UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
ý☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31,September 30, 2020
OR
¨☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 1-12691
ION GEOPHYSICAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWAREDelaware22-2286646
(State or other jurisdiction of(I.R.S. Employer
incorporation or organization)Identification No.)
2105 CityWest Blvd. Suite 100
2105 CityWest Blvd. Suite 100
Houston, Texas77042-2839
(Address of principal executive offices)(Zip Code)
Houston, Texas 77042-2855
(Address of principal executive offices) (Zip Code)

REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE: (281) 933-3339


Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par valueIONew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý☒No  ¨☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ý☒No  ¨☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 
Large accelerated filer☐Accelerated filer☒
Large accelerated fileroAccelerated filerý
Non-accelerated filer
o
☐		Smaller reporting companyo☐
Emerging growth companyo☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨☐


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨☐No  ý☒
At May 4,November 2, 2020, there were 15,036,64814,993,474 shares of common stock, par value $0.01 per share, outstanding.
1


ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS FOR FORM 10-Q
FOR THE QUARTER ENDED MARCH 31,SEPTEMBER 30, 2020
 
PAGE
PART I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of March 31,September 30, 2020 and December 31, 2019
3
Condensed Consolidated Statements of Operations for the three monthsthree- and nine-months ended March 31,September 30, 2020 and 2019
4
Condensed Consolidated Statements of Comprehensive Loss for the three monthsthree- and nine-months ended March 31,September 30, 2020 and 2019
5
Condensed Consolidated Statements of Cash Flows for the threenine months ended March 31,September 30, 2020 and 2019
6
Condensed Consolidated Statements of Stockholders' Deficit for the three monthsthree- and nine-months ended March 31,September 30, 2020 and 2019
7
Footnotes to Condensed Consolidated Financial Statements
89
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
2529
Item 3. Quantitative and Qualitative Disclosures about Market Risk
3440
Item 4. Controls and Procedures
3440
PART II. Other Information
Item 1. Legal Proceedings
3541
Item 1A. Risk Factors
3642
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
3744
Item 5. Other Information
3845
Item 6. Exhibits
3946
2


PART I. FINANCIAL INFORMATION
Item 1.Financial Statements


ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, 2020 December 31, 2019September 30, 2020December 31, 2019
(In thousands, except share data) (In thousands, except share data)
ASSETS   ASSETS
Current assets:   Current assets:
Cash and cash equivalents$42,663
 $33,065
Cash and cash equivalents$51,056 $33,065 
Accounts receivable, net51,149
 29,548
Accounts receivable, net8,288 29,548 
Unbilled receivables8,356
 11,815
Unbilled receivables9,629 11,815 
Inventories, net12,820
 12,187
Inventories, net11,873 12,187 
Prepaid expenses and other current assets5,681
 6,012
Prepaid expenses and other current assets5,861 6,012 
Total current assets120,669
 92,627
Total current assets86,707 92,627 
Deferred income tax asset, net7,905
 8,734
Deferred income tax asset, net8,092 8,734 
Property, plant and equipment, net12,706
 13,188
Property, plant and equipment, net11,227 13,188 
Multi-client data library, net54,344
 60,384
Multi-client data library, net53,289 60,384 
Goodwill18,298
 23,585
Goodwill18,684 23,585 
Right-of-use assets42,166
 32,546
Right-of-use assets37,730 32,546 
Other assets3,299
 2,130
Other assets2,136 2,130 
Total assets$259,387
 $233,194
Total assets$217,865 $233,194 
LIABILITIES AND DEFICIT   LIABILITIES AND DEFICIT
Current liabilities:   Current liabilities:
Current maturities of long-term debt$28,646
 $2,107
Current maturities of long-term debt$23,527 $2,107 
Accounts payable43,827
 49,316
Accounts payable35,107 49,316 
Accrued expenses29,078
 30,328
Accrued expenses29,197 30,328 
Accrued multi-client data library royalties21,424
 18,831
Accrued multi-client data library royalties20,534 18,831 
Deferred revenue4,882
 4,551
Deferred revenue2,156 4,551 
Current maturities of operating lease liabilities9,873
 11,055
Current maturities of operating lease liabilities6,727 11,055 
Total current liabilities137,730
 116,188
Total current liabilities117,248 116,188 
Long-term debt, net of current maturities119,296
 119,352
Long-term debt, net of current maturities119,349 119,352 
Operating lease liabilities, net of current maturities40,531
 30,833
Operating lease liabilities, net of current maturities40,380 30,833 
Other long-term liabilities433
 1,453
Other long-term liabilities412 1,453 
Total liabilities297,990
 267,826
Total liabilities277,389 267,826 
Deficit:   Deficit:
Common stock, $0.01 par value; authorized 26,666,667 shares; outstanding 14,240,126 and 14,224,787 shares at March 31, 2020 and December 31, 2019, respectively.142
 142
Common stock, $0.01 par value; authorized 26,666,667 shares; outstanding 14,315,453 and 14,224,787 shares at September 30, 2020 and December 31, 2019, respectively.Common stock, $0.01 par value; authorized 26,666,667 shares; outstanding 14,315,453 and 14,224,787 shares at September 30, 2020 and December 31, 2019, respectively.144 142 
Additional paid-in capital957,254
 956,647
Additional paid-in capital958,189 956,647 
Accumulated deficit(976,554) (974,291)Accumulated deficit(998,380)(974,291)
Accumulated other comprehensive loss(21,099) (19,318)Accumulated other comprehensive loss(21,012)(19,318)
Total stockholders’ deficit(40,257) (36,820)Total stockholders’ deficit(61,059)(36,820)
Noncontrolling interest1,654
 2,188
Noncontrolling interest1,535 2,188 
Total deficit(38,603) (34,632)Total deficit(59,524)(34,632)
Total liabilities and deficit$259,387
 $233,194
Total liabilities and deficit$217,865 $233,194 
See accompanying Footnotes to Condensed Consolidated Financial Statements.
3


ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended March 31, Three Months Ended September 30,Nine Months Ended September 30,
2020 2019 2020201920202019
(In thousands, except per share data) (In thousands, except per share data)
Service revenues$47,485
 $28,128
Service revenues$10,202 $41,990 $73,234 $100,525 
Product revenues8,929
 8,828
Product revenues6,032 11,249 22,145 31,445 
Total net revenues56,414
 36,956
Total net revenues16,234 53,239 95,379 131,970 
Cost of services22,275
 22,446
Cost of services11,491 22,690 47,033 61,931 
Cost of products4,628
 4,598
Cost of products3,454 5,261 12,962 15,256 
Impairment of multi-client data library1,167
 —
Impairment of multi-client data library0 0 1,167 0 
Gross profit28,344
 9,912
Gross profit1,289 25,288 34,217 54,783 
Operating expenses:   Operating expenses:
Research, development and engineering4,008
 5,357
Research, development and engineering2,899 4,878 9,943 15,421 
Marketing and sales4,858
 5,793
Marketing and sales2,811 5,591 8,888 17,444 
General, administrative and other operating expenses9,002
 14,699
General, administrative and other operating expenses6,743 10,961 21,546 36,550 
Impairment of goodwill4,150
 —
Impairment of goodwill0 0 4,150 0 
Total operating expenses22,018
 25,849
Total operating expenses12,453 21,430 44,527 69,415 
Income (loss) from operations6,326
 (15,937)Income (loss) from operations(11,164)3,858 (10,310)(14,632)
Interest expense, net(3,221) (3,112)Interest expense, net(3,669)(3,155)(10,304)(9,378)
Other income (expense), net429
 (792)Other income (expense), net(525)(242)6,675 (938)
Income (loss) before income taxes3,534
 (19,841)Income (loss) before income taxes(15,358)461 (13,939)(24,948)
Income tax expense5,874
 1,407
Income tax expense1,056 3,790 9,982 7,916 
Net loss(2,340) (21,248)Net loss(16,414)(3,329)(23,921)(32,864)
Less: Net (income) loss attributable to noncontrolling interest77
 (112)
Less: Net income attributable to noncontrolling interestLess: Net income attributable to noncontrolling interest(193)(394)(168)(841)
Net loss attributable to ION$(2,263) $(21,360)Net loss attributable to ION$(16,607)$(3,723)$(24,089)$(33,705)
Net loss per share:   Net loss per share:
Basic$(0.16) $(1.52)Basic$(1.16)$(0.26)$(1.69)$(2.39)
Diluted$(0.16) $(1.52)Diluted$(1.16)$(0.26)$(1.69)$(2.39)
Weighted average number of common shares outstanding:   Weighted average number of common shares outstanding:
Basic14,230
 14,033
Basic14,278 14,181 14,255 14,104 
Diluted14,230
 14,033
Diluted14,278 14,181 14,255 14,104 
See accompanying Footnotes to Condensed Consolidated Financial Statements.




4


ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)
Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
(In thousands)
Net loss$(16,414)$(3,329)$(23,921)$(32,864)
Other comprehensive loss, net of taxes, as appropriate:
Foreign currency translation adjustments772 (1,028)(1,743)(998)
Comprehensive net loss(15,642)(4,357)(25,664)(33,862)
Comprehensive income attributable to noncontrolling interest(144)(394)(119)(841)
Comprehensive net loss attributable to ION$(15,786)$(4,751)$(25,783)$(34,703)
 Three Months Ended March 31,
 2020 2019
 (In thousands)
Net loss$(2,340) $(21,248)
Other comprehensive loss, net of taxes, as appropriate:   
Foreign currency translation adjustments(1,781) 970
Total other comprehensive income (loss), net of taxes(1,781) 970
Comprehensive net loss(4,121) (20,278)
Comprehensive (income) loss attributable to noncontrolling interest77
 (112)
Comprehensive net loss attributable to ION$(4,044) $(20,390)
See accompanying Footnotes to Condensed Consolidated Financial Statements.


5


ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 Three Months Ended March 31,
 2020 2019
 (In thousands)
Cash flows from operating activities:   
Net loss$(2,340) $(21,248)
Adjustments to reconcile net loss to cash (used in) provided by operating activities:   
Depreciation and amortization (other than multi-client data library)840
 1,035
Amortization of multi-client data library8,020
 11,100
Stock-based compensation expense617
 1,293
Impairment of multi-client data library1,167
 —
Impairment of goodwill4,150
 —
Deferred income taxes421
 (1,398)
Changes in operating assets and liabilities:   
Accounts receivable(21,868) (2,870)
Unbilled receivables2,666
 29,498
Inventories(772) 81
Accounts payable, accrued expenses and accrued royalties1,688
 (2,013)
Deferred revenue355
 (333)
Other assets and liabilities(1,910) 253
Net cash (used in) provided by operating activities(6,966) 15,398
Cash flows from investing activities:   
Investment in multi-client data library(9,668) (8,767)
Purchase of property, plant and equipment(496) (807)
Net cash used in investing activities(10,164) (9,574)
Cash flows from financing activities:   
Borrowings under revolving line of credit27,000
 —
Payments on notes payable and long-term debt(760) (715)
Other financing activities(10) (239)
Net cash provided by (used in) financing activities26,230
 (954)
Effect of change in foreign currency exchange rates on cash, cash equivalents and restricted cash470
 81
Net increase in cash, cash equivalents and restricted cash9,570
 4,951
Cash, cash equivalents and restricted cash at beginning of period33,118
 33,854
Cash, cash equivalents and restricted cash at end of period$42,688
 $38,805
See accompanying Footnotes to Condensed Consolidated Financial Statements.

ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
(UNAUDITED)
 Three Months Ended March 31, 2020
 Common Stock Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Loss Noncontrolling Interests 
Total
Deficit
 (In thousands, except shares)Shares Amount 
Balance at January 1, 202014,224,787
 $142
 $956,647
 $(974,291) $(19,318) $2,188
 $(34,632)
Comprehensive income (loss):             
Net loss—
 —
 —
 (2,263) —
 (77) (2,340)
Translation adjustments—
 —
 —
 —
 (1,781) (457) (2,238)
Stock-based compensation expense—
 —
 617
 —
 —
 —
 617
Vesting of restricted stock units/awards16,089
 —
 —
 —
 —
 —
 —
Vested restricted stock cancelled for employee minimum income taxes(750) —
 (10) —
 —
 —
 (10)
Balance at March 31, 202014,240,126
 $142
 $957,254
 $(976,554) $(21,099) $1,654
 $(38,603)
 Three Months Ended March 31, 2019
 Common Stock Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Loss Noncontrolling Interests 
Total
Deficit
 (In thousands, except shares)Shares Amount 
Balance at January 1, 201914,015,615
 $140
 $952,626
 $(926,092) $(20,442) $1,592
 $7,824
Comprehensive income (loss):            

Net (loss) income—
 —
 —
 (21,360) —
 112
 (21,248)
Translation adjustments—
 —
 —
 —
 970
 (39) 931
Stock-based compensation expense—
 —
 1,293
 —
 —
 —
 1,293
Exercise of stock options5,750
 —
 18
 —
 —
 —
 18
Vesting of restricted stock units/awards68,199
 1
 (1) —
 —
 —
 —
Vested restricted stock cancelled for employee minimum income taxes(20,044) —
 (257) —
 —
 —
 (257)
Balance at March 31, 201914,069,520
 $141
 $953,679
 $(947,452) $(19,472) $1,665
 $(11,439)
 Nine Months Ended September 30,
20202019
 (In thousands)
Cash flows from operating activities:
Net loss$(23,921)$(32,864)
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization (other than multi-client data library)2,936 2,903 
Amortization of multi-client data library16,674 29,787 
Stock-based compensation expense1,637 3,736 
Impairment of multi-client data library1,167 0 
Impairment of goodwill4,150 0 
Amortization of government relief funding expected to be forgiven(6,923)0 
Deferred income taxes237 (1,248)
Changes in operating assets and liabilities:
Accounts receivable21,065 2,115 
Unbilled receivables1,181 12,772 
Inventories77 729 
Accounts payable, accrued expenses and accrued royalties(6,429)1,528 
Deferred revenue(2,246)(2,398)
Other assets and liabilities3,563 2,244 
Net cash provided by operating activities13,168 19,304 
Cash flows from investing activities:
Investment in multi-client data library(19,841)(21,225)
Purchase of property, plant and equipment(865)(1,272)
Net cash used in investing activities(20,706)(22,497)
Cash flows from financing activities:
Borrowings under revolving line of credit27,000 15,000 
Payments under revolving line of credit(4,500)(15,000)
Proceeds from government relief funding6,923 0 
Payments on notes payable and long-term debt(1,814)(1,960)
Dividend payment to noncontrolling interest(217)0 
Other financing activities(91)(655)
Net cash provided by (used in) financing activities27,301 (2,615)
Effect of change in foreign currency exchange rates on cash, cash equivalents and restricted cash501 151 
Net increase (decrease) in cash, cash equivalents and restricted cash20,264 (5,657)
Cash, cash equivalents and restricted cash at beginning of period33,118 33,854 
Cash, cash equivalents and restricted cash at end of period$53,382 $28,197 
See accompanying Footnotes to Condensed Consolidated Financial Statements.

6



ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
(UNAUDITED)
Three Months Ended September 30, 2020
Common StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive LossNoncontrolling InterestsTotal
Deficit
 (In thousands, except shares)SharesAmount
Balance at July 1, 202014,245,829 $142 $957,746 $(981,773)$(21,833)$1,608 $(44,110)
Comprehensive income (loss):
Net (loss) income— — — (16,607)— 193 (16,414)
Translation adjustments— — — — 821 (49)772 
Dividend payment to noncontrolling interest
— — — — — (217)(217)
Stock-based compensation expense— — 543 — — — 543 
Exercise of stock options— — — — — — 0 
Vesting of restricted stock units/awards111,094 2 (2)— — — 0 
Vested restricted stock cancelled for employee minimum income taxes(41,470)— (98)— — — (98)
Balance at September 30, 202014,315,453 $144 $958,189 $(998,380)$(21,012)$1,535 $(59,524)
Nine Months Ended September 30, 2020
Common StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive LossNoncontrolling InterestsTotal
Deficit
 (In thousands, except shares)SharesAmount
Balance at January 1, 202014,224,787 $142 $956,647 $(974,291)$(19,318)$2,188 $(34,632)
Comprehensive income (loss):
Net (loss) income— — — (24,089)— 168 (23,921)
Translation adjustments— — — — (1,694)(604)(2,298)
Dividend payment to noncontrolling interest
— — — — — (217)(217)
Stock-based compensation expense— — 1,637 — — — 1,637 
Exercise of stock options5,000 — 15 — — — 15 
Vesting of restricted stock units/awards128,183 2 (2)— — — 0 
Vested restricted stock cancelled for employee minimum income taxes(42,517)— (108)— — — (108)
Balance at September 30, 202014,315,453 $144 $958,189 $(998,380)$(21,012)$1,535 $(59,524)
Three Months Ended September 30, 2019
Common StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive LossNoncontrolling InterestsTotal
Deficit
 (In thousands, except shares)SharesAmount
Balance at July 1, 201914,171,561 $142 $954,904 $(956,074)$(20,412)$2,059 $(19,381)
Comprehensive income (loss):
Net (loss) income— — — (3,723)394 (3,329)
Translation adjustment— — — (1,028)(169)(1,197)
Stock-based compensation expense— — 905 — — — 905 
Exercise of stock options58,400 — 26 — — — 26 
Vesting of restricted stock units/awards1,066 — — — — — 0 
Vested restricted stock cancelled for employee minimum income taxes(29,377)— (130)— — — (130)
Balance at September 30, 201914,201,650 $142 $955,705 $(959,797)$(21,440)$2,284 $(23,106)
7

Nine Months Ended September 30, 2019
Common StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive LossNoncontrolling InterestsTotal Deficit
 (In thousands, except shares)SharesAmount
Balance at January 1, 201914,015,615 $140 $952,626 $(926,092)$(20,442)$1,592 $7,824 
Comprehensive income (loss):
Net (loss) income— — — (33,705)— 841 (32,864)
Translation adjustment— — — — (998)(149)(1,147)
Stock-based compensation expense— — 3,736 — — — 3,736 
Exercise of stock options82,900 1 102 — — — 103 
Vesting of restricted stock units/awards202,697 2 (2)— — — 0 
Vested restricted stock cancelled for employee minimum income taxes(99,562)(1)(757)— — — (758)
Balance at September 30, 201914,201,650 $142 $955,705 $(959,797)$(21,440)$2,284 $(23,106)
See accompanying Footnotes to Condensed Consolidated Financial Statements.

8


ION GEOPHYSICAL CORPORATION AND SUBSIDIARIES
FOOTNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1)    Summary of Significant Accounting Policies
Basis of Presentation
The condensed consolidated balance sheet of ION Geophysical Corporation and its subsidiaries (collectively referred to as the “Company” or “ION,” unless the context otherwise requires) at December 31, 2019,, has been derived from the Company’s audited consolidated financial statements at that date. The condensed consolidated balance sheet at March 31,September 30, 2020, and the condensed consolidated statements of operations, condensed consolidated statements of comprehensive loss, condensed consolidated statements of stockholders' deficit for the three and nine months ended September 30, 2020 and 2019 and the condensed consolidated statements of cash flows for the threenine months ended March 31,September 30, 2020 and 2019, are unaudited. In the opinion of management, all adjustments of a normal recurring nature that are necessary for a fair presentation of the results of the interim period have been included. Interim results are not necessarily indicative of the operating results for a full year or of future operations. Intercompany transactions and balances have been eliminated.
The Company’s condensed consolidated financial statements reflect a non-redeemable noncontrolling interest in a majority-owned affiliate which is reported as a separate component of equity in “Noncontrolling interest” in the condensed consolidated balance sheets. Net income(income) loss attributable to noncontrolling interest is stated separately in the condensed consolidated statements of operations. The activity for this noncontrolling interest relates to proprietary processing projects in Brazil.
These condensed consolidated financial statements have been prepared using accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and applicable rules of Regulation S-X of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in annual financial statements presented in accordance with GAAP have been omitted. The accompanying condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.2019.
Overview
The COVID-19 pandemic caused the global economy to enter a recessionary period, which may be prolonged and severe, and significantly reducedreduce the availability of capital and liquidity from banks and other providers of credit. The exploration and production (“E&P&P”) industry is facing the doubledual impact of demand destructiondeterioration from COVID-19 and market oversupply from increased production, which caused oil and natural gas prices to decline significantly since the start of the year. While OrganizationBrent crude oil prices, which are most relevant to ION’s internationally focused business, dropped 66% during the first quarter from $66 on January 1, 2020 to $23 on March 31, 2020. By the end of the Petroleum Exporting Countries (“OPEC”)second quarter, Brent crude oil prices rebounded to $41 per barrel benefiting from increased global demand as pandemic restrictions started to ease and decreased production. Brent crude oil prices have remained relatively stable at that level throughout the third quarter. While the consistency is beneficial, prices are significantly lower compared to the start of the year. The record production cut agreed to by OPEC and other oil producing countries agreedwas extended through December 2020 in an effort to a production cut in April 2020,stabilize oil prices nonetheless declined further to record low levels during the month. Whileby limiting supply.
The dramatic commodity prices can be volatile,price decline earlier this sharp declineyear triggered E&P companies to reduce budgets and delay near-term spending, but also provided a catalyst to drive necessary cost restructuring and digital transformation of the E&P ecosystem. ION is focused on offshore international markets, which have been less steeply impacted than onshore North America. However, exploration offerings and data purchases are often discretionary and, therefore, receive disproportionately higher reductions than overall budget cuts. There has been a material slowdown in offshore seismic spending during the second and third quarters, and while we are seeing signs that could improve during the fourth quarter, we expect the market to remain challenging into 2021.
The Company expects continued portfolio rationalization and high grading as E&P companies seek to find the best return on investment opportunities to meet oil and gas demand in the next decade. Near-term, due to the impact of the COVID-19, project high grading will likely curtail demand for some ofbe more acute due to budget reductions. Over the Company’s products and services.  Spending on explorationlast several years, the Company has already strategically shifted its portfolio closer to the reservoir, where revenue tends to be amonghigher and more consistent. New Venture data acquisition offshore and Software and related personnel-based offshore services are expected to continue to be most impacted by COVID-19 travel restrictions. While offshore operations have been temporarily impacted by travel restrictions, the most discretionary andCompany believes the demand for digitalization technologies will remain strong. In some cases, ION technology is expected to bear somebe more relevant and valuable in the current environment (for instance, offerings that facilitate remote working).  
While third quarter revenues came in lower than prior year due to the repercussions of the deepest cuts in percentage terms, although spending reductions inoil price volatility earlier this year and the offshore basins whereongoing uncertainty from the COVID-19 pandemic, the Company operates are projectedmade progress executing its strategy. Backlog
9

increased 77% sequentially, reversing several consecutive quarters of steady decline, driven by the strategic shift to be less severe than onshore inenter the United States.
While3D new acquisition multi-client market. The Company continues to work closely with its clients to understand revised budgets and to scale its business appropriately. The Company partially mitigated the durationimpact of the current macroeconomic environment by fully benefiting from the structural changes and extent of COVID-19 is difficult to predict, the Company recorded its highest first quarter revenues since 2014. A number of large multi-client contractsassociated cost reductions that were closedoutlined in the first quarter 2020, some of which were delayed from the fourth quarter 2019, even after E&P market dynamics changed. The Company worked closely with clients to assess the effect of E&P budget reductions to its business and took decisive action to proactively manage its business.quarter. To further mitigate the impact of COVID-19 and oil price volatility, management implemented a plan to preserve cash and manage liquidity as follows:
Scaling•Scaled down personnel costs and operating expenses in April 2020 by another $18.0 million during the remaining nine months of 2020, building on the over $20.0 million (net of severance expense of $3.1 million) of cuts made in January 2020. These further reductions are primarily through a variety of furlough programs and reduced compensation arrangements across the Company’s worldwide workforce. The Company executives have taken a 20% base salary reduction and a tiered reduction scheme has been cascaded to the rest of the worldwide workforce. The Company’s Board of Directors hashave taken a 20% reduction in directors’ fees. In addition, the Company has curtailed use of external contractors, decreased travel and event costs and implemented new systems and processes that more efficiently support its business.
Reducing•Reduced capital expenditures to an estimated $20.0$25.0 million to $35.0 million (a portion of which will be pre-funded or underwritten by the customers), down from the original budget of $35.0 million to $50.0 million, to reflect both reduced seismic demand and travel/border restrictions impacting new data acquisition offshore. This provides flexibility to aggressively reduce cash outflows while shifting to muchsignificantly lower cost reimaging programs. 

•Applied for and continue to explore various government assistance programs, of which $6.9approximately $7.0 million has beenwas received in April 2020.and applied against qualifying expenditures during the second quarter. Receipt of this $6.9 millionassistance allowed the Company to avoid further staff reductions while supporting its ongoing operations. Additional global government
•Re-negotiated existing lease agreements for its significant locations to obtain rent relief of between $2.0 millionapproximately $4.0 million. The majority of the cash savings from the rent relief is expected to $7.0 million may be possible.benefit the Company from July 2020 to March 2021. See Note 12 “Lease Obligations” for further details.
•Announced the sale of its 49% ownership interest in INOVA Geophysical Equipment Limited for $12.0 million, that is expected to close during the second half of the year, subject to regulatory approvals and other closing conditions. As the regulatory review is taking longer than anticipated, closing will likely extend into 2021.
•Entered into a settlement agreement with WesternGeco ending the uncertainty surrounding the decade-long patent litigation. See Note 89 “Litigation” for further details.
The Company believes that the above management plan, which includes the use of government assistance programs, along with the Company’s existing cash balance and the undrawn remaining borrowing capacity under its Credit Facility will provide sufficient liquidity to meet the Company’s anticipated cash needs for the next twelve months. At September 30, 2020, the Company’s liquidity was $59.4 million, consisting of $51.1 million of cash (including net revolver borrowings of $22.5 million) and $8.3 million of remaining available borrowing capacity under the revolving credit facility, slightly below liquidity of $65.5 million from one year ago. The outlined management plan reflects the Company’s continued focus on preserving cash and managing liquidity in the current uncertain macroeconomic environment. In addition, the event the Company’s customers experience more extensive budget reductions and capital constraints further reducing demand for its services and products, resulting in deterioration of its revenues below its current forecasted levels, management may be required to update its plan by implementing further cost reductions and delaying capital investments. Additionally, the Company is actively exploring a number of strategic options to optimally address the $121 million Second Lien Notes (as defined in Note 5, “Long-term Debt”) ahead of its scheduled maturity on December 15, 2021. If by September 15, 2021 the Company has not (1) repaid the Second Lien Notes, (2) extended the maturity of the Second Lien Notes to a date not earlier than October 31, 2023, or (3) submitted a written proposal summarizing its plan to either repay or extend the notes to the agent for the lenders (as defined in Note 5, “Long-term Debt”) of the Credit Facility that has been approved by the agent, then the Credit Facility shall immediately become due and payable on such date. If the written proposal is submitted and approved by the agent by September 15, 2021, but the Company is unable to execute the approved proposal on or before October 31, 2021, the Credit Facility shall immediately become due and payable on such date. The Company reviewed its debt covenants as of September 30, 2020, and expects that it will remain in compliance for the next twelve months.months (see Note 5, “Long-term Debt” for further discussion of our covenants).
The Company believes that the above management plan, including actions already taken, gives the Company the ability to operate for at least the next twelve months from the date the condensed consolidated financial statements are issued.
Significant Accounting Policies
The Company’s significant accounting policies are disclosed in Note 1 “Summary of Significant Accounting Policies.” of the Annual Report on Form 10-K for the year ended December 31, 2019. There have been no changes in such policies or the application of such policies during the threenine months ended March 31,September 30, 2020 except as discussed in Note 2 “Recent Accounting Pronouncements.”

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Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires the use of estimates and assumptions by management that affects the reported amounts in the condensed consolidated financial statements and accompanying notes. Areas involving significant estimates include, but are not limited to, accounts and unbilled receivables, inventory valuation, sales forecast related to multi-client data library, impairment of property, plant and equipment and goodwill and deferred taxes. Actual results could materially differ from those estimates.
(2)    Recent Accounting Pronouncements
Accounting Pronouncements Recently Adopted
On January 1, 2020, the Company adopted Accounting Standards Update (“ASU”) No. 2016-13, “Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments.” The guidance replaces the incurred loss impairment methodology under the current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates referred to as the current expected credit loss (“CECL”) methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets ranging from short-term accounts receivables to long-term receivable financing. The Company adopted the standard using the prospective transition approach for its trade receivables and unbilled receivables. The adoption of the standard had no material impact on the Company’s condensed consolidated financial statements.
On January 1, 2020, the Company adopted ASU 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” This guidance simplifies the accounting for goodwill impairment by eliminating step 2 from the goodwill impairment test. As a result, an entity should recognize a goodwill impairment charge for the amount by which the reporting unit’s carrying amount exceeds its fair value. If fair value exceeds the carrying amount, no impairment should be recorded. Any loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Impairment loss on goodwill cannot be reversed once recognized. The goodwill balance at March 31, 2020 before impairment charge was comprised of $19.5 million in the Optimization Software & Services and $2.9 million in the E&P Technology & Services reporting units. The Company recognized an impairment charge related to the goodwill of its Optimization Software & Service reporting unit, included within Operations Optimization segment, of $4.2 million for the threenine months ended March 31,September 30, 2020. See Note 910 “Details of Selected Balance Sheet Accounts” for details.
(3)Segment Information
The Company evaluates and reviews its results of operations based on two2 reporting segments: E&P Technology & Services and Operations Optimization. Refer to Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for information about each business segment’s business, products and services.
The segments represent components of the Company for which separate financial information is available that is utilized on a regular basis by the Chief Operating Decision Maker in determining how to allocate resources and evaluate performance. The Company measures segment operating results based on income (loss) from operations.
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The following table is a summary of segment information (in thousands):
Three Months Ended March 31,Three Months Ended September 30,Nine Months Ended September 30,
2020 2019 2020201920202019
Net revenues:   Net revenues:
E&P Technology & Services:   E&P Technology & Services:
New Venture$1,441
 $13,471
New Venture$1,213 $5,905 $7,340 $24,394 
Data Library40,131
 9,948
Data Library5,085 27,288 52,083 55,030 
Total multi-client revenues41,572
 23,419
Total multi-client revenues6,298 33,193 59,423 79,424 
Imaging and Reservoir Services4,942
 3,684
Imaging and Reservoir Services3,795 7,048 12,410 16,443 
Total46,514
 27,103
Total10,093 40,241 71,833 95,867 
Operations Optimization:   Operations Optimization:
Optimization Software & Services4,427
 5,033
Optimization Software & Services3,007 6,895 10,811 17,648 
Devices5,473
 4,820
Devices3,134 6,103 12,735 18,455 
Total9,900
 9,853
Total6,141 12,998 23,546 36,103 
Total net revenues$56,414
 $36,956
Total net revenues$16,234 $53,239 $95,379 $131,970 
Gross profit (loss):


Gross profit (loss):
E&P Technology & Services$23,730
(a) 
$5,440
E&P Technology & Services$(1,092)$18,316 $24,902 $36,113 
Operations Optimization4,614
 4,516
Operations Optimization2,381 6,972 9,315 18,670 
Segment gross profit28,344
 9,956
Other—
 (44)
Total gross profit$28,344
 $9,912
Total gross profit$1,289 $25,288 $34,217 $54,783 
Gross margin:   Gross margin:
E&P Technology & Services51% 20%E&P Technology & Services(11)%46 %35 %38 %
Operations Optimization47% 46%Operations Optimization39 %54 %40 %

52 %
Total gross margin50% 27%Total gross margin8 %47 %36 %42 %
Income (loss) from operations:   Income (loss) from operations:
E&P Technology & Services$17,952
(a) 
$(1,615)E&P Technology & Services$(4,591)$11,878 $13,803 (a)$15,500 
Operations Optimization(3,259)
(b) 
170
Operations Optimization(232)2,994 (3,965)(b)5,808 
Support and other(8,367) (14,492)Support and other(6,341)(11,014)(20,148)(35,940)
Income (loss) from operations6,326
 (15,937)Income (loss) from operations(11,164)3,858 (10,310)(14,632)
Interest expense, net(3,221) (3,112)Interest expense, net(3,669)(3,155)(10,304)(9,378)
Other income (expense), net429
 (792)Other income (expense), net(525)(242)6,675 (c)(938)
Income (loss) before income taxes$3,534
 $(19,841)Income (loss) before income taxes$(15,358)$461 $(13,939)$(24,948)
(a)
(a)     Includes impairment of multi-client data library of $1.2 million for the nine months ended September 30, 2020.
(b)     Includes impairment of goodwill of $4.2 million for the nine months ended September 30, 2020.
(c)     Includes amortization of the government relief funding expected to be forgiven of $6.9 million for the nine months ended September 30, 2020.
Includes impairment of multi-client data library of $1.2 million for the three months ended March 31, 2020.
(b)
Includes impairment of goodwill of $4.2 million for the three months ended March 31, 2020.
Intersegment sales are insignificant for all periods presented.
(4)     Revenue From Contracts With Customers
The Company derives revenue from the (i) sale or license of multi-client and proprietary data, imaging services and reservoir services within its E&P Technologies & Services segment; (ii) sale, license and repair of seismic data acquisition systems and other equipment; and (iii) sale or license of seismic command and control software systems and software solutions for operations management within its Operations Optimization segment. All E&P Technology & Services’ revenues and the services component of Optimization Software & Services’ revenues under Operations Optimization segment are classified as service revenues. All other revenues are classified as product revenues.
The Company uses a five-step model to determine proper revenue recognition from customer contracts. Revenue is recognized when (i) a contract is approved by all parties; (ii) the goods or services promised in the contract are identified; (iii) the consideration the Company expects to receive in exchange for the goods or services promised is determined; (iv) the consideration is allocated to the goods and services in the contract; and (v) control of the promised goods or services is transferred to the customer. The Company is not required to disclose information about remaining contractual future performance obligations with an original term of one year or less. The Company does not have any contractual future performance obligations with an original term of over one year.

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Revenue by Geographic Area
The following table is a summary of net revenues by geographic area (in thousands):
Three Months Ended March 31,Three Months Ended September 30,Nine Months Ended September 30,
2020 2019 2020201920202019
North America$31,810
 $7,157
North America$479 $12,182 $37,920 $32,984 
Latin America9,804
 13,531
Latin America7,925 22,720 22,695 50,572 
Asia Pacific9,288
 1,867
Asia Pacific3,777 2,744 15,696 8,287 
Europe3,810
 10,392
Europe3,011 8,335 12,997 24,850 
Middle East954
 1,359
Middle East306 3,899 2,202 6,364 
Africa591
 2,389
Africa344 2,874 1,939 7,541 
Other157
 261
Other392 485 1,930 1,372 
Total$56,414
 $36,956
Total$16,234 $53,239 $95,379 $131,970 
See Note 3“Segment Information” for net revenue by segment for the three and nine months ended March 31,September 30, 2020 and 2019.
Unbilled Receivables
Unbilled receivables balances relate to revenues recognized on multi-client surveys, imaging and reservoir services and devices equipment repairs on a proportionate basis, and on licensing of multi-client data for which invoices have not yet been presented to the customer. The following table is a summary of unbilled receivables (in thousands):
March 31, 2020 December 31, 2019September 30, 2020December 31, 2019
New Venture$1,586
 $5,222
New Venture$4,144 $5,222 
Imaging and Reservoir Services5,643
 6,539
Imaging and Reservoir Services3,705 6,539 
Devices1,127
 54
Devices1,780 54 
Total$8,356
 $11,815
Total$9,629 $11,815 
The changes in unbilled receivables are as follows (in thousands):
 Unbilled receivables at December 31, 2019$11,815
 Recognition of unbilled receivables55,132
 Revenues billed to customers(58,591)
Unbilled receivables at March 31, 2020$8,356
 Unbilled receivables at December 31, 2019$11,815 
 Recognition of unbilled receivables (a)
91,024 
 Revenues billed to customers (a)
(93,210)
Unbilled receivables at September 30, 2020$9,629 
(a) Includes all gross revenue recognition and related billing activity of the Company. As a matter of process, all net revenue recognized is initially reflected as an unbilled receivable and subsequently billed to customers, as applicable, including net revenue for all of software and a portion of devices within the Operations Optimization segment, although they are billed at the time of recognition.
Deferred Revenue
Billing practices are governed by the terms of each contract based upon achievement of milestones or pre-agreed schedules. Billing does not necessarily correlate with revenue recognized on a proportionate basis as work is performed and control is transferred to the customer. Deferred revenue represents cash received in excess of revenue recognized as of the reporting period but to be recognized in future periods. The following table is a summary of deferred revenues (in thousands):
September 30, 2020December 31, 2019
New Venture$500 $1,956 
Imaging and Reservoir Services608 1,501 
Optimization Software & Services1,000 642 
Devices48 452 
Total$2,156 $4,551 
13
 March 31, 2020 December 31, 2019
New Venture$2,456
 $1,956
Imaging and Reservoir Services1,141
 1,501
Optimization Software & Services832
 642
Devices453
 452
Total$4,882
 $4,551

The changes in deferred revenues are as follows (in thousands):
Deferred revenue at December 31, 2019$4,551 
Cash collected in excess of revenue recognized1,961 
Recognition of deferred revenue (a)
(4,356)
Deferred revenue at September 30, 2020$2,156 
Deferred revenue at December 31, 2019$4,551
Cash collected in excess of revenue recognized1,613
Recognition of deferred revenue (a)
(1,282)
Deferred revenue at March 31, 2020$4,882

(a) The majority of deferred revenue recognized relates to Company’s Ventures group.
The Company expects to recognize the majority of deferred revenue within the next 12 months.
Credit Risks
For the threenine months ended March 31,September 30, 2020 the Company had two customers with sales that each exceeded 10% of the Company’s consolidated net revenues. For three months ended March 31,and 2019, the Company had one customer with sales that exceeded 10% of the Company’s consolidated net revenues. Revenues related to each of these customers are included within the E&P Technology & Services segment.
At March 31,September 30, 2020, the Company had one customertwo customers with balances that accounted for 51%39% of the Company’s total combined accounts receivable and unbilled receivable balances. The Company routinely evaluates the financial stability and creditworthiness of its customers. At March 31,September 30, 2019, the Company had two customers with a combined balance that accounted for 26%40% of the Company’s total combined accounts receivable and unbilled receivable balances.
The Company routinely evaluates the financial stability and creditworthiness of its customers. The Company has a corporate credit policy that is intended to minimize the risk of financial loss due to a customer’s inability to pay. Credit coverage decisions for customers are based on references, payment histories, financial and other data. The Company utilizes a third party trade credit insurance policy. The Company has historically not extended long-term credit to its customers.
(5)Long-term Debt

The following table is a summary of long-term debt (in thousands):    
 March 31, 2020 December 31, 2019September 30, 2020December 31, 2019
Senior secured second-priority lien notes (maturing December 15, 2021)
 $120,569
 $120,569
Senior secured second-priority lien notes (maturing December 15, 2021)
$120,569 $120,569 
Revolving credit facility (maturing August 16, 2023) (a)
 27,000
 —
Revolving credit facility (maturing August 16, 2023) (a)
22,500 0 
Equipment finance leases (Note 11) 1,595
 1,869
Equipment finance leases (Note 12)Equipment finance leases (Note 12)1,027 1,869 
Other debt 486
 972
Other debt0 972 
Costs associated with issuances of debt (1,708) (1,951)Costs associated with issuances of debt(1,220)(1,951)
Total 147,942
 121,459
Total142,876 121,459 
Current maturities of long-term debt (28,646) (2,107)Current maturities of long-term debt(23,527)(2,107)
Long-term debt, net of current maturities $119,296
 $119,352
Long-term debt, net of current maturities$119,349 $119,352 
(a) The maturity of the Credit Facility will accelerate to October 31, 2021 if the Company is unable to repay or extend the maturity of the Second Lien Notes.Notes (see detailed discussion below in “Revolving Credit Facility”).
Revolving Credit Facility
On August 16, 2018, ION Geophysical Corporation and its material U.S. subsidiaries — GX Technology Corporation, ION Exploration Products (U.S.A) Inc. and I/O Marine Systems Inc. (the “Material U.S. Subsidiaries”) — along with GX Geoscience Corporation, S. de R.L. de C.V., a limited liability company (Sociedad de Responsibilidad Limitada de Capital Variable) organized under the laws of Mexico, and a subsidiary of the Company (the “Mexican Subsidiary”) (the Material U.S. Subsidiaries and the Mexican Subsidiary are collectively, the “Subsidiary Borrowers”, together with ION Geophysical Corporation are the “Borrowers”) — the financial institutions party thereto, as lenders, and PNC Bank, National Association (“PNC”), as agent for the lenders, entered into that certain Third Amendment and Joinder to Revolving Credit and Security Agreement (the “Third Amendment”), amending the Revolving Credit and Security Agreement, dated as of August 22, 2014 (as previously amended by the First Amendment to Revolving Credit and Security Agreement, dated as of August 4, 2015 and the Second Amendment to Revolving Credit and Security Agreement, dated as of April 28, 2016, the “Credit Agreement”). The Credit Agreement, as amended by the First Amendment, the Second Amendment and the Third Amendment is herein called the “Credit Facility”).
The Credit Facility is available to provide for the Borrowers’ general corporate needs, including working capital requirements, capital expenditures, surety deposits and acquisition financing.
The Third Amendment amended the Credit Agreement to, among other things:
extend the maturity date of the Credit Facility by approximately four years (from August 22, 2019 tomatures on August 16, 2023),2023 and is subject to the Company’s retirement or extension of the maturity date of itsION Geophysical Corporation’s 9.125% Senior Secured Second Priority Notes due December 2021 (the “Second Lien Notes”). If by September 15, 2021 the Company has not (1) repaid the Second Lien Notes, as defined below, which mature on December 15, 2021;
increase(2) extended the maximum revolver amount by $10.0 million (from $40.0 million to $50.0 million);
increase the borrowing base percentagematurity of the net orderly liquidation value as it relates to the multi-client data library (not to exceed $28.5 million, up from the previous maximum of $15.0 million for the multi-client data library component);
include the eligible billed receivables of the Mexican Subsidiary upSecond Lien Notes to a maximum of $5.0 million indate not earlier than October 31, 2023, or (3) submitted a written proposal to PNC summarizing its plan
14

to either repay or extend the borrowing base calculationnotes that has been approved by PNC, then the Credit Facility shall immediately become due and joinspayable on such date. If the Mexican Subsidiary as a borrower thereunder (with a maximum exposure of $5.0 million)written proposal is submitted and requireapproved by PNC by September 15, 2021, but the equityCompany is unable to execute the approved proposal on or before October 31, 2021, the Credit Facility shall immediately become due and assets of the Mexican Subsidiary to be pledged to secure obligations under the facility;payable on such date.
modify the interest rate such that theThe maximum interest rate remains consistent with the fixed interest rate prior to the Third Amendment (that is 3.00% per annum for domestic rate loans and 4.00% per annum for LIBOR rate loans), but now lowers

the range down toloans with a minimum interest rate of 2.00% for domestic rate loans and 3.00% for LIBOR rate loans based on a leverage ratio for the preceding four-quarter period;
decrease theperiod. The terms include a minimum excess borrowing availability threshold (excess borrowing availability less than $6.25 million for five consecutive days or $5.0 million on any given day), which (if the Borrowers have minimum excess borrowing availability below any such threshold) triggers the agent’s right to exercise dominion over cash and deposit accounts; and
modify the trigger required to test for compliance with the fixed charges coverage ratio, which is further described below.accounts.
The maximum amount available under the Credit Facility is the lesser of $50.0 million or a monthly borrowing base. The borrowing base under the Credit Facility will increase or decrease monthly using a formula based on certain eligible receivables, eligible inventory and other amounts, including a percentage of the net orderly liquidation value of the Borrowers’ multi-client library.library (not to exceed $28.5 million for the multi-client data library component). The borrowing base calculation includes the eligible billed receivables of the Mexican Subsidiary up to a maximum of $5.0 million. At March 31,September 30, 2020, there was $27.0$22.5 million outstanding indebtedness under the Credit Facility and the undrawn remaining borrowing base capacity was $11.1$8.3 million.
The obligations of Borrowers under the Credit Facility are secured by a first-priority security interest in 100% of the stock of the Subsidiary Borrowers and 65% of the equity interest in ION International Holdings L.P., and by substantially all other assets of the Borrowers. However, the first-priority security interest in the other assets of the Mexican Subsidiary is capped to a maximum exposure of $5.0 million.
The Credit Facility contains covenants that, among other things, limit or prohibit the Borrowers, subject to certain exceptions and qualifications, from incurring additional indebtedness in excess of permitted indebtedness (including finance lease obligations), repurchasing equity, paying dividends or distributions, granting or incurring additional liens on the Borrowers’ properties, pledging shares of the Borrowers’ subsidiaries, entering into certain merger transactions, entering into transactions with the Company’s affiliates, making certain sales or other dispositions of the Borrowers’ assets, making certain investments, acquiring other businesses and entering into sale-leaseback transactions with respect to the Borrowers’ property. The Credit Facility contains customary event of default provisions (including a “change of control” event affecting ION Geophysical Corporation).
The Credit Facility requires that the Borrowers maintain a minimum fixed charge coverage ratio of 1.1 to 1.0 as of the end of each fiscal quarter during the existence of a covenant testing trigger event. The fixed charge coverage ratio is defined as the ratio of (i) ION Geophysical Corporation’s earnings before interest, taxes, depreciation and amortization (“EBITDA”), minus unfunded capital expenditures made during the relevant period, minus distributions (including tax distributions) and dividends made during the relevant period, minus cash taxes paid during the relevant period, to (ii) certain debt payments made during the relevant period. A covenant testing trigger event occurs upon (a) the occurrence and continuance of an event of default under the Credit Facility or (b) by a two-step process based on (i) a minimum excess borrowing availability threshold (excess borrowing availability less than $6.25 million for five consecutive days or $5.0 million on any given day), and (ii) the Borrowers’ unencumbered cash maintained in a PNC deposit account is less than the Borrowers’ then outstanding obligations.
At March 31,September 30, 2020, the Company was in compliance with all of the covenants under the Credit Facility.
The Credit Facility contains customary event of default provisions (including a “change of control” event affecting ION Geophysical Corporation), the occurrence of which could lead to an acceleration of ION Geophysical Corporation’s obligations under the Credit Facility.
Senior Secured Notes
ION Geophysical Corporation’s 9.125% Senior SecuredThe Second PriorityLien Notes due December 2021 (the “Second Lien Notes”) are senior secured second-priority obligations guaranteed by the Material U.S. Subsidiaries and the Mexican Subsidiary (each as defined above and herein below, with the reference to the Second Lien Notes, the “Guarantors”). Interest on the Second Lien Notes is payable semiannually in arrears on June 15 and December 15 of each year during their term, except that the interest payment otherwise payable on June 15, 2021 will be payable on December 15, 2021.
The April 2016 indenture governing the Second Lien Notes contains certain covenants that, among other things, limits or prohibits ION Geophysical Corporation’s ability and the ability of its restricted subsidiaries to take certain actions or permit certain conditions to exist during the term of the Second Lien Notes, including among other things, incurring additional indebtedness in excess of permitted indebtedness, creating liens, paying dividends and making other distributions in respect of ION Geophysical Corporation’s capital stock, redeeming ION Geophysical Corporation’s capital stock, making investments or certain other restricted payments, selling certain kinds of assets, entering into transactions with affiliates, and effecting mergers or consolidations. These and other restrictive covenants contained in the Second Lien Notes Indenture are subject to certain exceptions and qualifications. All of ION Geophysical Corporation’s subsidiaries are currently restricted subsidiaries.
At March 31,September 30, 2020, the Company was in compliance with all of the covenants under the Second Lien Notes.
15

On or after December 15, 2019, the Company may, on one or more occasions, redeem all or a part of the Second Lien Notes at the redemption prices set forth below, plus accrued and unpaid interest and special interest, if any, on the Second Lien Notes redeemed during the twelve-month period beginning on December 15th of the years indicated below:

DatePercentage
2019105.50%
2020103.50%
2021100.00%
(6)    Government Relief Funding
On April 11, 2020, the Company entered into a Note Agreement (“Note”) with PNC amounting to $6.9 million pursuant to the Coronavirus Aid, Relief, and Economic Security Act’s (“CARES Act”) Paycheck Protection Program (“PPP”). Amounts outstanding under this Note will bear interest at 1% per annum as of the date of disbursement. Interest will be calculated based on the actual number of days that principal is outstanding over a year of 360 days. The Note matures in two years after the receipt of the loan proceeds.
The Company is in the process of applying to PNC for forgiveness of the amount due on this Note in an amount based on the sum of the following costs incurred by the Company’s US operations during the 24-week period beginning on the date of first disbursement (For payroll costs, it is beginning on the date of the first pay period following disbursement. For non-payroll costs, it is beginning on the date of first disbursement.) of this Note: (a) payroll costs; (b) any payment on a covered rent obligation; and (c) any covered utility payment. The amount of forgiveness shall be calculated (and may be reduced) in accordance with the requirements of the PPP, including the provisions of Section 1106 of the CARES Act. The forgiveness amount will be subject to the Small Business Administration’s review. Any outstanding principal amount under this Note that is not forgiven under the PPP shall convert to an amortizing term loan.
The Company recognized the Note following the government grant accounting by analogy to International Accounting Standards (“IAS”) 20, “Accounting for Government Grants and Disclosure of Government Assistance” (“IAS 20”). In accordance with IAS 20, a deferred income liability is recognized for the principal amount estimated to be forgiven and is amortized to other income on a systematic and rational basis. Any outstanding principal amount not expected to be forgiven is recognized as other debt. As the Company expects that the full amount of the Note will be forgiven, the entire $6.9 million was recognized as a deferred income liability during second quarter and fully amortized to other income in the condensed consolidated income statements for the six months ended June 30, 2020, as the related expenses it was intended to offset were incurred from April 2020 to June 2020. If, despite the Company’s good-faith belief that given its circumstances the Company satisfied all eligible requirements for the PPP Loan, the Company is later determined to have not been in compliance with these requirements or it is otherwise determined that it was ineligible to receive the PPP Loan, the Company may be required to repay the PPP Loan in its entirety and/or be subject to additional penalties. Should the Company be audited or reviewed by federal or state regulatory authorities as a result of filing an application for forgiveness of the PPP Loan or otherwise, such audit or review could result in a change in the Company’s estimate of the amount of forgiveness recorded in the condensed consolidated financial statements.
(7)    Net Loss Per Share
Basic net loss per share is computed by dividing net loss applicableattributable to common sharesION by the weighted average number of common shares outstanding during the period. DilutedIn computing diluted net incomeloss per commonshare, basic net loss per share is determinedadjusted based on the assumption that dilutive restricted stock and restricted stock unit awards have vested and outstanding dilutive stock options have been exercised and the aggregate proceeds were used to reacquire common stock using the average price of such common stock for the period. The total number of shares issuable pursuant to outstanding stock options at March 31,September 30, 2020 and 2019 of 669,209569,673 and 778,875,700,759, respectively, were excluded as their inclusion would have an anti-dilutive effect. The total number of shares issuable pursuant to restricted stock unitsunit awards outstanding at March 31,September 30, 2020 and 2019 of 903,204762,277 and 988,426,926,917, respectively, were excluded as their inclusion would have an anti-dilutive effect.
(7)(8)    Income Taxes
The Company maintains a valuation allowance for substantially all of its deferred tax assets. A valuation allowance is 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 record a valuation allowance for the substantial majority of its deferred tax assets until there is sufficient evidence to warrant reversal.
16

The tax provision for the threenine months ended March 31,September 30, 2020 has been calculated using the Company’s overall estimated annual effective tax rate based on projected 2020 full year results. The Company’s effective tax rates for the three and nine months ended March 31, 2020 and 2019 were 166.2% and (7.1)%, respectively. The Company’s effective tax rates for the three months ended March 31,September 30, 2020 and 2019 were negatively impacted by the change in valuation allowance related to U.S. operating losses for which the Company cannot currently recognize a tax benefit. The Company’s effective tax raterates for the threenine months ended March 31,September 30, 2020 waswere also negatively impacted by the establishment of a valuation allowance related to certain foreign operating losses. Due to the impact of the valuation allowances on tax expense, the Company’s effective tax rates are not meaningful for all periods presented. The Company’s income tax expense for the threenine months ended March 31,September 30, 2020 of $5.9$10.0 million primarily relates to results from the Company’s non-U.S. businesses, including $2.2 million of valuation allowance. The valuation allowance was established as a result of a change in the expectation of future revenues after entering into the settlement agreement with WesternGeco described in Note 89 “Litigation”.
In response to the global pandemic related to COVID-19, the President of the United States signed into law the Coronavirus Aid, Relief, and Economic SecurityCARES Act (the “CARES Act”) on March 27, 2020.  The CARES Act provides numerous relief provisions for corporate tax payers, including modification of the utilization limitations on net operating losses, favorable expansions of the deduction for business interest expense under Internal Revenue Code Section 163(j), and the ability to accelerate timing of refundable AMT credits. For the threenine months ended March 31,September 30, 2020, there were no material tax impacts to our condensed consolidated financial statements as it relates to COVID-19 measures. The Company received an AMT credit refund of $0.8 million for the nine months ended September 30, 2020. The Company continues to monitor additional guidance issued by the U.S. Treasury Department, the Internal Revenue ServicesService and others.
At March 31,September 30, 2020, the Company has approximately $0.4 million of unrecognized tax benefits and does not expect to recognize 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.
At March 31,September 30, 2020, the Company’s U.S. federal tax returns for 2016 and subsequent years remain subject to examination by tax authorities. In the Company’s foreign tax jurisdictions, tax returns for 2014 and subsequent years generally remain open to examination.

(8)
(9)Litigation
WesternGeco
Settlement
On April 7, 2020, the Company entered into a settlement agreement with WesternGeco that ended the ongoing litigation.
Pursuant to the settlement agreement, WesternGeco granted the Company a license to the underlying patents, lifted the injunction that prevented the Company from manufacturing DigiFIN®in the United States and, on April 13, 2020, the District Court permanently dismissed the pending lawsuit.

In exchange, the Company agreed to pay WesternGeco a settlement based on future revenues from the Company’s multi-client data library, consisting of (1) small percentage of 2D multi-client latedata library sales for a ten yearten-year period, and (2) the transfer of a majority of the Company’s future revenue share relating to the parties’ existing joint multi-client reimaging programs offshore Mexico (WesternGeco will receive 90%, instead of 50%, of net revenues from the program, except that the revenue share for the Perdido South portion of the program shall remain 50/50). A copy of the settlement agreement is filed as an exhibit to this Form 10-Q.Mexico.
Background
In June 2009, WesternGeco L.L.C. (“WesternGeco”) filed a lawsuit against the Company in the United States District Court for the Southern District of Texas (the “District Court”). In the lawsuit, styled WesternGeco L.L.C. v. ION Geophysical Corporation, WesternGeco alleged that the Company had infringed four4 of their patents concerning marine seismic surveys.
Trial began in July 2012, and the jury returned a verdict in August 2012. The jury found that the Company infringed the six6 “claims” contained in four4 of WesternGeco’s patents by supplying the Company’s DigiFIN® lateral streamer control units from the United States. (In patent law, a “claim” is a technical legal term; an infringer infringes on one or more “claims” of a given patent.)
In May 2014, the District Court entered a Final Judgment against the Company in the amount of $123.8 million. The Final Judgment also enjoined the Company from supplying DigiFINs or any parts unique to DigiFINs in or from the United States.
As of 2018, the Company had paid WesternGeco the $25.8 million of the Final Judgment (the portion of the judgment representing reasonable royalty damages and enhanced damages, plus interest).
17

The balance of the judgment against the Company ($98.0 million,million), representing lost profits from surveys performed by the Company’s customers outside of the United State,States, plus interest) was vacated by the United States Court of Appeals for the Federal Circuit (the award of lost profit damages was vacated because the Patent Trial and Appeal Board of the Patent and Trademark Office invalidated four of the five patent claims that could have supported an award of lost profit), and a new trial ordered, to determine what lost profit damages, if any, WesternGeco was entitled to.
As noted above, the lawsuit has been dismissed in accordance with the parties’ settlement agreement.
Other Litigation
In July 2018, the Company prevailed in an arbitration that it initiated against the Indian Directorate General of Hydrocarbons (“DGH”) relating to the Company’s ability to continue to license data under the Company’s IndiaSPAN program. The DGH filed a lawsuit in court in India to vacate the arbitration award; in connection with that lawsuit, the Company was ordered to escrow approximately $4.5 million in sales proceeds that it had received in respect of sales from the IndiaSPAN program, pending the outcome of the DGH’s challenge to the arbitration award. The Company challenged the escrow order, but on December 9, 2019, the Supreme Court of India ordered the Company to comply with it, which would have required the Company to deposit approximately $4.5 million in escrow in late February 2020. Since then, the Company received a court order deferring the deadline for depositing the required amount in escrow from late February 2020 to late March 2020.it. The Company prepared a petition to file with the court to request that thea March 2020 deadline to deposit approximately $4.5 million in escrow in early 2020 be extended due to the changes to the Company’s business, and to the markets, that have been spurred by the COVID-19 pandemic. The Company was unable to file the application because the courts in India arewere closed due to the pandemic (other than for emergencies), and arewere not accepting filings.filings at that time. The Company served a copy of its draft petition on the DGH’s counsel and intendintends to file it as soon asin advance of the courts re-open and resume accepting filings.next hearing, which has been repeatedly delayed due to the COVID-19 pandemic. The Company prevailed on the merits in the arbitration and expectexpects to have that award upheld in Indian court, which would result in release of the Company’s portion of the escrowed money. The DGH’s request to vacate the arbitration award is currently scheduled to be heard by the court in India on July 15,January 18, 2021. The Company has not escrowed the money as of September 30, 2020.
The Company has been named in various other 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 effect on its financial condition or results of operations.

(9)(10)    Details of Selected Balance Sheet Accounts
Inventories
A summary of inventories follows (in thousands):September 30, 2020December 31, 2019
Raw materials and subassemblies$18,622 $18,509 
Work-in-process1,372 2,079 
Finished goods4,652 4,932 
Less: reserve for excess and obsolete inventories(12,773)(13,333)
Inventories, net$11,873 $12,187 
18

A summary of inventories follows (in thousands):March 31, 2020 December 31, 2019
Raw materials and subassemblies$18,181
 $18,509
Work-in-process2,340
 2,079
Finished goods5,518
 4,932
Less: reserve for excess and obsolete inventories(13,219) (13,333)
Inventories, net$12,820
 $12,187
Property, Plant and Equipment
A summary of property, plant and equipment follows (in thousands):March 31, 2020 December 31, 2019A summary of property, plant and equipment follows (in thousands):September 30, 2020December 31, 2019
Buildings$15,665
 $15,486
Buildings$15,739 $15,486 
Machinery and equipment133,722
 133,048
Machinery and equipment133,900 133,048 
Seismic rental equipment1,668
 1,669
Seismic rental equipment1,851 1,669 
Furniture and fixtures3,158
 3,347
Furniture and fixtures3,164 3,347 
Other29,955
 31,142
Other (a)
Other (a)
30,269 31,142 
Total184,168
 184,692
Total184,923 184,692 
Less: accumulated depreciation(134,909) (134,951)Less: accumulated depreciation(137,143)(134,951)
Less: impairment of long-lived assets(36,553) (36,553)Less: impairment of long-lived assets(36,553)(36,553)
Property, plant and equipment, net$12,706
 $13,188
Property, plant and equipment, net$11,227 $13,188 
(a) Consists primarily of cable-based ocean bottom acquisition technologies that were fully impaired.
Total depreciation expense, including amortization of assets recorded under equipment finance leases, for both the threenine months ended March 31,September 30, 2020 and 2019 was $0.8 million. No$2.8 million and $2.4 million, respectively. NaN impairment charge was recognized during the threenine months ended March 31,September 30, 2020 and 2019.
Multi-ClientMulti-client Data Library
The change in multi-client data library are as follows (in thousands):March 31, 2020 December 31, 2019The change in multi-client data library are as follows (in thousands):September 30, 2020December 31, 2019
Gross costs of multi-client data creation$1,010,909
 $1,007,762
Gross costs of multi-client data creation$1,018,509 $1,007,762 
Less: accumulated amortization(824,421) (816,401)Less: accumulated amortization(833,075)(816,401)
Less: impairments to multi-client data library(132,144) (130,977)Less: impairments to multi-client data library(132,145)(130,977)
Multi-client data library, net$54,344
 $60,384
Multi-client data library, net$53,289 $60,384 
Total amortization expense for the threenine months ended March 31,September 30, 2020 and 2019 was $8.0$16.7 million and $11.1$29.8 million, respectively. For the threenine months ended March 31,September 30, 2020, the Company recognized an impairment to multi-client data library of $1.2 million. NoNaN impairment to multi-client data library was recognized during the threenine months ended March 31,September 30, 2019.

Goodwill
Goodwill GoodwillE&P Technology & Services Optimization Software & ServicesTotal
(In thousands)
Balance at January 1, 2019Balance at January 1, 2019$2,943 $19,972 $22,915 
E&P Technology & Services Optimization Software & Services Total
Balance at January 1, 2019$2,943
 $19,972
 $22,915
Impact of foreign currency translation adjustments—
 670
 670
Impact of foreign currency translation adjustments0 670 670 
Balance at December 31, 20192,943
 20,642
 23,585
Balance at December 31, 20192,943 20,642 23,585 
Impairment of goodwill—
 (4,150) (4,150)Impairment of goodwill0 (4,150)(4,150)
Impact of foreign currency translation adjustments—
 (1,137) (1,137)Impact of foreign currency translation adjustments0 (751)(751)
Balance at March 31, 2020$2,943
 $15,355
 $18,298
Balance at September 30, 2020Balance at September 30, 2020$2,943 $15,741 $18,684 
The Company, following the qualitative consideration, assessed the relevant events and circumstances in evaluating whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. During the first quarter of 2020, markets for oil and gas, as well as other commodities and equities, have experienced significant volatility and price declines amid concerns over the economic effects of the COVID-19 pandemic. As a result, the Company’s stock price experienced a significant decline during the first quarter of 2020.decline. Based on these facts, the Company performed a goodwill impairment test at March 31, 2020 to determine if it was more likely than not that the fair value of certain reporting units werewas less than their carrying value.
19

The Company, following the quantitative consideration, compared the fair value of each reporting unit against its carrying value. If the carrying value of the reporting unit exceeds the fair value, an impairment loss shall be recognized in an amount equal to that excess. The fair value of each reporting unit at March 31, 2020 was determined using a discounted cash flow model. The Company utilized a discount rate of 19% for both reporting units. The Company used reasonable assumptions based on historical data supplemented by anticipated market conditions and estimated growth rates. However, given the uncertainty in determining the assumptions underlying a discounted cash flow analysis, actual results may differ which could result in additional impairment chargecharges in the future.
TheAs a result of this assessment, the Company recorded an impairment charge of $4.2 million for the threenine months ended March 31,September 30, 2020 related to its Optimization Software & Services reporting unit, which is included within the Operations Optimization segment. No impairment charge was recognized for the E&P Technology Services reporting unit for the threenine months ended March 31,September 30, 2020.
(10)(11)    Stockholder's Equity and Stock-Based Compensation Expense
Stock-Based Compensation
The total number of shares issued or reserved for future issuance under outstanding stock options at March 31,September 30, 2020 and 2019 was 669,209569,673 and 778,875,700,759, respectively, and the total number of shares of restricted stock and shares reserved for restricted stock units outstanding at March 31,September 30, 2020 and 2019 was 903,204762,277 and 988,426,926,917, respectively. The total number of stock appreciation rights (“SARs”) awards outstanding at March 31,September 30, 2020 and 2019 was 937,597811,415 and 1,305,013,963,013, respectively. The following table presents a summary of the activity related to stock options, restricted stock, restricted stock unit awards and SARs awards for the threenine months ended March 31,September 30, 2020:
Stock Options Restricted Stock and Unit Awards Stock Appreciation RightsStock OptionsRestricted Stock and Unit AwardsStock Appreciation Rights
Number of SharesNumber of Shares
Outstanding at December 31, 2019689,209
 908,754
 954,679
Outstanding at December 31, 2019689,209 908,754 954,679 
Granted—
 67,500
 —
Granted0 67,500 0 
Stock options and SARs exercised/restricted stock and unit awards vested—
 (16,089) —
Stock options and SARs exercised/restricted stock and unit awards vested(5,000)(128,183)0 
Cancelled/forfeited(20,000) (56,961) (17,082)Cancelled/forfeited(114,536)(85,794)(143,264)
Outstanding at March 31, 2020669,209
 903,204
 937,597
Outstanding at September 30, 2020Outstanding at September 30, 2020569,673 762,277 811,415 
Stock-based compensation expense recognized for the threenine months ended March 31,September 30, 2020 and 2019, totaled $0.6$1.6 million and $1.3$3.7 million, respectively. SARs (credit) expense recognized for the threenine months ended March 31,September 30, 2020 and 2019, totaled $(1.1)$(1.0) million and $4.5$2.7 million, respectively.

SARs awards are considered liability awards as they are ultimately settled in cash. As such, these amounts are incrementally accrued in the liability section of the condensed consolidated balance sheets over the service period. All of the Company’s currently outstanding SARs awards achieve vesting through both a market condition and a service condition. SARs awards that are fully vested under both conditions are measured at intrinsic value (i.e. the difference between the market price on the last day of the quarter and the strike price of the awards times the number of awards vested and outstanding) and marked to market each quarter until settled. SARs awards that are not fully vested are incrementally accrued over the service period and adjusted to their fair value each quarter until settled based on a valuation model. The Company calculated the fair value of each award at March 31,September 30, 2020 and December 31, 2019 using a Monte Carlo simulation model. The following assumptions were used:
Risk-free interest rates1.9%
Expected lives (in years)5.31
Expected dividend yield—0 %
Expected volatility79%

(11)
20

(12)    Lease Obligations
The Company leases offices, processing centers, warehouse spaces and, to a lesser extent, certain equipment. These leases have remaining terms of 1 year to 10 years, some of which have options to extend for up to 10 years and/or options to terminate within 1 year. The options to renew are not recognized as part of the Company’s right-of-use assets and operating lease liabilities as the Company is not reasonably certain that it will exercise these options.
In January 2020, the Company amended its existing Houston, Texas headquarters lease agreement by extending the lease term from September 30, 2023 to June 30, 2029 and surrendering back to the landlord floors for which the Company had previously vacated. In July 2020, the Company re-negotiated the above-mentioned lease agreement to modify the rent abatement period from October 2023 through February 2024 to July 2020 through March 2021.
In May 2020, the Company amended its Houston data center lease agreement to reflect changes in the monthly base rent throughout the term of the lease and extend the lease term three months to December 2025. The execution of this amendment and the amendment to the Houston, Texas headquarters lease resulted in the Company obtaining rent relief of approximately $4.0 million.
Total operating lease expense, including short-term lease expense was $2.5$8.1 million and $3.1$8.9 million for the threenine months ended March 31,September 30, 2020 and 2019, respectively.
Future maturities of lease obligations are as follows (in thousands):
For the year ending March 31,Operating Leases Finance Leases Total
2021$11,260
 $1,254
 $12,514
20229,618
 443
 10,061
20239,538
 —
 9,538
20246,783
 —
 6,783
20258,878
 —
 8,878
Thereafter19,906
 —
 19,906
Total lease payments65,983
 1,697
 67,680
Less imputed interest(15,579) (102) (15,681)
Total$50,404
 $1,595
 $51,999
The weighted average remaining lease term as of March 31, 2020 and December 31, 2019 was 5.37 years and 4.71 years, respectively. The weighted average discount rate used to determine the operating lease liability at March 31, 2020 and December 31, 2019 was 6.51% and 6.47%, respectively.
 Three Months Ended March 31,
 2020 2019
Cash paid for amounts included in the measurement of lease liabilities:   
Operating leases$2,604
 $3,156
Equipment finance leases275
 281
Equipment Finance Leases
The Company has entered into equipment finance leases that are due in installments for the purpose of financing the purchase of computer equipment through August 2021. Interest accrues under these leases at a rate of 8.7% per annum, and the leases are collateralized by liens on the computer equipment. The assets are amortized over the lesser of their related lease terms or their estimated useful lives and such charges are reflected within depreciation expense.

(12)(13)    Supplemental Cash Flow Information and Non-cash Activity
Supplemental disclosure of cash flow information are as follows (in thousands):
Nine Months Ended September 30,
20202019
Cash paid during the period for:
Interest$6,628 $6,085 
Income taxes6,759 7,607 
Non-cash items from investing and financing activities:
Investment in multi-client data library in accounts payable and accrued expenses0 4,741 
 Three Months Ended March 31,
 2020 2019
Cash paid during the period for:   
Interest$160
 $198
Income taxes4,304
 3,176


The following table is a reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated balance sheets:
September 30,
20202019
(In thousands)
 Cash and cash equivalents$51,056 $27,894 
 Restricted cash included in prepaid expenses and other assets2,326 (a)303 
 Total cash, cash equivalents, and restricted cash shown in statements of cash flows$53,382 $28,197 
(a) Relates to letters of credit issued during third quarter 2020, primarily in connection with the Houston office lease deposit.

21
 March 31,
 2020 2019
 (In thousands)
 Cash and cash equivalents$42,663
 $38,407
 Restricted cash included in prepaid expenses and other current assets—
 398
 Restricted cash included in other long-term assets25
 —
 Total cash, cash equivalents, and restricted cash shown in statements of cash flows$42,688
 $38,805


(13)(14)    Fair Value of Financial Instruments
Authoritative guidance on fair value measurements defines fair value, establishes a framework for measuring fair value and stipulates the related disclosure requirements. The Company follows a three-level hierarchy, under which the fair value hierarchy prioritizes the inputs used to measure fair value. The three‑tieredthree-tiered hierarchy is summarized as follows:
Level 1—Quoted prices in active markets for identical assets and liabilities.
Level 2—Other significant observable inputs.inputs including quoted prices or other market data for similar assets and liabilities in active markets or quoted prices for identical or similar assets and liabilities in less active markets.
Level 3—Significant unobservable inputs.inputs that require significant judgment for which there is little or no market data.
Due to their highly liquid nature, the amount of the Company’s other financial instruments, including cash and cash equivalents, restricted cash, accounts and unbilled receivables, accounts payable and accrued multi-client data library royalties, represent their approximate fair value.
The carrying amounts of the Company’s long-term debtSecond Lien Notes at March 31,September 30, 2020 and December 31, 2019 were $149.7$120.6 million and $123.4 million, respectively, compared to its fair values of $77.4$87.9 million and $116.6$113.8 million at March 31,September 30, 2020 and December 31, 2019, respectively. Market conditions could cause an instrument to be reclassified from Level 1 to Level 2, or Level 2 to Level 3. The fair value of the long-term debtSecond Lien Notes was reclassified from Level 1 to Level 2 during the nine months ended September 30, 2020 resulting from less active market trading. The fair value of the Second Lien Notes was calculated using Level 2 inputs using significant observable data points for similar liabilities where estimated values are determined from observable transactions.
The carrying amount of any borrowings outstanding under the Credit Facility approximate fair value, as the interest rate is variable based on LIBOR and reflective of market rates.
Fair value measurements are applied with respect to non-financial assets and liabilities when possible indicators of impairment exists,exist, which would consist primarily of goodwill, multi-client data library and property, plant and equipment. The fair value of these assets is determined based on valuation techniques using the best information available and may include market comparables and discounted cash flow projections.
(14)(15)    Condensed Consolidating Financial Information
The Second Lien Notes were issued by ION Geophysical Corporation and are guaranteed by Guarantors, all of which are wholly owned subsidiaries. The Guarantors have fully and unconditionally guaranteed the payment obligations of ION Geophysical Corporation with respect to the Second Lien Notes. The following condensed consolidating financial information presents the results of operations, financial position and cash flows for:
•ION Geophysical Corporation and the Guarantors (in each case, reflecting investments in subsidiaries utilizing the equity method of accounting).
•All other subsidiaries of ION Geophysical Corporation that are not Guarantors.
•The consolidating adjustments necessary to present ION Geophysical Corporation’s results on a consolidated basis.

This condensed consolidating financial information should be read in conjunction with the accompanying condensed consolidated financial statements and footnotes. For additional information pertaining to the Second Lien Notes, See Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II of this Form 10-Q.
22

March 31, 2020September 30, 2020
Balance SheetION Geophysical Corporation The Guarantors All Other Subsidiaries Consolidating Adjustments Total ConsolidatedBalance SheetION Geophysical CorporationThe GuarantorsAll Other SubsidiariesConsolidating AdjustmentsTotal Consolidated
(In thousands)(In thousands)
ASSETS         ASSETS
Current assets:         Current assets:
Cash and cash equivalents$28,602
 $54
 $14,007
 $—
 $42,663
Cash and cash equivalents$32,106 $31 $18,919 $0 $51,056 
Accounts receivable, net8
 42,390
 8,751
 —
 51,149
Accounts receivable, net0 4,985 3,303 0 8,288 
Unbilled receivables—
 5,206
 3,150
 —
 8,356
Unbilled receivables0 7,186 2,443 0 9,629 
Inventories, net—
 7,603
 5,217
 —
 12,820
Inventories, net0 7,182 4,691 0 11,873 
Prepaid expenses and other current assets3,168
 1,319
 1,194
 —
 5,681
Prepaid expenses and other current assets3,858 1,006 997 0 5,861 
Total current assets31,778
 56,572
 32,319
 —
 120,669
Total current assets35,964 20,390 30,353 0 86,707 
Deferred income tax asset—
 7,799
 106
 —
 7,905
Deferred income tax asset0 7,982 110 0 8,092 
Property, plant and equipment, net1,609
 7,711
 3,386
 —
 12,706
Property, plant and equipment, net1,439 6,550 3,238 0 11,227 
Multi-client data library, net—
 46,771
 7,573
 —
 54,344
Multi-client data library, net0 44,957 8,332 0 53,289 
Investment in subsidiaries855,539
 274,923
 —
 (1,130,462) —
Investment in subsidiaries847,775 280,647 0 (1,128,422)0 
Goodwill—
 —
 18,298
 —
 18,298
Goodwill0 0 18,684 0 18,684 
Intercompany receivables—
 288,207
 112,830
 (401,037) —
Intercompany receivables0 279,010 118,944 (397,954)0 
Right-of-use assets22,699
 14,572
 4,895
 —
 42,166
Right-of-use assets20,656 12,770 4,304 0 37,730 
Other assets2,381
 865
 53
 —
 3,299
Other assets1,300 786 50 0 2,136 
Total assets$914,006
 $697,420
 $179,460
 $(1,531,499) $259,387
Total assets$907,134 $653,092 $184,015 $(1,526,376)$217,865 
LIABILITIES AND (DEFICIT) EQUITY         LIABILITIES AND (DEFICIT) EQUITY
Current liabilities:         Current liabilities:
Current maturities of long-term debt$27,486
 $1,160
 $—
 $—
 $28,646
Current maturities of long-term debt$22,500 $1,027 $0 $0 $23,527 
Accounts payable2,008
 40,192
 1,627
 —
 43,827
Accounts payable1,948 31,401 1,758 0 35,107 
Accrued expenses13,536
 8,371
 7,171
 —
 29,078
Accrued expenses14,917 7,544 6,736 0 29,197 
Accrued multi-client data library royalties—
 21,209
 215
 —
 21,424
Accrued multi-client data library royalties0 20,319 215 0 20,534 
Deferred revenue—
 3,610
 1,272
 —
 4,882
Deferred revenue0 1,143 1,013 0 2,156 
Current maturities of operating lease liabilities3,556
 5,143
 1,174
 —
 9,873
Current maturities of operating lease liabilities1,938 3,630 1,159 0 6,727 
Total current liabilities46,586
 79,685
 11,459
 —
 137,730
Total current liabilities41,303 65,064 10,881 0 117,248 
Long-term debt, net of current maturities118,861
 435
 —
 —
 119,296
Long-term debt, net of current maturities119,349 0 0 0 119,349 
Operating lease liabilities, net of current maturities21,900
 14,283
 4,348
 —
 40,531
Operating lease liabilities, net of current maturities22,227 14,359 3,794 0 40,380 
Intercompany payables766,521
 —
 —
 (766,521) —
Intercompany payables784,937 0 0 (784,937)0 
Other long-term liabilities395
 38
 —
 —
 433
Other long-term liabilities377 35 0 0 412 
Total liabilities954,263
 94,441
 15,807
 (766,521) 297,990
Total liabilities968,193 79,458 14,675 (784,937)277,389 
(Deficit) Equity:         (Deficit) Equity:
Common stock142
 290,460
 47,776
 (338,236) 142
Common stock144 290,460 47,776 (338,236)144 
Additional paid-in capital957,254
 180,700
 203,909
 (384,609) 957,254
Additional paid-in capital958,189 180,700 203,909 (384,609)958,189 
Accumulated earnings (deficit)(976,554) 406,440
 20,550
 (426,990) (976,554)Accumulated earnings (deficit)(998,380)398,464 26,645 (425,109)(998,380)
Accumulated other comprehensive income (loss)(21,099) 4,238
 (23,611) 19,373
 (21,099)Accumulated other comprehensive income (loss)(21,012)4,238 (23,770)19,532 (21,012)
Due from ION Geophysical Corporation—
 (278,859) (86,625) 365,484
 —
Due from ION Geophysical Corporation0 (300,228)(86,755)386,983 0 
Total stockholders’ (deficit) equity(40,257) 602,979
 161,999
 (764,978) (40,257)Total stockholders’ (deficit) equity(61,059)573,634 167,805 (741,439)(61,059)
Noncontrolling interest—
 —
 1,654
 —
 1,654
Noncontrolling interest0 0 1,535 0 1,535 
Total (deficit) equity(40,257) 602,979
 163,653
 (764,978) (38,603)Total (deficit) equity(61,059)573,634 169,340 (741,439)(59,524)
Total liabilities and (deficit) equity$914,006
 $697,420
 $179,460
 $(1,531,499) $259,387
Total liabilities and (deficit) equity$907,134 $653,092 $184,015 $(1,526,376)$217,865 
23


December 31, 2019
Balance SheetION Geophysical CorporationThe GuarantorsAll Other SubsidiariesConsolidating AdjustmentsTotal Consolidated
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents$8,426 $26 $24,613 $0 $33,065 
Accounts receivable, net8 19,493 10,047 0 29,548 
Unbilled receivables0 7,314 4,501 0 11,815 
Inventories, net0 6,902 5,285 0 12,187 
Prepaid expenses and other current assets3,292 1,513 1,207 0 6,012 
Total current assets11,726 35,248 45,653 0 92,627 
Deferred income tax asset402 8,417 (85)0 8,734 
Property, plant and equipment, net786 8,112 4,290 0 13,188 
Multi-client data library, net0 54,479 5,905 0 60,384 
Investment in subsidiaries841,522 279,327 0 (1,120,849)0 
Goodwill0 0 23,585 0 23,585 
Intercompany receivables0 287,692 99,884 (387,576)0 
Right-of-use assets11,934 15,802 4,810 0 32,546 
Other assets1,171 905 54 0 2,130 
Total assets$867,541 $689,982 $184,096 $(1,508,425)$233,194 
LIABILITIES AND (DEFICIT) EQUITY
Current liabilities:
Current maturities of long-term debt$972 $1,135 $0 $0 $2,107 
Accounts payable2,259 44,641 2,416 0 49,316 
Accrued expenses9,933 9,982 10,413 0 30,328 
Accrued multi-client data library royalties0 18,616 215 0 18,831 
Deferred revenue0 3,465 1,086 0 4,551 
Current maturities of operating lease liabilities4,429 5,469 1,157 0 11,055 
Total current liabilities17,593 83,308 15,287 0 116,188 
Long-term debt, net of current maturities118,618 734 0 0 119,352 
Operating lease liabilities, net of current maturities11,208 15,346 4,279 0 30,833 
Intercompany payables755,524 0 0 (755,524)0 
Other long-term liabilities1,418 35 0 0 1,453 
Total liabilities904,361 99,423 19,566 (755,524)267,826 
(Deficit) Equity:
Common stock142 290,460 47,776 (338,236)142 
Additional paid-in capital956,647 180,700 203,909 (384,609)956,647 
Accumulated earnings (deficit)(974,291)396,793 18,837 (415,630)(974,291)
Accumulated other comprehensive income (loss)(19,318)4,281 (21,907)17,626 (19,318)
Due from ION Geophysical Corporation0 (281,675)(86,273)367,948 0 
Total stockholders’ (deficit) equity(36,820)590,559 162,342 (752,901)(36,820)
Noncontrolling interest0 0 2,188 0 2,188 
Total (deficit) equity(36,820)590,559 164,530 (752,901)(34,632)
Total liabilities and (deficit) equity$867,541 $689,982 $184,096 $(1,508,425)$233,194 
24

 December 31, 2019
Balance SheetION Geophysical Corporation The Guarantors All Other Subsidiaries Consolidating Adjustments Total Consolidated
 (In thousands)
ASSETS         
Current assets:         
Cash and cash equivalents$8,426
 $26
 $24,613
 $—
 $33,065
Accounts receivable, net8
 19,493
 10,047
 —
 29,548
Unbilled receivables—
 7,314
 4,501
 —
 11,815
Inventories, net—
 6,902
 5,285
 —
 12,187
Prepaid expenses and other current assets3,292
 1,513
 1,207
 —
 6,012
Total current assets11,726
 35,248
 45,653
 —
 92,627
Deferred income tax asset402
 8,417
 (85) —
 8,734
Property, plant and equipment, net786
 8,112
 4,290
 —
 13,188
Multi-client data library, net—
 54,479
 5,905
 —
 60,384
Investment in subsidiaries841,522
 279,327
 —
 (1,120,849) —
Goodwill—
 —
 23,585
 —
 23,585
Intercompany receivables—
 287,692
 99,884
 (387,576) —
Right-of-use assets11,934
 15,802
 4,810
 —
 32,546
Other assets1,171
 905
 54
 —
 2,130
Total assets$867,541
 $689,982
 $184,096
 $(1,508,425) $233,194
LIABILITIES AND (DEFICIT) EQUITY         
Current liabilities:         
Current maturities of long-term debt$972
 $1,135
 $—
 $—
 $2,107
Accounts payable2,259
 44,641
 2,416
 —
 49,316
Accrued expenses9,933
 9,982
 10,413
 —
 30,328
Accrued multi-client data library royalties—
 18,616
 215
 —
 18,831
Deferred revenue—
 3,465
 1,086
 —
 4,551
Current maturities of operating lease liabilities4,429
 5,469
 1,157
 —
 11,055
Total current liabilities17,593
 83,308
 15,287
 —
 116,188
Long-term debt, net of current maturities118,618
 734
 —
 —
 119,352
Operating lease liabilities, net of current maturities11,208
 15,346
 4,279
 —
 30,833
Intercompany payables755,524
 —
 —
 (755,524) —
Other long-term liabilities1,418
 35
 —
 —
 1,453
Total liabilities904,361
 99,423
 19,566
 (755,524) 267,826
(Deficit) Equity:         
Common stock142
 290,460
 47,776
 (338,236) 142
Additional paid-in capital956,647
 180,700
 203,909
 (384,609) 956,647
Accumulated earnings (deficit)(974,291) 396,793
 18,837
 (415,630) (974,291)
Accumulated other comprehensive income (loss)(19,318) 4,281
 (21,907) 17,626
 (19,318)
Due from ION Geophysical Corporation—
 (281,675) (86,273) 367,948
 —
Total stockholders’ (deficit) equity(36,820) 590,559
 162,342
 (752,901) (36,820)
Noncontrolling interest—
 —
 2,188
 —
 2,188
Total (deficit) equity(36,820) 590,559
 164,530
 (752,901) (34,632)
Total liabilities and (deficit) equity$867,541
 $689,982
 $184,096
 $(1,508,425) $233,194
Three Months Ended September 30, 2020
Income StatementION Geophysical CorporationThe GuarantorsAll Other SubsidiariesConsolidating AdjustmentsTotal Consolidated
(In thousands)
Net revenues$0 $9,799 $6,435 $0 $16,234 
Cost of sales0 11,326 3,619 0 14,945 
Gross profit (loss)0 (1,527)2,816 0 1,289 
Total operating expenses6,335 4,270 1,848 0 12,453 
Income (loss) from operations(6,335)(5,797)968 0 (11,164)
Interest expense, net(3,368)(322)21 0 (3,669)
Intercompany interest, net(247)(1,425)1,672 0 0 
Equity in earnings (losses) of investments(6,081)1,722 0 4,359 0 
Other expense, net(4)(282)(239)0 (525)
Net income (loss) before income taxes(16,035)(6,104)2,422 4,359 (15,358)
Income tax expense572 185 299 0 1,056 
Net income (loss)(16,607)(6,289)2,123 4,359 (16,414)
Net income attributable to noncontrolling interest0 0 (193)0 (193)
Net income (loss) attributable to ION$(16,607)$(6,289)$1,930 $4,359 $(16,607)
Comprehensive net income (loss)$(15,786)$(6,289)$2,746 $3,687 $(15,642)
Comprehensive income attributable to noncontrolling interest0 0 (144)0 (144)
Comprehensive net income (loss) attributable to ION$(15,786)$(6,289)$2,602 $3,687 $(15,786)
Three Months Ended September 30, 2019
Income StatementION Geophysical CorporationThe GuarantorsAll Other SubsidiariesConsolidating AdjustmentsTotal Consolidated
(In thousands)
Net revenues$0 $21,474 $31,765 $0 $53,239 
Cost of sales0 20,165 7,786 0 27,951 
Gross profit0 1,309 23,979 0 25,288 
Total operating expenses9,514 7,976 3,940 0 21,430 
Income (loss) from operations(9,514)(6,667)20,039 0 3,858 
Interest expense, net(3,197)(49)91 0 (3,155)
Intercompany interest, net65 (2,077)2,012 0 0 
Equity in earnings of investments8,988 18,398 0 (27,386)0 
Other income (expense), net16 (55)(203)0 (242)
Net income (loss) before income taxes(3,642)9,550 21,939 (27,386)461 
Income tax expense (benefit)81 (403)4,112 0 3,790 
Net income (loss)(3,723)9,953 17,827 (27,386)(3,329)
Net income attributable to noncontrolling interest0 0 (394)0 (394)
Net income (loss) attributable to ION$(3,723)$9,953 $17,433 $(27,386)$(3,723)
Comprehensive net income (loss)$(4,751)$9,953 $16,403 $(25,962)$(4,357)
Comprehensive income attributable to noncontrolling interest0 0 (394)0 (394)
Comprehensive net income (loss) attributable to ION$(4,751)$9,953 $16,009 $(25,962)$(4,751)
25


Nine Months Ended September 30, 2020
Income StatementION Geophysical CorporationThe GuarantorsAll Other SubsidiariesConsolidating AdjustmentsTotal Consolidated
(In thousands)
Net revenues$0 $61,969 $33,410 $0 $95,379 
Cost of sales0 46,357 13,638 0 59,995 
Impairment of multi-client data library0 1,167 0 0 1,167 
Gross profit0 14,445 19,772 0 34,217 
Total operating expenses19,787 13,974 6,616 0 40,377 
Impairment of goodwill0 0 4,150 0 4,150 
Income (loss) from operations(19,787)471 9,006 0 (10,310)
Interest expense, net(9,923)(484)103 0 (10,304)
Intercompany interest, net(705)(4,884)5,589 0 0 
Equity in earnings (losses) of investments1,865 7,614 0 (9,479)0 
Other expense, net8,139 (276)(1,188)0 6,675 
Net income (loss) before income taxes(20,411)2,441 13,510 (9,479)(13,939)
Income tax expense3,678 770 5,534 0 9,982 
Net income (loss)(24,089)1,671 7,976 (9,479)(23,921)
Net income attributable to noncontrolling interest0 0 (168)0 (168)
Net income (loss) attributable to ION$(24,089)$1,671 $7,808 $(9,479)$(24,089)
Comprehensive net income (loss)$(25,783)$1,628 $6,113 $(7,622)$(25,664)
Comprehensive income attributable to noncontrolling interest0 0 (119)0 (119)
Comprehensive net income (loss) attributable to ION$(25,783)$1,628 $5,994 $(7,622)$(25,783)
Nine Months Ended September 30, 2019
Income StatementION Geophysical CorporationThe GuarantorsAll Other SubsidiariesConsolidating AdjustmentsTotal Consolidated
(In thousands)
Net revenues$0 $65,552 $66,418 $0 $131,970 
Cost of sales0 56,106 21,081 0 77,187 
Gross profit0 9,446 45,337 0 54,783 
Total operating expenses31,330 26,204 11,881 0 69,415 
Income (loss) from operations(31,330)(16,758)33,456 0 (14,632)
Interest expense, net(9,560)(156)338 0 (9,378)
Intercompany interest, net588 521 (1,109)0 0 
Equity in earnings of investments7,330 26,786 0 (34,116)0 
Other income (expense), net4 (265)(677)0 (938)
Net income (loss) before income taxes(32,968)10,128 32,008 (34,116)(24,948)
Income tax expense (benefit)737 (532)7,711 0 7,916 
Net income (loss)(33,705)10,660 24,297 (34,116)(32,864)
Net income attributable to noncontrolling interests0 0 (841)0 (841)
Net income (loss) applicable to ION$(33,705)$10,660 $23,456 $(34,116)$(33,705)
Comprehensive net income (loss)$(34,703)$10,617 $22,444 $(32,220)$(33,862)
Comprehensive income attributable to noncontrolling interest0 0 (841)0 (841)
Comprehensive net income (loss) attributable to ION$(34,703)$10,617 $21,603 $(32,220)$(34,703)
26
 Three Months Ended March 31, 2020
Income StatementION Geophysical Corporation The Guarantors All Other Subsidiaries Consolidating Adjustments Total Consolidated
 (In thousands)
Net revenues$—
 $40,422
 $15,992
 $—
 $56,414
Cost of sales—
 21,800
 5,103
 —
 26,903
Impairment of multi-client data library—
 1,167
 —
 —
 1,167
Gross profit—
 17,455
 10,889
 —
 28,344
Total operating expenses8,120
 6,980
 6,918
 —
 22,018
Income (loss) from operations(8,120) 10,475
 3,971
 —
 6,326
Interest expense, net(3,245) (38) 62
 —
 (3,221)
Intercompany interest, net(190) (1,927) 2,117
 —
 —
Equity in earnings of investments9,628
 1,732
 —
 (11,360) —
Other income (expense), net1,385
 —
 (956) —
 429
Net income (loss) before income taxes(542) 10,242
 5,194
 (11,360) 3,534
Income tax expense1,721
 595
 3,558
 —
 5,874
Net income (loss)(2,263) 9,647
 1,636
 (11,360) (2,340)
Net loss attributable to noncontrolling interest—
 —
 77
 —
 77
Net income (loss) attributable to ION$(2,263) $9,647
 $1,713
 $(11,360) $(2,263)
Comprehensive net income (loss)$(4,044) $13,754
 $4,082
 $(17,913) $(4,121)
Comprehensive loss attributable to noncontrolling interest—
 —
 77
 —
 77
Comprehensive net income (loss) attributable to ION$(4,044) $13,754
 $4,159
 $(17,913) $(4,044)

 Three Months Ended March 31, 2019
Income StatementION Geophysical Corporation The Guarantors All Other Subsidiaries Consolidating Adjustments Total Consolidated
 (In thousands)
Net revenues$—
 $17,613
 $19,343
 $—
 $36,956
Cost of sales—
 20,200
 6,844
 —
 27,044
Gross profit (loss)—
 (2,587) 12,499
 —
 9,912
Total operating expenses12,839
 9,075
 3,935
 —
 25,849
Income (loss) from operations(12,839) (11,662) 8,564
 —
 (15,937)
Interest expense, net(3,166) (49) 103
 —
 (3,112)
Intercompany interest, net300
 4,649
 (4,949) —
 —
Equity in earnings (losses) of investments(5,169) 2,001
 —
 3,168
 —
Other income (expense), net7
 (122) (677) —
 (792)
Net income (loss) before income taxes(20,867) (5,183) 3,041
 3,168
 (19,841)
Income tax expense (benefit)493
 (1,291) 2,205
 —
 1,407
Net income (loss)(21,360) (3,892) 836
 3,168
 (21,248)
Net income attributable to noncontrolling interest—
 —
 (112) —
 (112)
Net income (loss) attributable to ION$(21,360) $(3,892) $724
 $3,168
 $(21,360)
Comprehensive net income (loss)$(20,390) $(3,935) $1,699
 $2,348
 $(20,278)
Comprehensive income attributable to noncontrolling interest—
 

 (112) —
 (112)
Comprehensive net income (loss) attributable to ION$(20,390) $(3,935) $1,587
 $2,348
 $(20,390)
          
Nine Months Ended September 30, 2020
Statement of Cash FlowsION Geophysical CorporationThe GuarantorsAll Other SubsidiariesTotal Consolidated
(In thousands)
Cash flows from operating activities:
Net cash provided by operating activities$3,917 $2,253 $6,998 $13,168 
Cash flows from investing activities:
Cash invested in multi-client data library0 (8,344)(11,497)(19,841)
Purchase of property, plant and equipment(35)(415)(415)(865)
Net cash used in investing activities(35)(8,759)(11,912)(20,706)
Cash flows from financing activities:
Borrowings under revolving line of credit27,000 0 0 27,000 
Payments under revolving line of credit(4,500)0 0 (4,500)
Proceeds from government relief funding6,923 0 0 6,923 
Payments on notes payable and long-term debt(972)(842)0 (1,814)
Intercompany lending(6,289)7,353 (1,064)0 
Dividend payment to non-controlling interest0 0 (217)(217)
Other financing activities(91)0 0 (91)
Net cash provided by (used in) financing activities22,071 6,511 (1,281)27,301 
Effect of change in foreign currency exchange rates on cash, cash equivalents and restricted cash0 0 501 501 
Net increase (decrease) in cash, cash equivalents and restricted cash25,953 5 (5,694)20,264 
Cash, cash equivalents and restricted cash at beginning of period8,479 26 24,613 33,118 
Cash, cash equivalents and restricted cash at end of period$34,432 $31 $18,919 $53,382 


 Three Months Ended March 31, 2020
Statement of Cash FlowsION Geophysical Corporation The Guarantors All Other Subsidiaries Total Consolidated
 (In thousands)
Cash flows from operating activities:       
Net cash provided by (used in) operating activities$330
 $(1,570) $(5,726) $(6,966)
Cash flows from investing activities:       
Cash invested in multi-client data library—
 (5,382) (4,286) (9,668)
Purchase of property, plant and equipment(398) (98) —
 (496)
Net cash used in investing activities(398) (5,480) (4,286) (10,164)
Cash flows from financing activities:       
Borrowings under revolving line of credit27,000
 —
 —
 27,000
Payments on notes payable and long-term debt(485) (275) —
 (760)
Intercompany lending(6,289) 7,353
 (1,064) —
Other financing activities(10) —
 —
 (10)
Net cash provided by (used in) financing activities20,216
 7,078
 (1,064) 26,230
Effect of change in foreign currency exchange rates on cash, cash equivalents and restricted cash—
 —
 470
 470
Net increase (decrease) in cash, cash equivalents and restricted cash20,148
 28
 (10,606) 9,570
Cash, cash equivalents and restricted cash at beginning of period8,479
 26
 24,613
 33,118
Cash, cash equivalents and restricted cash at end of period$28,627
 $54
 $14,007
 $42,688
The following table is a reconciliation of cash and cash equivalents to total cash, cash equivalents, and restricted cash:
September 30, 2020
ION Geophysical CorporationThe GuarantorsAll Other SubsidiariesTotal Consolidated
(In thousands)
 Cash and cash equivalents$32,106 $31 $18,919 $51,056 
 Restricted cash included in prepaid expenses and other assets2,326 0 0 2,326 
 Total cash, cash equivalents, and restricted cash shown in statements of cash flows$34,432 $31 $18,919 $53,382 

27

 March 31, 2020
 ION Geophysical Corporation The Guarantors All Other Subsidiaries Total Consolidated
 (In thousands)
 Cash and cash equivalents$28,602
 $54
 $14,007
 $42,663
 Restricted cash included in other long-term assets25
 —
 —
 25
 Total cash, cash equivalents, and restricted cash shown in statements of cash flows$28,627
 $54
 $14,007
 $42,688
Nine Months Ended September 30, 2019
Statement of Cash FlowsION Geophysical CorporationThe GuarantorsAll Other SubsidiariesTotal Consolidated
(In thousands)
Cash flows from operating activities:
Net cash provided by operating activities$8,955 $9,619 $730 $19,304 
Cash flows from investing activities:
Investment in multi-client data library0 (15,197)(6,028)(21,225)
Purchase of property, plant and equipment(259)(118)(895)(1,272)
Net cash used in investing activities(259)(15,315)(6,923)(22,497)
Cash flows from financing activities:
Borrowings under revolving line of credit15,000 0 0 15,000 
Payments under revolving line of credit(15,000)0 0 (15,000)
Payments on notes payable and long-term debt(1,159)(801)0 (1,960)
Intercompany lending(13,511)6,495 7,016 0 
Other financing activities(655)0 0 (655)
Net cash provided by (used in) financing activities(15,325)5,694 7,016 (2,615)
Effect of change in foreign currency exchange rates on cash, cash equivalents and restricted cash0 0 151 151 
Net increase (decrease) in cash, cash equivalents and restricted cash(6,629)(2)974 (5,657)
Cash, cash equivalents and restricted cash at beginning of period14,085 47 19,722 33,854 
Cash, cash equivalents and restricted cash at end of period$7,456 $45 $20,696 $28,197 




 Three Months Ended March 31, 2019
Statement of Cash FlowsION Geophysical Corporation The Guarantors All Other Subsidiaries Total Consolidated
 (In thousands)
Cash flows from operating activities:       
Net cash provided by (used in) operating activities$5,216
 $(825) $11,007
 $15,398
Cash flows from investing activities:       
Investment in multi-client data library—
 (5,363) (3,404) (8,767)
Proceeds from sale (purchase) of property, plant and equipment(24) (48) (735) (807)
Net cash used in investing activities(24) (5,411) (4,139) (9,574)
Cash flows from financing activities:       
Payments on notes payable and long-term debt(434) (281) —
 (715)
Intercompany lending(13,511) 6,495
 7,016
 —
Other financing activities(239) —
 —
 (239)
Net cash provided by (used in) financing activities(14,184) 6,214
 7,016
 (954)
Effect of change in foreign currency exchange rates on cash, cash equivalents and restricted cash—
 —
 81
 81
Net increase (decrease) in cash, cash equivalents and restricted cash(8,992) (22) 13,965
 4,951
Cash, cash equivalents and restricted cash at beginning of period14,085
 47
 19,722
 33,854
Cash, cash equivalents and restricted cash at end of period$5,093
 $25
 $33,687
 $38,805
The following table is a reconciliation of cash and cash equivalents to total cash, cash equivalents, and restricted cash:
September 30, 2019
ION Geophysical CorporationThe GuarantorsAll Other SubsidiariesTotal Consolidated
(In thousands)
 Cash and cash equivalents$7,153 $45 $20,696 $27,894 
 Restricted cash included in prepaid expenses and other current assets303 0 0 303 
 Total cash, cash equivalents, and restricted cash shown in statement of cash flows$7,456 $45 $20,696 $28,197 
28
 March 31, 2019
 ION Geophysical Corporation The Guarantors All Other Subsidiaries Total Consolidated
 (In thousands)
 Cash and cash equivalents$4,695
 $25
 $33,687
 $38,407
 Restricted cash included in prepaid expenses and other current assets398
 —
 —
 398
 Total cash, cash equivalents, and restricted cash shown in statement of cash flows$5,093
 $25
 $33,687
 $38,805


Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
In this Form 10-Q, “ION Geophysical,” “ION,” “the company” (or, “the Company”), “we,” “our,” “ours” and “us” refer to ION Geophysical Corporation and its consolidated subsidiaries, except where the context otherwise requires or as otherwise indicated.
The information contained in this Quarterly Report on Form 10-Q contains references to trademarks, service marks and registered marks of ION and our subsidiaries, as indicated. Except where stated otherwise or unless the context otherwise requires, the term “DigiFIN” refers to DigiFIN® , a registered mark owned by ION or its affiliates, and the terms “Gemini”, “Marlin SmartPort”, “SailWing”, and “4Sea” refers to the Gemini™, Marlin SmartPort™, SailWing™ and 4Sea™ trademarks and service marks owned by ION.
Executive Summary
Overview
The COVID-19 pandemic caused the global economy to enter a recessionary period, which may be prolonged and severe, and significantly reducedreduce the availability of capital and liquidity from banks and other providers of credit. The exploration and production (“E&P&P”) industry is facing the doubledual impact of demand destructiondeterioration from COVID-19 and market oversupply from increased production, which caused oil and natural gas prices to decline significantly since the start of the year. Brent crude oil prices, which are most relevant to ION’s internationally-focusedour internationally focused business, dropped 66% during the first quarter from $66 on January 1, 2020 to $23 on March 31, 2020. By the end of the second quarter, Brent crude oil prices rebounded to $41 per barrel from increased global demand as pandemic restrictions started to ease and decreased production and remained relatively stable at that level throughout the third quarter. While membersthe consistency is beneficial, prices are significantly lower compared to the start of the year. The record production cut agreed to by OPEC and other oil producing countries agreedwas extended through December 2020 in an effort to cut production in April 2020,stabilize oil prices nonetheless declined further to record low levels during the month. by limiting supply.
While commodity prices can be volatile, thisthe sharp decline earlier this year triggered E&P companies to reduce budgets and will likely curtail demand for somedelay near-term spending, but is also a catalyst to drive necessary cost restructuring and digital transformation of our productsthe E&P ecosystem. However, exploration offerings and services. Spending on exploration tends to be among the mostdata purchases are often discretionary and, is expectedtherefore, receive disproportionately higher reductions than overall budget cuts. There has been a material slowdown in offshore seismic spending during the second and third quarters, and while we are seeing signs that could improve during the fourth quarter, we expect the market to bear some of the deepest cuts in percentage terms, although spending reductions in the offshore basins where we operate are projected to be less severe than onshore in the United States.remain challenging into 2021.
ION management expects continued portfolio rationalization and high grading as E&P companies seek to find the best return on investment opportunities to meet oil and gas demand in the next decade. Near-term, due to the impact of the COVID-19, project high grading will likely be more acute due to budget cuts. ION hadreductions. Over the last several years, we have already strategically shifted itsour portfolio closer to the reservoir, where revenue tends to be higher and more consistent. New VenturesVenture data acquisition offshore and Software and related personnel-based offshore services are expected to continue to be most impacted by COVID-19 travel restrictions. While offshore operations will behave been temporarily impacted by travel restrictions, we believe the demand for digitalization technologies will remain robust.strong. In some cases, ION technology is expected to be more relevant and valuable in the current environment such as(for instance, offerings that facilitate remote working.working).  
While the duration and extent of COVID-19 is difficult to predict, ION recorded its highest firstthird quarter revenues since 2014. A numbercame in lower than prior year due to the repercussions of largethe oil price volatility earlier this year and the ongoing uncertainty from the COVID-19 pandemic, we made progress executing our strategy. Backlog increased 77% sequentially, reversing several consecutive quarters of steady decline due to the strategic shift to enter the 3D new acquisition multi-client contractsmarket. We continue to work closely with our clients to understand their revised budgets and to scale our business appropriately. We partially mitigated the impact of the current macroeconomic environment by fully benefiting from the structural changes and associated cost reductions that were closedoutlined in the first quarter 2020, some of which were delayed from the fourth quarter 2019, even after E&P market dynamics changed. ION worked closely with clients to assess the effect of E&P budget reductions to its business and took decisive action to proactively manage its business.quarter. To further mitigate the impact of COVID-19 and oil price volatility, management implemented a plan to preserve cash and manage liquidity as follows:
Scaling•Scaled down personnel costs and operating expenses in April 2020 by another $18.0 million during the remaining nine months of 2020, building on the over $20.0 million (net of severance expense of $3.1 million) of cuts made in January 2020. These further reductions are primarily through a variety of furlough programs and reduced compensation arrangements across ION’sour worldwide workforce. IONOur executives have takentook a 20% base salary reduction and a tiered reduction scheme has been cascaded to the rest of the worldwide workforce. ION’s boardOur Board of directors has takenDirectors took a 20% reduction in directors’ fees. In addition, ION haswe have curtailed use of external contractors, decreased travel and event costs and implemented new systems and processes that more efficiently support itsour business.
Reducing•Reduced capital expenditures to an estimated $20.0$25.0 million to $35.0 million (a portion of which will be pre-funded or underwritten by our customers), down from the original budget of $35.0 million to $50.0 million, to reflect both reduced seismic demand and travel/border restrictions impacting new data acquisition offshore. The majority of capital expenditures relate to investments in multi-client data. This provides flexibility to aggressively reduce cash outflows while shifting to muchsignificantly lower cost reimaging programs.
29

•Applied for and continue to explore various government assistance programs, of which $6.9approximately $7.0 million has beenwas received in April 2020.and applied against qualifying expenditures during the second quarter. Receipt of this $6.9 millionassistance allowed us to avoid further staff reductions while supporting our ongoing operations. Additional global government
•Re-negotiated existing lease agreements for our significant locations to obtain rent relief of between $2.0 millionapproximately $4.0 million. The majority of the cash savings from the rent relief is expected to $7.0 million may be possible.benefit us from July 2020 to March 2021. See Note 12 “Lease Obligations” of Footnotes to Condensed Consolidated Financial Statements” for further details.
•Announced the sale of itsour 49% ownership interest in INOVA Geophysical joint venture (defined below in “Our Business”) for $12.0 million that is expected to close during the second half of the year, subject to regulatory approvals and other closing conditions. As the regulatory review is taking longer than anticipated, closing will likely extend into 2021.
•Entered into a settlement agreement with WesternGeco ending the uncertainty surrounding the decade-long patent litigation. See Note 89 “Litigation” of Footnotes to Condensed Consolidated Financial Statements” for further details.
•We believe that the above management plan, which includes the use of government assistance programs, along with our existing cash balance and the undrawn remaining borrowing capacity under our Credit Facility will provide sufficient liquidity to meet our anticipated cash needs for the next twelve months. At September 30, 2020, our liquidity was $59.4 million, consisting of $51.1 million of cash (including net revolver borrowings of $22.5 million) and $8.3 million of remaining available borrowing capacity under the revolving credit facility, slightly below liquidity of $65.5 million from one year ago. The outlined management plan reflects our continued focus on preserving cash and managing liquidity in the current uncertain macroeconomic environment. In the event our customers experience more extensive budget reductions and capital constraints further reducing demand for our services and products, resulting in deterioration of our revenues below our current forecasted levels, management may be required to update its plan by implementing further cost reductions and delaying capital investments. Additionally, we are actively exploring a number of strategic options to optimally address ION Geophysical Corporation’s 9.125% Senior Secured Second Priority Notes due December 2021 (the “Second Lien Notes”), which mature on December 15, 2021. If by September 15, 2021 we have not (1) repaid the Second Lien Notes, (2) extended the maturity of the Second Lien Notes to a date not earlier than October 31, 2023, or (3) submitted a written proposal summarizing our plan to either repay or extend the notes to the agent for the lenders (as defined in Note 5, “Long-term Debt” of Footnotes to Condensed Consolidated Financial Statements”) of the Credit Facility that has been approved by the agent, then the Credit Facility shall immediately become due and payable on such date. If the written proposal is submitted and approved by the agent by September 15, 2021, but we are unable to execute the approved proposal on or before October 31, 2021, the Credit Facility shall immediately become due and payable on such date. We reviewed our debt covenants as of September 30, 2020, and expect that we willto remain in compliance for the next twelve months.months (see Note 5, “Long-term Debt” of Footnotes to Condensed Consolidated Financial Statements” for further discussion of our covenants).
Our three and nine month results were consistent with our expectations of customer spend contraction related to COVID-19 demand deterioration and oil oversupply weighing on the commodity price early this year. Our backlog significantly improved compared to the prior quarter. In addition, ION is launching new offerings to support remote working, exploring new business models and finding new ways to remotely engage with clients. While the global COVID-19 pandemic and decline in oil and gas prices will likely reduce demand forwe are fully benefiting from our products and servicescost reduction measures taken earlier in the near-term, management believes the industry’s long-term prospects are favorable dueyear. Active priorities were further limited to projections about the number of new conventional offshore discoveries requiredimprove focus and execution on strategic initiatives, and ultimately deliver better results to meet long-term oil demand.shareholders. Management believes that datawe are better positioned to mitigate some of the immediate impacts of the market disruption given our lower cost basis and technology that improve decision-making, safety, efficiency or sustainability will continue to be valued, even in the current challenging market.
strategy execution progress.

Our Business
In this Form 10-Q, “ION Geophysical,” “ION,” “the company” (or, “the Company”), “we,” “our,” “ours” and “us” refer to ION Geophysical Corporation and its consolidated subsidiaries, except where the context otherwise requires or as otherwise indicated.
The information contained in this Quarterly Report on Form 10-Q contains references to trademarks, service marks and registered marks of ION and our subsidiaries, as indicated. Except where stated otherwise or unless the context otherwise requires, the terms “DigiFIN” and “VectorSeis” refer to DigiFIN® and VectorSeis® registered marks owned by ION or INOVA Geophysical or their affiliates, and the terms “Marlin,” “Marlin SmartPort,” “Gator,” “SailWing,” and “4Sea” refers to the Marlin™, Marlin SmartPort™, Gator™, SailWing™ and 4Sea™ trademarks and service marks owned by ION.
ION is an innovative, asset light global technology company that delivers powerful data-driven decision-making offerings to offshore energy, ports and defense industries. We are entering a fourth industrial revolution where technology is fundamentally changing how decisions are made. Decision-making is shifting from what was historically an art to a science. Data, analytics and digitalization provide a step-change opportunity to translate information into insights, enabling our clients to enhance decisions, gain a competitive edge and deliver superior returns.
We have been a leading technology innovator for over 50 years. While the traditional focus of our cutting-edge technology has been on the exploration and production (“E&P”)&P industry, we are now broadening and diversifying our business into relevant adjacent markets such as offshore logistics, ports and harbors, defense and marine robotics. Our offerings are focused on improving subsurface knowledge to enhance E&P decision-making and improving situational awareness to optimize offshore operations. We serve customers in most major energy producing regions of the world from strategically located offices.
The Company is publicly listed on the New York Stock Exchange under the ticker IO. We are headquartered in Houston, Texas with regional offices around the world. We have approximately 470450 employees, 41%42% of whom are in technical roles and 20% have advanced degrees.
30

We provide our services and products through two business segments: E&P Technology & Services and Operations Optimization. In addition, we have a 49% ownership interest in our INOVA Geophysical Equipment Limited (“INOVA Geophysical” or “INOVA”), a joint venture with BGP Inc. (“BGP”), a subsidiary of China National Petroleum Corporation (“CNPC”).Corporation. BGP owns the remaining 51% equity interest in INOVA. We wrote our investment in INOVA down to zero in 2014. See further discussion below on our agreement to sell our interest in INOVA.
Our E&P Technology & Services segment creates digital data assets and delivers services to help E&P companies improve decision-making, reduce risk and maximize value. Across the E&P lifecycle, our E&P offerings focus on driving customer decisions, such as which blocks to bid on and for how much, how to maximize portfolio value, where to drill wells or how to optimize production.
Our Operations Optimization segment develops mission-critical subscription offerings and provides engineering services that enable operational control and optimization offshore. This segment is comprised of our Optimization Software & Services and Devices offerings. While we primarily sell to service providers, we began selling existing technology to new customers in E&P, ports and harbors, defense and academic industries.
We historically conducted our land seismic equipment business through INOVA, which manufactures land seismic data acquisition systems, digital sensors, vibroseis vehicles (i.e., vibrator trucks), and energy source controllers.
E&P Technology & Services. Our offerings are designed to help E&P companies improve decision-making, reduce risk and maximize value. Within our E&P Technology and Services segment, there are two synergistic groups: Imaging and Reservoir Services and Ventures.
Our Imaging and Reservoir Services group provides advanced data processing, imaging and reservoir services designed to maximize image quality and subsurface insights, helping E&P companies reduce exploration and production risk, evaluate and develop reservoirs, and increase production. Imaging and Reservoir Services continually develops and applies proprietary processing algorithms via its cutting-edge imaging engine to data owned or licensed by our customers to translate raw data into subsurface images. We continually enhance our novel workflows and invest inmaintain leading-edge infrastructure to efficiently deliver the best image quality.
While our Imaging and Reservoir Services group processes and images data for customers on a proprietary basis, most of these resources support our higher potential return multi-client business. The proprietary work we take on is complex where our advanced technology is valued and where we closely collaborate with our customers to solve their toughest challenges, keeping our toolkit sharp.challenges. We maintain approximately 19 petabytes of digital seismic data storage in fourthrough our global data centers, including a core data center located in Houston. We utilize a globally distributed network of Linux-cluster processing centers in combination with our major hubs in Houston and London to process seismic data using advanced, proprietary algorithms and workflows.

Our Ventures group leverages the world-class geoscience skills of the Imaging and Reservoir Services group to create global digital data assets that are licensed to multiple E&P companies to optimize their investment decisions. Our global data library consists of over 715,000740,000 km of 2D and over 350,000355,000 sq. km of 3D multi-client seismic data in virtually all major offshore petroleum provinces. Ventures provides services to manage multi-client or proprietary surveys, from survey planning and design to data acquisition and management, to final subsurface imaging and reservoir characterization. We focus on the technologically intensive components of the image development process, such as survey planning and design, and data processing and interpretation, while outsourcing asset-intensive components (such as field acquisition) to experienced contractors.
We offer our services to customers on both a proprietary and multi-client (non-exclusive) basis. In both cases, a majority of our survey expenses are generally pre-funded by our customers, limiting our cost exposure. The period during which our multi-client surveys are being designed, acquired or processed is referred to as the “New Venture” phase. Once the New Venture phase is completed, they becomethe program becomes part of our Data Library. For proprietary services, the customer has exclusive ownership of the data. For multi-client surveys, we generally retain ownership of orour long-term exclusive marketing rights to the data and receive ongoing revenue from subsequent data license sales.
In ourOur E&P Technology & Services segment new venturenet revenues decreased compared to the firstthird quarter of 2019. This decrease was more than offset by the significant increase2019 due to decline in ourmulti-client data library revenues.sales. We invested $9.7$19.8 million in our multi-client data library during the first quarternine months of 2020 and we expect investments in our multi-client data library to be in the range of $20.0$25.0 million to $30.0 million for 2020 (a portion of which will be pre-funded or underwritten by our customers) compared to the $28.8 million invested in 2019 and down from the $30.0 million to $40.0 million initial range for 2020 due to COVID-19.
At March 31,September 30, 2020, our E&P Technology & Services segment backlog, which consists of commitments for (i) Imagingimaging and Reservoir Servicesreservoir services work and (ii) new venture projects (both multi-client and proprietary) by our Ventures group underwritten by our customers, was $14.6$17.7 million compared to $10.0 million at June 30, 2020, $18.9 million at December 31, 2019 and $29.3$24.8 million at March 31,September 30, 2019. The majority of our backlog relates to our multi-client seismic programs and our proprietary imaging and reservoir services work. We anticipate that most of our backlog will be recognized as revenue over the remainder of 2020.next twelve months.
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In the E&P Technology & Services segment, to accelerate our shift in portfolio weighting from 2D to 3D, we restructured our multi-client business development and streamlined our product delivery strategy.
Over the last five years, we have made an effort to diversify our offerings across the E&P life cycle and move closer to the reservoir, where capital investment tends to be higher and more consistent. Historically, our data library was largely 2D exploration focused. We had not materially participated in 3D multi-client projects. As a result, our 3D revenues and data volumes only accounted for 3% of the market, giving us substantial upside growth potential. In 2019, we grew our 3D multi-client data library 56% to 350,000 sq. km. through cost effective, seamlesscontiguous reimaging of existing data. 37% of our 2019 multi-client revenue was from 3D multi-client sales,data, an offering that barely registered just four years ago. Our successful foray into 3D reimaging has given us credibility and experience in the 3D market segment, creating a pipeline of opportunities for new 3D towed streamer and/or seabed programs we have not seen prior. We also completed development of enabling technologies like our Enhanced Frequency SourceGemini enhanced frequency source and 4Sea ocean bottom platform to further increase the likelihood of our participation success in new 3D multi-client programs.
Operations Optimization. Our Operations Optimization segment develops mission-critical subscription offerings and provides engineering services that enable operational control and optimization offshore. Our advanced systems improve situational awareness, communication and risk management to enable rapid and informed decisions in challenging offshore environments. Our industry-leading mission management, navigation, communications and sensing technologies enable the operations of modern 3D operations.
This segment is comprised of our Optimization Software & Services and Devices offerings. While we primarily sell to oil and gas service providers, we began selling existing technology to new customers in E&P, ports and harbors, defense and academic industries. Service providers rely on our industry-leading marine imaging systems and services to acquire the highest quality data - safely and efficiently - in both towed streamer and seabed operations. Our integrated technology platforms combined with advanced prediction tools enable safer, more efficient surveys.survey optimization.
We also leverage our core competencies to develop custom solutions. Our capabilities include data management, navigation, software development, acoustics, sensing, telemetry, fluid dynamics, positioning and control devices and electrical and mechanical engineering expertise.
Our Optimization Software & Services group provides survey design, command and control software systems and related services for marine towed streamer and seabed operations. Our software business commands recurring, premium subscription revenues. We are market leaders in our core business and adapted our platform to more broadly optimize operations. Our software offerings leverage a leading data integration platform to control and optimize operations. Engineering services experts deliver in-field optimization services, equipment maintenance and training to maximize value from our offerings.

Our Devices group develops intelligent equipment controlled by our software to optimize operations. Our Devices group develops, manufactures and repairs marine towed streamer and seabed data acquisition technology, sensors and compasses which have been deployed in marine robotics, defense, E&P and other commercial applications.
Our Operations Optimization net revenues were consistentdecreased compared to the firstthird quarter of 2019.2019 resulting from COVID-19 reduced seismic activity and vessel stacking. When E&P companies reviewed their 2020 exploration plans and budgets in light of lower commodity prices, many contracts were postponed or canceled, and tender activity dropped dramatically.
It is our view that technologies that provide a competitive advantage through improved imaging, lower costs, higher productivity, or enhanced safety will continue to be valued in our marketplace.the market. We believe that our newest technologies such as Marlin and 4Sea, will continue to attract customer interest because these technologies are designed to deliver those desirable attributes.
INOVA Geophysical. INOVA manufactures land acquisition systems, including the G3i HD, Hawk and Quantum recording platforms, land source products, including the AHV-IV series, UNIVIB®, and UNIVIB 2 vibroseis vehicles, and source controllers and multicomponent sensors, including the VectorSeis digital 3C receivers. We wrote our investment in INOVA down to zero in 2014.sensors.
In March 2020, we announced that we had entered into an agreement to sell our 49% ownership interest in INOVA Geophysical joint venture for a total consideration of $12.0 million. The transaction is expected to close in the second half of the year,million, subject to regulatory approvals and other closing conditions. As the regulatory review is taking longer than anticipated, closing will likely extend into 2021.
WesternGeco Litigation Settlement
On April 7, 2020, we entered into a settlement agreement with WesternGeco that ended the ongoing litigation.
Pursuant to the settlement agreement, WesternGeco granted us a license to the underlying patents, lifted the injunction that prevented us from manufacturing DigiFIN in the United States and, on April 13, 2020, the District Court permanently dismissed the pending lawsuit.
In exchange, we agreed to pay WesternGeco a settlement based on future revenues from our multi-client data library, consisting of 1) small percentage of 2-D multi-client latedata library sales for a ten-year period, and 2) the transfer of a majority of our revenue share relating to the parties’ existing joint multi-client reimaging programs offshore Mexico. (WesternGeco will receive 90%, instead of 50%, of Net Revenues from the program, except that the revenue share for the Perdido South portion of the program shall remain 50/50). A copy of the settlement agreement is filed as an exhibit to this Form 10-Q.
32

See Note 89 “Litigation” of Footnotes to Unaudited Condensed Consolidated Financial Statements” and Part II - Item 1. “Legal Proceedings” for further details.
Key Financial Metrics
The table below provides an overview of key financial metrics for our company as a whole and our two business segments for the three and nine months ended March 31,September 30, 2020,, compared to the same period of 2019.
Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
(in thousands, except share data)
Net revenues:
E&P Technology & Services:
New Venture$1,213 $5,905 $7,340 $24,394 
Data Library5,085 27,288 52,083 55,030 
Total multi-client revenues6,298 33,193 59,423 79,424 
Imaging and Reservoir Services3,795 7,048 12,410 16,443 
Total10,093 40,241 71,833 95,867 
Operations Optimization:
Optimization Software & Services3,007 6,895 10,811 17,648 
Devices3,134 6,103 12,735 18,455 
Total6,141 12,998 23,546 36,103 
Total net revenues$16,234 $53,239 $95,379 $131,970 
Gross profit (loss):
E&P Technology & Services$(1,092)$18,316 $24,902 (a)$36,113 
Operations Optimization2,381 6,972 9,315 18,670 
Total gross profit$1,289 $25,288 $34,217 $54,783 
Gross margin:
E&P Technology & Services(11)%46 %35 %38 %
Operations Optimization39 %54 %40 %52 %
Total gross margin8 %47 %36 %42 %
Income (loss) from operations:
E&P Technology & Services$(4,591)$11,878 $13,803 (a)$15,500 
Operations Optimization(232)2,994 (3,965)(b)5,808 
Support and other(6,341)(11,014)(20,148)(c)(35,940)
Income (loss) from operations$(11,164)$3,858 $(10,310)$(14,632)
Operating margin:
E&P Technology & Services(45)%30 %19 %16 %
Operations Optimization(4)%23 %(17)%16 %
Support and other(39)%(21)%(21)%(27)%
Total operating margin(69)%7 %(11)%(11)%
Net loss(16,414)(3,329)(23,921)(32,864)
Less: Net income attributable to noncontrolling interest(193)(394)(168)(841)
Net loss attributable to ION$(16,607)$(3,723)$(24,089)$(33,705)
Net loss per share:
Basic$(1.16)$(0.26)$(1.69)$(2.39)
Diluted$(1.16)$(0.26)$(1.69)$(2.39)
Weighted average number of common shares outstanding:
Basic14,278 14,181 14,255 14,104 
Diluted14,278 14,181 14,255 14,104 
 Three Months Ended March 31, 
 2020 2019 
 (in thousands, except share data)
Net revenues:    
E&P Technology & Services:    
New Venture$1,441
 $13,471
 
Data Library40,131
 9,948
 
Total multi-client revenues41,572
 23,419
 
Imaging and Reservoir Services4,942
 3,684
 
Total46,514
 27,103
 
Operations Optimization:    
Optimization Software & Services4,427
 5,033
 
Devices5,473
 4,820
 
Total9,900
 9,853
 
Total net revenues$56,414
 $36,956
 

 Three Months Ended March 31, 
 2020 2019 
Gross profit (loss):    
E&P Technology & Services$23,730
(a)$5,440
 
Operations Optimization4,614
 4,516
 
Segment gross profit28,344
 9,956
 
Other—
 (44) 
Total gross profit$28,344
 $9,912
 
Gross margin:    
E&P Technology & Services51 % 20 % 
Operations Optimization47 % 46 % 
Total gross margin50 % 27 % 
Income (loss) from operations:    
E&P Technology & Services$17,952
(a)$(1,615) 
Operations Optimization(3,259)(b)170
 
Support and other(8,367) (14,492) 
Income (loss) from operations$6,326
 $(15,937) 
Operating margin:    
E&P Technology & Services39 % (6)% 
Operations Optimization(33)% 2 % 
Support and other(15)% (39)% 
Total operating margin11 % (43)% 
     
Net loss attributable to ION$(2,263) $(21,360) 
Special items:6,975
(c)4,460
(d)
Net income (loss) attributable to ION, as adjusted$4,712
 $(16,900) 
     
Net loss per share:    
Basic$(0.16) $(1.52) 
Diluted$(0.16) $(1.52) 
     
Net income (loss) per share as adjusted:    
Basic$0.33
 $(1.20) 
Diluted$0.33
 $(1.20) 
     
Weighted average number of common shares outstanding:    
Basic14,230
 14,033
 
Diluted14,230
 14,033
 
(a) Includes impairment of multi-client data library of $1.2 million for the three months ended March 31, 2020.million.
(b) Includes impairment of goodwill of $4.2 million for the threenine months ended March 31,September 30, 2020.
(c) Represents impairmentIncludes amortization of goodwillthe government relief funding expected to be forgiven of $4.2$6.9 million severance expense of $3.1 million, impairment of multi-client data library of $1.2 million and related income tax benefit of $0.4 million, partially offset by stock appreciation right awards credit of $1.1 million.for the nine months ended September 30, 2020.
(d) Represents stock appreciation right awards expense in the first quarter of 2019.
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We intend that the following discussion of our financial condition and results of operations will provide information that will assist in understanding our condensed consolidated financial statements, the changes in certain key items in those financial statements from period to period, and the primary factors that accounted for those changes. The financial results are reported in accordance with Generally Accepted Accounting Principles (“GAAP”). However, management believes that certain non-GAAP performance measures may provide users of this financial information, additional meaningful comparisons between current results and results in prior operating periods. One such non-GAAP financial measure is Net income (loss) attributable to ION as adjusted or adjusted net income (loss), which excludes certain charges or amounts. This adjusted net income (loss) amount is not a measure of financial performance under GAAP. Accordingly, it should not be considered as a substitute for income (loss) from operations, net income (loss) or other income data prepared in accordance with GAAP.
For a discussion of factors that could impact our future operating results and financial condition, see (i) Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019,, and (ii) Item 1A. “Risk Factors” in Part II of this Form 10-Q.

Results of Operations
Three Months Ended March 31,September 30, 2020 Compared to Three Months Ended March 31,September 30, 2019
Our consolidated net revenues of $56.4$16.2 million for the three months ended March 31,September 30, 2020 (the “Current Quarter”) increaseddecreased by $19.5$37.0 million, or 53%70%, compared to consolidated net revenues of $37.0$53.2 million for the three months ended March 31,September 30, 2019 (the “Comparable Quarter”). Our total gross margin was 50%8% in the Current Quarter, as compared to 27%47% in the Comparable Quarter. For the Current Quarter, our incomeloss from operations was $6.3$11.2 million, compared to a lossan income of $15.9$3.9 million for the Comparable Quarter.
Net loss attributable to ION for the Current Quarter was $2.3$16.6 million, or $0.16$1.16 loss per share, compared to $21.4a Net loss attributable to ION of $3.7 million, or $1.52$0.26 loss per share, for the Comparable Quarter. Adjusted net income for the Current Quarter was $4.7 million, or $0.33 per share, compared to an adjusted net loss of $16.9 million, or $1.20 loss per share for the Comparable Quarter.
Net Revenues, Gross Profits and Gross Margins
E&P Technology & Services — Net revenues for the Current Quarter increaseddecreased by $19.4$30.1 million, or 72%75%, to $46.5$10.1 million, compared to $27.1$40.2 million for the Comparable Quarter. Within the E&P Technology & Services segment, total multi-client net revenues were $41.6$6.3 million, an increasea decrease of 78%. This increase was driven by increased81% primarily due to lower volume of ION’s global library sales, of global 2D data library, partly offset byas well as a reductiondecline in new venture revenues.revenues due to completing acquisition of a large new program in Comparable Quarter compared to revenues from smaller reimaging programs in the Current Quarter. Imaging and Reservoir Services net revenues were $4.9$3.8 million, a $1.3$3.3 million increasedecrease compared to the Comparable Quarter resulting from working through existing backlog. Quarter due to lower proprietary tender activity, and consistent with our strategy to preferentially utilize these resources to generate higher margin multi-client reimaging products. The Current Quarter reflects a gross profit of $23.7$1.1 million, representing a 51%an (11)% gross margin, compared to a gross profit of $5.4$18.3 million, or 20%46% gross margin, in the Comparable Quarter. These improvementsChanges in gross profit and margin were due to an increasedecrease in our Data Library revenues.net revenues as discussed above, as well as the cost cutting initiatives implemented earlier in the year.
Operations Optimization — Total netNet revenues for the Current Quarter are consistent withdecreased by $6.9 million, or 53% to $6.1 million, compared to $13.0 million for the Comparable Quarter. Optimization Software & Services net revenues for the Current Quarter decreased by $0.6$3.9 million, or 12%57% to $4.4$3.0 million, compared to $5.0$6.9 million for the Comparable Quarter is due to reduced command and control hardware sales, and to a lesser extent, COVID-19 reduced seismic activity and associated services demand.demand resulting from COVID-19. Devices net revenues for the Current Quarter increaseddecreased by $0.7$3.0 million, or 14%49%, to $5.5$3.1 million, compared to $4.8$6.1 million for the Comparable Quarter primarily due to an increase inlower sales of towed streamer equipment spares and repairs. The Current Quarter reflects a gross profit of $4.6$2.4 million, representing a 47%39% gross margin compared to a gross profit of $4.5$7.0 million, representing a 46%54% gross margin for the Comparable Quarter. Changes in gross profit and margin were due to the decline in our net revenues as discussed above.
Operating Expenses
Research, Development and Engineering — Research, development and engineering expense were $4.0$2.9 million for the Current Quarter, a decrease of $1.4$2.0 million, or 25%41% compared to $5.4$4.9 million for the Comparable Quarter primarily due to the cost cutting initiative implemented duringfollowing the quarter.COVID-19 related market impact.
Marketing and Sales — Marketing and sales expense were $4.9$2.8 million for the Current Quarter, a decrease of $0.9$2.8 million, or 16%50% compared to $5.8$5.6 million for the Comparable Quarter primarily due to the reduction of commission expense resulting from reduced revenues during the Current Quarter, as well as the cost cutting initiativeinitiatives implemented duringearlier in the quarter.year.
General, Administrative and Other Operating Expenses — General, administrative and other operating expenses were $9.0$6.7 million for the Current Quarter, a decrease of $5.7$4.3 million, or 39% compared to $14.7$11.0 million for the Comparable Quarter primarily due to the reduction in expenses resulting from our cost cutting initiative implemented during the quarter as well as decrease in stock appreciation rights expense partly offset by an increase in severance expense.initiatives, including lower compensation, travel, rent and professional services expenses.
Other Items
Interest Expense, Net — Interest expense, net, was $3.2$3.7 million for the Current Quarter compared to $3.1$3.2 million for the Comparable Quarter, due to increased borrowings during the Current Quarter. For additional information, please refer to “Liquidity and Capital Resources — Sources of Capital” below.
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Income Tax Expense — Income tax expense for the Current Quarter was $5.9$1.1 million compared to $1.4$3.8 million for the Comparable Quarter. Our effective tax rates for the Current Quarter and Comparable Quarter were 166.2% and (7.1)%, respectively. The income tax expense for the Current Quarter and Comparable Quarter primarily relates to results generated by our non-U.S. businesses. The income tax expense for the Current Quarter includes $2.2 million of valuation allowance related to our non-U.S. businesses.businesses in Latin America. Our effective tax rates for the Current Quarter and Comparable Quarter were negatively impacted by the change in valuation allowances related to U.S and certain foreign operating losses. Due to the impact of the valuation allowances on tax expense, our effective tax rates are not meaningful for all periods presented. See further discussion of establishment of the deferred tax valuation allowance at Note 78 “Income Taxes”of Footnotes to Condensed Consolidated Financial Statements.
Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019
Our consolidated net revenues of $95.4 million for the nine months ended September 30, 2020 (the “Current Period”) decreased by $36.6 million, or 28%, compared to total net revenues of $132.0 million for the nine months ended September 30, 2019 (the “Comparable Period”). Our total gross margin for the Current Period was 36%, compared to 42%, for the Comparable Period. For the Current Period, our loss from operations was $10.3 million, compared to a loss of $14.6 million, for the Comparable Period.
Net loss attributable to ION for the Current Period was $24.1 million, or $1.69 loss per share, compared to a Net loss attributable to ION of $33.7 million, or $2.39 loss per share, in the Comparable Period.
Net Revenues, Gross Profits and Gross Margins
E&P Technology & Services — Net revenues for the Current Period decreased by $24.1 million, or 25%, to $71.8 million, compared to $95.9 million for the Comparable Period. Within E&P Technology & Services segment, multi-client net revenues were $59.4 million, a decrease of 25%. This result was predominantly driven by decreased new venture net revenues due to reduced new program activity during the Current Period.Data library revenues were fairly consistent with the Comparable Period largely due to increased sales of global 2D data library in the first quarter of 2020. Imaging and Reservoir Services net revenues were $12.4 million, a decrease of 24% from the Comparable period due to lower proprietary tender activity, and consistent with our strategy to preferentially utilize these resources to generate higher margin multi-client reimaging products.Gross profit decreased by $11.2 million to $24.9 million, or 35% gross margin, compared to $36.1 million, or 38% gross margin, in the Comparable Period. This decline in gross profit and margin resulted from the decrease in new venture revenues, as well as the $1.2 million impairment of the multi-client data library in the Current Period.
Operations Optimization — Net revenues for the Current Period decreased by $12.6 million or 35%, to $23.5 million compared to $36.1 million for the Comparable Period. Optimization Software & Services net revenues for the Current Period decreased by $6.8 million, or 39%, to $10.8 million compared to $17.6 million for the Comparable Period. Devices net revenues for the Current Period decreased by $5.8 million, or 31%, to $12.7 million, compared to $18.5 million. The change in net revenues during the Current Period is consistent with the changes described for the Current Quarter discussed above. Gross profit decreased by $9.4 million to $9.3 million, representing a 40% gross margin, for the Current Period compared to $18.7 million, representing a 52% gross margin, for the Comparable Period due to the decline in our net revenues.
Operating Expenses
Research, Development and Engineering — Research, development and engineering expense was $9.9 million for the Current Period, a decrease of $5.5 million, or 36%, compared to $15.4 million for the Comparable Period due to primarily due to the cost cutting initiative implemented in January 2020 and following the COVID-19 related market impact.
Marketing and Sales — Marketing and sales expense was $8.9 million for the Current Period, a decrease of $8.5 million, or 49%, compared to $17.4 million, for the Comparable Period, primarily due to the reduction of commission expense resulting from reduced revenues during the Current Period, as well as the cost cutting initiative implemented earlier in the year.
General, Administrative and Other Operating Expenses — General, administrative and other operating expenses were $21.5 million for the Current Period, a decrease of $15.1 million, or 41%, compared to $36.6 million for the Comparable Period. This decrease was primarily due to the reduction in compensation, travel, rent and professional services expenses resulting from our cost cutting initiatives.
Impairment of Goodwill — Impairment of goodwill was $4.2 million for the Current Period compared to zero for the Comparable Period resulting from impairment charge recognized during the first quarter of 2020. See further discussion at Note 10 “Details of Selected Balance Sheet Accounts”of Footnotes to Condensed Consolidated Financial Statements.
Other Items
Interest Expense, net — Interest expense, net, was $10.3 million for the Current Period compared to $9.4 million for the Comparable Period due to increased borrowings during the Current Period. For additional information, please refer to “Liquidity and Capital Resources — Sources of Capital” below.
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Income Tax Expense — Income tax expense for the Current Period was $10.0 million compared to $7.9 million for the Comparable Period. Our income tax expense for the Current Period and Comparable Period, were primarily related to results from our non-US businesses in Latin America. The income tax expense for the Current Period includes $2.2 million of valuation allowance related to our non-U.S. businesses. Our effective tax rate for the Current Period and Comparable Period was negatively impacted by the change in valuation allowance related to U.S. operating losses for which we cannot currently recognize a tax benefit. Due to the impact of the valuation allowances on tax expense, our effective tax rates are not meaningful for all periods presented. See further discussion of establishment of the deferred tax valuation allowance at Note 8 “Income Taxes”of Footnotes to Condensed Consolidated Financial Statements.
Other income (expense), net — Other income for the Current Period was $6.7 million compared to other expense of $0.9 million for the Comparable Period, an increase of $7.9 million primarily due to the amortization of government relief funding expected to be forgiven of $6.9 million. See further discussion at Note 6 “Government Relief Funding”of Footnotes to Condensed Consolidated Financial Statements.
Liquidity and Capital Resources
Sources of Capital
As of March 31,At September 30, 2020,, we had total liquidity of $53.8$59.4 million, consisting of $42.7$51.1 million of cash on hand and $11.1$8.3 million of remaining borrowing capacity under our Credit Facility. In response to the market uncertainty resulting from the COVID-19 pandemic combined with weaker oil and gas prices, in March we drew $27.0 million under our Credit Facility thatduring the first quarter 2020, of which $22.5 million remains outstanding and in our cash balances. balances as of September 30, 2020.
Our cash requirements include working capital requirements and cash required for our debt service payments, multi-client seismic data acquisition activities and capital expenditures. As of March 31,September 30, 2020, we had negative working capital of $17.0$30.5 million compared to negative working capital of $23.6 million as of December 31, 2019. Working capital requirements are primarily driven by our investment in our multi-client data library ($9.719.8 million in the Current QuarterPeriod and $20.0$25.0 million to $30.0 million expected, for the full year, a portion of which will be pre-funded or underwritten by our customers) and royalty payments for multi-client sales. Whether remaining planned expenditures will actually be spent in 2020 depends on industry conditions, project approvals and schedules, and careful monitoring of our levels of liquidity. Also, our
Our headcount has traditionally been a significant driver of our working capital needs. Our headcount decreased to 470approximately 450 employees as of March 31,September 30, 2020 from approximately 520 employees as of December 31, 2019 resulting from our cost reduction initiative earlier this year, a significant portion of which is reduction in January 2020.our personnel costs. As a significant portion of our business is involved in the planning, processing and interpretation of seismic data services, one of our largest investments is in our employees, which requires cash expenditures for their salaries, bonuses, payroll taxes and related compensation expenses, including stock appreciation awards, typically in advance of related revenue billings and collections.
Our working capital requirements may change from time to time depending upon many factors, including our operating results and adjustments in our operating plan in response to industry conditions, competition and unexpected events. In recent years, our primary sources of funds have been cash flows generated from operations, existing cash balances, debt and equity issuances and borrowings under our Credit Facility.
Revolving Credit Facility
On August 16, 2018, we and our material U.S. subsidiaries — GX Technology Corporation, ION Exploration Products (U.S.A), Inc. and I/O Marine Systems, Inc. (the “Material U.S. Subsidiaries”) — along with GX Geoscience Corporation, S. de R.L. de C.V., a limited liability company (Sociedad de Responsibilidad Limitada de Capital Variable) organized under the laws of Mexico, and a subsidiary of the Company (the “Mexican Subsidiary”) (the Material U.S. Subsidiaries and the Mexican Subsidiary are collectively, the “Subsidiary Borrowers”, together with ION Geophysical Corporation are the “Borrowers”) — the financial institutions party thereto, as lenders, and PNC Bank, National Association (“PNC”), as agent for the lenders, entered into that certain Third Amendment and Joinder to Revolving Credit and Security Agreement (the “Third Amendment”), amending the Revolving Credit and Security Agreement, dated as of August 22, 2014 (as previously amended by the First Amendment to Revolving Credit and Security Agreement, dated as of August 4, 2015 and the Second Amendment to Revolving Credit and Security Agreement, dated as of April 28, 2016, the “Credit Agreement”). The Credit Agreement, as amended by the First Amendment, the Second Amendment and the Third Amendment is herein called the “Credit Facility”). The Third Amendment amended the Credit Agreement to, among other things:
extend the maturity date of the Credit Facility by approximately four years (from August 22, 2019 to August 16, 2023), subject to our retirement or extension of the maturity date of our Second Lien Notes, as defined below, which mature on December 15, 2021;
increase the maximum revolver amount by $10.0 million (from $40.0 million to $50.0 million);
increase the borrowing base percentage of the net orderly liquidation value as it relates to the multi-client data library (not to exceed $28.5 million, up from the previous maximum of $15.0 million for the multi-client data library component);
include the eligible billed receivables of the Mexican Subsidiary up to a maximum of $5.0 million in the borrowing base calculation and joins the Mexican Subsidiary as a borrower thereunder (with a maximum exposure of $5.0 million) and require the equity and assets of the Mexican Subsidiary to be pledged to secure obligations under the facility;
modify the interest rate such that the maximum interest rate remains consistent with the fixed interest rate prior to the Third Amendment (that is, 3.00% per annum for domestic rate loans and 4.00% per annum for LIBOR rate loans), but now lowers the range down to a minimum interest rate of 2.00% for domestic rate loans and 3.00% for LIBOR rate loans based on a leverage ratio for the preceding four-quarter period;
decrease the minimum excess borrowing availability threshold which (if the Borrowers have minimum excess borrowing availability below any such threshold) triggers the agent’s right to exercise dominion over cash and deposit accounts; and
modify the trigger required to test for compliance with the fixed charges coverage ratio.
The maximum amount available under the Credit Facility is the lesser of $50.0 million or a monthly borrowing base. The borrowing base under the Credit Facility will increase or decrease monthly using a formula based on certain eligible

receivables, eligible inventory and other amounts, including a percentage of the net orderly liquidation value of the Borrowers’ multi-client data library. As of March 31,At September 30, 2020, there was $27.0$22.5 million outstanding indebtedness under the Credit Facility and the undrawn remaining borrowing base capacity was $11.1$8.3 million. The maturity of the Credit Facility will accelerate to October 31, 2021 if we are unable to repay or extend the maturity of the Second Lien Notes.
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The Credit Facility requires us to maintain compliance with various covenants. At March 31,September 30, 2020, we were in compliance with all of the covenants under the Credit Facility. For further information regarding our Credit Facility, see above Note 5 “Long-term Debt” of Footnotes to Condensed Consolidated Financial Statements.
Senior Secured Notes
As of March 31,September 30, 2020, ION Geophysical Corporation’s 9.125% Senior Secured Second Priority Notes due December 2021 (the “Second Lien Notes”) had an outstanding aggregate principal amount of $120.6 million and are senior secured second-priority obligations guaranteed by the Material U.S. Subsidiaries and the Mexican Subsidiary. Interest on the Second Lien Notes is payable semiannually in arrears on June 15 and December 15 of each year during their term, except that the interest payment otherwise payable on June 15, 2021 will be payable on December 15, 2021.
The April 2016 indenture governing the Second Lien Notes contains certain covenants that, among other things, limits or prohibits our ability and the ability of our restricted subsidiaries to take certain actions or permit certain conditions to exist during the term of the Second Lien Notes, including among other things, incurring additional indebtedness in excess of permitted indebtedness, creating liens, paying dividends and making other distributions in respect of our capital stock, redeeming our capital stock, making investments or certain other restricted payments, selling certain kinds of assets, entering into transactions with affiliates, and effecting mergers or consolidations. These and other restrictive covenants contained in the Second Lien Notes Indenture are subject to certain exceptions and qualifications. All of our subsidiaries are currently restricted subsidiaries.
At March 31,September 30, 2020, we were in compliance with all of the covenants under the Second Lien Notes.
On or after December 15, 2019, we may, on one or more occasions, redeem all or a part of the Second Lien Notes at the redemption prices set forth below, plus accrued and unpaid interest and special interest, if any, on the Second Lien Notes redeemed during the twelve-month period beginning on December 15th of the years indicated below:
DatePercentage
2019105.50%
2020103.50%
2021100.00%
Government Relief Funding
On April 11, 2020, we entered into a Note Agreement (“Note”) with PNC amounting to $6.9 million pursuant to the Coronavirus Aid, Relief, and Economic Security Act’s (“CARES Act”) Paycheck Protection Program (“PPP”). Amounts outstanding under this Note will bear interest at 1% per annum beginning on the six-month anniversary of the date of the Note. Interest will be calculated based on the actual number of days that principal is outstanding over a year of 360 days. The Note matures in two years after the receipt of the loan proceeds.
We are in the process of applying to PNC for forgiveness of the amount due on this Note in an amount based on the sum of the following costs incurred by our US operations during the 24-week period beginning on the date of first disbursement (for payroll costs, beginning on the date of the first pay period following disbursement; for non-payroll costs, beginning on the date of first disbursement) of this Note: (a) payroll costs; (b) any payment on a covered rent obligation; and (c) any covered utility payment. The amount of forgiveness shall be calculated (and may be reduced) in accordance with the requirements of the PPP, including the provisions of Section 1106 of the CARES Act. The forgiveness amount will be subject to the Small Business Administration’s review. Any outstanding principal amount under this Note that is not forgiven under the PPP shall convert to an amortizing term loan.
We recognized the Note following the government grant accounting by analogy to International Accounting Standards (“IAS”) 20, “Accounting for Government Grants and Disclosure of Government Assistance” (“IAS 20”). In accordance with IAS 20, a deferred income liability is recognized for the principal amount estimated to be forgiven and is amortized to other income on a systematic and rational basis. Any outstanding principal amount not expected to be forgiven is recognized as other debt. As we expect that the full amount of the Note will be forgiven, the entire $6.9 million was recognized as a deferred income liability during second quarter and fully amortized to other income in the condensed consolidated income statements for the six months ended June 30, 2020, as the related expenses it was intended to offset were incurred from April 2020 to June 2020. If, despite our good-faith belief that given our circumstances we satisfied all eligible requirements for the PPP Loan, we are later determined to have not been in compliance with these requirements or it is otherwise determined that we were ineligible to receive the PPP Loan, we may be required to repay the PPP Loan in its entirety and/or be subject to additional penalties. Should we be audited or reviewed by federal or state regulatory authorities as a result of filing an application for forgiveness of the PPP Loan or otherwise, such audit or review could result in the diversion of management’s time and attention and the incurrence of additional costs.
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Date Percentage
2019 105.50%
2020 103.50%
2021 100.00%

Meeting our Liquidity Requirements
At March 31,September 30, 2020, our total outstanding indebtedness (including equipment finance leases) was approximately $147.9$142.9 million, consisting primarily of approximately $120.6 million outstanding Second Lien Notes, $1.6$1.0 million of equipment finance leases and other short-term debt, partially offset by $1.7$1.2 million of debt issuance costs. In response to the market uncertainty resulting from COVID-19 pandemic combined with weaker oil and gas prices, in March we drew $27.0 million under our Credit Facility during the first quarter 2020, of which $22.5 million remains outstanding and in our cash balances.balances as of September 30, 2020.
For the Current Quarter,Period, total capital expenditures, including the investments in our multi-client data library, were $10.2 million.$20.7 million. We expect that our total capital expenditures, primarily related to investments in our multi-client data library, this year to be in the range of $20.0$25.0 million to $35.0 million, a portion of which will be pre-funded or underwritten by our customers. Whether remaining planned expenditures will actually be spent in 2020 depends on industry conditions, project approvals and schedules, and careful monitoring of our levels of liquidity.
While Current Quarter revenues came in lower than prior year due to the durationrepercussions of the oil price volatility earlier this year and extentthe ongoing uncertainty from the COVID-19 pandemic, we made progress executing our strategy. Backlog increased 77% sequentially, reversing several consecutive quarters of COVID-19 is difficultsteady decline due to predict, we recorded its highest first quarter revenues since 2014. A numberthe strategic shift to enter the 3D new acquisition multi-client market. We continue to work closely with our clients to understand their revised budgets and to scale our business appropriately. We partially mitigated the impact of large multi-client contractsthe current macroeconomic environment by fully benefiting from the structural changes and associated cost reductions that were closedoutlined in the first quarter 2020, some of which were delayed from the fourth quarter 2019, even after E&P market dynamics changed. ION worked closely with clients to assess the effect of E&P budget reductions to our business and took decisive action to proactively manage its business.quarter. To further mitigate the impact of COVID-19 and oil price volatility, management implemented a plan to preserve cash and manage liquidity as follows:
Scaling•Scaled down personnel costs and operating expenses in April 2020 by another $18.0 million during the remaining nine months of 2020, building on the over $20.0 million (net of severance expense of $3.1 million) of cuts made in January 2020. These further reductions are primarily through a variety of furlough programs and reduced compensation arrangements across ION’sour worldwide workforce. IONOur executives have takentook a 20% base salary reduction and a tiered reduction scheme has been cascaded to the rest of the worldwide workforce. ION’sOur board of directors has takentook a 20%

reduction in directors’ fees. In addition, ION haswe have curtailed use of external contractors, decreased travel and event costs and implemented new systems and processes that more efficiently support itsour business.
Reducing•Reduced capital expenditures to an estimated $20.0$25.0 million to $35.0 million (a portion of which will be pre-funded or underwritten by our customers), down from the original budget of $35.0 million to $50.0 million, to reflect both reduced seismic demand and travel/border restrictions impacting new data acquisition offshore. The majority of capital expenditures relate to investments in multi-client data. This provides flexibility to aggressively reduce cash outflows while shifting to much lower cost reimaging programs.
•Applied for and continue to explore various government assistance programs, of which $6.9approximately $7.0 million has beenwas received in April 2020.and applied against qualifying expenditures during the period. Receipt of this $6.9 millionassistance allowed us to avoid further staff reductions while supporting our ongoing operations. Additional global government
•Re-negotiated existing lease agreements for our significant locations to obtain rent relief of between $2.0 millionapproximately $4.0 million. The majority of the cash savings from the rent relief is expected to $7.0 million may be possible.benefit us from July 2020 to March 2021. See Note 12 “Lease Obligations” for further details.
•Announced the sale of itsour 49% ownership interest in INOVA Geophysical joint venture for $12.0 million that is expected to close during the second half of the year, subject to regulatory approvals and other closing conditions. As the regulatory review is taking longer than anticipated, closing will likely extend into 2021.
•Entered into a settlement agreement with WesternGeco ending the uncertainty surrounding the decade-long patent litigation. See Note 89 “Litigation” for further details.
•In addition, we reviewed our debt covenants and expect that we will remain in compliance for the next twelve months.
We believe that the above management plan, which includes the use of government assistance programs, along with our existing cash balance and the undrawn remaining borrowing capacity under our Credit Facility will beprovide sufficient liquidity to meet our anticipated cash needs for at least the next twelve months. At September 30, 2020, our liquidity was $59.4 million, slightly below liquidity of $65.5 million from one year ago. The outlined management plan reflects our continued focus on preserving cash and managing liquidity in the current uncertain macroeconomic environment. In the event our customers experience more extensive budget reductions and capital constraints further reducing demand for our services and products, resulting in deterioration of our revenues below our current forecasted levels, management may be required to update its plan by implementing further cost reductions and delaying capital investments. Additionally, we are actively exploring a number of strategic options to optimally address the Second Lien Notes, which mature on December 15, 2021. If by September 15, 2021 we have not (1) repaid the Second Lien Notes, (2) extended the maturity of the Second Lien Notes to a date not earlier than October 31, 2023, or (3) submitted a written proposal summarizing our plan to either repay or extend the notes to the agent for
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the lenders (as defined in Note 5, “Long-term Debt” of Footnotes to Condensed Consolidated Financial Statements”) of the Credit Facility that has been approved by the agent, then the Credit Facility shall immediately become due and payable on such date. If the written proposal is submitted and approved by the agent by September 15, 2021, but we are unable to execute the approved proposal on or before October 31, 2021, the Credit Facility shall immediately become due and payable on such date. We reviewed our debt covenants as of September 30, 2020, and expect to remain in compliance for the next twelve months (see Note 5, “Long-term Debt” of Footnotes to Condensed Consolidated Financial Statements” for further discussion of our covenants).
Cash Flow from Operations
In the Current Period, we used $7.0 million ofgenerated cash from operating activities of $13.2 million compared to cash generated from operating activities of $15.4$19.3 million for the Comparable Period. ThisThe decrease was driven primarily by an increasea reduction in net revenues during the Current Period, partially offset by a reduction of operating expenses due to cost savings initiatives fully realized during the Current Period, as well as collection of our accounts receivables related to significantly increased current quarter sales, that a majority are expected to be collected duringin the second quarter and payments of our payables in the Current Period.2020.
Cash Flow from Investing Activities
Cash used in investing activities was $10.2$20.7 million in the Current Period compared to $9.6 $22.5 million for the Comparable Period. The principal uses of cash in our investing activities during the Current QuarterPeriod were $9.7$19.8 million invested in our multi-client data library and $0.5$0.9 million for capital expenditures related to property, plant and equipment.
The principal use of cash in our investing activities during the Comparable QuarterPeriod were $8.8$21.2 million invested in our multi-client data library and $0.8$1.3 million for capital expenditures related to property, plant and equipment.
Cash Flow from Financing Activities
Net cash provided by financing activities was $26.2$27.3 million in the Current Period, compared to net cash used in financing activities of $1.0$2.6 million for the Comparable Quarter.Period. Cash provided by financing activities during the Current Period was related to $27.0a $22.5 million ofnet drawdown on our credit facility, partly$6.9 million of government relief funding, partially offset by $0.8$1.8 million of payments of long-term debt, including equipment finance leases in the Current Quarter.leases.
The net cash used in financing activities during the Comparable QuarterPeriod was related to $0.7$2.0 million of payments of long-term debt, including equipment finance leases in the Comparable Quarter.Period.
Inflation and Seasonality
Inflation in recent years has not had a material effect on our cost of goods or labor, or the prices for our products or services. Traditionally, our business has been seasonal, with strongest demand often occurring in the second half of our fiscal year.
Critical Accounting Policies and Estimates
Refer to our Annual Report on Form 10-K for the year ended December 31, 2019,, for a complete discussion of our significant accounting policies and estimates.

Foreign Sales Risks
The majority of our foreign sales are denominated in U.S. dollars. Product revenues are allocated to geographical locations on the basis of the ultimate destination of the equipment, if known. If the ultimate destination of such equipment is not known, product revenues are allocated to the geographical location of initial shipment. Service revenues, which primarily relate to our E&P Technology & Services segment, are allocated based upon the billing location of the customer. For the Current and Comparable Periods, international sales comprised 44%60% and 81%75%, respectively, of total net revenues.
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Three Months Ended March 31,Nine Months Ended September 30,
2020 2019 20202019
Net revenues by geographic area:(In thousands)Net revenues by geographic area:(In thousands)
North America$31,810
 $7,157
North America$37,920 $32,984 
Latin America9,804
 13,531
Latin America22,695 50,572 
Asia Pacific9,288
 1,867
Asia Pacific15,696 8,287 
Europe3,810
 10,392
Europe12,997 24,850 
Middle East954
 1,359
Middle East2,202 6,364 
Africa591
 2,389
Africa1,939 7,541 
Other157
 261
Other1,930 1,372 
Total$56,414
 $36,956
Total$95,379 $131,970 
Credit Risks
For the threenine months ended March 31,September 30, 2020 we had two customers with sales that each exceeded 10% of the Company’s consolidated net revenues. For three months ended March 31,and 2019, we had one customer with sales that exceeded 10% of the Company’s consolidated net revenues.
We routinely evaluate the financial stability and creditworthiness of our customers. At March 31,September 30, 2020, we had one customertwo customers with balances that accounted for 51%39% of our total combined accounts receivable and unbilled receivable balances. At March 31,September 30, 2019, we had two customers with a combined balance that accounted for 26%40% of our total combined accounts receivable and unbilled receivable balances.
The loss of these customers or deterioration in our relationship with these customers could have a material adverse effect on our results of operations and financial condition.
We routinely evaluate the financial stability and creditworthiness of our customers. We have a corporate credit policy that is intended to minimize the risk of financial loss due to a customer’s inability to pay. Credit coverage decisions for customers are based on references, payment histories, financial and other data. We utilize a third party trade credit insurance policy. We have historically not extended long-term credit to its customers.
Item 3.Quantitative and Qualitative Disclosures about Market Risk
For the three and nine months ended September 30, 2020, we recorded net foreign currency translation losses of approximately $0.5 million and $1.8 million, respectively, primarily due to currency fluctuations related to our operations in Brazil.
Refer to Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2019 for a discussion regarding our quantitative and qualitative disclosures about market risk. There have been no material changes to those disclosures during the Current Quarter.Period.
Item 4.Controls and Procedures
Disclosure Controls and Procedures. Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file with or submit to the Securities and Exchange Commission (the “SEC”)SEC under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time period specified by the SEC’s rules and forms. Disclosure controls and procedures are defined in Rule 13a-15(e) under the Exchange Act, and they include, without limitation, controls and procedures designed to ensure that information required to be disclosed under the Exchange Act is accumulated and communicated to management, including the principal executive officer and the principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Our management carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2020.September 30, 2020. Based upon that evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective as of March 31, 2020.September 30, 2020.
Changes in Internal Control over Financial Reporting. There was not any change in our internal control over financial reporting that occurred during the three months ended March 31,September 30, 2020,, which has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II — OTHER INFORMATION
Item 1.Legal Proceedings
WesternGeco
Settlement
On April 7, 2020, we entered into a settlement agreement with WesternGeco that ended the ongoing litigation.
Pursuant to the settlement agreement, WesternGeco granted us a license to the underlying patents, lifted the injunction that prevented us from manufacturing DigiFIN in the United States and, on April 13, 2020, the District Court permanently dismissed the pending lawsuit.
In exchange, we agreed to pay WesternGeco a settlement based on future revenues from our multi-client data library, consisting of 1) small percentage of 2-D multi-client latedata library sales for a ten-year period, and 2) the transfer of a majority of our revenue share relating to the parties’ existing joint multi-client reimaging programs offshore Mexico. (WesternGeco will receive 90%, instead of 50%, of Net Revenues from the program, except that the revenue share for the Perdido South portion of the program shall remain 50/50). A copy of the settlement agreement is filed as an exhibit to this Form 10-Q.
Background
In June 2009, WesternGeco L.L.C. (“WesternGeco”) filed a lawsuit against us in the United States District Court for the Southern District of Texas (the “District Court”). In the lawsuit, styled WesternGeco L.L.C. v. ION Geophysical Corporation, WesternGeco alleged that we infringed four of their patents concerning marine seismic surveys.
Trial began in July 2012, and the jury returned a verdict in August 2012. The jury found that we infringed the six “claims” contained in four of WesternGeco’s patents by supplying our DigiFIN lateral streamer control units from the United States. (In patent law, a “claim” is a technical legal term; an infringer infringes on one or more “claims” of a given patent.)
In May 2014, the District Court entered a Final Judgment against the Company in the amount of $123.8 million. The Final Judgment also enjoined the Company from supplying DigiFINs or any parts unique to DigiFINs in or from the United States.
As of 2018, we paid WesternGeco the $25.8 million of the Final Judgment (the portion of the judgment representing reasonable royalty damages and enhanced damages, plus interest).
The balance of the judgment against us ($98.0 million, representing lost profits from surveys performed by our customers outside of the United States, plus interest) was vacated by the United States Court of Appeals for the Federal Circuit (the award of lost profit damages was vacated because the Patent Trial and Appeal Board of the Patent and Trademark Office invalidated four of the five patent claims that could have supported an award of lost profit), and a new trial ordered, to determine what lost profit damages, if any, WesternGeco was entitled to.
As noted above, the lawsuit has been dismissed in accordance with the parties’ settlement agreement.
Our assessments disclosed in this Quarterly Report on Form 10-Q or elsewhere are based on currently available information and involve elements of judgment and significant uncertainties. See Note 89 “Litigation” of Notes to Condensed Consolidated Financial Statements.
Other Litigation
In July 2018, we prevailed in an arbitration that we initiated against the Indian Directorate General of Hydrocarbons (“DGH”) relating to our ability to continue to license data under our IndiaSPAN program. The DGH filed a lawsuit in court in India to vacate the arbitration award; in connection with that lawsuit, we were ordered to escrow approximately $4.5 million in sales proceeds that we had received in respect of sales from our IndiaSPAN program, pending the outcome of the DGH’s challenge to the arbitration award. We challenged the escrow order, but on December 9, 2019, the Supreme Court of India ordered us to comply with it which would have required us to deposit approximately $4.5 million in escrow in late February 2020. Since then, we received a court order deferring the deadline for depositing the required amount in escrow from late February 2020 to late March 2020.it. We prepared a petition to file with the court to request that thea March 2020 deadline to deposit approximately $4.5 million in escrow in early 2020 be extended due to the changes to our business, and to the markets, that have been spurred by the COVID-19 pandemic (other than for emergencies) and are not accepting filings.pandemic. We were unable to file the application because the courts in India arewere closed due to the pandemic.pandemic (other than for emergencies), and were not accepting filings at that time. We served a copy of our draft petition on the DGH’s counsel and intend to file it as soon asin advance of the courts re-open and resume accepting filings.next hearing, which has been repeatedly delayed due to the COVID-19 pandemic. We prevailed on the merits in the arbitration and expect to have that award upheld in Indian court, which would result in release of our portion of the escrowed money. The DGH’s request to vacate the arbitration award is currently scheduled to be heard by the court in India on July 15,January 18, 2021. We have not escrowed the money as of September 30, 2020.

We have been named in various other lawsuits or threatened actions that are incidental to our ordinary business. Litigation is inherently unpredictable. Any claims against us, whether meritorious or not, could be time-consuming, cause us 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. We currently believe that the ultimate resolution of these matters will not have a material adverse effect on our financial condition or results of operations or our liquidity.
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Item 1A.Risk Factors
This report contains or incorporates by reference statements concerning our future results and performance and other matters that are “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). These statements involve known and unknown risks, uncertainties, and other factors that may cause our or our industry’s results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “would,” “should,” “intend,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue” or the negative of such terms or other comparable terminology. Examples of other forward-looking statements contained or incorporated by reference in this report include statements regarding:
•the impact of the COVID-19 pandemic on our business, financial condition, and results of operations;
•future levels of our capital expenditures and of our customers for seismic activities;
•future oil and gas commodity prices;
•the effects of current and future worldwide economic conditions (particularly in developing countries) and demand for oil and natural gas and seismic equipment and services;
•future implication of our negative working capital and shareholdersstockholders’ deficit, including future cash needs and availability of cash, to fund our operations and pay our obligations;
•the effects of current and future unrest in the Middle East, North Africa and other regions;
•the timing of anticipated revenues and the recognition of those revenues for financial accounting purposes;
•the effects of ongoing and future industry consolidation;
•the timing of future revenue realization of anticipated orders for multi-client survey projects and data processing work in our E&P Technology & Services segment;
•future government laws or regulations pertaining to the oil and gas industry, including trade restrictions, embargoes and sanctions imposed by the U.S government;government or laws curtailing the exploration for, or use of; hydrocarbons;
•future government actions that may result in the deprivation of our contractual rights, including the potential for adverse decisions by judicial or administrative bodies in foreign countries with unpredictable or corrupt judicial systems;
•expected net revenues, gross margins, income from operations and net income for our services and products;
•future seismic industry fundamentals, including future demand for seismic services and equipment;
•future benefits to our customers to be derived from new services and products;
•future benefits to be derived from our investments in technologies, joint ventures and acquired companies;
•future growth rates for our services and products;
•the degree and rate of future market acceptance of our new services and products;
•expectations regarding E&P companies and seismic contractor end-users purchasing our more technologically-advanced services and products;
•anticipated timing and success of commercialization and capabilities of services and products under development and start-up costs associated with their development, including 4Sea and Marlin SmartPorts;SmartPort;
•future opportunities for new products and projected research and development expenses;
•expected continued compliance with our debt financial covenants;
•expectations regarding realization of deferred tax assets;
•expectations regarding the impact of the U.S. Tax Cuts, Jobs Act and JobsCARES Act;
•expectations regarding the approval of our request for forgiveness of the PPP loan.
•anticipated results with respect to certain estimates we make for financial accounting purposes;

•future success dependent on our continuing ability to identify, hire, develop, motivate and retain skilled personnel for all areas of our organization;
•breaches to our systems could lead to loss of intellectual property, dissemination of highly confidential information, increased costs and impairment of our ability to conduct our operations; and
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•evolving cybersecurity risks, such as those involving unauthorized access or control, denial-of-service attacks, malicious software, data privacy breaches by employees, insiders or others with authorized access, cyber or phishing-attacks, ransomware, malware, social engineering, physical breaches or other actions;
•compliance with the U.S. Foreign Corrupt Practices Act and other applicable U.S. and foreign laws prohibiting corrupt payments to government officials and other third parties.parties; and
•anticipated approval of the INOVA sale by applicable regulators
The COVID-19 pandemic has adversely affected our business; the ultimate effect on our operations and financial condition will depend on future developments that are highly uncertain.
The COVID-19 pandemic has adversely affected the global economy.  It has disrupted supply chains, caused downward pressure on stock prices, depressed the demand for many goods and services, and created significant volatility in the financial markets. The pandemic has also resulted in travel restrictions, business closures and other restrictions on movement and interactions in many locations.  There has been a significant reduction in the demand for oil, and a significant drop in the price of oil. If the reduced demand and reduced prices continue for a prolonged period, our operations, financial condition, and cash flows may be materially and adversely affected.
Our operations also may be adversely affected if significant portions of our workforce are unable to work effectively, whether because of illness, quarantines, government actions, or other restrictions in connection with the pandemic.
We have already implemented workplace restrictions, including guidance for our employees to work remotely if able, in our offices and work sites for health and safety reasons and are continuing to monitor national, state and local government directives where we have operations.  Currently around 95%the majority of our workforce is working from home. The notable exception to this is our manufacturing operations in Louisiana; currently, employees are not restricted by the government from reporting to work in Louisiana, but they are subject to enhanced safety precautions. The extent to which the COVID-19 pandemic will adversely affect our business, results of operations, and financial condition will depend on future developments that are highly uncertain. The course, scope and duration of the pandemic, and actions taken by governmental authorities and other third parties in response to the pandemic, cannot be predicted.
Crude oil prices have declined significantly in 2020 and, if oil prices fail to rebound, our operations and financial condition maywill be materially and adversely affected.
InDuring the first quarternine months of 2020, crude oil prices fell dramatically due in part to significantly decreased demand as a result of the COVID-19 pandemic and an increase in global production. While members of OPEC and other oil producing countries agreed to certain production cuts in April 2020 that were extended through December 2020, these cuts are not expected to offset near-term demand loss attributable to the COVID-19 pandemic. If crude oil prices fail to rebound for a prolonged period, or if demand for our products and services does not rebound commensurately with oil prices, our operations, financial condition, and cash flows maywill be materially and adversely affected.
We face a significant debt maturity in December 2021.2021 and if not addressed as contemplated by our Credit Facility, all amounts outstanding under our Credit Facility shall immediately become due and payable.
Our $120.6 million aggregate principal amount of Senior Secured Second-Priority Lien notes mature on December 15, 2021. If our cash flows from operations and other capital resources are insufficient to pay off or if we are unable to re-negotiate such notes, we may face substantial liquidity problems and may be forced to reduce or delay investments, dispose of material assets or operations, or issue additional debt or equity. We may not be able to take such actions, if necessary, on commercially reasonable terms or at all. In addition, if by September 15, 2021 we have not (1) repaid the Second Lien Notes, (2) extended the maturity of the Second Lien Notes to a date not earlier than October 31, 2023, or (3) submitted a written proposal summarizing our plan to either repay or extend the notes to the agent for the lenders (as defined in Note 5, “Long-term Debt” of Footnotes to Condensed Consolidated Financial Statements”) of the Credit Facility that has been approved by the agent, then the Credit Facility shall immediately become due and payable on such date. If the written proposal is submitted and approved by the agent by September 15, 2021, but we are unable to execute the approved proposal on or before October 31, 2021, the Credit Facility shall immediately become due and payable on such date. Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, would materially and adversely affect our financial position and results or operations.
We may not be entitled to forgiveness of our Paycheck Protection Program (PPP) Loan, and our application for it could be determined by the government to have been impermissible.
On April 15, 2020, we received loan proceeds of approximately $6.9 million (the “PPP Loan”) pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) administered by the U.S. Small Business Administration (the “SBA”). We used the PPP Loan proceeds in accordance with the provisions of the CARES Act. The PPP Loan bears interest at a rate of 1.00% per annum, and is subject to the standard terms and conditions applicable to loans administered by the SBA under the CARES Act.
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Under the CARES Act, as amended in June 2020, loan forgiveness is generally available for the sum of documented payroll costs, covered rent payments, covered mortgage interest and covered utilities during the Covered Period, which is 8 weeks or 24 weeks (at the election of the Company) beginning on the date of the first disbursement of the PPP Loan. The amount of the PPP Loan eligible to be forgiven may be reduced in certain circumstances, including as a result of certain headcount or salary reductions. We will be required to repay any portion of the outstanding principal that is not forgiven, along with accrued interest.
In order to apply for the PPP Loan, we were required to certify, among other things, that the current economic uncertainty made the PPP Loan request necessary to support our ongoing operations. We made this certification in good faith after analyzing, among other things, the maintenance of our workforce, our need for additional funding to continue operations, and our ability to access alternative forms of capital in the current market environment to offset the effects of the COVID-19 pandemic. Following this analysis, we believe that we satisfied all eligibility criteria for the PPP Loan, and that our receipt of the PPP Loan is consistent with the broad objectives of the CARES Act.
On April 23, 2020, the SBA issued guidance stating that it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith. The lack of clarity regarding loan eligibility under the Paycheck Protection Program has resulted in significant media coverage and controversy with respect to public companies applying for and receiving loans. If, despite our good-faith belief that given our circumstances we satisfied all eligible requirements for the PPP Loan, we are later determined to have not been in compliance with these requirements or it is otherwise determined that we were ineligible to receive the PPP Loan, we may be required to repay the PPP Loan in its entirety and/or be subject to additional penalties. Should we be audited or reviewed by federal or state regulatory authorities as a result of filing an application for forgiveness of the PPP Loan or otherwise, such audit or review could result in the diversion of management’s time and attention and the incurrence of additional costs. Any of these events could have a material adverse effect on our business, results of operations and financial condition.
The disruption and uncertainty spurred by COVID-19 has created new avenues for phishing and other cyberattacks, which may impact us to a greater extent as we allow a significant number of our employees to work remotely.
The United States Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency (“CISA”) has warned that cybercriminals will take advantage of the disruption and uncertainty created by the COVID-19 pandemic in their cyberattacks. Increased exposure of our employees to phishing and other scams by cybercriminals in this environment could increase the risk of malicious software being installed on our system, and increase our risk of surrendering sensitive or confidential information. In response to COVID-19, we have been allowing a significant portion of our workforce to work from home. In line with this response, we have provided some employees with expanded remote network access options which enable them to work outside of our physical office locations, and, in this environment, more of our employees use their own personal devices, which can further increase these and other cybersecurity risks. A significant disruption of our information technology systems, unauthorized loss of, or dissemination of, confidential information, or legal claims resulting from our violation of privacy laws, could each have a material adverse effect on our business.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(c) Purchase of Equity Securities by the Issuer and Affiliated Purchasers
During the three months ended March 31,September 30, 2020, in connection with the vesting of (or lapse of restrictions on) shares of our restricted stock held by certain employees, we acquired shares of our common stock in satisfaction of tax withholding obligations that were incurred on the vesting date. The date of acquisition, number of shares and average effective acquisition price per share were as follows:
Period(a)
Total Number of
Shares Acquired		(b)
Average Price Paid Per Share		(c)
Total Number of Shares Purchased as Part of Publicly Announced Plans or Program		(d)
Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Program
July 1, 2020 to July 31, 2020— $— Not applicableNot applicable
August 1, 2020 to August 31, 2020— $— Not applicableNot applicable
September 1, 2020 to September 30, 202041,470 $2.39 Not applicableNot applicable
Total41,470 $2.39 

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Period 
(a)
Total Number of
Shares Acquired
 (b)
Average Price Paid Per Share		 (c)
Total Number of Shares Purchased as Part of Publicly Announced Plans or Program		 (d)
Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Program
January 1, 2020 to January 31, 2020 —
 $—
 Not applicable Not applicable
February 1, 2020 to February 29, 2020 —
 $—
 Not applicable Not applicable
March 1, 2020 to March 31, 2020 750
 $3.52
 Not applicable Not applicable
Total 750
 $3.52
    

Item 5. Other Information
None.
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Item 6.Exhibits
3.1
Restated Certificate of Incorporation, as amended, filed on November 3, 2016 as Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q and incorporated by reference.
3.2
Amended and Restated Bylaws of ION Geophysical Corporation filed on September 24, 2007 as Exhibit 3.5 to the Company’s Current Report on Form 8-K and incorporated herein by reference.
4.1
Indenture, dated May 13, 2013, among ION Geophysical Corporation, the subsidiary guarantors named therein, Wilmington Trust, National Association, as trustee, and U.S. Bank, National Association, as collateral agent, filed on May 13, 2013 as Exhibit 4.1 to the Company’s Current Report on Form 8-K and incorporated herein by reference.

4.2
First Supplemental Indenture, dated as of April 28, 2016, to the Indenture, dated May 13, 2013, among ION Geophysical Corporation, the subsidiary guarantors named therein, Wilmington Savings Fund Society, FSB, as trustee, and U.S. Bank National Association, as collateral agent, filed on April 28, 2016 as Exhibit 4.3 to the Company’s Current Report on Form 8-K and incorporated by reference.
4.3
Indenture, dated as of April 28, 2016, among ION Geophysical Corporation, the subsidiary guarantors named therein, Wilmington Savings Fund Society, FSB, as trustee and collateral agent filed on April 28, 2016 as Exhibit 4.1 to the Company’s Current Report on Form 8-K and incorporated by reference.
4.4
Intercreditor Agreement, dated as of April 28, 2016, by and among PNC Bank, National Association, as first lien representative and first lien collateral agent for the first lien secured parties, and Wilmington Savings Fund Society, FSB, as second lien representative and second lien collateral agent for the second lien secured parties and as third lien representative for the third lien secured parties, and U.S. Bank National Association as third lien collateral agent for the third lien secured parties and acknowledged and agreed to by ION Geophysical Corporation and the other grantors named therein, filed on April 28, 2016 as Exhibit 10.1 to the Company’s Current Report on Form 8-K and incorporated by reference.
31.1
10.1
31.1
Certification of Chief Executive Officer
31.2
32.1
32.2
101The following materials are formatted in Extensible Business Reporting Language (XBRL): (i) Condensed Consolidated Balance Sheets as of March 31,September 30, 2020 and December 31, 2019, (ii) Condensed Consolidated Statements of Operations for the three monthsthree- and nine-months ended March 31,September 30, 2020 and 2019, (iii) Condensed Consolidated Statements of Comprehensive Loss for the three monthsthree- and nine-months ended March 31,September 30, 2020 and 2019, (iv) Condensed Consolidated Statements of Cash Flows for the threenine months ended March 31,September 30, 2020 and 2019, (v) Condensed Consolidated Statements of Stockholders' Deficit for the three monthsthree- and nine-months ended March 31,September 30, 2020 and 2019 and (vi) Footnotes to Condensed Consolidated Financial Statements.
*

104
Certain portions of this exhibit have been omitted pursuant to Item 601(b)(10) of Regulation S-K.

Cover page interactive Data File




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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 thereunto duly authorized.
 
ION GEOPHYSICAL CORPORATION
(Registrant)
By/s/ Mike Morrison
Mike Morrison
Executive Vice President and Interim Chief Financial Officer
Date: May 7,November 5, 2020

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