decreased its reported gross profit for 2008 and a significant drop in its gross profit in 2009. The decline was based on both reduced volumes caused by the economic environment and credit crisis as well as by temporarily depressed margins that were caused by high priced inventory that resulted from cancelled projects. As a result of these factors, LMS’ distribution to Alaris in 2010 decreased. Since 2009, LMS’ gross profits have continued to be impaired due to construction market conditions across Western Canada, Since 2011, LMS has seen sales volume steadily improve in all of its regions and has seen corresponding improvement in gross profit. However, challenging market conditions might continue to have a negative impact on LMS' business, financial condition, results of operation and cash flows and could have a material adverse effect on Alaris. 

Supplier Base LMS relies on key suppliers for the supply of raw materials. Disruption of any one supplier could have a material adverse effect on the ability of LMS to secure its supplies, as well as an increase in the cost of those supplies adversely affecting its financial results. 

Labour Relations Risk Approximately one-half of LMS's employees are unionized or governed by collective trade agreements. Although these agreements are with multiple union locals within diverse regions, a labour dispute with any union or employee association could adversely affect LMS’ business. 

Trade Policy Restrictions LMS is a significant importer of commodity steel products that are sourced both domestically and globally. Steel is often the subject of cross border trade disputes. Any material dispute that is not resolved in LMS's favour could have a material adverse effect on LMS's results. 

## Risks Relating Specifically to Solowave Design 

Customer Risk Solowave’s four largest customers represent approximately 78% of Solowave’s revenues. Although Solowave has increased revenues from other customers in the last three years, these four customers continue to represent a large portion of Solowave’s revenues. Should these four customers experience difficulties in fulfilling their financial obligations to Solowave, cease to do business with Solowave, or significantly reduce orders from Solowave, there could be a material adverse effect to Solowave’s business, financial condition and cash flows, which could in turn have a material adverse effect on Alaris. Solowave has accounts receivable insurance in place to protect payments, but the insurance recovery process could take time to realize. In addition, should any of Solowave’s major customers seek price reductions, additional financial incentives, or changes in sale terms, Solowave’s business could be adversely affected. 

International Operations Risk Solowave sources certain component parts from Asia and assembles some of its goods in leased space in China. In addition, Solowave distributes a large number of its products through its distribution centre in Buffalo, New York, USA. These operations are subject to the risks normally associated with international operations, including but not limited to: currency conversion risks and currency fluctuations; political instability; civil unrest and economic instability; complications in complying with laws in several jurisdictions; changes in governmental policies; rising costs of raw materials; rising energy prices; blackouts due to energy shortages; transportation delays, interruptions and strikes; and the potential imposition of tariffs. Should Solowave’s operations in China or the USA be impacted as a result, Solowave would need to shift additional business volumes to its Canadian manufacturing centre, which would 

