months or less. Cash and cash equivalents are classified as held-for-trading and recorded at fair value.
b)	Short-term investment
	The short-term investment is classified as a held-for-trading financial instrument and is recorded at market value. Any adjustments to market value are recorded in the statement of income in that year.
c)	Inventory
	Inventory is recorded at the lower of cost and net realizable value. Cost is determined as follows:

Raw materials	—	average cost of direct materials
Work-in-progress and finished goods	—	average cost of direct materials, labour and an allocation of direct and indirect overhead

	Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of sale.
d)	Long-term receivables
	Long-term receivables are finance agreements for the sale of seismic equipment. The agreements are recorded as a sales-type lease transaction. The sales revenue is recognized at the inception of the agreement at the present value of the minimum future payments. Finance income is recorded in earnings over the term of the agreement.

F-6

ARAM Group of Companies
Notes to Combined Financial Statements
December 31, 2007, 2006 and 2005 and six months ended June 30, 2008

(expressed in Canadian dollars)

e)	Property, plant and equipment
	Property, plant and equipment are recorded at cost.
	Depreciation and amortization is provided over the estimated useful life of the assets on the following basis:

Building	5% per annum	—	Declining balance basis
Computer equipment	25% per annum	—	Declining balance basis
Equipment	20% per annum	—	Declining balance basis
Furniture and fixtures	20% per annum	—	Declining balance basis
Computer software programs	33 1/3% per annum	—	Straight-line basis
Vehicles	30% per annum	—	Declining balance basis
Leasehold improvements	10-20% per annum	—	Straight-line basis

	The Group evaluates the carrying value of property for potential impairment when facts and circumstances indicate an impairment may have occurred. Recoverability of this amount is based on a review of future operating cash flows on a non-discounted basis. If the carrying value of the property is determined to be impaired, then the carrying value is reduced to the fair value.
f)	Rental equipment
	Rental equipment is recorded at cost and amortized on a straight-line basis of 40% per annum.
	The Group evaluates the carrying value of rental equipment for potential impairment when facts and circumstances indicate an impairment may have occurred. Recoverability of this amount is based on a review of future operating cash flows on a non-discounted basis. If the carrying value of the rental equipment is determined to be impaired, then the carrying value is reduced to the fair value.
g)	Income taxes
	The Group follows the liability method of accounting for income taxes. Under the liability method of tax allocation, future tax assets and liabilities are determined based on the differences between the financial reporting and tax basis of assets and liabilities and are measured using enacted or substantively enacted tax rates expected to be in effect when the differences are expected to be reversed. A valuation allowance is recorded against any future tax asset to the extent that it is more likely than not that the future income tax asset will not be realized.
h)	Investment tax credits
	Investment tax credits are accounted for using the cost reduction method, whereby the credits relating to the purchase of assets are deducted from the related assets and the credits relating to the incurring of expenses are deducted from the related expense. The Group recognizes its investment tax credits in the year in which the costs are incurred.

F-7

ARAM Group of Companies
Notes to Combined Financial Statements
December 31, 2007, 2006 and 2005 and six months ended June 30, 2008

(expressed in Canadian dollars)

i)	Warranty provision
	The Group records a provision for warranties upon recognition of the related revenue based on the Group’s best estimate, with reference to past experience.
j)	Research and development
	Research costs are expensed as incurred. Development costs are charged as an expense of the period in which they are incurred unless they meet the conditions for deferral in compliance with generally accepted accounting principles including establishment of a proven future market and management’s intention to market the product. Amortization commences upon commercial production or use of the product and will be over the period in which future benefits are expected to be realized. There were no development costs deferred in 2008, 2007 or 2006.
k)	Revenue recognition
	The Group recognizes revenue when it is earned. The Group considers revenue earned when it has persuasive evidence of an arrangement, the product has been delivered or the services have been provided to the customer, the sales price is fixed or determinable and collectability is reasonably assured. In addition to this general policy, the following are the specific revenue recognition policies for each major category of revenue:

i)	Equipment sales
	Revenue from the sale of equipment is recorded when title is transferred to the customer and all significant risks and rewards of ownership have transferred and contractual obligations have been filled. Generally, revenue is recorded on shipment of the inventory as no further obligation exists.
ii)	Field rentals
	The Group receives rental income from the rental of seismic equipment. The rental of the equipment is in the form of operating leases as the lease terms range from a couple days to several months. Rental revenue is recognized on a straight line basis over the term of the operating lease.
iii)	Repair service revenue
	Repair service revenue is recognized when earned, which is when the repairs have been completed.

l)

Foreign currency translation

The Group’s integrated foreign operations are translated using the temporal method. Under this method monetary assets and liabilities are translated at the exchange rate in effect at the balance sheet date. All other assets and liabilities are translated at the historical rates. Revenue and expense items are translated at the exchange rate in effect at the date of the transaction with the exception of amortization, which is

F-8

ARAM Group of Companies
Notes to Combined Financial Statements
December 31, 2007, 2006 and 2005 and six months ended June 30, 2008

(expressed in Canadian dollars)

	translated at the historical rates. Translation gains or losses are reflected in the statement of combined net income and comprehensive income.
	Monetary assets and liabilities denominated in foreign currencies are translated at the exchange rate in effect at the balance sheet date. Non-monetary assets and liabilities arising from foreign currency transactions are translated at the exchange rate in effect at the date of the transaction. Transactions denominated in foreign currencies are exchanged at the rate in effect on the date of the transaction.
m)	Measurement uncertainty
	Certain items in the financial statements are measured using management’s best estimates based on assumptions that reflect the most probable set of economic conditions and planned course of action. It is reasonably possible, based on existing knowledge, that changes in future conditions in the near term would require a material change in the recognized amount of certain items, particularly the valuation of inventory, future income tax assets (liabilities), the allowance for accounts receivable and long-term receivables and depreciation on property, plant and equipment and rental equipment.
n)	Currency of presentation
	All amounts are expressed in Canadian dollars unless otherwise stated.
o)	Accounting standards
	On January 1, 2007, the Group adopted the new Canadian accounting standards for financial instruments — recognition and measurement, financial instruments — presentation and disclosures, hedging and comprehensive income. The adoption of these accounting standards had no material impact on the Group’s net income or cash flows.

i)	Financial instruments — recognition and measurement
	All financial instruments, including all derivatives, are recognized on the balance sheet initially at fair value. Subsequent measurement of all financial assets and liabilities except those held-for-trading and available for sale are measured at amortized cost determined using the effective interest rate method. Held-for-trading financial assets are measured at fair value with changes in fair value recognized in earnings. Available-for-sale financial assets are measured at fair value with changes in fair value recognized in other comprehensive income and reclassified to earnings when derecognized or impaired. The Group’s cash and cash equivalents and short-term investments are designated as held-for-trading. Accounts receivable are designated as loans and receivables. Bank debt, accounts payable and accrued liabilities, long-term liabilities and amounts due to related parties are designated as other financial liabilities.
ii)	Embedded derivatives
	The Group is required to identify embedded derivatives that require separation from the related host contract and measure any embedded derivatives at fair value.

F-9

ARAM Group of Companies
Notes to Combined Financial Statements
December 31, 2007, 2006 and 2005 and six months ended June 30, 2008

(expressed in Canadian dollars)

	From time to time, the Group enters into certain contracts for the purchase or sale of non-financial items that are denominated in currencies other than the U.S. dollar. In cases where the foreign exchange component is not leveraged and does not contain any option feature and the contract is denominated in either the functional currency of the Group or the counter-party, the embedded foreign currency derivative is considered to be closely related to the host contract and is not accounted for separately.
	If the contract is neither denominated in the functional currency of the Group or the associated counter-party, the embedded foreign currency derivative is separated from the host contract unless the non-financial item delivered requires payments denominated in the currency that is routinely accepted in commercial transactions around the world, or is commonly used for such transactions in the economic environment in which the transaction takes place. The Group did not identify any embedded foreign currency derivatives that required separation.
iii)	Comprehensive income
	A statement of comprehensive income, which is comprised of net income and other comprehensive income, is now required. Comprehensive income is the change in equity of an entity during a period from transactions and other events from non-owner sources, such as unrealized gains and losses on available-for-sale investment securities.

Effective January 1, 2008, the Group adopted new Canadian accounting standards regarding inventories, capital disclosures and financial instruments. The adoption of these standards did not have a material impact on the combined financial statements.

iv)	Capital disclosures
	Section 1535, Capital Disclosures established disclosure requirements concerning capital such as qualitative information about the Group’s objectives, policies and process for managing capital, quantitative data about what the Company regards as capital and whether the Company has complied with any externally imposed capital requirements and, if not, the consequences of such non-compliance. These recommendations were effective for fiscal years beginning on or after October 1, 2007 and resulted in the additional disclosure included in note 18.
v)	Financial instruments — disclosures and presentation
	Section 3862 Financial Instruments — Disclosures and Section 3863, Financial Instruments — Presentation replace Section 3861, Financial Instruments — Disclosure and Presentation, revising and enhancing the Group’s disclosure requirement, and carrying forward unchanged, the Group’s presentation requirements. These recommendations were effective for fiscal years beginning on or after October 1, 2007 and resulted in the additional disclosure included in note 16.

F - 10

ARAM Group of Companies
Notes to Combined Financial Statements
December 31, 2007, 2006 and 2005 and six months ended June 30, 2008

(expressed in Canadian dollars)

vi)

Inventories

Section 3031, Inventories, replaces Section 3030, Inventories. The purpose of this section was to prescribe the accounting treatment for inventories. Under this standard, inventories are required to be measured at the lower of cost or net realizable value, and the reversal of previously recorded write-downs to realizable value when the circumstances that caused the write-down no longer exist. These recommendations are effective for fiscal years beginning on or after January 1, 2008. The adoption of this standard did not have a material impact on the Group’s financial position and results of operations. Total inventory amounts recognized as an expense for the six months ended June 30, 2008 in cost of goods sold totalled $18,909,596 (June 30, 2007 — $25,707,356).

3 Inventory

	June 30,		December 31,
	(Unaudited)
	2008		2007		2006
	$		$		$
Raw materials		13,407,151		13,028,811		9,520,262
Work-in-progress		9,262,385		9,001,007		6,455,658
Finished goods		22,823,399		22,179,340		5,178,639
		45,492,935		44,209,158		21,154,559

4 Long-term receivables

The total long-term receivables outstanding at June 30, 2008 is $4,487,553 (December 31, 2007 — $2,602,705 and December 31, 2006 — $2,334,707). The amount is due from five customers (December 31, 2007 — four customers and December 31, 2006 — three customers) in the oil and gas industry and generally mature within 12 to 18 months of the balance sheet date.

5 Property, plant and equipment

	December 31, 2007
			Accumulated
			depreciation
			and
	Cost		amortization		Net
	$		$		$
Land and building		807,000		—		807,000
Computer equipment		1,875,890		1,420,508		455,382
Equipment		7,467,841		3,046,810		4,421,031
Furniture and fixtures		382,070		150,878		231,192
Computer software programs		413,011		255,610		157,401
Vehicles		235,934		178,650		57,284
Leasehold improvements		1,539,835		710,419		829,416
		12,721,581		5,762,875		6,958,706

F - 11

ARAM Group of Companies
Notes to Combined Financial Statements
December 31, 2007, 2006 and 2005 and six months ended June 30, 2008

(expressed in Canadian dollars)

     The building was acquired in December 2007 and depreciation commenced in January 2008.

	December 31, 2006
			Accumulated
			depreciation
			and
	Cost		amortization		Net
	$		$		$
Computer equipment		1,752,610		1,296,258		456,352
Equipment		5,586,287		2,440,945		3,145,342
Furniture and fixtures		253,121		111,051		142,070
Computer software programs		294,654		208,762		85,892
Vehicles		297,862		169,824		128,038
Leasehold improvements		1,202,867		502,049		700,818
		9,387,401		4,728,889		4,658,512

6 Rental equipment

	December 31, 2007
			Accumulated
	Cost		amortization		Net
	$		$		$
Rental equipment		39,066,528		15,241,415		23,825,113

	December 31, 2006
			Accumulated
	Cost		amortization		Net
	$		$		$
Rental equipment		17,704,636		6,045,343		11,659,293

Included in equipment are amounts financed under capital lease obligations (note 9) with a cost of $4,659,544 (2006 — $nil) and accumulated amortization of $1,553,182 (2006 — $nil).

7 Bank debt

     At June 30, 2008, December 31, 2007 and 2006, the Group had available three credit facilities as follows:

• A credit facility of $25,000,000 (December 31, 2007 — $25,000,000, December 31, 2006 — $13,000,000) bearing interest at the bank’s prime lending rate plus 0.125% (December 31, 2007 —

F - 12

ARAM Group of Companies
Notes to Combined Financial Statements
December 31, 2007, 2006 and 2005 and six months ended June 30, 2008

(expressed in Canadian dollars)

	0.125%, December 31, 2006 — 0.25%) per annum and payable upon demand. As at June 30, 2008, the Group had utilized $4,093,679 (December 31, 2007 — $8,401,820, December 31, 2006 — $nil) of this facility. The facility is collateralized by a general security agreement creating a first priority security interest over all present and future personal property, and a floating charge over present and future real property, a postponement agreement by the sole shareholders of ARAM Systems Ltd., Section 427 security over inventory, and assignment of all risk insurance. As at December 31, 2007, the carrying amount of the assets pledged as security was approximately $108 million (2006 — $92 million).
•	A revolving loan (to a maximum of the lesser of $3.5 million and 50% of the net book value or market value of the rental equipment in CSEL), bearing interest at the bank’s prime rate plus 1.5% and due on demand. As at June 30, 2008, the Group had utilized $nil (December 31, 2007 — $812,500, December 31, 2006 — $587,500) of this facility. The facility is secured by a General Security Agreement with a floating charge over all present and future personal property, an assignment of insurance and General Postponement Agreements from all the shareholders of CSEL. Each amount advanced under the credit facility is repayable in 24 equal monthly installments.
•	A $200,000 (December 31, 2007 — $200,000, December 31, 2006 — $200,000) line of credit bearing interest at prime plus 1.5% (2007 — 1.5%, 2006 — 1.5%), guaranteed by a shareholder and due on demand. The Group had not utilized this facility at June 30, 2008, December 31, 2007 and 2006.

     The Group’s bank facility contains financial covenants with respect to the following ratios:

• Debt to tangible net worth

• Current assets to current liabilities

• Funded debt to earnings before interest, taxes, depreciation and amortization (EBITDA)

• Minimum tangible net worth

     The Group monitors these ratios and as at December 31, 2007 the Group was in compliance with all financial covenants.

8 Long-term liabilities

	June 30,		December 31,
	(unaudited)
	2008		2007		2006
	$		$		$
Lease cancellation fee obligation, unsecured, non-interest bearing, with monthly repayments of $4,167, maturing August 31, 2010.		108,333		133,333		183,333

F - 13

ARAM Group of Companies
Notes to Combined financial Statements
December 31, 2007, 2006 and 2005 and six months ended June 30, 2008

(expressed in Canadian dollars)

	June 30			December 31,
	(unaudited)
	2008			2007			2006
	$			$			$
Amounts due to former officers, unsecured, non-interest bearing. The balance was repaid in full subsequent to June 30, 2008.		250,000			350,000			450,000
		358,333			483,333			633,333
Less: Current portion		(300,000	)		(150,000	)		(150,000	)
		58,333			333,333			483,333

     Scheduled minimum repayments of principal at December 31, 2007 are as follows:

	$
2008		150,000
2009		150,000
2010		133,333
2011		50,000
		483,333

9 Obligation under capital lease

Rental equipment has been financed under a long-term lease, expiring March 2012. Future minimum lease payments, together with the balance of the obligations are as follows:

	December 31,
	2007
	$
2008		1,107,108
2009		1,107,108
2010		1,107,108
2011		1,107,108
2012		276,776
		4,705,208
Less: Imputed interest at 6.739%		(646,560	)
		4,058,648
Less: Current portion		(853,439	)
		3,205,209

F-14

ARAM Group of Companies
Notes to Combined financial Statements
December 31, 2007, 2006 and 2005 and six months ended June 30, 2008

(expressed in Canadian dollars)

10 Amounts due to related parties

	June 30,						December 31,
	(Unaudited)
	2008			2007			2006
	$			$			$
Payable to a shareholder, on demand, unsecured, bearing interest at prime rate plus 2%, interest only paid monthly, no set repayment terms. The balance was repaid in full subsequent to June 30, 2008.		1,335,674			1,460,347			1,645,473
Payable to a shareholder, on demand, unsecured, in monthly installments of $49,931, including interest at 8.5%.		275,566			527,321			1,095,772
Payable to 1236929 Alberta Ltd., the parent of ARAM Systems Ltd., unsecured, bearing interest at 10.05% with no set repayment terms. The balance was repaid in full subsequent to June 30, 2008.		3,189,516			3,187,898			1,527,629
Payable to Geoex Seismic Inc., a company wholly owned by a director of ARAM Systems Ltd., unsecured, bearing interest at 13%, with no set repayment terms. Interest has been waived for the period. The balance was repaid in full subsequent to June 30, 2008.		419,809			503,814			503,895
Amounts due to shareholders are unsecured, non-interest bearing with no fixed terms of repayment. This balance is subordinated to the bank debt. The balance was repaid in full subsequent to June 30, 2008		800,003			1,695,475			6,973,792
		6,020,568			7,374,855			11,746,561
Less: Current portion		(275,566	)		(527,321	)		(599,176	)
		5,745,002			6,847,534			11,147,385

     a) Amounts payable to director

During the normal course of operations for the six months ended June 30, 2008, the Group leased equipment from the director for a total of $nil (December 31, 2007 — $200,000 and December 31, 2006 — $200,000). As at June 30, 2008, the Group had an accounts payable balance of $212,000 (December 31, 2007 — $212,000 and December 31, 2006 — $137,900) owing to the director.

Related party transactions are recorded at the exchange amount.

F-15

ARAM Group of Companies
Notes to Combined financial Statements
December 31, 2007, 2006 and 2005 and six months ended June 30, 2008

(expressed in Canadian dollars)

11 Income taxes

The provision for income taxes differs from that which would be expected by applying the combined Federal and Provincial income tax rate. A reconciliation of the difference is as follows:

	December 31,
	2007			2006
	$			$
Income from continuing operations before income taxes and non- controlling interest		43,323,570			47,444,795
Combined income		32.12	%		32.50	%
Expected income tax provision		13,915,531			15,419,558
Add (deduct)
Non-deductible expenses and other miscellaneous		253,325			382,834
Income earned taxed at partner level		—			(313,746	)
		253,325			69,088
(Reduction) increase of future tax balances due to substantially enacted tax rate changes		(18,716	)		260,967
		14,150,140			15,749,613

F-16

ARAM Group of Companies
Notes to Combined financial Statements
December 31, 2007, 2006 and 2005 and six months ended June 30, 2008

(expressed in Canadian dollars)

The net future tax liability is comprised of the tax effect of the following temporary differences:

	December 31,
	2007			2006
	$			$
Liabilities
Investment tax credits		(297,221	)		(238,606	)
Assets
Capital assets		1,720,933			1,694,234
Unpaid bonus		103,250			1,250,500
Other		(296,765	)		111,043
		1,527,418			3,055,777
		1,230,197			2,817,171

12 Capital stock

a) Authorized

The following is a description of the Group’s authorized share capital at June 30, 2008:

ARAM Systems Ltd.

Unlimited Class A and B voting common shares

Unlimited Class C non-voting common shares

Unlimited Class D and E voting preferred shares carrying a 6% non-cumulative dividend, redeemable and retractable at fair market value

Unlimited Class F voting preferred shares carrying a 6% non-cumulative dividend, redeemable and retractable at fair market value and
  convertible into Class A common shares on a one-for-one basis

Unlimited Class G non-voting preferred shares carrying a 5% non-cumulative dividend, redeemable and retractable at fair market value

Canadian Seismic Rentals Inc.

Unlimited Class A and B voting shares

Unlimited Class C non-voting shares

Unlimited preferred shares

F-17

ARAM Group of Companies
Notes to Combined Financial Statements
December 31, 2007, 2006 and 2005 and six months ended June 30, 2008

(expressed in Canadian dollars)

b) Issued and outstanding

	June 30,		December 31,
	(unaudited)
	2008		2007		2006
	$		$		$
ARAM Systems Ltd., 244 Class A voting common shares		244		244		244
Canadian Seismic Rentals Inc., 100 Class A voting common shares		—		100		100
Canadian Seismic Equipment Ltd., 2,800,000
Class A voting common shares		—		488,627		488,627
Alberta Seismic Rentals Corp., 100 Class A voting common shares		—		100		100
Canadian Seismic Rentals Inc., (amalgamated), 100,000 Class A voting common shares		488,827		—		—
		489,071		489,071		489,071

c)	Contributed surplus
	In December 2007, a shareholder made a non-reciprocal cash contribution of $594,780 (2006 — $nil) to the Group.

13	Segmented information
	The Group’s operations are carried on in the following geographic locations:

June 30, 2008	Canada		International		Total
(unaudited)
Revenue		45,200,925		1,483,374		46,684,299
Assets		103,527,462		11,954,566		115,482,029

December 31, 2007	Canada		International		Total
Revenue		134,186,073		3,197,792		137,383,865
Assets		118,746,862		2,825,835		121,572,697

December 31, 2006	Canada		International		Total
Revenue		93,374,207		9,963,142		103,337,349
Assets		98,179,317		3,975,438		102,154,755

F-18

ARAM Group of Companies
Notes to Combined Financial Statements
December 31, 2007, 2006 and 2005 and six months ended June 30, 2008

(expressed in Canadian dollars)

14	Commitments
	The Group has operating leases for warehouse and manufacturing facilities and office space. The minimum lease commitments, including estimated operating costs as at December 31, 2007, are approximately:

	$
2008		1,919,000
2009		1,899,000
2010		1,431,000
2011		139,000
		5,388,000

15	Income from discontinued operations
	On April 30, 2006, the Group sold the operating assets of the processing division to a third party for proceeds of $11,500,000. Consideration received consisted of $10,500,000 in cash and $1,000,000 of capital stock of the purchaser, a publicly traded company. A breakdown of the income from discontinued operations is as follows:

	2006			2005
	$			$
Revenue		6,669,359			14,400,506
Salaries, general and administration		(5,938,238	)		(12,842,211	)
Depreciation and amortization		(212,253	)		(640,769	)
Income from processing operations		518,868			917,526
Gain on disposal of assets related to the processing division		8,949,817			—
		9,468,685			917,526
Income taxes		(1,489,817	)		(27,525	)
		7,978,868			890,001

The net assets disposed of are as follows:

	2006		2005
	$		$
Property, plant and equipment		2,550,183		2,581,508

F-19

ARAM Group of Companies
Notes to Combined Financial Statements
December 31, 2007, 2006 and 2005 and six months ended June 30, 2008

(expressed in Canadian dollars)

16	Financial instruments and financial risks (unaudited)
	The Group’s financial instruments included in the balance sheet are cash and cash equivalents, short-term investment, accounts receivable, bank debt, accounts payable and accrued liabilities, long-term liabilities, obligations under capital lease and amounts due to related parties.
	As at June 30, 2008 and December 31, 2007, the values of financial instruments other than the short-term investment, bank debt, long-term liabilities, obligations under capital leases and amounts due to related parties, approximate their fair value due to the short-term nature of the instruments. The short-term investment is carried at fair value with gains and losses included within earnings for the period. The carrying amount of bank debt approximates its fair value as it bears interest at floating rates. The fair value of the long-term liabilities and amounts due to related parties are not readily determinable however these amounts were settled at amounts equal to the carrying value subsequent to June 30, 2008. The fair value of the capital lease obligation approximates its carrying amount as interest rates for the term of the lease have not changed significantly since the inception of the lease.

a)	Financial risks
	The Group is exposed to a number of financial risks in the normal course of its business operations, including market risks resulting from fluctuations in interest rates and foreign currency exchange rates, as well as credit and liquidity risks. The nature of the financial risks and the Group’s strategy for managing these risks has not changed significantly for the six months ended June 30, 2008.

i)	Market risk
	Market risk is the risk that changes in prices, such as foreign exchange rates and interest rates will affect the Group’s income or the value of its holdings of financial instruments. The objective of management is to manage and control market risk exposures within acceptable parameters, while optimizing the return on risk.
	Through its use of long-term debt, bank debt and capital leases, the Group is exposed to interest rate risk as its debt has fixed and floating rates. An increase of one percent in the interest rate at December 31, 2007 and 2006 would not result in a material increase or decrease in interest expense.

F-20

ARAM Group of Companies
Notes to Combined Financial Statements
December 31, 2007, 2006 and 2005 and six months ended June 30, 2008

(expressed in Canadian dollars)

ii)	Credit risk
	The Group is exposed to credit risk from its customers’ abilities to fulfill their obligations to the Group. The Group manages this risk through various internal processes including credit policies and limits, credit checks, special conditions applied to customers based on historical experience and management of accounts receivable exposure to any individual customer.

	June 30, 2008
	(unaudited)
	Gross		Allowance		Net
	$		$		$
Not past due		2,662,229		—		2,662,229
Past due 0 — 30 days		2,188,099		—		2,188,099
Past due 31 — 60 days		186,728		—		186,728
More than 61 days		13,407,647		1,752,457		11,655,190
		18,444,703		1,752,457		16,692,246

	The Group establishes an allowance for doubtful accounts that represents its estimate of potential losses in respect of trade and other receivables. This allowance consists of specific provisions that relate to individually significant exposures and includes an estimate of a provision based on a number of factors.
iii)	Liquidity risk
	The Group is exposed to liquidity risk from the potential inability to generate or obtain sufficient cash and cash equivalents in a timely manner to discharge its financial liabilities as they come due. The Group manages liquidity risk by forecasting cash flows to identify financing requirements and by maintaining committed credit facilities. Any debt issued by the Group is managed in accordance with specified liquidity and maturity profiles.
	The following are the Group’s contractual obligations:

	June 30, 2008
	(unaudited)
	Less than one		One to three
	year		years		Total
	$		$		$
Bank debt		4,093,679		—		4,093,679
Long-term liabilities		300,000		58,333		358,333
Obligation under capital lease		853,439		2,785,658		3,639,097
Due to related parties		275,566		5,745,002		6,020,568
		5,522,684		8,588,993		14,111,677

F-21

ARAM Group of Companies
Notes to Combined Financial Statements
December 31, 2007, 2006 and 2005 and six months ended June 30, 2008

(expressed in Canadian dollars)

17	Subsequent event
	On September 18, 2008, the ARAM Group was sold to ION Geophysical Corporation (“ION”). Immediately prior to the sale, the Group undertook the following transactions:

• the amounts due to former officers and the amounts due to related parties were repaid in full;

• the life insurance policy was transferred to a shareholder;

• a dividend of $94,450,000 was declared by ARAM to its parent company, 1236929 Alberta Ltd., and settlement was by way of a note payable. Immediately thereafter 1236929 Alberta Ltd. subscribed for $94,450,000 in Class D preferred shares of ARAM Systems Ltd. in exchange for the note payable;

	Subsequent to June 30, 2008 and immediately prior to the close of the sale, the Group paid a discretionary bonus of $35 million to certain employees with the ARAM Group. These bonuses were financed in part by the funds available under the Group’s credit facility disclosed in Note 7.
18	Capital management (unaudited)
	The Group’s strategy is to carry a capital base to maintain investor, creditor and market confidence and to sustain future development of the business. The Group seeks to maintain a balance between the level of debt and shareholders’ equity to ensure access to capital markets to fund growth and working capital given the cyclical natural of the oilfield services sector. The Group may occasionally need to increase these levels to facilitate acquisition or expansionary activities. The Group considers its capital structure to include bank debt, long-term liabilities, capital leases, amounts due to related parties and shareholder’s equity.
	There were no changes in the Group’s approach to capital management for the six months ended June 30, 2008.
19	Canadian — U.S. GAAP reconciliation
	There are no material differences between the Canadian generally accepted accounting principles used to prepare these financial statements and accounting principles generally accepted in the United States of America.

F-22

ARAM Group of Companies
Notes to Combined Financial Statements
December 31, 2007, 2006 and 2005 and six months ended June 30, 2008

(expressed in Canadian dollars)

20 Supplementary cashflow information

	June 30,				December 31,
	(unaudited)
	2008		2007		2007		2006		2005
	$		$		$		$		$
Supplementary disclosure
Cash paid for income taxes		7,004,606		15,785,287		10,240,077		1,734,563		1,714,728
Cash paid for interest		293,433		161,896		715,698		329,773		242,929
Non-cash transactions
Transfers of rental equipment to inventory		5,141,803		2,063,566		3,401,086		3,964,840		5,033,748
Equipment included in rental equipment and received upon settlement of long-term receivable		—		—		2,369,331		—		—
Consideration received from disposal of processing division		—		—		—		1,000,000		—
Rental equipment acquired by way of capital lease		—		4,659,545		4,659,544		—		—

21	Economic dependence
	As of December 31, 2007, 33% (December 31, 2006 — 20%) of the Group’s revenue relates to two customers (December 31, 2006 — two customers).

F-23