Exhibit 2

Revised Consolidated Financial Statements
(Expressed in Canadian dollars)

BENNETT ENVIRONMENTAL INC.

Years ended December 31, 2004 and 2003

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING

The revised consolidated financial statements contained in this annual report have been prepared by management in accordance with Canadian generally accepted accounting principles and have been approved by the Board of Directors. The integrity and objectivity of these financial statements are the responsibility of management. In addition, management is responsible for all other information in this annual report and for ensuring that this information is consistent, where appropriate with the information contained in the financial statements.

In support of this responsibility, management maintains a system of internal controls to provide reasonable assurance as to the reliability of financial information and the safeguarding of assets. The financial statements include amounts, which are based on the best estimates and judgments of management. The Board of Directors is responsible for ensuring that management fulfills its responsibility for financial reporting and internal control and exercises this responsibility principally through the Audit Committee. The Audit Committee consists of three directors not involved in the daily operations of the Company. The Audit Committee meets with management and the external auditors to satisfy itself that management’s responsibilities are properly discharged and to review the financial statements prior to their presentation to the Board of Directors for approval.

The shareholders’ auditors, KPMG LLP, have conducted an independent examination of the financial statements. Their examination includes a review of the Company’s system of internal controls and appropriate tests and procedures to provide reasonable assurance that the financial statements are, in all material respects, presented fairly and in accordance with accounting principles generally accepted in Canada.

“Allan Bulckaert”	“Andrew Boulanger”
Allan Bulckaert	Andrew Boulanger
Chief Executive Officer	Chief Financial Officer
May 30, 2006

KPMG LLP	Telephone	(604) 691-3000
Chartered Accountants	Fax	(604) 691-3031
PO Box 10426 777 Dunsmuir Street	Internet	www.kpmg.ca
Vancouver BC V7Y 1K3
Canada

AUDITORS’ REPORT TO THE SHAREHOLDERS

We have audited the revised consolidated balance sheets of Bennett Environmental Inc. as at December 31, 2004 and 2003 and the revised consolidated statements of operations and retained earnings and cash flows for years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, these revised consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2004 and 2003 and the results of its operations and its cash flows for the years then ended in accordance with Canadian generally accepted accounting principles.

Our previous report dated February 28, 2005, except as to note 16, which is as of March 16, 2005 has been withdrawn and the consolidated financial statements have been revised as explained in note 3.

Chartered Accountants

Vancouver, Canada

February 28, 2005, except
as to note 16 which is
as of March 16, 2005 and
notes 3 and 18 which are
as of May 30, 2006

KPMG LLP, a Canadian limited liability partnership is the Canadian
member firm of KPMG International, a Swiss cooperative.

BENNETT ENVIRONMENTAL INC.

Revised Consolidated Balance Sheets
(Expressed in Canadian dollars)

December 31, 2004 and 2003

	2004		2003
	(Restated -		(Restated -
	note 3)		note 2(a)(i)
			and note 3)
Assets
Current assets:
Cash and cash equivalents	$	13,830,570	$	11,552,943
Restricted cash		1,349,490		1,033,410
Accounts receivable (note 4)		14,316,648		22,124,355
Income taxes receivable		3,417,204		—
Prepaid expenses and other		1,531,580		2,306,876
		34,445,492		37,017,584
Future income tax asset (note 11)		891,826		—
Note receivable		315,000		172,500
Investments (note 5)		—		568,193
Property, plant and equipment (note 6)		48,920,377		24,408,889
Other assets (note 7)		4,793,069		7,354,403
Goodwill		646,638		646,638
	$	90,012,402	$	70,168,207
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities	$	6,646,005	$	10,324,724
Income taxes payable		—		1,096,245
Deferred revenue		661,557		814,409
Current portion of long-term liabilities (note 8)		1,218,405		4,601
		8,525,967		12,239,979
Future income tax liability (note 11)		—		2,616,861
Long-term liabilities (note 8)		1,483,045		993,593
Shareholders’ equity:
Share capital (note 9)		67,644,681		28,397,470
Contributed surplus (note 9(f))		1,595,205		1,201,776
Retained earnings		10,763,504		24,718,528
		80,003,390		54,317,774
Contingencies (notes 4 and 17)
Related party transactions (note 12)
Commitments (note 15)
	$	90,012,402	$	70,168,207

See accompanying notes to revised consolidated financial statements.

Approved on behalf of the Board:

“David Williams” Director “George Ploder” Director

1

BENNETT ENVIRONMENTAL INC.

Revised Consolidated Statements of Operations and Retained Earnings
(Expressed in Canadian dollars)

Years ended December 31, 2004 and 2003

	2004			2003
	(Restated -			(Restated -
	note 3)			note 2(a)(i)
				and note 3)
Sales	$	30,642,052		$	64,487,677
Expenses:
Operating costs		25,568,125			33,744,348
Administration and business development (note 10)		15,780,332			8,542,452
Amortization		3,771,371			1,602,666
Foreign exchange		273,626			544,337
Loss from asset impairment (notes 6 and 7)		4,343,979			—
Interest expense		305,313			156,675
		50,042,746			44,590,478
Earnings (loss) before the undernoted		(19,400,694	)		19,897,199
Gain on debt settlement (note 8)		—			1,316,936
Loss on investments (note 5)		(818,193	)		(133,202	)
Interest and other income		580,280			1,280,629
Earnings (loss) before income taxes		(19,638,607	)		22,361,562
Income taxes (recovery) (note 11):
Current		(2,937,047	)		7,047,195
Future		(2,746,536	)		1,721,123
		(5,683,583	)		8,768,318
Net earnings (loss)		(13,955,024	)		13,593,244
Retained earnings, beginning of year
As previously reported		26,413,905			11,621,859
Restatement for change in accounting policy (note 2(a)(i))		(1,695,377	)		(496,575	)
As restated		24,718,528			11,125,284
Retained earnings, end of year	$	10,763,504		$	24,718,528
Earnings (loss) per share (note 13):
Basic	$	(0.76	)	$	0.81
Diluted		(0.76	)		0.78

See accompanying notes to revised consolidated financial statements.

2

BENNETT ENVIRONMENTAL INC.

Revised Consolidated Statements of Cash Flows
(Expressed in Canadian dollars)

Years ended December 31, 2004 and 2003

	2004			2003
	(Restated -			(Restated -
	note 3)			note 2(a)(i)
				and note 3)
Cash provided by (used in):
Operations:
Net earnings (loss)	$	(13,955,024	)	$	13,593,244
Items not involving cash:
Gain on debt settlement		—			(1,316,936	)
Amortization		3,771,371			1,602,666
Stock-based compensation		675,176			1,198,802
Loss on investments		818,193			133,202
Loss from asset impairment (notes 6 and 7)		4,343,979			—
Future income taxes		(2,746,536	)		1,721,123
Increase in cash surrender value of insurance		(30,375	)		—
Accretion expense of long-term liabilities		165,000			—
Changes in operating working capital:
Partial redemption of equity investment		—			150,000
Accounts receivable		7,807,707			(9,790,910	)
Prepaid expenses and other		775,296			(718,611	)
Accounts payable and accrued liabilities		(3,928,117	)		2,442,056
Income taxes receivable/payable		(4,513,449	)		(4,766,278	)
Deferred revenue		(152,852	)		718,981
Severance payable (note 8)		1,660,000			—
		(5,309,631	)		4,967,339
Financing:
Repayments of long-term debt		(121,744	)		(405,777	)
Share capital issued for cash net of costs		37,838,129			4,021,868
Shares repurchased and held in treasury		(71,879	)		—
Increase in restricted cash		(316,080	)		(1,033,410	)
		37,328,426			2,582,681
Investments:
Purchase of property, plant and equipment		(28,304,635	)		(11,748,147	)
Increase in note receivable		(142,500	)		—
Increase in license, permits and other assets		(1,294,033	)		(3,516,569	)
		(29,741,168	)		(15,264,716	)
Increase (decrease) in cash and cash equivalents		2,277,627			(7,714,696	)
Cash and cash equivalents, beginning of year		11,552,943			19,267,639
Cash and cash equivalents, end of year	$	13,830,570		$	11,552,943
Supplementary disclosure of cash flow information:
Interest paid	$	20,800		$	16,354
Income taxes paid		385,212			11,813,473
Supplemental disclosure of non-cash transactions:
Stock-based compensation included in deferred permitting		436,461			—

See accompanying notes to revised consolidated financial statements.

3

BENNETT ENVIRONMENTAL INC.

Notes to Revised Consolidated Financial Statements
(Expressed in Canadian dollars)

Years ended December 31, 2004 and 2003

1.	Operations:
	The Company was federally incorporated on July 29, 1992 under the Canada Business Corporation Act and primarily carries on the business of remediating chlorinated hydrocarbon contaminated soil. The treatment of soil is performed using the Company’s thermal oxidation technology. In 1997, the Company commenced operations of its remediation site located in St. Ambroise, Quebec.
	In 2002, the Company acquired Material Resource Recovery Inc. (“MRR”) which carries on the business of remediating hazardous and non-hazardous contaminated electrical equipment, construction material, and natural gas storage units.
	In 2004, the Company completed construction of a new facility in Belledune, New Brunswick. This remediation site has not yet received its final operating permit and is in the process of performing compliance tests with the Department of Environment. The Company anticipates the compliance tests to be completed and the Belledune facility to be operating in the later half of 2005.
2.	Significant accounting policies:

(a) Changes in accounting policies:

(i)

Stock-based compensation:

Effective January 1, 2004, the Company adopted the amended recommendations of The Canadian Institute of Chartered Accountants (“CICA”) for accounting for stock-based compensation to employees. The amended standard requires recognition of an estimate of the fair value of employee stock-based awards in earnings. Previously, the Company recorded no compensation expense when employee options were issued and consideration paid by the employees was recorded as share capital. The Company provided note disclosure of pro forma net income as if a fair value based method had been used.

4

BENNETT ENVIRONMENTAL INC.

Notes to Revised Consolidated Financial Statements (continued)
(Expressed in Canadian dollars)

Years ended December 31, 2004 and 2003

2. Significant accounting policies (continued):

The amended recommendations have been applied retroactively, with restatement of prior periods. The restatement at January 1, 2004 resulted in an increase to share capital at December 31, 2003 of $493,601 (2002 — $4,498), contributed surplus of $1,201,776 (2002 - $492,077) and a decrease to retained earnings of $1,695,377 (2002 — $496,575). The adjustments represent the total compensation expense which would have been recorded had a fair value based method been used for stock options granted to employees after January 1, 2002, as adjusted, and adjustments for exercised options. Compensation expense related to employee stock options for the year ended December 31, 2004 is $675,176 (2003 - $1,198,802).

	As previously
	reported		Adjustment			Restated
As at December 31, 2002:
Retained earnings	$	11,621,859	$	(496,575	)	$	11,125,284
Share capital		23,882,001		4,498			23,886,499
Contributed surplus		—		492,077			492,077
As at December 31, 2003:
Retained earnings		26,413,905		(1,695,377	)		24,718,528
Share capital		27,903,869		493,601			28,397,470
Contributed surplus		—		1,201,776			1,201,776

(ii)

Asset retirement obligation:

Effective January 1, 2004, the Company adopted CICA Handbook Section 3110, Asset Retirement Obligations (“HB 3110”). The new section is for fiscal years beginning on January 1, 2004. HB 3110 requires an entity to record the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of tangible long-lived assets that results from the acquisition, construction, development and (or) normal use of the assets. The Company would also record a corresponding increase to the carrying amount of the related long-lived asset and to depreciate that cost over the life of the asset. The liability is changed at the end of each period to reflect the passage of time and changes in the amount and timing of estimated future cash flows underlying the initial fair value measurement. The Company considered each of its three manufacturing plants and individual permit arrangements. Where applicable, letters of credit have been issued to cover potential costs upon ceasing operations. As at December 31, 2004, no legal liability is estimated to exist; therefore, no obligation has been accrued.

5

BENNETT ENVIRONMENTAL INC.

Notes to Revised Consolidated Financial Statements (continued)
(Expressed in Canadian dollars)

Years ended December 31, 2004 and 2003

2. Significant accounting policies (continued):

(iii)	Long-lived assets:
	Effective January 1, 2004, the Company adopted CICA Handbook Section 3063, Impairment of Long-Lived Assets (“HB 3063”). HB 3063 requires an entity to evaluate whether events and circumstances have occurred that may warrant revision of the estimated useful life of property and equipment or whether the remaining balance of property and equipment, or other long-lived assets, should be evaluated for possible impairment. Instances that may lead to an impairment include: (i) a significant decrease in the market price of a long-lived asset group; (ii) a significant adverse change in the extent or manner in which a long-lived asset or asset group is being used or in its physical condition; (iii) a significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset or asset group, including an adverse action or assessment by a regulator; (iv) an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset or asset group; (v) a current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset or asset group; or (vi) a current expectation that, more likely than not, a long-lived asset or asset group will be sold or otherwise disposed of significantly before the end of its previously estimated useful life.
	The Company uses an estimate of the related undiscounted cash flows, excluding interest, over the remaining life of the property and equipment and long-lived assets in assessing their recoverability. The Company measures impairment loss as the amount by which the carrying amount of the asset(s) exceeds the fair value of the asset(s).
(iv)	Termination benefits:
	Effective January 1, 2004, the Company adopted the Emerging Issues Committee abstract of issue discussed EIC-134, Accounting for Severance and Termination Benefits, prospectively. This abstract addresses the different accounting treatments of the various types of severance and termination benefits related to the termination of employees’ services prior to normal retirement. During 2004, the Company accounted for severance arrangements in accordance with this abstract.

6

BENNETT ENVIRONMENTAL INC.

Notes to Revised Consolidated Financial Statements (continued)
(Expressed in Canadian dollars)

Years ended December 31, 2004 and 2003

2. Significant accounting policies (continued):

(b)	Basis of consolidation:
	The revised consolidated financial statements include the accounts of the Company’s wholly-owned subsidiaries, Bennett Remediation Services Ltd., Bennett RemTech Ltd., Bennett Environmental U.S., Inc. (“BEIUS”), Récupère Sol Inc. (“RSI”), MRR and Bennett Environmental New Brunswick Inc. All material intercompany transactions and balances have been eliminated on consolidation.
(c)	Use of estimates:
	The preparation of consolidated financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant areas requiring the use of estimates relate to the determination of percentage of completion and estimated project costs and revenues for contract revenue recognition, recoverability of accounts receivable, deferred permitting costs, property, plant and equipment and of other assets, the assessment of realization on future income tax balances and estimates of future obligations related to asset retirement obligations and environmental obligations. Actual results could differ from those estimates.
(d)	Cash and cash equivalents:
	Cash and cash equivalents consist of highly liquid investments having an original term to maturity of three months or less when acquired.
(e)	Work-in-progress:
	Work-in-progress related to costs incurred to ship untreated soil to the treatment facility and other treatment costs for soil, for which treatment is not complete, are not significant in 2004 and 2003 and are included in prepaid expenses and other assets. These amounts will be expensed when the related treatment of the related soil is complete.

7

BENNETT ENVIRONMENTAL INC.

Notes to Revised Consolidated Financial Statements (continued)
(Expressed in Canadian dollars)

Years ended December 31, 2004 and 2003

2. Significant accounting policies (continued):

(f)	Investments:
	Investments where the Company has the ability to exercise significant influence are recorded on the equity basis of accounting and the Company’s share of earnings (loss) is included in the computation of earnings.
	Investments where the Company does not exercise significant influence are accounted for under the cost method, under which the investment is carried at cost, and income is reflected only to the extent of dividends received.
	The Company’s management reviews the estimated realizable value of the investments on a regular basis based on established criteria including trading value, anticipated cash flows and profitability of the investee. If an other than temporary impairment in value is determined, a provision is recognized.
(g)	Property, plant and equipment:
	Property, plant and equipment is recorded at cost. Amortization is not taken until the asset has been put into use by the Company. The Company annually evaluates for long-lived asset impairment in accordance with HB 3063, Impairment of Long-Lived Assets (note 2(a)(iii)). Amortization commences on property, plant and equipment under construction once construction has been completed.
	Amortization is provided for using the following methods and annual rates:

Asset	Basis	Rate
Automobiles	Declining balance		30	%
Computer equipment	Declining balance		30	%
Equipment — ELI Ecologic Inc. (“ELI”)	Straight line	2		years
Kiln — AGT, furniture and equipment and treatment equipment	Declining balance		20	%
Kiln — RSI facility	Straight line	10		years
Land improvements	Declining balance		8% - 20	%
Leasehold improvements	Straight line	Over term of lease
Storage building and pads	Straight line	20		years
Software	Declining balance		100	%
Treatment building	Declining balance		20	%

8

BENNETT ENVIRONMENTAL INC.

Notes to Revised Consolidated Financial Statements (continued)
(Expressed in Canadian dollars)

Years ended December 31, 2004 and 2003

2. Significant accounting policies (continued):

(h)	Other assets:
	The Company defers costs incurred related to securing permits to operate their kilns. Deferred permit costs are amortized over ten years, commencing in the year the permit is secured. Costs related to unsuccessful permitting efforts are expensed in the period that this determination is made.
	Operating licenses and other assets related to ELI are amortized over period up to ten years, being the estimated useful lives of the assets and the expected term of the licenses. Any remaining balance related to these assets is expensed in the event the assets are determined to have no value or the licenses and permits are not renewed.
(i)	Stock-based compensation:
	The Company has a stock-based compensation plan for executives and other key employees. The Company recognizes stock-based compensation expense in accordance with CICA Handbook Section 3870, Stock-Based Compensation and Other Stock-Based Payments. Beginning January 1, 2004, the Company changed its accounting policy related to employee stock options, and, on a retroactive basis, began to recognize compensation expense for stock or stock option grants to employees, based on the fair value of the stock or stock options issued (note 2(a)(i)). Consideration paid by employees on the purchase of shares and exercise of stock options is recorded as share capital.
	The Company accounts for all stock-based payments to non-employees using the fair value based method. Under the fair value based method, stock-based payments to non-employees are measured at the fair value of the equity instruments issued. The fair value of stock-based payments to non-employees is periodically re-measured during the vesting period, and any change therein is recognized over the period and in the same manner as if the Company had paid cash instead of paying with or using equity instruments.

9

BENNETT ENVIRONMENTAL INC.

Notes to Revised Consolidated Financial Statements (continued)
(Expressed in Canadian dollars)

Years ended December 31, 2004 and 2003

2. Significant accounting policies (continued):

(j)	Goodwill:
	The Company accounts for goodwill and intangible assets under the provisions of CICA Handbook Section 3062, Goodwill and Other Intangible Assets (“HB 3062”). Under HB 3062, goodwill is not amortized but is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. When the carrying amount of goodwill exceeds the implied fair value of the goodwill, an impairment loss is recognized in an amount equal to the excess and is presented as a separate line item in the statement of operations. Goodwill is tested for impairment on a reporting unit basis. In the fourth quarter of 2004 and 2003, the Company completed its annual impairment test for goodwill and determined that no impairment has occurred. The Company has identified one reporting unit.
(k)	Revenue recognition:
	The Company provides high-temperature, highly specialized treatment services of contaminated materials. In some cases, the Company is also engaged to remove and transport the contaminated materials to its facilities for processing and disposal. The Company recognizes revenue for these activities using the proportional performance method when all of the following criteria are met:

(i)	remediation activities are completed for each batch of material or waste stream being treated;
(ii)	the Company has confirmed that the contaminants have been destroyed in accordance with the contract terms; and
(iii)	collection is reasonably assured.

For those contracts whereby the Company is engaged to transport the contaminated material from the customer’s site to its facilities, the transportation costs incurred are deferred until the materials have been treated and the Company has determined that the contaminants have been destroyed in accordance with the contract terms. All other processing costs are expensed as incurred.

10

BENNETT ENVIRONMENTAL INC.

Notes to Revised Consolidated Financial Statements (continued)
(Expressed in Canadian dollars)

Years ended December 31, 2004 and 2003

2. Significant accounting policies (continued):

	Revenue from long-term fixed price soil remediation contracts is recognized using the percentage of completion method, based on the ratio of costs incurred to date over estimated total costs. This method is used because management considers costs to be the best available measure of performance on these contracts. Contract costs include all direct material and wages and related benefits. Revenue related to unpriced change orders under the percentage of completion method is recognized to the extent of the costs incurred, if the amount is probable of collection. If it is probable that the contract will be adjusted by an amount that exceeds the costs attributable to the change order and the amount of the excess can be reliably estimated, revenue in excess of the costs attributable to unpriced change orders is recorded when realization is assured beyond a reasonable doubt.
	The Company records revenue relating to claims to the extent of costs incurred and only when it is probable that the claim will result in additional contract revenue and the amount can be reasonably estimated. Claims are amounts in excess of the agreed upon contract price that the Company seeks to collect from its customers for customer-caused delays, errors in specifications and designs, contract terminations, change orders in dispute or unapproved as to both scope and price, or other causes of unanticipated additional costs.
(l)	Translation of foreign currency:
	BEIUS, a wholly-owned foreign subsidiary, has a Canadian dollar functional currency since its operations are integrated with those of its parent. The accounts of BEIUS have been translated into Canadian dollars as follows:

(i)	monetary assets and liabilities at the year-end Canadian dollar rate;
(ii)	non-monetary assets and liabilities at the historical rate of exchange; and
(iii)	revenues and expenses at the rate at the time of the transaction.

Translation gains or losses are included in the determination of earnings.

11

BENNETT ENVIRONMENTAL INC.

Notes to Revised Consolidated Financial Statements (continued)
(Expressed in Canadian dollars)

Years ended December 31, 2004 and 2003

2. Significant accounting policies (continued):

(m)	Fair values of financial instruments:
	Carrying amounts of certain of the Company’s financial instruments, including cash and cash equivalents, restricted cash, accounts receivable and accounts payable and accrued liabilities approximate fair values due to their short term to maturity. Based on borrowing rates currently available to the Company for loans with similar terms, the carrying value of its long-term liabilities approximate fair value.
	The carrying value of the note receivable approximates its fair value as the interest rate on the note approximates current market rates.
(n)	Income taxes:
	The Company follows the asset and liability method of accounting for income taxes. Under this method, future income taxes are recognized for the future income tax consequences attributable to differences between the financial statement carrying values of assets and liabilities and their respective income tax bases (temporary differences). Changes in the net future tax asset or liability are included in earnings. Future tax assets and liabilities are measured using enacted or substantially enacted tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. The effect on future income tax assets and liabilities of a change in tax rates is included in income in the period that includes the substantial enactment date. Future income tax assets are evaluated and if their realization is not considered “more likely than not”, a valuation allowance is provided.
(o)	Earnings (loss) per share:
	Earnings (loss) per share are calculated based on the weighted average number of common shares outstanding. Diluted earnings (loss) per share are calculated using the treasury stock method.
(p)	Comparative figures:
	Certain 2003 figures have been reclassified to conform with the financial statement presentation adopted in 2004.

12

BENNETT ENVIRONMENTAL INC.

Notes to Revised Consolidated Financial Statements (continued)
(Expressed in Canadian dollars)

Years ended December 31, 2004 and 2003

3. Restatements:

(a)	The Company determined there was an error in how it accounted for certain revenue under the percentage-of-completion method of revenue recognition in 2004 and 2003 related to the Saglek contract. In addition, the Company determined that during 2004 and 2003, certain expense items relating to the Saglek contract were recorded in the incorrect period and items of a capital nature were expensed in the period incurred rather than being capitalized. The Company’s Board of Directors approved management’s recommendation to restate its consolidated financial statements for the fiscal years ended December 31, 2004 and December 31, 2003.
	While the restatement adjustments change the Company’s previously reported results of operations in each of the individual annual reporting periods, the adjustments do not change the cumulative results of operations for the two-year period or the December 31, 2004 consolidated balance sheet. The cumulative restated revenue and net earnings (loss) for the two-year period are the same as the previously reported cumulative amounts.
	Restatement of fiscal 2003:

(i)

Revenue recognition:

In September of 2002, the Company entered into a fixed price contract with Defence Construction Canada, a federal government agency, to excavate and treat contaminated soil in a remote northern site (the “Saglek contract”). In accounting for revenue related to the Saglek contract, the Company accounted for revenue under the Saglek contract using the percentage-of-completion method. In August 2003, the Company determined that the nature of the material being excavated and processed was significantly different than that described in the tender documents. As a consequence, the Company incurred additional costs to excavate and process the materials.

13

BENNETT ENVIRONMENTAL INC.

Notes to Revised Consolidated Financial Statements (continued)
(Expressed in Canadian dollars)

Years ended December 31, 2004 and 2003

3. Restatements (continued):

	In calculating contract revenue earned in 2003, the Company inappropriately accounted for the revenue related to additional costs incurred as change orders. The Company recognized revenue in excess of additional costs incurred and revenue for costs incurred that was not probable of recovery of approximately $5.3 million. The Company has now determined that the revenue related to the additional costs incurred should have been accounted for as a claim. Management has determined that the contract provided a legal basis for the claim; the additional costs were caused by circumstances that were unforeseen at the contract date and were not the result of deficiencies in the Company’s performance, the costs associated with the claim were identifiable and reasonable in view of the work performed, and management’s claims submitted in 2004 was objective and verifiable. Accordingly, the Company has recorded a restatement adjustment to reduce revenue for the year ended December 31, 2003 by $5.3 million, and unbilled receivable (included in accounts receivable) as at December 31, 2003 by $5.3 million.
(ii)	Operating expenses and capital assets:
	In addition, the Company determined that there were certain operating expense items incurred in 2003 that were incorrectly expensed in fiscal 2004 and that there were items of a capital nature that were inappropriately expensed in 2003 that should have been capitalized and amortized over the estimated useful life of the capital asset. A portion of the operating expenses were recovered from the customer, thus accounts receivable is also affected. Accordingly, the Company has recorded a restatement adjustment for the year ended December 31, 2003 to increase operating expenses by $1.3 million and to decrease amortization expense by $0.2 million and to increase capital assets by $0.6 million and to decrease accounts receivable by $1.3 million and to increase accounts payable and accrued liabilities by $0.4 million.

The related income tax effect of the above items of $1.9 million is recorded as a reduction of current tax expense for the year ended December 31, 2003 and a decrease in income taxes payable as at December 31, 2003 by $1.9 million.

14

BENNETT ENVIRONMENTAL INC.

Notes to Revised Consolidated Financial Statements (continued)
(Expressed in Canadian dollars)

Years ended December 31, 2004 and 2003

3. Restatements (continued):

The impact of the restatement on the consolidated statement of operations for the year ended December 31, 2003 is as follows:

	As previously
	reported		Restatement			As restated
Sales	$	69,806,526	$	(5,318,849	)	$	64,487,677
Operating costs		32,419,935		1,324,413			33,744,348
Amortization		1,800,326		(197,660	)		1,602,666
Current income taxes		8,912,582		(1,865,387	)		7,047,195
Net earnings		18,173,459		(4,580,215	)		13,593,244

The impact of the restatement on the consolidated balance sheet as at December 31, 2003 is as follows:

	As previously
	reported		Restatement			As restated
Accounts receivable	$	28,839,675	$	(6,715,320	)	$	22,124,355
Property, plant and equipment		23,779,384		629,505			24,408,889
Accounts payable and accrued liabilities		9,964,937		359,787			10,324,724
Income taxes payable		2,961,632		(1,865,387	)		1,096,245
Retained earnings		29,298,743		(4,580,215	)		24,718,528

15

BENNETT ENVIRONMENTAL INC.

Notes to Revised Consolidated Financial Statements (continued)
(Expressed in Canadian dollars)

Years ended December 31, 2004 and 2003

3. Restatements (continued):

The impact of the restatement on the consolidated statement of cash flows for the year ended December 31, 2003 is as follows:

	As previously
	reported			Restatement			As restated
Cash flows from (used in) operations:
Net earnings	$	18,173,459		$	(4,580,215	)	$	13,593,244
Amortization		1,800,326			(197,660	)		1,602,666
Accounts receivable		(16,506,230	)		6,715,320			(9,790,910	)
Accounts payable and accrued liabilities		2,082,269			359,787			2,442,056
Income taxes receivable/payable		(2,900,891	)		(1,865,387	)		(4,766,278	)
Cash flows from operations		4,535,494			431,845			4,967,339
Cash flows (used in) investments:
Purchase of property, plant and equipment		(11,316,302	)		(431,845	)		(11,748,147	)
Cash used in investments		(14,832,871	)		(431,845	)		(15,264,716	)

Restatement of fiscal 2004:

(iii)

Revenue recognition:

The Company continued to incur additional costs related to the remediation of contaminated materials under the Saglek contract. As a consequence of the 2003 restatement adjustments and accounting for the revenue under the contract in accordance with the percentage-of-completion method of accounting, the Company has recorded a restatement adjustment to increase revenue for the year ended December 31, 2004 and to increase accounts receivable during the year ended December 31, 2004 in the amount of $5.3 million.

16

BENNETT ENVIRONMENTAL INC.

Notes to Revised Consolidated Financial Statements (continued)
(Expressed in Canadian dollars)

Years ended December 31, 2004 and 2003

3. Restatements (continued):

	At December 31, 2004, the Company recorded cumulative revenue for the Saglek contract of $37.5 million, (which included 2002 revenue) and cumulative direct costs of $28.6 million (not including the allocation of indirect fixed costs) and had $4.9 million as amounts receivable from the customer at December 31, 2004 relating to the claims (note 4). The Company submitted claims to the customer in the amount of $9.5 million in 2004 but only recorded claim revenue to the extent of the additional costs that are probable of recovery incurred in the amount of $5.4 million in 2003 as noted above. At the time, management was satisfied that such amounts were probable of collection and met the criteria for revenue recognition. Management continues to hold this view and is pursuing collection under the contract.
(iv)	Operating expenses and capital assets:
	The Company inappropriately recorded expenses and capitalized certain items of a capital nature during the year ended December 31, 2004 that should have been recorded in 2003 as noted above. Accordingly, the Company recorded a restatement adjustment to decrease operating expenses for the year ended December 31, 2004 by $1.1 million, to increase amortization expense by $0.04 million, to increase accounts receivable during the year by $1.3 million, to decrease capital assets during the year by $0.604 million and to decrease accounts payable by $0.4 million. These restatement adjustments of the balance sheet accounts had no effect on the December 31, 2004 balance sheet as previously reported and are a consequence of the 2003 restatement adjustments.

The related income tax effect of the above adjustments of $1.9 million was recorded as an increase to current income tax expense for the year ended December 31, 2004 and a reduction to income taxes receivable during the year ended December 31, 2004.

The impact of the restatement on the consolidated statement of operations for the year ended December 31, 2004 is as follows:

	As previously
	reported			Restatement			As restated
Sales	$	25,323,203		$	5,318,849		$	30,642,052
Operating costs		26,736,521			(1,168,396	)		25,568,125
Amortization		3,729,728			41,643			3,771,371
Current income taxes		(4,802,434	)		1,865,387			(2,937,047	)
Loss for the year		(18,535,239	)		4,580,215			(13,955,024	)

17

BENNETT ENVIRONMENTAL INC.

Notes to Revised Consolidated Financial Statements (continued)
(Expressed in Canadian dollars)

Years ended December 31, 2004 and 2003

3. Restatements (continued):

The impact of the restatement on the consolidated balance sheet as at December 31, 2004 is as follows:

	As previously
	reported		Restatement		As restated
Accounts receivable	$	14,316,648	$	—	$	14,316,648
Property, plant and equipment		48,920,377		—		48,920,377
Accounts payable and accrued liabilities		6,646,005		—		6,646,005
Income taxes receivable		3,417,204		—		3,417,204
Retained earnings		10,763,504		—		10,763,504

The impact of the restatement on the consolidated statement of cash flows for the year ended December 31, 2004 is as follows:

	As previously
	reported			Restatement			As restated
Cash flows from (used in) operations:
Loss for the year	$	(18,535,239	)	$	4,580,215		$	(13,955,024	)
Amortization		3,729,728			41,643			3,771,371
Accounts receivable		14,523,027			(6,715,320	)		7,807,707
Accounts payable and accrued liabilities		(3,568,330	)		(359,787	)		(3,928,117	)
Income taxes receivable/payable		(6,378,836	)		1,865,387			(4,513,449	)
Cash used in operations		(4,721,769	)		(587,862	)		(5,309,631	)
Cash flows from (used in) Investments:
Purchase of property, plant and equipment		(28,892,497	)		587,862			(28,304,635	)
Cash flows from (used in) investments		(30,329,030	)		587,862			(29,741,168	)

18

BENNETT ENVIRONMENTAL INC.

Notes to Revised Consolidated Financial Statements (continued)
(Expressed in Canadian dollars)

Years ended December 31, 2004 and 2003

3. Restatements (continued):

(b) The Company has reclassified the restricted cash balance from the cash and cash equivalents balance as at December 31, 2004 and 2003 as the restricted cash represents letters of credit held as security for the MRR facility for the Ministry of Environment. As a result, the cash and cash equivalents balance decreased by $1,349,490 as at December 31, 2004 and by $1,033,410 as at December 31, 2003 and the restricted cash balance increased by the same amount on the consolidated balance sheets. The effect on the consolidated statements of cash flows is as follows:

	As previously
December 31, 2004	reported		Restatement			As restated
Cash used in financing:
Increase in restricted cash	$	—	$	(316,080	)	$	(316,080	)
Cash and cash equivalents, beginning of year		11,552,943		—			11,552,943
Cash and cash equivalents, end of year		15,180,060		(1,349,490	)		13,830,570

	As previously
December 31, 2003	reported		Restatement			As restated
Cash used in financing:
Increase in restricted cash	$	—	$	(1,033,410	)	$	(1,033,410	)
Cash and cash equivalents, beginning of year		19,267,639		—			19,267,639
Cash and cash equivalents, end of year		11,552,943		—			11,552,943

(c)	The Company has reclassified the note receivable from current assets to long-term assets as the note receivable is repayable in full on July 7, 2007. As a result, the current assets balance as at December 31, 2004 decreased by $315,000 (2003 — $172,500) and long-term assets increased by the same amount on the consolidated balance sheets.
(d)	In compliance with a response to a comment letter received by the Securities and Exchange Commission in January 2006, the Company has amended its revenue recognition policy as noted in note 2(k).

19

BENNETT ENVIRONMENTAL INC.

Notes to Revised Consolidated Financial Statements (continued)
(Expressed in Canadian dollars)

Years ended December 31, 2004 and 2003

4. Accounts receivable:

	2004		2003
	(Restated - note 3)
Billed	$	8,139,690	$	11,979,171
Claims		4,900,000		5,384,295
Unbilled		1,276,958		4,760,889
	$	14,316,648	$	22,124,355

	Included in accounts receivable are amounts outstanding from one customer of approximately $12.3 million (2003 — $13.6 million). Included in this receivable are claims for additional work performed pursuant to the contracts which are in dispute with the customer (note 3(a)).
	The ultimate settlement of the claim is expected in the future and may result in a change in the estimated amounts of revenues and receivable recorded on this project. The Company estimates are based on the fact that it has a contractual right to claim for these amounts, has verifiable costs related to this claim and has obtained an opinion from an independent third party to confirm its entitlement to a claim. The Company continues to believe that amounts recorded as revenue will be recovered.
5.	Investments:

	2004		2003
Investment accounted for using the cost method	$	—	$	440,000
Investment accounted for using the equity method, net of Company’s share of net earnings and partial redemption		—		128,193
	$	—	$	568,193

During the year, the value of investments accounted for under the cost method became impaired on an other than temporary basis which resulted in a write off of $540,000. The Company also wrote off the carrying value of its equity accounted investment together with unsecured receivables in 2004 which resulted in a loss of $278,193 due to the losses incurred by the investee and the other than temporary impairment in value during the year. Amounts advanced to this investee and accrued interest which are secured have been recorded as note receivable in the amount of $315,000 (2003 - $172,500).

20

BENNETT ENVIRONMENTAL INC.

Notes to Revised Consolidated Financial Statements (continued)
(Expressed in Canadian dollars)

Years ended December 31, 2004 and 2003

6. Property, plant and equipment:

			Accumulated		Net book
2004	Cost		amortization		value
Automobiles	$	180,358	$	95,450	$	84,908
Computer equipment		599,862		308,052		291,810
Equipment — ELI (note 7)		534,000		267,000		267,000
Furniture and equipment		1,077,448		519,698		557,750
Kiln — RSI facility		16,312,361		4,704,540		11,607,821
Land		88,228		—		88,228
Land improvements		139,577		41,773		97,804
Leasehold improvements		58,322		58,322		—
Software		301,008		244,753		56,255
Storage building and pads		5,981,467		1,171,468		4,809,999
Treatment building		3,437,471		273,212		3,164,259
Treatment equipment		31,076,295		3,181,752		27,894,543
	$	59,786,397	$	10,866,020	$	48,920,377

			Accumulated		Net book
2003	Cost		amortization		value
Automobiles	$	177,837	$	64,647	$	113,190
Computer equipment		440,222		233,019		207,203
Equipment — ELI (note 7)		534,000		—		534,000
Furniture and equipment		955,014		404,626		550,388
Kiln — RSI facility		11,361,344		3,965,415		7,395,929
Land		83,579		—		83,579
Land improvements		90,103		31,845		58,258
Leasehold improvements		58,322		54,774		3,548
Software		200,671		176,275		24,396
Storage building and pads		5,933,465		791,467		5,141,998
Treatment building		2,506,008		160,601		2,345,407
Treatment equipment		10,057,495		2,106,502		7,950,993
	$	32,398,060	$	7,989,171	$	24,408,889

At December 31, 2004, property, plant and equipment includes $33,297,946 of assets under construction (2003 — $6,205,736) related to the new remediation site in New Brunswick. No depreciation has been recorded on these assets since they are not available for productive use.

During the year, capital assets related to the Kirkland Lake project were written-off. The application for permitting of this site was postponed indefinitely (note 7); therefore, related equipment was transferred to other facilities and are being used for alternative purposes. An impairment charge of $921,212 was realized on this equipment.

21

BENNETT ENVIRONMENTAL INC.

Notes to Revised Consolidated Financial Statements (continued)
(Expressed in Canadian dollars)

Years ended December 31, 2004 and 2003

7. Other assets:

	2004		2003
Deferred permitting costs (amortization nil for 2004 and 2003) (note 2(h))	$	3,286,808	$	4,979,081
Operating permits, licenses and other assets — ELI (net of amortization of $899,436; 2003 - nil)		899,436		1,798,872
Cash surrender value of insurance (note 8)		606,825		576,450
	$	4,793,069	$	7,354,403

	The Company is in the process of obtaining a final operating permit for its New Brunswick facility and will commence amortizing the related permitting costs upon obtaining this approval.
	During the year, the Company wrote off permitting costs of $3,422,767 related to its bid to acquire a permit in Kirkland Lake. The Kirkland Lake project has been postponed indefinitely.
	The Company acquired certain operating permits, licenses and other assets from ELI in December 2003 for cash and notes payable (note 8).
8.	Long-term liabilities:
	Long-term liabilities comprise the following:

	2004		2003
Promissory note, unsecured non-interest bearing, due December 31, 2005 (note 7)	$	300,000	$	300,000
Promissory note, non-interest bearing, due upon receipt by the Company of license assignment from two specified licensees (note 7)		—		100,000
Capital lease obligation		—		21,744
Tenure agreement		741,450		576,450
Severance payable		1,660,000		—
		2,701,450		998,194
Less current portion		1,218,405		4,601
	$	1,483,045	$	993,593

22

BENNETT ENVIRONMENTAL INC.

Notes to Revised Consolidated Financial Statements (continued)
(Expressed in Canadian dollars)

Years ended December 31, 2004 and 2003

8.	Long-term liabilities (continued):
	During 2003, the Company concluded a settlement agreement with IT Corp and obtained court approval accepting this settlement in the fourth quarter of 2003. Under the terms of the settlement agreement, the Company’s obligation to IT Corp was extinguished. Accordingly, the Company recorded a gain on debt settlement of $1,316,936 in 2003.
	The Company entered into a tenure agreement with the founder of the Company, Mr. John Bennett, which provides an annual allowance of $69,500 until age 85. The present value of these payments using an interest rate of 5.75% at December 31, 2004 is approximately $741,450 which the Company intends to fund from cash flows and, in part, from the cash surrender value of a life insurance policy it holds on Mr. Bennett. The cash surrender value of this life insurance policy is $606,825 at December 31, 2004 (note 7). An expense of $165,000 (2003 — $65,000) is included in administration and business development with respect to this tenure allowance.
	During the year ended December 31, 2004, plans were approved to close the Vancouver administrative office in 2005. During this period, certain executive employment agreements were also terminated resulting in severance obligation payments over periods ending December 31, 2008. As a result of these terminations, the Company has accrued and expensed administration and business development severance costs of $1,660,000, using an interest rate of 5.75% over the payment term, which will be accreted as interest expense over the payment dates.
	Principal payments on long-term liabilities as at December 31, 2004 are as follows:

2005	$	1,218,405
2006		686,102
2007		256,435
2008		65,721
2009		65,721
Thereafter		409,066
	$	2,701,450

23

BENNETT ENVIRONMENTAL INC.

Notes to Revised Consolidated Financial Statements (continued)
(Expressed in Canadian dollars)

Years ended December 31, 2004 and 2003

9. Share capital:

(a)	The authorized share capital of the Company consists of an unlimited number of common shares and an unlimited number of Series I non-voting redeemable preferred shares (none issued).
(b)	On February 3, 2004, the Company completed a financing arrangement with an Underwriter whereby the Underwriter agreed to purchase 1,000,000 Units, each Unit consisting of one common share and one half common share purchase warrant at $26.00 per Unit for gross proceeds of $26,000,000. Each whole share purchase warrant entitles the holder to purchase one common share of the Company at $30.00 per share for a period of 18 months following the closing date of February 3, 2004. Net proceeds from this financing transaction were $24,700,000. No share purchase warrants have been exercised at December 31, 2004.
(c)	On December 30, 2004, the Company completed another financing arrangement with an Underwriter whereby the Underwriter agreed to purchase 3.0 million common shares at $4 per common share for gross proceeds of $12,000,000. The common shares issued consist of 2.5 million common shares from the bought deal financing and an additional 500,000 common shares were issued under an option granted to the Underwriter, which the Underwriter has exercised in full. Net proceeds from this financing transaction were $11,329,450.

24

BENNETT ENVIRONMENTAL INC.

Notes to Revised Consolidated Financial Statements (continued)
(Expressed in Canadian dollars)

Years ended December 31, 2004 and 2003

9. Share capital (continued):

(d) The issued share capital of the Company is as follows:

	Shares			Amount
				(Restated -
				note 2(a)(i))
Balance, December 31, 2002		16,508,739		$	23,886,499
Issued during the year ended December 31, 2003 for:
Exercise of options		637,050			4,021,868
Stock-based compensation related to exercise of options		—			489,103
Balance, December 31, 2003		17,145,789			28,397,470
Issued during the year ended December 31, 2004 for:
Exercise of options		281,651			2,115,156
Stock-based compensation related to exercise of options		—			718,208
Private placement		1,000,000			26,000,000
Bought deal		3,000,000			12,000,000
Share issue costs					(2,277,027	)
Tax benefits related to share issue costs		—			762,753
Total issued shares		21,427,440			67,716,560
Shares repurchased in 2004 and held in treasury		(11,500	)		(71,879	)
Balance at December 31, 2004		21,415,940		$	67,644,681

(e)	Stock option plan:
	The Company has reserved 5,096,325 common shares for future issuance under its Stock Option Plan (the “Plan”). The Plan provides for the granting of options for the purchase of common shares of the Company at the fair market value of the Company’s stock at the grant date. Stock options are granted to both employees and non-employees. The Company’s Board of Directors has discretion as to the number, vesting period and expiry dates of stock options granted.
	The weighted average fair value of the options granted for the year was $4.55 per share (2003 - $3.67 per share).

25

BENNETT ENVIRONMENTAL INC.

Notes to Revised Consolidated Financial Statements (continued)
(Expressed in Canadian dollars)

Years ended December 31, 2004 and 2003

9. Share capital (continued):

Stock option activity for 2004 and 2003 is presented below:

	2004					2003
				Weighted					Weighted
				average					average
				exercise					exercise
	Shares			price		Shares			price
Outstanding, beginning of year		1,120,602		$	9.21		1,419,953		$	5.67
Granted		210,000			5.19		564,000			18.02
Exercised		(281,651	)		7.51		(636,850	)		6.31
Cancelled		(17,500	)		14.09		(226,501	)		9.95
Outstanding, end of year		1,031,451			8.07		1,120,602			9.21
Exercisable, end of year		711,951		$	8.65		803,500		$	6.99

The following table summarizes information concerning outstanding and exercisable options at December 31, 2004:

					Options outstanding						Options exercisable
							Weighted
							average		Weighted				Weighted
							remaining		average				average
							contractual		exercise				exercise
Range of					Number		life		price		Number		price
exercise prices					of shares		(in years)		per share		exercisable		per share
$	2.17	-	$	3.55		296,501		0.76	$	2.79		296,501	$	2.79
$	4.84	-	$	7.10		350,500		3.10		5.39		125,500		5.54
$	9.10	-	$	14.29		225,450		2.01		12.51		190,450		12.81
$	17.43	-	$	22.90		159,000		3.91		22.06		99,500		22.06
						1,031,451			$	8.07		711,951	$	8.65

26

BENNETT ENVIRONMENTAL INC.

Notes to Revised Consolidated Financial Statements (continued)
(Expressed in Canadian dollars)

Years ended December 31, 2004 and 2003

9. Share capital (continued):

The fair value of each option grant was estimated on the date of the grant using the Black-Scholes option pricing model with the following weighted average assumptions:

	2004			2003
Risk-free interest rate		2.7	%		2.6	%
Dividend yield		—			—
Expected option lives	5		years	2		years
Volatility		135.7	%		42.0	%
(f) Contributed surplus:
	2004			2003
				(Restated -
				note 2(a)(i))
Balance, beginning of year	$	1,201,776		$	492,077
Stock-based compensation charge to earnings		675,176			1,198,802
Stock-based compensation to non-employees included in deferred permitting costs		436,461			—
Stock-based compensation related to options exercised		(718,208	)		(489,103	)
Balance, end of year	$	1,595,205		$	1,201,776
10.     Administration and business development:
	2004			2003
Insurance	$	1,222,389		$	875,032
Marketing and public relations		2,059,459			2,146,191
Office supplies and miscellaneous		1,563,602			1,151,598
Wages, salaries and fees		2,788,158			1,584,535
Stock-based compensation		675,176			1,198,802
Professional fees		4,711,548			1,586,294
Severance and termination		2,760,000			—
	$	15,780,332		$	8,542,452

27

BENNETT ENVIRONMENTAL INC.

Notes to Revised Consolidated Financial Statements (continued)
(Expressed in Canadian dollars)

Years ended December 31, 2004 and 2003

11.	Income taxes:
	Income tax expense (recovery) varies from the amount that would be computed by applying the Canadian federal and provincial statutory tax rate of 35.6% (2003 - 36.6%) to earnings (loss) before income taxes as shown in the following table:

	2004			2003
		(Restated - note 3)
Combined Canadian federal and provincial income taxes at expected rate	$	(6,991,344	)	$	8,184,332
Provincial tax rate difference		786,305			(901,356	)
Permanent and other differences		521,456			1,485,342
	$	(5,683,583	)	$	8,768,318

The Company has non-capital losses carried forward of approximately $4,142,000, which are available to reduce future years’ income for income tax purposes.

Non-capital loss carry forwards expire as follows:

2007	$	1,000
2008		25,000
2009		1,046,000
2010		31,000
2011		3,039,000
	$	4,142,000

28

BENNETT ENVIRONMENTAL INC.

Notes to Revised Consolidated Financial Statements (continued)
(Expressed in Canadian dollars)

Years ended December 31, 2004 and 2003

11.	Income taxes (continued):
	The composition of the future income tax assets and liabilities at December 31 is as follows:

	2004		2003
Future income tax assets:
Loss carry forwards	$	1,458,032	$	363,341
Share issue costs		657,605		—
Tenure/severance		866,923		—
Other		174,053		—
		3,156,613		363,341
Future income tax liabilities:
Property, plant and equipment		710,921		1,185,787
Deferred permitting costs		1,028,975		1,672,971
Other		524,891		121,444
		2,264,787		2,980,202
Net future income tax asset (liability)	$	891,826	$	(2,616,861	)

	Management believes that realization of the net future tax assets is more likely than not. The ultimate realization of future tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences become deductible. Management considered projected future taxable income and tax planning strategies in making their assessment.
12.	Related party transactions:
	During the year ended December 31, 2004, the Company expensed management fees of $336,642 (2003 - $446,931) to a company owned by a director and officer of the Company.
	During the year ended December 31, 2004, the Company expensed legal fees of $1,733,668 (2003 - $23,780) to the Company’s legal counsels, of which one of the partners is a director of the Company.

29

BENNETT ENVIRONMENTAL INC.

Notes to Revised Consolidated Financial Statements (continued)
(Expressed in Canadian dollars)

Years ended December 31, 2004 and 2003

12.	Related party transactions (continued):
	The above transactions are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.
	During the year ended December 31, 2004, the Company recorded an investment loss of $278,193 from an investment accounted for under the equity method (note 5).
13.	Earnings (loss) per share:
	Basic earnings (loss) per share are calculated based upon the weighted average number of voting common shares outstanding during the year, which was 18,272,090 (2003 - 16,790,724).
	Fully diluted earnings (loss) per share reflects the dilutive effect of the conversion of the stock options and warrants outstanding at the end of the year or those items exercised or converted during the year, as if they had been exercised or converted at the beginning of the year or the date issued, if later. The number of shares used for the calculation of the fully diluted earnings (loss) per share is 18,272,090 (2003 - 17,527,801) based on application of the treasury stock method.
	The reconciliation of the net earnings (loss) and weighted average number of common shares used to calculate basic and diluted earnings (loss) per common share is as follows:

		2004					2003
	Number of		Loss for			Number of		Net
	shares		the year			shares		Earnings
			(Restated -					(Restated -
			note 3)					note 3)
Net earnings (loss)		18,272,090	$	(13,955,024	)		16,790,724	$	13,593,244
Dilutive effect of stock options and warrants		—		—			737,077		—
Diluted earnings (loss) per share		18,272,090	$	(13,955,024	)		17,527,801	$	13,593,244

Options aggregating 1,031,451 (2003 - 383,525) and common share purchase warrants totalling 500,000 (2003 - nil) (note 9(b)) have not been included in the computation of diluted earnings (loss) per share as they were anti-dilutive.

30

BENNETT ENVIRONMENTAL INC.

Notes to Revised Consolidated Financial Statements (continued)
(Expressed in Canadian dollars)

Years ended December 31, 2004 and 2003

14. Financial instruments:

(a)	Foreign currency risk management:
	A substantial amount of the Company’s revenues have been recognized in currencies other than the Canadian dollar, principally the United States dollar. Fluctuations in the exchange rates between these currencies and the Canadian dollar could have a material effect on the Company’s business, financial condition and results of operations. The Company attempts to mitigate some of this risk by denominating many of its payment obligations in United States dollars, and, to a lesser extent, through the use of currency derivative contracts. There were no such derivative contracts in place at December 31, 2004.
(b)	Concentration of credit risk:
	Financial instruments that potentially subject the Company to concentrations of credit risk are primarily accounts receivable. As at December 31, 2004, two customers represented 91% of accounts receivable (2003 - 73%). Management is of the opinion that any risk of loss due to bad debts is significantly reduced due to the financial strength of its customers. The Company performs ongoing credit evaluations of its customers’ financial condition and requires letters of credit or other guarantees whenever deemed necessary.

15.	Commitments:
	Future minimum annual rental payments for operating leases are payable over the next five years and thereafter as follows:

2005	$	315,562
2006		188,133
2007		130,806
2008		127,782
2009		127,782
	$	890,065

Restricted cash includes the amounts on deposit plus accrued interest relating to these letters of credit outstanding at December 31, 2004 of $1,141,170 (2003 - $1,092,000) which are held as security for the MRR facility site for the Ministry of the Environment.

31

BENNETT ENVIRONMENTAL INC.

Notes to Revised Consolidated Financial Statements (continued)
(Expressed in Canadian dollars)

Years ended December 31, 2004 and 2003

16. Segmented information:

(a)	Geographic information:
	The Company operates and manages its business in a single reporting operating segment, the business of remediating contaminated soil and other waste materials. All significant capital assets are located in Canada. Sales during the year to customers domiciled in the United States amounted to $10,214,976 (2003 - $23,985,810) and in Canada amounted to $20,427,076 (2003 - $40,501,867).
(b)	Major customers:
	For the year ended December 31, 2004, revenues from two customers, Customer A and Customer B represented approximately 24% and 27%, respectively, of total revenues (2003 - two customers 36% and 35%). A long-term contract in place during 2003 with Customer B was completed during 2004.

17. Contingencies:

(a)	Judicial Review of Minister Decision:
	On May 20, 2004, the Company received a report from the federal Canadian Environment Assessment Agency (the “CEAA”) which confirmed that there was no reason to conclude that the Company’s facility at Belledune, New Brunswick would likely cause significant adverse transboundary environmental effects. The study team was comprised of experts from Fisheries and Oceans Canada, Environment Canada, Health Canada, Indian and Northern Affairs Canada and the CEAA.
	Despite the findings of this report, the former federal Minister of the Environment, the Hon. David Anderson, referred the project to a CEAA federal review panel to assess the potential transboundary environmental effects of the Belledune facility. The Company applied to the Federal Court of Canada for a judicial review of the legality of the Minister’s decision to refer this project to a review panel.
	On August 19, 2004, the Federal Court of Canada granted the Company’s application and quashed the decision by the former federal Minister of Environment to refer the project to a review panel. The federal Minister of Environment has appealed the Federal Court of Canada decision to the Federal Court of Appeal. The appeal is pending.

32

BENNETT ENVIRONMENTAL INC.

Notes to Revised Consolidated Financial Statements (continued)
(Expressed in Canadian dollars)

Years ended December 31, 2004 and 2003

17. Contingencies (continued):

(b)	Manville, New Jersey (Federal Creosote Contracts):
	In June 2003, the Company announced that it had been awarded a subcontract (the “2003 Phase III Contract”) to treat 300,000 tons (plus or minus 15%) of soil contaminated with wood treatment chemicals such as creosote, from the Federal Creosote Superfund Site (the “FC Site”) in Manville, New Jersey. The 2003 Phase III contract is an indefinite delivery/indefinite quantity (“ID/IQ”) contract.
	Shortly after the award of the 2003 Phase III Contract, an unsuccessful bidder lodged a protest of the award with United States Army Corps of Engineers (the “Corps”), which supervises the contractors on the FC Site and is responsible for the remediation process and consents to the award of subcontracts and under U.S. government procurement regulations. The Corps alleges, and the Company disputes, that the Corps withdrew its consent to the award of the 2003 Phase III Contract to the Company, although it consented to ship up to 10,000 tons of soil to the Company for treatment under the 2003 Phase III Contract. The principal contractor on the FC Site did not take any action to cancel the 2003 Phase III Contract, or otherwise notify the Company of the Corps’ actions. The Company began receiving shipments against the 2003 Phase III Contract in August 2003.
	After the unsuccessful bidder’s protest of the 2003 Phase III Contract, the principal contractor issued an Invitation for Bids (“IFB”) in November 2003 for an lD/IQ contract for thermal remediation. The IFB provided for a guaranteed minimum of 1,000 tons and a maximum of 100,000 tons. The Company bid on the IFB in December 2003, and was notified in early 2004 that it was the low bidder. During and after the bidding process, the Company repeatedly asked the principal contractor to state whether the IFB supplemented or replaced the 2003 Phase III Contract. The principal contractor did not respond to these queries. To benefit from deliveries from the FC site, the Company elected to participate in the contract process, while continuing to seek clarification from the principal contractor and the Corps regarding the IFB. Without waiving any of its rights under the 2003 Phase III Contract, on June 3, 2004 the Company entered into an lD/IQ subcontract (the “2004 Phase III Contract”) with a guaranteed minimum of 1,000 tons and a maximum of 100,000 tons for the same type of services as were covered by the 2003 Phase III Contract. The 2004 Phase III Contract is on less favourable economic terms than the 2003 Phase III Contract but is consistent with pricing under FC Site contracts concluded before the 2003 Phase III Contract. On July 22, 2004, the Company announced that, based on correspondence received from the Corps, all future shipments from the FC Site will be delivered under the 2004 Phase III Contract.

33

BENNETT ENVIRONMENTAL INC.

Notes to Revised Consolidated Financial Statements (continued)
(Expressed in Canadian dollars)

Years ended December 31, 2004 and 2003

17. Contingencies (continued):

	Currently, a number of agencies ranging from municipal to federal and including the United States Environmental Protection Agency (the “EPA”) are conducting studies to determine the extent of excavation required at the FC Site in order to remove soil contaminants including creosote. The extent of the excavation is ultimately expected to be dependent upon a number of factors including a decision by municipal authorities as to the future use of the land and United States federal government funding restrictions imposed on the EPA. The Company is awaiting a definitive design plan from the EPA to better evaluate the prospects for additional contracts for the FC Site. The extent of the excavation will be factored into the definitive design plan for the FC Site and will be a primary factor in determining the tonnage of soil to be treated by the Company.
(c)	Class action:
	On July 30, 2004, a class action lawsuit was filed in the United States against the Company and certain officers. A total of 12 similar actions have been filed to this date. Plaintiffs filed a Consolidated Amended Complaint on December 23, 2004. That complaint asserts claims under sections 10(b) and 20(a) of the United States Securities Exchange Act of 1934, as amended, and Securities and Exchange Commission Rule 10b-5 based on the Company’s public statements concerning the Company’s subcontract for Phase III of the Manville, New Jersey federal creosote soil remediation project. The consolidated complaint names as defendants the Company, its former Chairman and Chief Executive Officer John Bennett, its current Chief Executive Officer Allan Bulckaert, its Vice-President of Engineering and Business Development Danny Ponn, its former Chief Financial Officer Richard Stern and its former Vice-President of Sales and Marketing for the United States Robert Griffiths. Plaintiffs purport to assert their claims on behalf of a class of purchasers of the Company’s securities from June 2, 2003 to July 22, 2004, inclusive, and on behalf of a subclass of purchasers of the Company’s securities in a private placement that closed on January 24, 2004. All defendants have filed motions to dismiss the consolidated amended complaint. At present the claim of the lead plaintiff (not including claims of any other plaintiffs or potential plaintiffs) is approximately U.S. $3.11 million. The Company disagrees with the allegations and intends to defend against them vigorously.

34

BENNETT ENVIRONMENTAL INC.

Notes to Revised Consolidated Financial Statements (continued)
(Expressed in Canadian dollars)

Years ended December 31, 2004 and 2003

17. Contingencies (continued):

(d)	Regulatory investigations:
	On January 29, 2004, the Company announced that it was in discussions with Ontario Securities Commission (the “OSC”) concerning a disclosure issue raised by the OSC staff arising from information disclosed in response to questions posed in a telephone call with a research analyst after the release of the Company’s 1999 annual results in March 2000. OSC staff suggested that some of the information conveyed in response to the analyst’s questions had not been publicly disclosed and might have been material. The Company has not heard from the OSC staff on this matter since September 30, 2004.
	On July 30, 2004, the Company was informed by the OSC that it was investigating the trading of shares of the Company prior to (i) the disclosure on March 29, 2004 relating to delays in shipments of soil from the two largest customers of the Company which caused an unscheduled shut down of the Company’s plant in Saint Ambroise, Québec, and (ii) the disclosure on July 22, 2004 regarding the status of the Phase III contracts to treat contaminated soil from the FC Site. The OSC requested a detailed written chronology of the events which resulted in the announcements on March 29, 2004 and July 22, 2004. On August 26, 2004, the OSC requested further information and documents relating to (i) the Saglek Labrador project for the Department of National Defense, (ii) the timely disclosure of the Federal Court of Canada decision to quash the decision of the former federal Minister of Environment to refer the Company’s project in Belledune, New Brunswick to a federal review panel, and (iii) the Company’s customer contract backlog status, projected soil volume to be processed in the third quarter of 2004 and the plans for the Belledune facility.
	On August 19, 2004, the Company was advised by the Toronto Stock Exchange (the “TSX”) that the TSX was also investigating the Company’s July 22, 2004 announcement regarding the status of the Phase III contracts to treat contaminated soil from the FC Site. The TSX requested certain information in connection with its investigation. The Company provided the requested information and documents in respect of each of the above requests to the OSC and the TSX on September 30, 2004.
	The Company and certain of the current officers and former officers received a letter dated February 11, 2005 from the OSC giving such officers and directors the opportunity to provide written submissions to the OSC before the OSC determines to commence enforcement proceedings. The OSC stated in the letter to the Company that it was of the view that the Company failed to disclose the change in status of the contract at the Federal Creosote Site, and made allegations of illegal insider trading. Submissions, if any, are to be submitted to the OSC by March 17, 2005.

35

BENNETT ENVIRONMENTAL INC.

Notes to Revised Consolidated Financial Statements (continued)
(Expressed in Canadian dollars)

Years ended December 31, 2004 and 2003

17. Contingencies (continued):

On March 16, 2005, the Company received a letter from the TSX alleging that the Company had breached the TSX’s timely disclosure policy by failing to promptly disclose the change of the status of the 2003 Phase III Contract in August 2003 after the Company’s original press release of the award of the 2003 Phase III Contract on June 2, 2003. The TSX also alleged in the letter that the Company did not provide balanced disclosure by failing to disclose the removal of the Company from certain indices. The TSX requested a meeting with the Company and at least one independent director to be held by April 8, 2005, and asked the Company’s disclosure committee to attend a timely disclosure education session. The TSX also advised that it intended to pass its findings to the OSC.

In a letter dated August 23, 2004, the United States Securities and Exchange Commission (the “SEC”) advised the Company that the SEC is conducting an informal inquiry of the Company. The SEC requested that the Company voluntarily produce certain records and oral testimony, and the Company is cooperating with the request. According to the notice, “[t]his request is confidential and should not be construed as an indication by the Commission or its staff that any violation of the Federal Securities laws has occurred, nor should it be construed as a reflection upon any security, person or entity.” The SEC subsequently obtained a judicial order opening a formal investigation and authorizing it to depose witnesses.

In a letter dated September 3, 2004, the Company received notice from the NASD Regulatory Division, on behalf of the American Stock Exchange, that it is conducting a review of certain transactions in the Company’s common shares which occurred prior to the Company’s announcement on July 22, 2004 of the loss in its second quarter of 2004. According to the notice, “[t]his is a routine review and should not be construed as an indication that any violations of Federal Securities laws or Exchange rules have occurred, on an adverse reflection on the Company, its securities or any individual who effected transactions in such securities.” On December 22, 2004, the Company received a request for additional information to which the Company responded on February 11, 2005.

The Company is continuing to cooperate with all regulatory agencies regarding these inquiries and investigations.

36

BENNETT ENVIRONMENTAL INC.

Notes to Revised Consolidated Financial Statements (continued)
(Expressed in Canadian dollars)

Years ended December 31, 2004 and 2003

17. Contingencies (continued):

(e)	Quebec Order:
	On September 17, 2004, RSI received a Preliminary Notice to the issuance of an Order from the Quebec Ministry of Sustainable Development and Parks (formerly the Quebec Ministry of the Environment) concerning the RSI plant in Saint-Ambroise. The Preliminary Notice alleges that increases in levels of dioxins and furans measured in soils near the RSI plant are attributable to RSI. If issued, the Order seeks to require RSI to limit its emissions of dioxins and furans, to install equipment to further monitor the emissions and to transmit the collected data to the Ministry.
	On November 1, 2004, RSI filed its observations with respect to the allegations contained in the Preliminary Notice. The Company disputes allegations contained in the Preliminary Notice. In support of its position, the Company commissioned several qualified third-party experts to review the allegations contained in the Preliminary Notice. The experts retained support of the Company’s position that other sources may have contributed to increases in levels of dioxins and furans in the soil around the RSI plant.
	Since the filing of its observations, RSI has exchanged correspondence and has had several discussions with the Ministry. Recently, at a meeting held on February 9, 2005, the Company met with Ministry officials where they asked the Company to develop an action plan to address the concerns raised in the Preliminary Notice. The Company developed an action plan that it believes addresses the Ministry’s concerns, while at the same time allow it to remain commercially competitive. The action plan was submitted to the Ministry on February 21, 2005. Subsequently, there is a submission of an amended action plan on March 21, 2005. The Company anticipates further discussion with the Ministry.

37

BENNETT ENVIRONMENTAL INC.

Notes to Revised Consolidated Financial Statements (continued)
(Expressed in Canadian dollars)

Years ended December 31, 2004 and 2003

18.

United States generally accepted accounting principles reconciliation:

The revised consolidated financial statements have been prepared in accordance with generally accepted accounting principles in Canada (“Canadian GAAP”) which differ in certain respects from those principles and practices that the Company would have followed had its revised consolidated financial statements been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) as summarized below. Previously reported U.S. GAAP figures have been restated as described in notes 3(a) and 18(d).

(a) Earnings (loss) and earnings (loss) per share:

	2004			2003
		(Restated - note 3)
Net earnings (loss) in accordance with Canadian GAAP	$	(13,955,024	)	$	13,593,244
Compensation expense (d)		621,029			1,093,899
Deferred permitting costs (e)		(1,730,494	)		(1,717,697	)
Write-down of deferred permitting costs (e)		3,422,767			—
Recovery of deferred business development costs (f)		—			43,950
Loss on investments (g)		81,050			—
Future income tax recovery on U.S. GAAP adjustments (h)		(610,911	)		479,302
Net earnings (loss) per share in accordance with U.S. GAAP	$	(12,171,583	)	$	13,492,698
Basic earnings (loss) per share in accordance with U.S. GAAP	$	(0.67	)	$	0.80
Diluted earnings (loss) per share in accordance with U.S. GAAP	$	(0.67	)	$	0.77
Weighted average shares outstanding (note 13):
Basic		18,272,090			16,790,724
Diluted		18,272,090			17,527,801

38

BENNETT ENVIRONMENTAL INC.

Notes to Revised Consolidated Financial Statements (continued)
(Expressed in Canadian dollars)

Years ended December 31, 2004 and 2003

18. United States generally accepted accounting principles reconciliation (continued):

(b)	Balance sheet:
	The amounts in the revised consolidated balance sheets that differ significantly from those reported under Canadian GAAP are as follows:

				Other
	Investments			assets			All other		Total
									(Restated -
									note 3)
Assets in accordance with Canadian GAAP as at December 31, 2004	$	—		$	4,793,069		$	85,219,333	$	90,012,402
U.S. GAAP adjustments		—			(3,286,808	)		—		(3,286,808	)
Future income tax recovery on U.S. GAAP adjustment (h)		—			—			1,062,057		1,062,057
	$	—		$	1,506,261		$	86,281,390	$	87,787,651
Assets in accordance with Canadian GAAP as at December 31, 2003	$	568,193		$	7,354,403		$	62,245,611	$	70,168,207
U.S. GAAP adjustments		(81,050	)		(4,979,081	)		—		(5,060,131	)
	$	487,143		$	2,375,322		$	62,245,611	$	65,108,076
k

	2004		2003
Liabilities in accordance with Canadian GAAP	$	10,009,012	$	15,850,433
Future income tax recovery on U.S. GAAP adjustments (h)		—		(1,672,971	)
	$	10,009,012	$	14,177,462

39

BENNETT ENVIRONMENTAL INC.

Notes to Revised Consolidated Financial Statements (continued)
(Expressed in Canadian dollars)

Years ended December 31, 2004 and 2003

18. United States generally accepted accounting principles reconciliation (continued):

	2004			2003
				(Restated -
				note 3)
Shareholders’ equity in accordance with Canadian GAAP	$	80,003,390		$	54,317,774
Deferred permitting and business development costs (e) and (f)		(3,286,808	)		(3,387,160	)
Future income taxes (h)		1,062,057			—
Shareholders’ equity in accordance with U.S. GAAP	$	77,778,639		$	50,930,614
Shareholders’ equity in accordance with U.S. GAAP is comprised of:
Share capital	$	70,645,023		$	31,670,112
Additional paid-in capital (d)		193,425			154,775
Deferred compensation expense (d)		(54,990	)		(61,037	)
Retained earnings		6,995,181			19,166,764
	$	77,778,639		$	50,930,614

(c)	Statement of cash flows:
	Under U.S. GAAP, cash provided by operations would decrease by $1,294,032 (2003 - ($1,194,445)) and cash used in investments would increase by $1,294,032 (2003 - ($1,194,445)) for the costs of deferred permitting and business development, which would be expensed as incurred and classified as a component of operating cash flows under U.S. GAAP.

40

BENNETT ENVIRONMENTAL INC.

Notes to Revised Consolidated Financial Statements (continued)
(Expressed in Canadian dollars)

Years ended December 31, 2004 and 2003

18. United States generally accepted accounting principles reconciliation (continued):

(d)	Stock-based compensation:
	For U.S. GAAP purposes, the Company accounts for its employee stock-based compensation arrangements in accordance with the provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees and related interpretations. As such, compensation expense under fixed plans is recorded on the grant date only if the market price of the Company’s stock at that date exceeds the exercise price. Variable accounting is required to be applied if the exercise price of outstanding fixed stock options is reduced. Under variable accounting, the compensation expensed is remeasured based on the option’s intrinsic value at each reporting date until the date award is exercised, forfeited or expires unexercised with changes in the intrinsic value recorded in the measurement of net income. For Canadian GAAP, the Company has accounted for employee stock based compensation as described in note 2(a)(i).
	The Company determined that it had incorrectly accounted for the U.S. GAAP adjustment for stock-based compensation during the year ended December 31, 2003. The Company had previously recorded the stock-based compensation to be recorded under U.S. GAAP under the instrinsic value basis but had not reversed the stock-based compensation recorded under the fair value based method under Canadian GAAP. As a result, the Company had revised the U.S. GAAP adjustment by $1,198,802 to increase net earnings under U.S. GAAP for the year ended December 31, 2003.
	Accounting for employee stock options under U.S. GAAP would result in a reclass to increase share capital and a corresponding decrease in additional paid-in capital of $9,448 (2003 - $104,903 to increase compensation expense and a corresponding increase to paid-in capital).

41

BENNETT ENVIRONMENTAL INC.

Notes to Revised Consolidated Financial Statements (continued)
(Expressed in Canadian dollars)

Years ended December 31, 2004 and 2003

18. United States generally accepted accounting principles reconciliation (continued):

Under United States GAAP, the issue of stock options and warrants to non-employees is accounted for under Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation. The Company recognizes compensation expense for stock options, warrants and other equity instruments issued to non-employees for services received based upon the fair value of the services received or the equity instruments issued, whichever is more reliably determined. Under Canadian GAAP, the Company has applied the fair value method for non-employee awards granted since January 1, 2002. Under this policy, stock options issued to non-employees after December 31, 2002, the only measurement difference for non-employees are those carried forward from previous periods as noted below. The fair value of stock options and warrants granted to non-employees during the year ended December 31, 2001 was estimated on the date of grant using the Black-Scholes option-pricing model and the following weighted-average assumptions:

Expected volatility	74.1	%
Risk-free interest rate	4.0	%
Dividend yield	—
Expected life of options	3 to 5 years

(e)	Deferred permitting costs:
	Under Canadian GAAP the expenditures relating to the acquisition of operating permits may be deferred and amortized to expense in a rational and systematic manner. Under U.S. GAAP these expenditures are charged to expense when incurred.
(f)	Deferred business development costs:
	Under Canadian GAAP, expenditures relating to the development of new business may be deferred and amortized to expense in a rational and systematic manner. Under U.S. GAAP, these expenditures are charged to expense when incurred.

42

BENNETT ENVIRONMENTAL INC.

Notes to Revised Consolidated Financial Statements (continued)
(Expressed in Canadian dollars)

Years ended December 31, 2004 and 2003

18. United States generally accepted accounting principles reconciliation (continued):

(g)	Loss on investments:
	Under Canadian GAAP, certain investments were written-off during 2004 and for U.S. GAAP purposes, these investments were written-down in prior years. For U.S. GAAP purposes, 2004 write-offs totalling $81,050 have been reduced since they were previously recorded for U.S. GAAP purposes.
(h)	Income taxes:
	Under Canadian GAAP, future tax assets and liabilities are recorded at substantially enacted tax rates. Under U.S. GAAP, deferred tax assets and liabilities are recorded at enacted tax rates. Recording Canadian future income tax assets and liabilities at enacted tax rates would not change recorded net earnings (loss) or shareholders’ equity under U.S. GAAP. The future income tax effect of U.S. GAAP adjustments has been recorded at the enacted tax rate in the period of adjustment.

43