Management Discussion & Analysis  Alaris Royalty Corp. 2011 Annual Report   75  Referral Loss  KMH’s revenue is dependent in part on referrals from centers that do not have in- house medical imaging capabilities. The loss of any of these referrals would have a  significant adverse effect on KMH’s business. Aside from a general decline in referrals,  a complete loss of a referral channel could result if a private practice sells their practice  to a local hospital that has its own internal imaging capabilities. Supplier Base  KMH relies on key suppliers for the supply of isotopes. Isotopes are essential to  conducting nuclear medicine diagnostic tests. The supply of isotopes can be affected  by a number of factors, including, without limitation, an interruption of operations at  any nuclear reactors around the world or increased regulation with respect to the  production of nuclear power. If KMH loses its supply of isotopes, for even a short  period of time, it could result in a significant decrease in nuclear tests conducted,  affecting revenue.  Regulation  KMH operates in a strictly regulated industry. All KMH facilities are subject to  scrutiny by the regulators and any failures to comply with set requirements could  result in the loss of KMH’s operating licenses. In addition, any change in  governmental regulation and licensing requirements or interpretation and application  of same relating to healthcare services could have an adverse impact on the scope of  KMH’s activities. Foreign Exchange  Rate Fluctuations  Though minimal, KMH is exposed to foreign exchange rate fluctuations from the U.S.  operations thus decreasing income from U.S. operations if affected negatively by a  USD to CDN dollar rate change. Risks Relating Specifically to Killick Government  Regulation  The size and scope of the global maintenance, repair & overhaul market is determined  largely by government regulatory requirements created to ensure the safety of the air  traveling public. Any change in the governmental regulation and licensing  requirements or interpretation and application of same relating to aircraft  maintenance and service could have an adverse impact on the scope of Killick’s  operations and volumes.  New Product Risk  The threat of a new model of engine coming to market has the potential to  significantly reduce the demand for the types of engines and parts that Killick services  and supplies. However, an event can generally be predicted and planned for well in  advance of the product arriving in the market.  Customer  Bargaining Power  Risk  In the market segment that Killick’s CT Aerospace division participates, buyers are  limited in number but large in size and industry influence. Buyers exercise increased  power as the available options for sources of engine parts are often many. Participants  in the market segment in turn work to distinguish themselves from the competition in  an effort to win their business, making the market segment highly relational and  service oriented. Losing favor with a buyer could result in an adverse impact on CT  Aerospace’s revenue.  General Economic  Conditions  The growth of the MRO market is driven by two main factors: the growth of the  worldwide aircraft fleet and the increased average age of the fleet as evidenced by  cumulative number of flight hours. Economic factors negatively effecting demand and  overall industry flight time could reduce the level of work for MRO operations.