Management Discussion & Analysis Risks Relating Specifically to Quetico Customer Risk  Operational Risk  Quetico’s largest customer represents approximately 70% of Quetico’s revenues.  Substantial decreases in product and servicing orders from this customer could  adversely affect Quetico’s business, financial condition and results from operations.  Quetico’s relationship with this customer is over two decades old and Quetico is  integrated into the customer’s inventory system, offering services that no other  company currently provides. However, if the customer starts to see its sales volumes  across North America decline or decides to use additional service providers, it may  have a materially negative effect on Quetico’s business, and therefore have a material  effect on Alaris. Quetico has no formal agreements with any of its wholesale merchandise customers,  except for in respect to licensing and royalty agreements. The Company conducts  wholesale business with purchase orders from retailers, or brand owners, which  indicate a future commitment or promise to take ownership of inventory at some time  in the future. If at any point, a customer does not honour a purchase order  commitment, Quetico will have inventory to sell to cover its financial position on the  transaction. There can be no guarantee that this will be sold, particularly in a weak  economy. In addition, carrying the additional inventory may cause a drain on  Quetico’s capital availability to fund new transactions.  In addition to the risks relating specifically to our material Private Company Partners (being LifeMark  Health, LMS, Solowave, KMH, Killick and Quetico), there are several other risks which impact all of our  current and future Private Company Partners collectively, which if realized, could have a material impact on  our operations and financial condition, as described below.  RisksrelatingtoallofourPrivateCompanyPartners,generally  There is no publicly-available information concerning our Private Company Partners  There is generally no publicly available information regarding private businesses and the boards of directors  and management of these companies are not subject to the same governance and disclosure requirements  applicable to public companies. Therefore, we rely on our Management and consultants to investigate these  businesses. There can be no assurance that our due diligence efforts will uncover all material information  about the privately held businesses necessary to make fully informed decisions. Private Company Partners  may have significant variations in operating results; may from time to time be parties to litigation; may be  engaged in rapidly changing businesses; may expand business operations to new jurisdictions, may require  substantial additional capital to support their operations, to finance expansion or to maintain their  competitive position; or may be adversely affected by changes in the business cycle. Numerous factors may  affect the quantum of a Private Company Partner's distribution obligations to Alaris, or the ability of a  Private Company Partner to service such distribution obligations, including the failure to meet its business  plan, a downturn in its industry or negative economic conditions. Deterioration in a Private Company  Partner's financial condition and prospects may be accompanied by a material reduction in the  distributions or payments received by us. How a Private Company Partner is leveraged may have adverse consequences to them  Leverage may have important adverse consequences on our Private Company Partners. Private Company  Partners may be subject to restrictive financial and operating covenants. Leverage may impair our Private  76  2011 Annual Report  Alaris Royalty Corp.