UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2025

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______, 20___, to _____, 20___.

Commission File Number 001-41204

Hour Loop, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware

47-2869399

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification Number)

8201 164^th Ave. NE

Redmond, WA

98052-7615

(Address of Principal Executive Offices)

(Zip Code)

(206) 385-0488, ext. 100

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each Exchange on which Registered
Common Stock		HOUR		The Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒

Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 12, 2025, there were 35,160,190 shares of common stock, par value $0.0001 per share, of the registrant issued and outstanding.

Hour Loop, Inc.

Contents

		Page
PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)	3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33

Item 4.	Controls and Procedures	33

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	34

Item 1A.	Risk Factors	34

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34

Item 3.	Defaults Upon Senior Securities	34

Item 4.	Mine Safety Disclosures	34

Item 5.	Other Information	34

Item 6.	Exhibits	35

Signatures		36

Item 1. Financial Statements.

HOUR LOOP, INC.

CONSOLIDATED BALANCE SHEETS

(In U.S. Dollars, except for share and per share data)

As of March 31, 2025 and December 31, 2024

(Unaudited)

	March 31, 2025			December 31, 2024

ASSETS
Current assets
Cash	$	1,260,122		$	2,119,581
Accounts receivable, net		394,242			1,650,547
Inventory, net		15,889,482			14,640,632
Prepaid expenses and other current assets		614,685			327,894
Total current assets		18,158,531			18,738,654

Property and equipment, net		42,759			56,797
Deferred tax assets		821,205			1,060,104
Operating lease right-of-use lease assets		54,978			111,409
Total non-current assets		918,942			1,228,310
TOTAL ASSETS	$	19,077,473		$	19,966,964

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	6,859,536		$	4,176,305
Credit cards payable		2,404,365			3,389,880
Short-term loan		603,227			610,967
Operating lease liabilities-current		56,478			114,540
Accrued expenses and other current liabilities		677,726			2,322,535
Due to related parties		2,660,418			4,192,995
Total current liabilities		13,261,750			14,807,222

Total liabilities		13,261,750			14,807,222
Commitments and contingencies		-			-

Stockholders’ equity
Preferred stock: $0.0001 par value, 10,000,000 shares authorized, none issued and outstanding as of March 31, 2025 and December 31, 2024		-			-
Common stock: $0.0001 par value, 300,000,000 shares authorized, 35,151,440 and 35,143,460 shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively		3,515			3,514
Additional paid-in capital		5,817,685			5,802,686
Retained earnings (accumulated deficit)		59,342			(595,175	)
Accumulated other comprehensive loss		(64,819	)		(51,283	)
Total stockholders’ equity		5,815,723			5,159,742

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	19,077,473		$	19,966,964

The accompanying footnotes are an integral part of these unaudited consolidated financial statements.

HOUR LOOP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(In U.S. Dollars, except for share and per share data)

For the Three Months Ended March 31, 2025 and 2024

(Unaudited)


	Three Months Ended March 31,
	2025			2024

Revenues, net	$	25,837,090		$	24,681,122
Cost of revenues		(11,691,792	)		(10,228,916	)
Gross profit		14,145,298			14,452,206

Operating expenses
Selling and marketing		11,246,997			11,174,191
General and administrative		1,977,436			1,739,843
Total operating expenses		13,224,433			12,914,034

Income from operations		920,865			1,538,172

Other income (expense)
Other income (expense)		301			(1,156	)
Interest expense		(47,055	)		(62,112	)
Other income		61,825			28,034
Total other income (expense), net		15,071			(35,234	)

Income before income taxes		935,936			1,502,938
Income tax expense		(281,419	)		(437,124	)

Net income		654,517			1,065,814

Other comprehensive loss
Foreign currency translation adjustments		(13,536	)		(16,533	)

Total comprehensive income	$	640,981		$	1,049,281

Basic and diluted earnings per common share	$	0.02		$	0.03
Weighted-average number of common shares outstanding		35,151,351			35,095,602

The accompanying footnotes are an integral part of these unaudited consolidated financial statements.

HOUR LOOP, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In U.S. Dollars, except for share data)

For the Three Months Ended March 31, 2025 and 2024

(Unaudited)


	Common Stock				Additional Paid-In		(Accumulated Deficit) Retained			Accumulated Other Comprehensive			Total Stockholders’
	Shares		Amount		Capital		Earnings			Loss			Equity

BALANCE AT DECEMBER 31, 2023		35,082,464	$	3,508	$	5,727,650	$	(1,252,622	)	$	(25,639	)	$	4,452,897

Stock-based compensation		26,340		2		35,998		-			-			36,000

Currency translation adjustments		-		-		-		-			(16,533	)		(16,533	)

Net income		-		-		-		1,065,814			-			1,065,814

BALANCE AT MARCH 31, 2024		35,108,804	$	3,510	$	5,763,648	$	(186,808	)	$	(42,172	)	$	5,538,178

BALANCE AT DECEMBER 31, 2024		35,143,460	$	3,514	$	5,802,686	$	(595,175)		$	(51,283	)	$	5,159,742
Balance		35,143,460	$	3,514	$	5,802,686	$	(595,175)		$	(51,283	)	$	5,159,742

Stock-based compensation		7,980		1		14,999		-			-			15,000

Currency translation adjustments		-		-		-		-			(13,536	)		(13,536	)

Net income		-		-		-		654,517			-			654,517

BALANCE AT MARCH 31, 2025		35,151,440	$	3,515	$	5,817,685	$	59,342		$	(64,819	)	$	5,815,723
Balance		35,151,440	$	3,515	$	5,817,685	$	59,342		$	(64,819	)	$	5,815,723

The accompanying footnotes are an integral part of these unaudited consolidated financial statements.

HOUR LOOP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In U.S. Dollars)

For the Three Months Ended March 31, 2025 and 2024

(Unaudited)


	Three Months Ended March 31,
	2025			2024

Cash flows from operating activities
Net income	$	654,517		$	1,065,814
Reconciliation of net income to net cash used in operating activities:
Depreciation expenses		14,126			35,273
Amortization of operating lease right-of-use lease assets		55,383			42,892
Deferred tax assets		238,899			351,127
Stock-based compensation		15,000			36,000
Inventory allowance		497,347			637,058
Unrealized foreign exchange gain		(24,826	)		-
Changes in operating assets and liabilities:
Accounts receivable		1,256,305			210,133
Inventory		(1,746,197	)		2,021,008
Prepaid expenses and other current assets		(286,791	)		76,091
Accounts payable		2,683,231			(392,733	)
Credit cards payable		(985,515	)		(2,543,010	)
Accrued expenses and other current liabilities		(2,338,386	)		(1,093,909	)
Operating lease liabilities		(56,984	)		(35,175	)
Income taxes payable		-			82,374
Net cash (used in) provided by operating activities		(23,891	)		492,943

Cash flows from investing activities:
Purchases of property and equipment		(720	)		(17,798	)
Net cash used in investing activities		(720	)		(17,798	)

Cash flows from financing activities:
Payments to related parties		(839,000	)		-
Net cash used in financing activities		(839,000	)		-

Effect of changes in foreign currency exchange rates		4,152			(37,218	)

Net change in cash		(859,459	)		437,927

Cash at beginning of period		2,119,581			2,484,153

Cash at end of period	$	1,260,122		$	2,922,080

Supplemental disclosures of cash flow information:
Cash paid for interest	$	4,986		$	3,380
Cash paid for income tax	$	6,230		$	-
Non-cash investing and financing activities:
Operating lease right-of-use of assets and operating lease liabilities recognized	$	-		$	123,107

The accompanying footnotes are an integral part of these unaudited consolidated financial statements.

HOUR LOOP, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - Nature of Operations and Summary of Significant Accounting Policies

Hour Loop, Inc. (“Hour Loop” or the “Company”) is a technology-enabled consumer products company that uses machine learning and data analytics to design, develop, market and sell products. Hour Loop predominantly operates through online retail channels such as Amazon, Walmart, and Hourloop.com. The Company, as an Internet marketplace seller, sells products in multiple categories, including home/garden décor, toys, kitchenware, apparel, and electronics. The Company has only one segment, which is online retail (e-commerce).

The Company was incorporated on January 13, 2015 under the laws of the state of Washington. On April 7, 2021, the Company was converted from a Washington corporation to a Delaware corporation.

In 2019, Hour Loop formed Flywheel Consulting Ltd. (“Flywheel”), a wholly owned subsidiary located in Taiwan, to provide business operating consulting services exclusively to Hour Loop.

Basis of Presentation - These unaudited consolidated financial statements have been prepared in accordance with rules and regulations of the Securities and Exchange Commission (“SEC”) and accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, we have included all adjustments considered necessary for a fair presentation and such adjustments are of a normal recurring nature. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2024 and notes thereto and other pertinent information contained in our Annual Report on Form 10-K as filed with the SEC on March 27, 2025.

Principles of Consolidation - The unaudited consolidated financial statements include the accounts of Hour Loop and Flywheel. All material inter-company accounts and transactions were eliminated in consolidation.

Foreign Currency and Currency Translation - The assets and liabilities of Flywheel, having a functional currency other than the U.S. dollar, are translated into U.S. dollars at exchange rates in effect at period-end, with resulting translation gains or losses included within other comprehensive income or loss. Revenues and expenses are translated into U.S. dollars at average monthly rates of exchange in effect during each period. All of the Company’s foreign operations use their local currency as their functional currency. Currency gains or losses resulting from transactions executed in currencies other than the functional currency are included in General and administrative in the consolidated statement of operations and other comprehensive income.

The relevant exchange rates are listed below:

	March 31, 2025		December 31, 2024		March 31, 2024

Period NTD: USD exchange rate	$	33.155	$	32.735	$	31.950
Period Average NTD: USD exchange rate	$	32.938	$	32.526	$	31.641

Use of Estimates - The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Significant estimates, include but not limited to, estimates associated with the collectability of accounts receivable, useful life of property and equipment, impairment of long-lived assets, valuation allowance for deferred tax assets, inventory valuation and inventory provision.

Cash and Cash Equivalents - The Company considers all highly liquid financial instruments purchased with original maturities of three months or less to be cash. Our cash is held in the bank and covered by the Federal Deposit Insurance Corporation (“FDIC”), subject to applicable limits. Deposits are insured up to $250,000 per depositor, per FDIC-insured bank, per ownership category. Cash equivalents and marketable securities are comprised of time deposits, money market funds, highly liquid government bonds, corporate debt securities, mortgage-backed and asset-backed securities, and marketable equity securities. Our cash and cash equivalents primarily consisted of cash and money market funds. Such amounts are recorded at fair value.

Accounts Receivable and Allowance for Credit Losses - Accounts receivable are stated at historical cost less allowance for credit loss. On a periodic basis, management evaluates its accounts receivable and determines whether to provide an allowance for credit losses in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 326. Credit losses are provided based on a past history of write-offs, collections, current credit conditions, current economic conditions, reasonable and supportable forecasts of future economic conditions. The evaluation is performed on a collective basis where similar characteristics exist, primarily based on similar services or products offerings. We adopted the standard effective January 1, 2023. The impact of the adoption was not considered material to the financial statements and primarily resulted in new/enhanced disclosures only. A receivable is considered past due if the Company has not received payments based on agreed-upon terms. The Company generally does not require any security or collateral to support its receivables. The collection is primarily through Amazon and the collection period is usually less than seven days. The Company performs on-going evaluations of its customers and maintains an allowance for credit losses as the Company deems necessary or appropriate. As of March 31, 2025 and December 31, 2024, the Company did not deem it necessary to have an allowance for credit loss.

Inventory and Cost of Goods Sold - The Company’s inventory consists mainly of finished goods. Inventories are stated at the lower of cost or net realizable value. Cost is principally determined on a first-in-first-out basis. The Company’s costs include the amounts it pays manufacturers for product, tariffs and duties associated with transporting product across national borders, and freight costs associated with transporting the product from its manufacturers to its warehouses, as applicable. The merchandise with terms of FOB shipping point from vendors was recorded as the inventory-in-transit when inventory left the shipping dock of the vendors but not yet reached the receiving dock of the Company. Management continually evaluates its estimates and judgments including those related to merchandise inventory.

The “Cost of revenues” line item in the unaudited consolidated statements of operations is principally inventory sold to customers during the reporting period.

Policy for inventory allowance: The Company writes down the cost of obsolete and slow-moving inventories to the estimated net realizable value, based on inventory obsolescence trends, historical experience, forecasted consumer demand and application of the specific identification method. As of March 31, 2025 and December 31, 2024, $497,347 and $560,293, respectively, were written down from the cost of inventories to their net realizable values. Full inventory allowance is recorded for the inventory SKU not sold for more than one year.

Property and Equipment - Property and equipment are recorded at cost and depreciated or amortized over the estimated useful life of the asset using the straight-line method. The Company elected to expense any individual property and equipment items under $2,500.

The majority of the Company’s property and equipment is computers, and the estimated useful life is three years.

Impairment of Long-lived Assets- In accordance with ASC 360-10-35-17, if the carrying amount of an asset or asset group (in use or under development) is evaluated and found not to be fully recoverable (the carrying amount exceeds the estimated gross, undiscounted cash flows from use and disposition), then an impairment loss must be recognized. The impairment loss is measured as the excess of the carrying amount over the asset’s (or asset group’s) fair value. The Company did not record any impairment charges for the three months ended March 31, 2025 and 2024.

Leases - Leases are classified at lease commencement date as either a finance lease or an operating lease. A lease is a finance lease if it meets any of the following criteria: (a) the lease transfers ownership of the underlying asset to the lessee by the end of the lease term, (b) the lease grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise, (c) the lease term is for the major part of the remaining economic life of the underlying asset, (d) the present value of the sum of the lease payments and any residual value guaranteed by the lessee that is not already reflected in the lease payments equals or exceeds substantially all of the fair value of the underlying asset or (e) the underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. When none of the foregoing criteria is met, the lease shall be classified as an operating lease.

The Company typically utilizes operating leases for its office space requirements. This means that the Company leases office space, categorizing the lease arrangement as an operating lease. Under this arrangement, The Company does not hold ownership of the leased assets but instead pays rent for the right to use them.

For a lessee, a lease is recognized as an operating lease right-of-use asset with a corresponding liability at lease commencement date. The lease liability is calculated at the present value of the lease payments not yet paid by using the lease term and discount rate determined at lease commencement. The operating lease right-of-use asset is calculated as the lease liability, increased by any initial direct costs, and prepaid lease payments, reduced by any lease incentives received before lease commencement. The operating lease right-of-use asset itself is amortized on a straight-line basis unless another systematic method better reflects how the underlying asset will be used by and benefits the lessee over the lease term.

Fair Value Measurement - Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable, accounts payable, due to related parties and short-term debt at fair value or cost, which approximates fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rates of interest.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:

	i.	Level 1 — Valuations based on quoted prices for identical assets and liabilities in active markets.

	ii.	Level 2 — Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

	iii.	Level 3 — Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

Revenue Recognition - The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC Topic 606”). The Company adopted ASC Topic 606 as of January 1, 2019. The standard did not affect the Company’s consolidated financial position, or cash flows. There were no changes to the timing of revenue recognition as a result of the adoption.

The Company recognizes revenue in accordance with ASC Topic 606, which provided a five-step model for recognizing revenue from contracts with customers as follows:

	●	Identify the contract with a customer.

	●	Identify the performance obligations in the contract.

	●	Determine the transaction price.

	●	Allocate the transaction price to the performance obligations in the contract.

	●	Recognize revenue when or as performance obligations are satisfied.

The Company evaluated principal versus agent considerations to determine whether it is appropriate to record platform fees paid to Amazon as an expense or as a reduction of revenue. Platform fees are recorded as sales and distribution expenses and are not recorded as a reduction of revenue because the Company as principal owns and controls all the goods before they are transferred to the customer. The Company can, at any time, direct Amazon, similarly, other third-party logistics providers (“Logistics Providers”), to return the Company’s inventories to any location specified by the Company. It is the Company’s responsibility to make any returns made by customers directly to Logistics Providers and the Company retains the back-end inventory risk. Further, the Company is subject to credit risk (i.e., credit card chargebacks), establishes prices of its products, can determine who fulfills the goods to the customer (Amazon or the Company) and can limit quantities or stop selling the goods at any time. Based on these considerations, the Company is the principal in this arrangement.

The Company derives its revenue from the sale of consumer products. The Company sells its products directly to consumers through online retail channels. The Company considers customer order confirmations to be a contract with the customer. For each contract, the promise to transfer products is identified as the sole performance obligation. Transaction prices are evaluated for potential refunds or adjustments, determining the net consideration expected. Revenues for the three months ended March 31, 2025 and 2024 were recognized at a point in time. Customer confirmations are executed at the time an order is placed through third-party online channels. For all of the Company’s sales and distribution channels, revenue is recognized when control of the product is transferred to the customer (i.e., when the Company’s performance obligation is satisfied), which typically occurs at shipment date. As a result, the Company has a present and unconditional right to payment and record the amount due from the customer in accounts receivable.

The customer can return the products within 30 days after the products are delivered and estimated sales returns are calculated based on the expected returns. The rates of sales returns were 6.35% and 5.53% of gross sales for the three months ended March 31, 2025 and 2024, respectively.

From time to time, the Company offers price discounts on certain selected items to stimulate the sales of those items. Revenue is measured as the amount of consideration for which the Company expects to be entitled in exchange for transferring goods. Consistent with this policy, the Company reduces the amount of these discounts from the gross revenue to calculate the net revenue recorded on the statement of operations.

A performance obligation, defined as the promise to transfer a distinct good, is the unit of account in ASC Topic 606. The Company treats shipping and handling as fulfillment activities, not separate performance obligations. Costs for shipping and handling were $5,748,972 and $5,705,385 for the three months ended March 31, 2025 and 2024, respectively, recorded as selling and marketing expenses.

Segment Information – The Company has only one segment, which is online retail (e-commerce).

The Company uses the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. The Company’s chief operating decision maker has been identified as the chief executive officer of the Company who reviews financial information of separate operating segments based on U.S. GAAP. The chief operating decision maker now reviews results analyzed by customers. This analysis is only presented at the revenue level with no allocation of direct or indirect costs. Consequently, the Company has determined that it has only one operating segment.

Income Taxes - Income tax expense includes U.S. (federal and state) and foreign income taxes.

The Company also complied with state tax codes and regulations, including with respect to California franchise taxes. Management has evaluated its tax positions and has concluded that the Company had taken no uncertain tax positions that could require adjustment or disclosure in the financial statements to comply with provisions set forth in ASC section 740, Income Taxes.

Deferred tax assets represent amounts available to reduce income taxes payable in future periods. Deferred tax assets are evaluated for future realization and reduced by a valuation allowance to the extent we believe they will not be realized. We consider many factors when assessing the likelihood of future realization of our deferred tax assets, including recent cumulative loss experience and expectations of future earnings, capital gains and investment in such jurisdiction, the carry-forward periods available to us for tax reporting purposes, and other relevant factors.

Concentration of Credit Risks - Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company maintains cash and cash equivalents with various domestic and foreign financial institutions of high credit quality. The Company performs periodic evaluations of the relative credit standing of all of the aforementioned institutions.

The Company maintains reserves for potential credit losses on customer accounts when deemed necessary. Significant customers are those which represent more than 10% of the Company’s total net revenue or gross accounts receivable balance at the balance sheet date. During the three months ended March 31, 2025 and 2024, the Company had no customer that accounted for 10% or more of total net revenues. In addition, as of March 31, 2025 and December 31, 2024, the Company had no customer that accounted for 10% or more of gross accounts receivable. As of March 31, 2025 and December 31, 2024, all of the Company’s accounts receivable were held by the Company’s sales platform agent, Amazon, which collects money on the Company’s behalf from its customers. Therefore, the Company’s accounts receivable are comprised of receivables due from Amazon and the reimbursement from Amazon to the Company usually takes less than seven days.

The Company’s business is reliant on one key vendor which currently provides the Company with its sales platform, logistics and fulfillment operations, including certain warehousing for the Company’s net goods, and invoicing and collection of its revenue from the Company’s end customers. During the three months ended March 31, 2025 and 2024, approximately 99% and 99%, respectively, of the Company’s revenue was through or with the Amazon sales platform.

Foreign Currency Exchange Risk - The Company is exposed to foreign currency exchange risk through its foreign subsidiary in Taiwan. The Company does not hedge foreign currency translation risk in the net assets and income reported from these sources.

Advertising and Promotion Expenses – Our policy is to recognize advertising costs as they are incurred. Advertising and promotion expenses were $1,004,083 and $884,000 for the three months ended March 31, 2025 and 2024, respectively.

Commitments and Contingencies - Liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.

Related Parties - The Company accounts for related party transactions in accordance with FASB ASC Topic 850 (Related Party Disclosures). A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.

Earnings per Share - The Company computes basic earnings per common share using the weighted-average number of shares of common stock outstanding during the period. For the period in which the Company reports net losses, diluted net loss per share attributable to stockholders is the same as basic net loss per share attributable to stockholders, because potentially dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. There were no dilutive securities or other items that would affect earnings per for the three months ended March 31, 2025 and 2024. Therefore, the diluted earnings per share is the same as the basic earnings per share.

Shares Issued for Services – Stock-based compensation cost for all equity-classified stock awards expected to vest is measured at fair value on the date of grant and recognized over the service period.

NOTE 2 - Recent Accounting Pronouncements Not Yet Adopted

In December 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07 on Improvements to Reportable Segment Disclosures, which requires entities to disclose incremental segment information on an annual and interim basis, including significant segment expenses and measures of profit or loss that are regularly provided to the chief operating decision maker (“CODM”). The standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. We are currently evaluating the impact of ASU 2023-07 on the consolidated financial statements and related disclosures and we expect to adopt the new standard using a retrospective approach.

In December 2023, the FASB issued ASU 2023-09 on Improvements to Income Tax Disclosures that require greater disaggregation of income tax disclosures to the income rate tax rate reconciliation and income taxes paid. The Updates are effective for annual periods beginning after December 15, 2024. The Company will adopt and apply the guidance in fiscal year 2025. There is no material impact expected to our results of operations, cash flows and financial condition at the time of adoption, however the Company is still assessing the disclosure impact.

NOTE 3 - Inventory

Inventory was comprised of the following as of March 31, 2025 and December 31, 2024, respectively:

Schedule of Inventory

	March 31, 2025			December 31, 2024

Inventory	$	12,499,473		$	12,716,062
Inventory-in-transit		3,887,356			2,484,863
Allowance		(497,347	)		(560,293	)
Total	$	15,889,482		$	14,640,632

As of March 31, 2025 and December 31, 2024, $497,347 and $560,293 were written down from the cost of purchased inventory to their net realizable values, respectively. Full inventory allowance is recorded for the inventory SKU not sold for more than one year.

The allowance of inventory is recorded under cost of goods sold in the statements of operations.

NOTE 4 - Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets were comprised of the following as of March 31, 2025 and December 31, 2024, respectively:

	March 31, 2025		December 31, 2024

Advance to suppliers	$	298,854	$	71,934
Prepaid expenses-insurance		33,870		2,174
Prepaid expenses-other		103,413		33,501
Lease refundable deposit		49,306		49,939
Tax receivable		121,247		157,538
Other current assets		7,995		12,808
Total	$	614,685	$	327,894

As of March 31, 2025 and December 31, 2024, there was a tax receivable of $121,247 and $157,538, respectively, due to income taxes prepaid by the Company.

NOTE 5 - Property and Equipment

Property and equipment were comprised of the following as of March 31, 2025 and December 31, 2024, respectively:

Schedule of Property and Equipment

	March 31, 2025			December 31, 2024

Property and equipment	$	376,955		$	381,067
Accumulated depreciation and amortization		(334,196	)		(324,270	)
Total property and equipment, net	$	42,759		$	56,797

For the three months ended March 31, 2025 and 2024, the Company purchased $720 and $17,798 of fixtures and office equipment, respectively.

For the three months ended March 31, 2025 and 2024, the Company had $14,126 and $35,273, recorded for depreciation, respectively.

For the three months ended March 31, 2025 and 2024, the Company had no disposal or pledge on property and equipment.

NOTE 6 - Accounts Payable and Credit Cards Payable

	March 31, 2025		December 31, 2024

Accounts payable	$	6,859,536	$	4,176,305
Credit cards payable		2,404,365		3,389,880

The Company’s accounts payable represent amounts owed to suppliers or other creditors for goods or services purchased but not yet paid for. As of March 31, 2025 and December 31, 2024, there were accounts payable of $6,859,536 and $4,176,305, respectively.

The Company’s credit cards payable consisted of outstanding balances on credit cards held by the Company. As of March 31, 2025 and December 31, 2024, there were credit cards payable of $ 2,404,365 and $3,389,880, respectively.

NOTE 7 - Short-Term Loan

Line of Credit

On August 18, 2022, Flywheel entered into a line of credit agreement in the amount of $6,940,063 with Taishin International Bank. The line of credit initially matured on August 30, 2023. On August 11, 2023, the line of credit was extended for an additional year, revising the maturity date to August 30, 2024. On May 28, 2024, the term of the loan was revised such that maturity date was extended to November 24, 2024.

On November 25, 2024, the term of the loan was revised such that maturity date was extended to May 23, 2025. The line of credit bears interest at a rate of 3.33% per annum.

As of March 31, 2025 and December 31, 2024, the outstanding balance under the Taishin line of credit was $603,227 and $610,967, respectively.

NOTE 8 - Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities were comprised of the following as of March 31, 2025 and December 31, 2024, respectively:

	March 31, 2025		December 31, 2024

Refund liability	$	-	$	766,721
Accrued payroll		274,701		302,685
Accrued bonus		133,391		963,800
Accrued expenses		208,645		255,154
Accrued interest		42,051		-
Other payables		18,938		34,175
Total	$	677,726	$	2,322,535

As of March 31, 2025 and December 31, 2024, the Company has accrued $-0- and $766,721, respectively, in a proactive approach towards potential future refunds.

A bonus expense is accrued on an annual basis, when the Company’s financial or operational performance meets the required performance level. The Company has $133,391 and $963,800 accrued for bonuses as of March 31, 2025 and December 31, 2024, respectively.

NOTE 9 - Leases

The Company had three operating leases (Flywheel’s office leases in Taiwan) as of March 31, 2025. The leased assets in Flywheel are presented as operating lease right-of-use assets.

The table below reconciles the fixed component of the undiscounted cash flows for each of the first five years and the total remaining years to the operating lease liabilities recorded in the statements of financial position as of March 31, 2025:

Schedule of Operating Leases Cost

	Flywheel			Flywheel			Flywheel
	March 2024			June 2024			August 2024
Initial lease term	to June 2025			to May 2025			to July 2025

Initial recognition of operating lease right-of-use assets	$	123,107		$	52,434		$	73,175
Weighted-average remaining lease term at March 31, 2025		0.25			0.17			0.33
Weighted-average discount rate at March 31, 2025		3.20	%		3.33	%		3.33	%

Operating lease liabilities-current as of March 31, 2025 and December 31, 2024 were $56,478 and $114,540, respectively. The operating lease right-of-use assets balance as of March 31, 2025 and December 31, 2024, were $54,978 and $111,409, respectively.

For the three months ended March 31, 2025 and 2024, the amortization of the operating lease right-of-use asset was $55,383 and $42,892, respectively. These amounts were recorded in general and administrative expenses. Additionally, for the three months ended March 31, 2025 and 2024, the Company made lease payments of $56,984 and $35,175, respectively, which were included in the operating cash flows statements.

The future minimum lease payment schedule for all operating leases as of March 31, 2025, is as disclosed below.

Schedule of Operating Lease Liabilities

For the Year Ending March 31,	Amount

2025	$	56,807
2026		-
2027		-
2028 and thereafter		-
Total minimum lease payments		56,807
Less: effect of discounting		(329	)
Present value of the future minimum lease payment		56,478
Less: operating lease liabilities-current		(56,478	)
Total operating lease liabilities-non-current	$	-

NOTE 10 - Related Party Balances and Transactions

From time to time, the Company receives loans and advances from its stockholders to fund its operations. Stockholder loans and advances are payable on demand. As of March 31, 2025 and December 31, 2024, the Company had $2,660,418 and $4,192,995, respectively, due to related parties (Sam Lai, the Company’s Chairman of the Board, Chief Executive Officer and Interim Chief Financial Officer and a significant stockholder of the Company; and Maggie Yu, the Company’s Senior Vice President, a member of the Company’s Board of Directors and a significant stockholder of the Company). The loan is memorialized in a Loan Agreement dated October 15, 2021. The annual interest rate was 2% and the initial repayment date was December 31, 2022.

On December 28, 2022, the Company, Mr. Lai and Ms. Yu agreed to extend the term of the loan for another two years, with a revised maturity date of December 31, 2024. On December 31, 2024, the Company, Mr. Lai and Ms. Yu agreed to extend the term of the loan for another one year, with a revised maturity date of December 31, 2025. The annual interest rate is 5.5%.

For the three months ended March 31, 2025 and 2024, the Company made repayments to related parties of $1,532,577 and $-0-, respectively. The amount repaid in 2025 consisted of $839,000 in principal and $693,577 in bonus.

NOTE 11 – Disaggregation of Revenue

Revenue was comprised of the following for the three months ended March 31, 2025 and 2024, respectively:

Schedule of Revenue


	Three Months Ended March 31,
	2025			2024

Revenue-U.S.	$	26,602,547		$	25,459,691
Revenue-International		951,439			869,695
Revenue-Other		302,255			120,556
Revenue		302,255			120,556
Sales returns		(1,767,559	)		(1,463,085	)
Discounts		(251,592	)		(305,735	)
Total	$	25,837,090		$	24,681,122

NOTE 12 - Income Tax

Effective Tax Rate Reconciliation for the Three Months Ended March 31, 2025
	$		%			$
Pre-tax book Income	$	935,936		21.00	%	$	196,547
Permanent differences		18,862		0.42	%		3,961
Prior year federal Permanent True-up		117,653		2.64	%		24,707
State income tax		42,326		4.38	%		40,984
Other deferred adjustment		-		1.63	%		15,220
Total tax expenses				30.07	%	$	281,419

Effective Tax Rate Reconciliation for the Three Months Ended March 31, 2024
	$		%			$
Pre-tax book income	$	1,502,938		21.25	%	$	319,332
Permanent differences		22,627		0.32	%		4,808
State income tax		85,997		7.59	%		114,055
Other deferred adjustment		-		-0.07	%		(1,071	)
Total tax expense				29.08	%	$	437,124

Schedule of Tax Expense Summary

Tax Expense Summary, for the three months ended March 31, 2025	Current Income Tax Expense		Deferred Income Tax Expense		Total Income Tax Expense
Federal	$	36,127	$	202,966	$	239,093
State		6,393		35,933		42,326
Total tax expense	$	42,520		238,899	$	281,419

Tax Expense Summary, for the three months ended March 31, 2024	Current Income Tax Expense		Deferred Income Tax Expense		Total Income Tax Expense
Federal	$	-	$	304,796	$	304,796
State		85,997		46,331		132,328
Total tax expense	$	85,997	$	351,127	$	437,124

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets at March 31, 2025 and December 31, 2024 were as follows:

	Deferred Tax Assets		Deferred Tax Assets
Deferred Tax Assets Summary	March 31, 2025		December 31, 2024
Federal	$	705,726	$	908,691
State		115,479		151,413
Total	$	821,205	$	1,060,104

	Deferred Tax Assets		Deferred Tax Assets
Deferred Tax Assets Summary	March 31, 2025		December 31, 2024
Operating lease right of use lease assets	$	377	$	787
Inventories allowance		124,931		140,743
Net loss carry forward		695,897		918,574
Total	$	821,205	$	1,060,104

The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. Based on management’s evaluation, there is no provision necessary for material uncertain tax position for the Company at March 31, 2025 and December 31, 2024.

NOTE 13 - Stockholders’ Equity

Preferred Stock

As of March 31, 2025 and December 31, 2024, the Company had 10,000,000 shares of preferred stock, $0.0001 par value per share, authorized. The Company did not have any preferred shares issued and outstanding as of March 31, 2025 and December 31, 2024. The holders of the preferred stock are entitled to receive dividends, if and when declared by the Board of Directors.

Common Stock

As of March 31, 2025 and December 31, 2024, the Company had 300,000,000 shares of common stock, $0.0001 par value per share, authorized. As of March 31, 2025 and December 31, 2024, there were 35,151,440 and 35,143,460 shares of common stock issued and outstanding, respectively.

Share Issuances for Stock Compensation

On January 2, 2024, the Company issued 2,139 shares of Company common stock to each of Sam Lai, Maggie Yu, Michael Lenner, Douglas Branch, Alan Gao and Hillary Bui, with a fair market value of $1.4025 per share as compensation for the services as executives or directors of the Company pursuant to the terms of their respective Executive Employment Agreements or Director Agreements with the Company.

On March 29, 2024, the Company issued 2,251 shares of Company common stock to each of Sam Lai, Maggie Yu, Michael Lenner, Douglas Branch, Alan Gao and Hillary Bui, with a fair market value of $1.3330 per share as compensation for the services as executives or directors of the Company pursuant to the terms of their respective Executive Employment Agreements or Director Agreements with the Company.

On July 1, 2024, the Company issued 2,946 shares of Company common stock to each of Sam Lai and Maggie Yu (both of whom are executive officers, directors and significant stockholders of the Company), and Michael Lenner, Douglas Branch, Alan Gao and Hillary Bui (each of whom was a director of the Company as of such date), with a fair market value of $1.0185 per share as compensation for the services as executives or directors of the Company pursuant to the terms of their respective Executive Employment Agreements or Director Agreements with the Company. Subsequently, on July 22, 2024, Mr. Branch resigned his position as a member of the Company’s Board of Directors.

On July 25, 2024, following Mr. Branch’s resignation, the Company issued 6,000 shares of restricted common stock to Mr. Branch as compensation for services rendered.

On October 1, 2024, the Company issued 2,196 shares of Company common stock to each of Sam Lai, Maggie Yu, Michael Lenner, Alan Gao and Hillary Bui, with a fair market value of $1.3660 per share as compensation for the services as executives or directors of the Company pursuant to the terms of their respective Executive Employment Agreements or Director Agreements with the Company.

On January 2, 2025, the Company issued 1,596 shares of Company common stock to each of Sam Lai, Maggie Yu, Michael Lenner, Alan Gao and Hillary Bui, with a fair market value of $1.8799 per share as compensation for the services as executives or directors of the Company pursuant to the terms of their respective Executive Employment Agreements or Director Agreements with the Company.

NOTE 14 - Commitments and Contingencies

As of March 31, 2025 and December 31, 2024, the Company had no material or significant commitments outstanding.

From time-to-time, the Company is subject to various litigation and other claims in the normal course of business. The Company establishes liabilities in connection with legal actions that management deems to be probable and estimable. As of March 31, 2025 and December 31, 2024, the Company had no pending legal proceedings. No amounts have been accrued in the unaudited consolidated financial statements with respect to any such matters.

NOTE 15 - Subsequent Events

On April 1, 2025, the Company issued 1,750 shares of Company common stock to each of Sam Lai, Maggie Yu, Michael Lenner, Alan Gao and Hillary Bui, with a fair market value of $1.7140 per share as compensation for the services as executives or directors of the Company pursuant to the terms of their respective Executive Employment Agreements or Director Agreements with the Company.

The Company has evaluated subsequent events from the balance sheet date through May 12, 2025, the date at which the unaudited consolidated financial statements were available to be issued, and determined that, apart from the events mentioned above, there were no other subsequent events to disclose.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Private Securities Litigation Reform Act of 1995 and Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), provide a safe harbor for forward-looking statements made by or on behalf of Hour Loop, Inc. (“Hour Loop” or the “Company”). The Company and its representatives may from time to time make written or oral statements that are “forward-looking,” including statements contained in this report and other filings with the Securities and Exchange Commission (“SEC”) and in our reports and presentations to stockholders or potential stockholders. In some cases, forward-looking statements can be identified by words such as “believe,” “expect,” “anticipate,” “plan,” “potential,” “continue” or similar expressions. Such forward-looking statements include risks and uncertainties and there are important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors, risks and uncertainties can be found in Part I, Item 1A, “Risk Factors,” of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, as the same may be updated from time to time, including in Part II, Item 1A, “Risk Factors,” of this Quarterly Report on Form 10-Q.

Although we believe the expectations reflected in our forward-looking statements are based upon reasonable assumptions, it is not possible to foresee or identify all factors that could have a material effect on the future financial performance of the Company. The forward-looking statements in this report are made on the basis of management’s assumptions and analyses, as of the time the statements are made, in light of their experience and perception of historical conditions, expected future developments and other factors believed to be appropriate under the circumstances.

Except as otherwise required by the federal securities laws, we disclaim any obligation or undertaking to publicly release any updates or revisions to any forward-looking statement contained in this Quarterly Report on Form 10-Q and the information incorporated by reference in this report to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any statement is based.

Overview

Our Business

We are an online retailer engaged in e-commerce retailing in the U.S. market. We have operated as a third-party seller on www.amazon.com since 2013, and on www.walmart.com since 2020. We have also sold merchandise on our website at www.hourloop.com since 2013. To date, we have generated practically all of our revenue as a third-party seller on www.amazon.com and only a negligible amount of revenue from our operations on our website at www.hourloop.com and as a third-party seller on www.walmart.com. We manage more than 100,000 stock-keeping units (“SKUs”). Product categories include home/garden décor, toys, kitchenware, apparel, and electronics. Our primary strategy is to bring most of our vendors’ product selections to the customers. We have advanced software that assists us in identifying product gaps so we can keep such products in stock year-round including the entirety of the last quarter (holiday season) of the calendar year (“Q4”). In upcoming years, we plan to expand our business rapidly by increasing the number of business managers, vendors and SKUs.

Business Model

There are three main types of business models on Amazon: wholesale, private label and retail arbitrage. Our business model is wholesale, also known as reselling, which refers to buying products in bulk directly from the brand or manufacturer at a wholesale price and making a profit by selling the product on Amazon. We sell merchandise on Amazon and the sales are fulfilled by Amazon. We pay Amazon fees for allowing us to sell on their platform. Our relationship with Walmart is also similar. We pay Walmart fees for allowing us to sell our merchandise on their platform. As stated above, to date, we have generated only a negligible amount of revenues as a third-party seller on www.walmart.com.

The advantages of selling via a wholesale model include the following:

	●	Purchase lower unit quantities with wholesale orders than private label products.
	●	Selling wholesale is less time intensive and easier to scale than sourcing products via retail arbitrage.
	●	More brands will want to work with us because we can provide broader Amazon presence.

The challenges of selling via a wholesale model include the following:

	●	Fierce competition on listing for Buy Box on amazon.com (as described below).
	●	Developing and maintaining relationships with brand manufacturers.

Market Description/Opportunities

Total U.S. retail sales increased 2.5% to $7.42 trillion in 2024, from $7.24 trillion in 2023. Consumers spent $1,192.29 billion online with U.S. merchants in 2024, which represents approximately 16.07% of total U.S. retail sales for the year, compared to 15.45% in 2023.

Amazon accounted for approximately 40% of all e-commerce in the United States, which Amazon the biggest ecommerce giant currently in the market.

Formation

The Company was founded in 2013 by Sam Lai and Maggie Yu. With their vision, leadership, and software development skills, the Company grew rapidly. From 2013 to 2024, sales grew from $0 to $138,252,861.

We were originally incorporated under the laws of the State of Washington on January 13, 2015. In 2019, we formed a wholly owned subsidiary, Flywheel Consulting Ltd. (“Flywheel”), to provide business operating consulting services, exclusively to Hour Loop. On April 7, 2021, Hour Loop converted from a Washington corporation to a Delaware corporation.

Competitive Advantage

Among the approximately 1.9 million active third-party sellers on Amazon, we believe we have two main competitive advantages:

	●	First, we have strong operations and sales teams experienced in listing, shipment, advertising, reconciliation and sales. By delivering high quality results and enhancing procedures through the process, our teams are competitive.
	●	Second, we believe our proprietary software system gives us an advantage over our competition. The system is highly customized to our business model; it collects and processes large amounts of data every day to optimize our operation and sales. Through advanced software, we can identify product gaps and keep them in stock all year round.

With respect to our advertising strategy, we advertise those products that we estimate will have greater demand based on our experience. This lets us allocate our advertising budget in a fashion that delivers positive value. We advertise our products on Amazon. We allocate our advertising dollars prudently. This is accomplished by advertising items that deliver the most return for our advertising spending. We monitor the items being advertised by our competitors. On the operations side, we constantly refine our processes based on learnings from historical data. The combination of managing the business operations effectively along with allocating our advertising budget to high value items allows us to grow profitably. In cases where the advertising is fierce, we allocate the spending appropriately. Our strategy for competing with larger competitors is to monitor their pricing and not compete with them when their pricing is low or at a loss. Competitors sell at low prices or at a loss due to a variety of reasons, including, but not limited to, their desire to liquidate inventory or achieve short-term increase in revenue. During these times, we avoid matching their prices. This strategy allows us to stay profitable.

Tariff Impact and Response Measures

In the first quarter ended March 31, 2025, the U.S. administration’s announcement of additional tariff increases—particularly on China-origin goods—introduced elevated volatility and uncertainty across global supply chains. Anticipating both rising import costs and the risk of inventory shortages driven by accelerated market stockpiling, the company undertook a strategic reassessment of its procurement and inventory management policies.

Effective April 2025, the company expanded its inventory holding policy from a baseline of 1.5–2 months to a more resilient 3–6 month coverage. This adjustment is intended to mitigate supply chain disruptions and preserve fulfillment continuity amid fluctuating trade conditions.

Given the material impact of recent tariff adjustments on shipments originating from China, the company temporarily suspended all containerized exports from China as a precautionary measure. This suspension will remain in effect pending a comprehensive reassessment of tariff developments and their operational implications.

To offset increased input costs and reduce the risk of stockouts, the company implemented measured price increases on select finished goods (FC) inventory. These actions are designed to support margin stability and ensure product availability in a highly dynamic trade environment.

Our Financial Position

For the three months ended March 31, 2025 and 2024, we generated net revenues of $25,837,090 and $24,681,122, respectively, and reported net income of $654,517 and $1,065,814, respectively, and cash flow (used in) provided by operating activities of $(23,891) and $492,943, respectively. As noted in our unaudited consolidated financial statements, as of March 31, 2025, we had retained earnings of $59,342.

Results of Operations

The following table shows comparisons of our unaudited income statements for the three months ended March 31, 2025 and 2024.

	Three Months Ended March 31,
	2025			2024
Statement of Operations Data
Revenues, net		25,837,090		$	24,681,122
Cost of revenues		(11,691,792	)		(10,228,916	)
Gross profit		14,145,298			14,452,206
Total operating expenses		13,224,433			12,914,034
Income from operations		920,865			1,538,172
Total other expenses, net		15,071			(35,234	)
Income tax expense		(281,419	)		(437,124	)
Net income		654,517			1,065,814
Other comprehensive loss		(13,536	)		(16,533	)
Total comprehensive income		640,981		$	1,049,281

For the three months ended March 31, 2025 compared to the three months ended March 31, 2024

Revenues

We generated $25,837,090 in revenues for the three months ended March 31, 2025, as compared to $24,681,122 in revenues for the same period in 2024. This represents an increase in revenues of $1,155,968, or 4.68%. We attribute this increase to our continued growth and maturity in our operating model, despite an overall e-commerce traffic slowdown and intense competition. Our total orders in the three months ended March 31, 2025 were approximately 1,229,792, as compared to 1,123,204 orders in the three months ended March 31, 2024, representing an increase of 9.49%. This surge in orders has played a pivotal role in driving the overall revenue growth. The substantial increase in order quantity indicates a rising demand for our products, leading to a corresponding increase in revenue generated from these sales. As a result, the increase in orders has directly contributed to the overall growth in the Company’s revenues during the period. The 9.49% increase in orders reflects strong customer demand, but our pricing strategy, including competitive pricing pressure and discounts offered during the period, resulted in lower prices for products sold. As a consequence, even with the significant order volume increase, the revenue growth was slightly shy of fully matching this proportion.

Cost of Goods Sold

Cost of goods sold for the three months ended March 31, 2025 totaled $11,691,792, as compared to $10,228,916 for the three months ended March 31, 2024. Cost of goods sold includes the cost of the merchandise sold and shipping costs, as well as estimated losses due to damage to goods.

Operating Expenses

Operating expenses for the three months ended March 31, 2025 totaled $13,224,433, representing a $310,399, or 2.4%, increase from the $12,914,034 of operating expenses for the three months ended March 31, 2024.

Other Income (Expenses), Net

Other income (expenses), net, was $15,071 and $(35,234), respectively, for the three months ended March 31, 2025 and 2024.

Total Comprehensive Income

Total comprehensive income for the three months ended March 31, 2025, was $640,981, as compared with $1,049,281 for the three months ended March 31, 2024. The decrease in total comprehensive income was attributed to an increase in the Company’s cost of revenues in the three months ended March 31, 2025, compared to the three months ended March 31, 2024.

Liquidity and Capital Resources

Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. We had cash of $1,260,122 and $2,922,080 as of March 31, 2025 and 2024, respectively.

Our primary uses of cash have been for inventory, payments to Amazon related to sales and shipping of products, for services provided, payments for marketing and advertising, and salaries paid to our employees. We have received funds from the sales of products that we sell online. The following trends are reasonably likely to result in changes in our liquidity over the near to long term:

	●	An increase in working capital requirements to finance the rapid growth in our current business;

	●	An increase in fees paid to Amazon and other partners as our sales grows;

	●	The cost of being a public company;

	●	Marketing and advertising expenses for attracting new customers; and

	●	Capital requirements for the development of additional infrastructure.

	●	Increased costs and inventory carrying requirements associated with import tariffs and global trade policy uncertainty.

Since inception, we have generated liquidity from revenues generated by our ongoing business, from debt and from the Company’s initial public offering to fund our operations.

The following table shows a summary of our cash flows for the three months ended March 31, 2025 and 2024.

	Three Months Ended March 31,
	2025			2024

Statement of Cash Flows
Net cash (used in) provided by operating activities	$	(23,891	)	$	492,943
Net cash used in investing activities	$	(720	)	$	(17,798	)
Net cash used in financing activities	$	(839,000	)	$	-
Effect of changes in foreign currency rates	$	4,152		$	(37,218	)
Net (decrease) increase in cash	$	(859,459	)	$	437,927
Cash - beginning of the period	$	2,119,581		$	2,484,153
Cash - end of the period	$	1,260,122		$	2,922,080

Net Cash Used in Operating Activities

For the three months ended March 31, 2025, cash used in operating activities amounted to $23,891, as compared to $492,943 of cash provided by operating activities for the three months ended March 31, 2024. This was driven by our net income of $654,517 for the three months ended March 31, 2025, as compared to $1,065,814 for the same period in 2024.

Despite the increase in revenue to $25,837,090 for the three months ended March 31, 2025, as compared to $24,681,122 for the three months ended March 31, 2024, the revenue increase was offset by a corresponding increase in cost of revenues.

Net Cash Used in Investing Activities

For the three months ended March 31, 2025, $720 in cash was used in investing activities, compared to $17,798 in cash used in investing activities for the three months ended March 31, 2024.

Net Cash Used in Financing Activities

For the three months ended March 31, 2025, cash used in financing activities amounted to $839,000, as compared to cash provided by financing activities of $-0- for the three months ended March 31, 2024.

Off-balance sheet financing arrangements

We have no obligations, assets or liabilities which would be considered off-balance sheet arrangements. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.

Contractual Obligations

Except as set forth below, we do not have any long-term capital lease obligations, operating lease obligations or long-term liabilities.

Taishin International Bank

On November 25, 2024, the term of the loan was revised such that maturity date was extended to May 23, 2025. The line of credit bears interest at a rate of 3.33% per annum.

As of March 31, 2025 and December 31, 2024, the outstanding balance under the Taishin line of credit was $603,227 and $610,967, respectively.

Affiliated Loans

From time to time, the Company receives loans and advances from its stockholders to fund its operations. As of March 31, 2025, the Company had a total of $2,660,418 due to related parties.

July 2021 Loan

On July 27, 2021, the Company, Mr. Lai and Ms. Yu entered into a loan agreement with a principal amount of $4,170,418. The loan is subordinated. The original annual interest rate was 2% and the original repayment date was December 31, 2022. On December 28, 2022, the Company, Mr. Lai and Ms. Yu agreed to extend the term of the loan, with a new maturity date of December 31, 2024. On December 31, 2024, the Company, Mr. Lai and Ms. Yu agreed to extend the term of the loan, with a new maturity date of December 31, 2025. As amended, the annual interest rate of the loan is 5.5%.

Leases

The Company has three operating leases (Flywheel has three offices lease in Taiwan). The respective lease terms are March 1, 2024 to June 30, 2025, June 1, 2024 to May 31, 2025, and August 1, 2024 to July 31, 2025, respectively.

For the Year Ending March 31,	Amount

2025	$	56,807
2026		-
2027		-
2028 and thereafter		-
Total minimum lease payments		56,807
Less: effect of discounting		(329	)
Present value of the future minimum lease payment		56,478
Less: operating lease liabilities-current		(56,478	)
Total operating lease liabilities-non-current	$	-

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates.

The “Cost of revenues” line item in the unaudited consolidated statements of operations is principally inventory sold to customers during the reporting period.

The majority of the Company’s property and equipment is computers, and the estimated useful life is three years.

	i.	Level 1 — Valuations based on quoted prices for identical assets and liabilities in active markets.

	ii.	Level 2 — Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

	iii.	Level 3 — Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

The Company recognizes revenue in accordance with ASC Topic 606, which provided a five-step model for recognizing revenue from contracts with customers as follows:

	●	Identify the contract with a customer.

	●	Identify the performance obligations in the contract.

	●	Determine the transaction price.

	●	Allocate the transaction price to the performance obligations in the contract.

	●	Recognize revenue when or as performance obligations are satisfied.

Segment Information – The Company has only one segment, which is online retail (e-commerce).

Income Taxes - Income tax expense includes U.S. (federal and state) and foreign income taxes.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

The Company’s Chief Executive Officer and Interim Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2025. Based upon such evaluation, the Chief Executive Officer and Interim Chief Financial Officer concluded that, as of March 31, 2025, the Company’s disclosure controls and procedures were effective as required under Rules 13a-15(e) and 15d-15(e) under the Exchange Act.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or 15d-15 of the Exchange Act that occurred during the quarter ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we are involved in various claims and legal actions arising in the ordinary course of business. To the knowledge of our management, there are no legal proceedings currently pending against us which we believe would have a material effect on our business, financial position or results of operations and, to the best of our knowledge, there are no such legal proceedings contemplated or threatened.

ITEM 1A. RISK FACTORS

As a smaller reporting company, the Company is not required to disclose material changes to the risk factors that were contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, as updated from time to time.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On April 1, 2025, subsequent to the quarter ended March 31, 2025, the Company issued 1,750 shares of Company common stock to each of Sam Lai, Maggie Yu, Michael Lenner, Alan Gao and Hillary Bui, with a fair market value of $1.714 per share as compensation for the services as executives or directors of the Company pursuant to the terms of their respective Executive Employment Agreements or Director Agreements with the Company. These shares were issued pursuant to an exemption from the registration requirements of the Securities Act available to the Company by Section 4(a)(2) promulgated thereunder.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

There have been no defaults in any material payments during the covered period.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

(a) None.

(b) There have been no material changes to the procedures by which security holders may recommend nominees to the Company’s Board of Directors since the Company last provided disclosure in response to the requirements of Item 407(c)(3) of Regulation S-K.

(c) During the registrant’s last fiscal quarter, no director or officer adopted or terminated: (i) any contract, instruction or written plan for the purchase or sale of securities of the registrant intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) (a “Rule 10b5-1 trading arrangement”); and/or (ii) any “non-Rule 10b5-1 trading arrangement” as defined in Item 408(c) of Regulation S-K.

ITEM 6. EXHIBITS

Exhibit Number		Description of Document

10.1†		Addendum No. 4 to Executive Employment Agreement between the registrant and Sam Lai (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on March 17, 2025).
10.2†		Addendum No. 4 to Executive Employment Agreement between the registrant and Sau Kuen Yu (incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed on March 17, 2025).
31.1*		Rule 13a-14(a) Certification of Principal Executive Officer.
31.2*		Rule 13a-14(a) Certification of Principal Financial Officer.
32.1**		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Principal Executive Officer and Principal Financial Officer.
101.INS*		Inline XBRL Instance Document
101.SCH*		Inline XBRL Taxonomy Extension Schema Document
101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB*		Inline XBRL Taxonomy Extension Labels Linkbase
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase
104*		Cover Page Interactive Data File (embedded within the Inline XBRL document)

*	Filed herewith.

**	Furnished herewith.
†	Management contract, compensation plan or arrangement.

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, thereto duly authorized.

	HOUR LOOP, INC.

Dated: May 12, 2025	By:	/s/ Sam Lai
		Sam Lai
		Chief Executive Officer and Interim Chief Financial Officer (principal executive officer, principal financial officer and principal accounting officer)