significantly increase transportation and manufacturing costs and possibly disrupt its business. Also, the imposition of trade sanctions by Canada, the USA or China against any of the products imported by Solowave could significantly increase Solowave’s manufacturing costs. 

Seasonal Business Risks The majority of Solowave’s back yard active play sets are shipped for delivery and sold by its customers between February and August. As such, any interruption to the shipment of product to Solowave’s customers during its peak selling season can result in a permanent loss of sales revenue for both Solowave and its customers, as well as an increase in Solowave’s inventory carrying costs. Both of these items could potentially adversely affect Solowave’s financial condition. In addition, a failure by Solowave to properly manage its seasonal sales cycle could result in a temporary or permanent loss of orders from customers, a strain on Solowave’s working capital or a shortage of labour, all of which would adversely affect Solowave’s financial condition and operating results. 

Natural or Other Disasters The risk to Solowave’s financial condition would depend on the severity of the damage caused; the length of time the affected operations were off-line; the length of time for Solowave to realize upon its insurance coverage; and the extent of damage covered by Solowave’s business interruption insurance. A fire or other unforeseen disaster could interrupt Solowave’s manufacturing or distribution operation, or cause damage to Solowave’s inventory or equipment. Such disaster could adversely affect Solowave’s financial condition and operating results. 

Product Recall Risk As a manufacturer of products that are used by children, Solowave is subject to strict product safety regulations and guidelines. A major product recall instituted either by the governing bodies or by Solowave, could adversely affect Solowave’s financial condition; and could lead to a permanent loss of revenue. 

## Risks Relating Specifically to KMH 

Customer Risk Any cause that would reduce the affordability to pay for private healthcare will negatively affect KMH’s volumes and revenue. A loss or reduction of personal income, due to continued unemployment in the U.S., and uncertain economic conditions, has a direct impact on the ability of U.S. citizens to pay for private insurance. 

Medical Reimbursement Rates KMH derives the majority of its revenue from public health insurance programs. Therefore, any major change in these programs would negatively impact KMH. The largest risk KMH faces in the U.S. is the fact that reimbursement rates are dictated by Medicare. If Medicare decides to cut these rates significantly, all issuers follow, leading to a substantial decrease in margins. 

