MANAGEMENT’S DISCUSSION AND ANALYSIS reversals of timing differences and the anticipated tax rules that will be in place when timing differences  reverse. Consequently, total liabilities of the Company as well as results of operations including net income  could be either understated or overstated. During 2011, AKITA guaranteed bank loans made to joint venture partners in order to facilitate their purchase  of co-owned rig interests totalling $2,700,000 for a period of four years. During the third quarter of 2013,  the Company guaranteed bank loans made to joint venture partners totalling $2,812,000 for a period of four  years. AKITA has provided assignments of monies on deposit totalling $5,950,000 with respect to these  guarantees. AKITA’s security from its partners for these guarantees includes interests in specific rig assets. The $5,950,000 in deposits has been classified as restricted cash on the Statement of Financial Position and  is in addition to the $13,998,000 in cash held at December 31, 2013. The following information is a summary only of certain risk factors relating to the business of AKITA and should  be read in conjunction with the detailed information appearing elsewhere in this document. Shareholders and  potential shareholders should consider carefully the information contained herein including the following risk  factors. The contract drilling industry is highly competitive and includes a large number of drilling contractors with  varied rig fleets. Drilling contracts are usually awarded through a competitive bid process with pricing and  rig availability being primary drivers in the bid process. Other factors that influence the bid process include:  mobility and efficiency of the rig; experience and quality of service provided by rig crews; safety record of the  rig as well as the contractor as a whole and the adaptability of equipment to utilize new technologies. Rigs  can be moved from one region to another depending on the competitive environment within that region and  therefore a contractor’s competitive advantage in a region can be quickly eroded by other contractors moving  in equipment from other regions. Reduced levels of activity in the oil and gas industry can also increase  competition and therefore lower day rates. AKITA has a diversified fleet of rigs that compete in most major Canadian market segments. The Company has  developed and maintains a rigorous and comprehensive set of standards in terms of equipment design and  operating procedures. Customer relations is an important aspect to this service based business and AKITA has  always emphasized having a strong set of business relationships with customers that are active throughout  all phases of the business cycle. Often, these customers are some of the largest oil and gas producers that  operate in the Western Canadian market. In order to enhance the Company’s competitiveness, AKITA has historically maintained a low cost structure. A  key aspect of this cost structure is the limited use of financial leverage. The Company did not have any financial  leverage at either December 31, 2012 or December 31, 2013. AKITA continually upgrades its drilling fleet to ensure that it is able to meet ongoing and evolving customer  requirements. The Company has a stringent ongoing maintenance program designed to minimize rig down  time and maximize customer satisfaction. AKITA operates its rigs utilizing employees that are well trained,  knowledgeable of and motivated to comply with the highest possible safety standards. AKITA uses a  comprehensive set of training programs to help achieve this result. 23 AKITA DRILLING LTD.  ANNUAL REPORT Commitments Business Risks and Risk Management Competition