MANAGEMENT’S DISCUSSION AND ANALYSIS Dependence on Major Customers Seasonal Nature of Industry Volatility of Industry Conditions In 2013 AKITA earned 49.9% of total adjusted revenue from four major customers. These were the only four  customers who individually provided over 10% of the Company’s revenue for the 2013 fiscal year. The loss of  one or more major customers or a significant reduction in the business done with any one of these customers  without offsetting new revenue could have a material adverse effect on AKITA’s business, results of operations  and prospects. In Canada, the level of activity in the contract drilling industry, particularly for conventional rigs, is influenced by  seasonal weather patterns. Spring breakup, which typically occurs between mid-March and mid-June, makes  the ground unstable leaving many secondary roads temporarily incapable of supporting the weight of heavy  equipment, thereby reducing drilling activity levels. In addition, during excessively rainy periods, equipment  moves may be delayed, thereby adversely affecting revenue. There is greater demand for contract drilling services in the winter drilling season as freezing permits the  movement and operation of heavy equipment. Drilling activities tend to increase in the fall as the ground begins  to freeze and peak in the winter months of November through February as areas having muskeg conditions  also become accessible to drilling operations. Variability in the weather can therefore create unpredictability in  activity and utilization rates, which could have a material adverse effect on the Company’s business, financial  condition, results of operations and cash flows. AKITA’s mitigation strategies to reduce the impact of seasonality include the strategic positioning of conventional  rigs within its markets to reduce this impact, particularly at the end of each winter drilling season. Pad rigs are  less susceptible to the seasonal nature of the industry as they are typically capable of continuing their drilling  programs once they are rigged up on a pad. The demand, pricing and terms for contract drilling services are dependent upon the level of industry activity  for Canadian crude oil and natural gas exploration and development. Industry conditions are influenced by  numerous factors which AKITA does not control including (without limitation): current crude oil and natural  gas prices; expectations about future crude oil and natural gas prices; the cost of exploring for, producing and  delivering crude oil and natural gas; the expected rates of decline in current production for AKITA’s customers;  discovery rates of new oil and gas reserves by AKITA’s customers; available pipeline and other oil and gas  transportation capacity; weather conditions; political, regulatory and economic conditions; influences from  special interest groups; the ability of oil and gas companies to raise equity capital or debt financing; and  technological advances in the exploration and production of crude oil and natural gas. The level of activity in the Canadian oil and gas exploration and production industry is volatile. No assurance  can be given that the expected trends in oil and gas exploration and production activities will continue or that  demand for contract drilling services will reflect the level of activity in the industry. Any prolonged substantial  reduction in crude oil and natural gas prices would likely affect oil and gas production levels and therefore  affect the demand for drilling services to oil and gas customers. Any elimination or curtailment of government  incentives or adverse changes in government regulation could have a significant impact on the contract drilling  industry in Canada or in individual provinces. These factors could lead to a decline in demand for AKITA’s  services which could result in a material adverse effect on AKITA’s business, financial condition, results of  operations and cash flow. The Company’s board and management are cognizant of the potentially volatile nature of the industry in which  24 AKITA DRILLING LTD.  ANNUAL REPORT