Copa Corporation Inc.

The Company recorded an operating loss of ¥281,839 thousand, an ordinary loss of ¥278,838 thousand, and a net loss of ¥437,770 thousand for the fiscal year under review, and together with the losses recorded in the two consecutive preceding fiscal years, a situation exists that raises material doubt about the going concern assumption. The Company projects a narrowing of losses through an increase in the number of new product launches, expansion of new wholesale outlets, and cost containment in the following fiscal year, and profitability in the fiscal year after that, but if the plan is not achieved, this could materially affect the continuity of the business. As of the end of the fiscal year under review, the Company held cash and deposits of ¥658,733 thousand, and has also secured additional fundraising capacity through an overdraft agreement.

In the fiscal year ended February 2025, Jupiter Shop Channel Co., Ltd. accounted for 23.4% of net sales and Amazon Japan G.K. accounted for 22.1%, with the top two customers together accounting for approximately 45.5% of net sales. If, for any reason, these customers' transaction policies change and they refuse to renew or terminate contracts, this could have a material impact on the Company's business and operating results. The Company is working to maintain stable transactions by improving quality and planning capabilities and developing new sales channels.

The Company employs a "3D marketing sales strategy" that generates synergy effects with Vendor Sales Channel and Internet Shopping Channel, starting from live demonstration salespeople appearing on TV shopping programs, but the frequency of appearances on TV shopping programs is not something the Company can control. If the frequency of appearances declines, this could have a chain-reaction impact on sales volume across multiple sales channels as a whole, and could materially affect the Company's business and operating results. In addition, since media appearances by live demonstration salespeople serve as a catalyst for creating hit products, this also entails the risk of sales fluctuations.

The Company's key products account for a high proportion of overall sales, and if demand declines or procurement becomes difficult for one or several products, this could materially affect the Company's business and operating results. For exclusively distributed products, suppliers may set certain sales target amounts, which also entails the risk of excessive inventory holdings due to increased procurement. In the event of a decline in consumer demand, a write-down of inventory valuation may also become necessary.

Live demonstration sales are the Company's core competitive strength, and organizationally maintaining a pool of live demonstration salespeople is a key differentiating factor from other companies; however, if the securing and development of personnel does not proceed as planned, or if existing salespeople leave for other companies, this could materially affect the Company's business and operating results. Although the Company has a policy of ongoing recruitment and development, as a small organization with 45 employees, the impact of personnel outflow is relatively significant.

In addition to rising crude oil and raw material prices due to global conditions, a weaker yen may push up import prices, potentially causing procurement prices to surge. There is also a risk that supply of products may be disrupted due to difficulties on the part of suppliers or supplier bankruptcy, and even after quality inspections are conducted, if product defects occur due to unforeseen circumstances, additional costs or claims for damages may arise. Country risks such as US-China trade friction and the situation in Ukraine could similarly affect the Company through logistics disruptions and rising freight rates.

The Company's Internet Shopping Channel relies primarily on major internet malls such as Amazon, Rakuten Ichiba, and Yahoo! Shopping as its main sales channels. If relations with mall operators deteriorate, or if store contracts are terminated due to violation of terms, system failures, or mall closures occur, the Internet Shopping Channel business could become unable to continue, which could materially affect the Company's business and operating results.

The Company is subject to numerous legal regulations, including the Act against Unjustifiable Premiums and Misleading Representations, the Act on Specified Commercial Transactions, and the Consumer Contract Act, and if there are amendments to laws or new items become subject to regulation, this could materially affect the Company's business and operating results. The Company has established a legal compliance framework through employee training (such as holding seminars) and the development and strengthening of compliance regulations, but there is also a risk of reputational damage if a violation occurs.

The Company holds personal information through its Internet Shopping Channel operations, and if unauthorized use or an unforeseen leak to outside parties occurs, this could materially affect the Company's business and operating results due to loss of credibility or claims for damages. In addition, if a system failure occurs due to a surge in access, computer viruses, natural disasters, or other causes, there is also a risk of reputational damage and claims for damages. The Company has implemented measures such as setting data access permissions, encrypting communications, and preventing external intrusion, but complete protection cannot be guaranteed.

Representative Director Taisuke Yoshimura and his asset management companies (Empower Field Co., Ltd. and Choiz Co., Ltd.) hold 68.9% of the total issued shares (excluding treasury stock), giving them dominant influence over decision-making at general shareholders' meetings. If this individual sells the Company's shares in the future, this could have a material impact on the market price and trading conditions of the stock. In addition, the Company paid no dividend in the fiscal year under review, and the possibility and timing of future dividend payments remain undetermined at this time.