General and Administrative Expenses G&A increased slightly in 2006 versus 2005, from $764,287 to $813,178. Normalized EBITD A Normalized EBITD A in 2006 was $2,671,306, an increase of $1,484,882 from the $1,186,424 achieved in 2005. If the impact of the paste-fill contract and bonuses to directors are excluded, EBITD A in 2005 was $1,223,483 and 2006 represented an increase of 118% over the prior year. Also in 2005 bonuses to directors were paid in the amount of $1,150,000. F inancial Expenses Interest costs in 2006 were $189,851 as Garant operated at a very low level of leverage. This is similar to the $102,123 seen in 2005. Amortization Amortization is comparable to 2005. T otal amortization in each of 2005 and 2006 was $734,846 and $738,523, respectively. Net Earnings Net earnings for the year totalled $1,082,807 as compared to $277,769 achieved in 2005. The average tax rate for the Company in 2006 was 32%, an increase over 20% in 2005 due to a significant part of the taxable income taxed at the rate without small businesses deduction. Effect of Exchange Rate P rior to the acquisition of Drift in April, 2007, all of the Company’s revenue was denominated in Canadian dollars. The Company’s main exposure to exchange rate fluctuations arose from certain purchases denominated in U.S. dollars which, in fiscal 2007, totalled approximately $1 million. The acquisition of Drift has resulted in certain of the Company’s revenues being received in U.S. dollars and certain expenses being paid in U.S. dollars. After accounting for these revenues, costs, taxes and other U.S.-dollar-denominated purchases, management estimates its net U.S. dollar exposure at approximately U.S.$1.0 million per year. A ccordingly, fluctuations in the U.S. dollar against the Canadian dollars do not have a significant impact on the financial results of the Company. Seasonality The revenue of the Company shows some seasonal trends, although fluctuations due to seasonality are not significant. In the underground drilling division, scheduled mine shut-downs over the holiday and summer periods at some locations result in lower revenue in these periods than would otherwise be the case. In the domestic surface drilling division, weather conditions in the spring and fall often cause drilling programs to pause or be planned around the seasonal fluctuations. Similarly, in the international surface drilling division, weather conditions at certain times of the year make drilling difficult, resulting in revenue fluctuations. Liquidity and Capital R esources The Company’s primary sources of liquidity are from operations and borrowings under its Existing Credit Agreement. The Company plans to enter into the New Credit Agreement upon the closing of the Offering. See ‘‘Description of Debt’’. The Company has historically used cash from operations to maintain its existing drills and fund the building or purchase of new rigs to expand capacity and other working capital needs. The Company currently has an operating facility of up to $7 million to manage working capital requirements throughout the year. Net cash flows from operating activities increased by $890,397 in 2007 over 2006. This was mainly attributable to an increase in the net earnings. 48