Zacks Investment Research has recently initiated coverage of Hour Loop, Inc. (HOUR) with a Neutral recommendation, marking the firm’s first-ever analyst report on the microcap e-commerce player. The initiation reflects a balanced view of Hour Loop’s strengths in operational execution and technology-driven scalability against significant risks related to liquidity and platform dependence. Hour Loop’s growing order volume is a noteworthy development. Despite modest top-line growth of just 3%, the company reco ...

Revenue and Orders - For the three months ended September 30, 2025, the company generated net revenues of $33,424,703, representing an increase of $2,349,205, or 7.56%, compared to $31,075,498 in the same period in 2024[127]. - Total orders for the three months ended September 30, 2025 were approximately 1,656,681, an increase of 12.51% from 1,472,515 orders in the same period in 2024[131]. - For the nine months ended September 30, 2025, the company generated net revenues of $86,364,899, an increase of $2,537,572, or 3.03%, compared to $83,827,327 in the same period in 2024[136]. - Total orders for the nine months ended September 30, 2025 were approximately 4,140,448, representing an increase of 7.14% from 3,864,609 orders in the same period in 2024[136]. Costs and Expenses - Cost of goods sold for the three months ended September 30, 2025 totaled $16,249,395, compared to $14,036,187 for the same period in 2024[132]. - Operating expenses for the three months ended September 30, 2025 totaled $16,433,302, reflecting a $115,834, or 0.71%, increase from $16,317,468 in the same period in 2024[133]. - Cost of goods sold for the nine months ended September 30, 2025 totaled $39,546,941, compared to $36,710,400 for the same period in 2024[137]. - Operating expenses for the nine months ended September 30, 2025, totaled $43,534,236, a decrease of $385,480 or 0.88% from $43,919,716 for the same period in 2024, attributed to increased operating efficiency[138]. - Other expenses, net, decreased to $51,174 for the nine months ended September 30, 2025, from $76,963 in 2024, due to repayment of part of loans from stockholders, reducing interest expenses[139]. Income and Earnings - Net income for the three months ended September 30, 2025 was $530,591, compared to $469,647 in the same period in 2024[127]. - Total comprehensive income for the three months ended September 30, 2025 was $492,010, compared with $485,613 for the same period in 2024[135]. - Total comprehensive income increased to $2,464,931 for the nine months ended September 30, 2025, compared to $2,175,986 for the same period in 2024[140]. Cash Flow and Financing - Cash at the end of the period was $796,307 as of September 30, 2025, down from $1,194,239 in 2024[141]. - Cash used in operating activities amounted to $425,000 for the nine months ended September 30, 2025, compared to cash provided of $1,231,885 for the same period in 2024, driven by a strategic policy to front-load inventory[145]. - Cash used in investing activities increased to $48,963 for the nine months ended September 30, 2025, from $35,031 in 2024, reflecting higher purchases of property and equipment[146]. - Cash used in financing activities was $839,000 for the nine months ended September 30, 2025, compared to $0 in 2024, primarily due to repayments made to related parties[147]. - The outstanding balance under the Taishin line of credit was $658,003 as of September 30, 2025, compared to $610,967 as of December 31, 2024[150]. - As of September 30, 2025, the company had $2,660,418 due to related parties from loans and advances[151]. Inventory and Sales - The company recorded $499,752 and $560,293 as inventory write-downs to net realizable values as of September 30, 2025, and December 31, 2024, respectively[160]. - Revenue for the nine months ended September 30, 2025, was recognized at a point in time, with customer confirmations executed at the time an order is placed through third-party online channels[172]. - The estimated sales return rates were 7.09% and 6.00% of gross sales for the nine months ended September 30, 2025, and 2024, respectively[173]. - Shipping and handling costs were $19,232,988 and $18,749,793 for the nine months ended September 30, 2025, and 2024, respectively[175]. - Approximately 99% of the Company's revenue for the nine months ended September 30, 2025, was generated through the Amazon sales platform[182]. - Advertising and promotion expenses were $3,190,480 and $3,096,997 for the nine months ended September 30, 2025, and 2024, respectively[183]. Customer and Market Information - The Company had no customer that accounted for 10% or more of total net revenues during the three and nine months ended September 30, 2025, and 2024[181]. - The Company treats shipping and handling as fulfillment activities, not separate performance obligations[175]. - The Company has only one operating segment, which is online retail (e-commerce)[176]. - There were no dilutive securities or other items affecting earnings per share for the three and nine months ended September 30, 2025, and 2024[186]. - The Company maintains reserves for potential credit losses on customer accounts when deemed necessary[181].

Financial Performance - Net revenues increased by 7.6% to $33.4 million, compared to $31.1 million in the same period last year[4] - Net income rose to $0.53 million, up from $0.47 million in the year-ago period, reflecting improved operational efficiency despite increased costs[7] - Net income for the nine months ended September 30, 2025, was $2,362,109, an increase from $2,184,611 in 2024, representing a growth of approximately 8.1%[17] Operational Efficiency - Gross profit margin decreased by 3.4% to 51.4% of net revenues, primarily due to strategic price adjustments and tariff surcharges[6] - Operating expenses as a percentage of net revenues decreased by 3.3% to 49.2%, indicating improved operational efficiency[6] - Cash used in operating activities for the nine months ended September 30, 2025, was $0.4 million, a significant improvement from $1.2 million in the prior year[4] - Net cash used in operating activities improved to $(425,000) in 2025 from $(1,231,885) in 2024, indicating a significant reduction in cash outflow[17] Assets and Equity - Total assets as of September 30, 2025, were $31.6 million, up from $20.0 million as of December 31, 2024[14] - Total stockholders' equity increased to $7.67 million as of September 30, 2025, compared to $5.16 million at the end of 2024[14] Inventory and Receivables - Inventories increased to $28.9 million as of September 30, 2025, compared to $14.6 million as of December 31, 2024, in preparation for the holiday season[8] - Accounts receivable increased to $1,104,073 in 2025 compared to $199,426 in 2024, showing a substantial rise in receivables[17] - Inventory allowance decreased to $499,752 in 2025 from $578,622 in 2024, reflecting improved inventory management[17] Cash Flow and Tax - Cash at the end of the period was $796,307 in 2025, down from $1,194,239 in 2024, indicating a decrease in cash reserves[17] - Cash paid for income tax decreased to $163,015 in 2025 from $210,811 in 2024, suggesting a reduction in tax liabilities[17] - Cash flows from investing activities resulted in a net cash outflow of $(48,963) in 2025, compared to $(35,031) in 2024, indicating increased investment activity[17] Strategic Plans and Guidance - The company is unable to provide forward-looking guidance for the full year 2025 due to ongoing economic uncertainty influenced by current tariff conditions[9] - The company plans to expand its business rapidly by increasing the number of business managers, vendors, and SKUs in upcoming years[10] Depreciation and Currency Management - Depreciation expenses decreased to $31,109 in 2025 from $98,624 in 2024, indicating a reduction in asset depreciation[17] - The effect of changes in foreign currency exchange rates resulted in a loss of $(10,311) in 2025, compared to $(22,998) in 2024, showing improved currency management[17] Related Party Transactions - Payments to related parties amounted to $(839,000) in 2025, with no corresponding payments in 2024, highlighting a new financial strategy[17]

Core Insights - Hour Loop, Inc. reported its strongest financial results to date for the third quarter of 2025, despite challenges from U.S. reciprocal tariffs impacting the retail industry [3][4]. Financial Performance - Net revenues for Q3 2025 were $33.4 million, a 7.6% increase from $31.1 million in Q3 2024 [5][8]. - Net income rose to $0.53 million, compared to $0.47 million in the same period last year [7][8]. - Gross profit margin decreased by 3.4% to 51.4% due to strategic price adjustments and tariff surcharges [6]. - Operating expenses as a percentage of net revenues decreased by 3.3% to 49.2%, reflecting improved operational efficiency [6]. Operational Insights - The company adapted its product portfolio and inventory management in response to rising costs and operational complexities due to tariffs [3]. - Hour Loop's operational model has shown durability, with strategic investments leading to lower operating expenses and higher net income despite increased product costs [4]. Cash Flow and Liquidity - Cash used in operating activities for the nine months ended September 30, 2025, was $0.4 million, an improvement from $1.2 million used in the same period last year [8]. - As of September 30, 2025, cash and cash equivalents were $0.8 million, down from $2.1 million at the end of 2024, primarily due to loan repayments and inventory growth [9]. Inventory Management - Inventories increased to $28.9 million as of September 30, 2025, compared to $14.6 million at the end of 2024, in preparation for the holiday season [9]. Future Outlook - The company is unable to provide forward-looking guidance for the full year 2025 due to ongoing economic uncertainty influenced by current tariff conditions [10].

Group 1 - The Value Lab focuses on long-only value investment ideas, aiming for a portfolio yield of about 4% and has performed well over the last 5 years by engaging in international markets [1][2] - Hour Loop, Inc. (NASDAQ: HOUR) is described as lacking competitive advantages and demonstrating weak economics, despite significant scaling [2] - The Valkyrie Trading Society consists of analysts sharing high-conviction investment ideas that are expected to yield non-correlated and outsized returns in the current economic environment [3]

Core Points - Investors have until September 26, 2025, to file lead plaintiff applications in a securities class action lawsuit against Sable Offshore Corp. [1] - The class period for the lawsuit is defined as between May 19, 2025, and June 3, 2025, inclusive [1]

Core Points - Investors have until September 23, 2025, to file lead plaintiff applications in a securities class action lawsuit against Flywire Corporation [1] - The lawsuit pertains to investors who purchased Flywire's securities between February 28, 2024, and February 25, 2025, inclusive [1]

Group 1 - The article discusses a securities class action lawsuit against Neogen Corporation, reminding investors of the deadline to file lead plaintiff applications [1] - The class period for the lawsuit is defined as from January 5, 2023, to June 3, 2025, inclusive [1] - The lawsuit is being handled in the United States District Court [1]

Core Insights - Hour Loop, Inc. (HOUR) is trading at $3.65 with a target price of $2.13, indicating a potential downside of approximately 41.60% [1] - American Rebel Holdings, Inc. (AREB) is trading at $0.68 with a discounted cash flow (DCF) valuation of $1.02, suggesting a growth potential of 48.92% [2] - Ensysce Biosciences, Inc. (ENSC) trades at $2.135 with a DCF valuation of $1.832, resulting in a negative growth potential of -14.17% [3] Company Comparisons - AREB shows promising growth potential despite a negative earnings per share (EPS) of -9.68 and no dividend yield, with a market cap of $5.12 million [2][4] - HOUR's significant potential downside and lack of analyst coverage make it less appealing compared to AREB [1][4] - ENSC offers a high dividend yield of 20.39%, which may attract income-focused investors despite its negative growth potential [3][5]

[PART I - FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section presents Hour Loop, Inc.'s unaudited consolidated financial statements and management's discussion and analysis for the periods ended June 30, 2025 [Item 1. Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents Hour Loop's unaudited consolidated financial statements, including balance sheets, income statements, equity, and cash flows, with detailed accounting notes [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) This section provides a snapshot of Hour Loop's financial position, detailing assets, liabilities, and equity as of June 30, 2025, and December 31, 2024 | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :------------------ | | Total Assets | $22,960,533 | $19,966,964 | | Total Liabilities | $15,797,869 | $14,807,222 | | Total Stockholders' Equity | $7,162,664 | $5,159,742 | | Cash | $325,354 | $2,119,581 | | Inventory, net | $20,940,746 | $14,640,632 | [Consolidated Statements of Operations and Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) This section outlines Hour Loop's financial performance, presenting revenues, net income, and earnings per share for the three and six months ended June 30, 2025 and 2024 | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues, net | $27,103,106 | $28,070,707 | $52,940,196 | $52,751,829 | | Net income | $1,177,001 | $649,150 | $1,831,518 | $1,714,964 | | Basic and diluted income per share | $0.04 | $0.02 | $0.06 | $0.05 | [Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) This section details changes in Hour Loop's stockholders' equity, including common stock and retained earnings, for the periods ended June 30, 2025, and December 31, 2024 | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :------------------ | | Common Stock Shares Outstanding | 35,160,190 | 35,143,460 | | Total Stockholders' Equity | $7,162,664 | $5,159,742 | - The company issued **8,750 shares** of common stock during the three months ended June 30, 2025, contributing **$15,001** to additional paid-in capital[13](index=13&type=chunk) - Net income for the three months ended June 30, 2025, was **$1,177,001**, increasing retained earnings[13](index=13&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section presents Hour Loop's cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | | Net cash (used in) provided by operating activities | $(925,430) | $949,175 | | Net cash used in investing activities | $(801) | $(34,593) | | Net cash used in financing activities | $(839,000) | $-0- | | Net change in cash | $(1,794,227) | $862,744 | | Cash at end of the period | $325,354 | $3,346,897 | [Notes to Unaudited Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) This section provides detailed explanations of Hour Loop's business operations, significant accounting policies, and specific financial statement line items, including inventory, leases, and income taxes [NOTE 1 - Nature of Operations and Summary of Significant Accounting Policies](index=9&type=section&id=NOTE%201%20-%20Nature%20of%20Operations%20and%20Summary%20of%20Significant%20Accounting%20Policies) Hour Loop operates as a technology-enabled consumer products company primarily through online retail, with significant reliance on Amazon, detailing its accounting policies and business nature - Hour Loop, Inc. is a technology-enabled consumer products company operating predominantly through online retail channels such as Amazon, Walmart, and Hourloop.com, with a single e-commerce segment[19](index=19&type=chunk) - Approximately **99%** of the Company's revenue for the six months ended June 30, 2025 and 2024, was generated through the Amazon sales platform[56](index=56&type=chunk) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | | Sales returns rate (of gross sales) | 6.92% | 5.94% | | Shipping and handling costs | $11,659,356 | $11,886,764 | | Advertising and promotion expenses | $964,824 | $1,953,155 | [NOTE 2 - Recent Accounting Pronouncements Adopted](index=14&type=section&id=NOTE%202%20-%20Recent%20Accounting%20Pronouncements%20Adopted) Hour Loop adopted ASU 2023-07 for segment disclosures and will adopt ASU 2023-09 for income tax disclosures in 2025, with no material financial impact expected - The Company adopted ASU 2023-07 on Improvements to Reportable Segment Disclosures beginning with interim periods in the fiscal year starting January 1, 2025, with no material impact expected on consolidated financial statements[63](index=63&type=chunk) - The Company will adopt ASU 2023-09 on Improvements to Income Tax Disclosures in fiscal year 2025 and is currently assessing the disclosure impact, with no material impact expected on results of operations, cash flows, and financial condition at the time of adoption[64](index=64&type=chunk) [NOTE 3 - Inventory](index=14&type=section&id=NOTE%203%20-%20Inventory) Inventory, primarily finished goods, is valued at the lower of cost or net realizable value, with an allowance for obsolete and slow-moving items | Inventory Component | June 30, 2025 | December 31, 2024 | | :------------------ | :------------ | :------------------ | | Inventory | $17,097,686 | $12,716,062 | | Inventory-in-transit | $4,259,256 | $2,484,863 | | Allowance | $(416,196) | $(560,293) | | **Total Inventory** | **$20,940,746** | **$14,640,632** | - The inventory allowance decreased from **$560,293** as of December 31, 2024, to **$416,196** as of June 30, 2025[65](index=65&type=chunk) [NOTE 4 - Prepaid Expenses and Other Current Assets](index=15&type=section&id=NOTE%204%20-%20Prepaid%20Expenses%20and%20Other%20Current%20Assets) Prepaid expenses and other current assets significantly increased, mainly due to higher advances to suppliers and other prepaid items | Asset Category | June 30, 2025 | December 31, 2024 | | :----------------------------- | :------------ | :------------------ | | Advance to suppliers | $231,572 | $71,934 | | Prepaid expenses-insurance | $22,500 | $2,174 | | Prepaid expenses-other | $92,300 | $33,501 | | Lease refundable deposit | $70,212 | $49,939 | | Tax receivable | $95,925 | $157,538 | | Other current assets | $12,778 | $12,808 | | **Total** | **$525,287** | **$327,894** | [NOTE 5 - Property and Equipment](index=15&type=section&id=NOTE%205%20-%20Property%20and%20Equipment) Net property and equipment decreased due to depreciation, with lower depreciation expenses recorded for the six months ended June 30, 2025 | Metric | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :------------------ | | Property and equipment, gross | $427,280 | $381,067 | | Accumulated depreciation and amortization | $(386,706) | $(324,270) | | **Total property and equipment, net** | **$40,574** | **$56,797** | | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | | Purchases of property and equipment | $801 | $34,593 | | Depreciation expense | $23,517 | $70,920 | [NOTE 6 - Accounts Payable and Credit Cards Payable](index=15&type=section&id=NOTE%206%20-%20Accounts%20Payable%20and%20Credit%20Cards%20Payable) Accounts payable significantly increased, while credit cards payable decreased, indicating shifts in operational liabilities and payment timing | Liability Category | June 30, 2025 | December 31, 2024 | | :----------------- | :------------ | :------------------ | | Accounts payable | $8,584,090 | $4,176,305 | | Credit cards payable | $2,980,539 | $3,389,880 | [NOTE 7 - Short-Term Loan](index=16&type=section&id=NOTE%207%20-%20Short-Term%20Loan) Flywheel's line of credit with Taishin International Bank was extended to November 2025 at 3.33% interest, with an increased outstanding balance - The line of credit with Taishin International Bank has an annual interest rate of **3.33%** and was extended to mature on November 19, 2025[75](index=75&type=chunk) | Metric | June 30, 2025 | December 31, 2024 | | :--------------- | :------------ | :------------------ | | Outstanding balance | $683,760 | $610,967 | [NOTE 8 - Accrued Expenses and Other Current Liabilities](index=16&type=section&id=NOTE%208%20-%20Accrued%20Expenses%20and%20Other%20Current%20Liabilities) Total accrued expenses and other current liabilities significantly decreased, mainly due to the elimination of refund liability and reduced accrued bonuses | Liability Category | June 30, 2025 | December 31, 2024 | | :------------------------- | :------------ | :------------------ | | Refund liability | $-0- | $766,721 | | Accrued payroll | $332,820 | $302,685 | | Accrued bonus | $102,564 | $963,800 | | Accrued expenses | $195,311 | $255,154 | | Accrued interest | $80,491 | $-0- | | Other payables | $21,181 | $34,175 | | **Total** | **$732,367** | **$2,322,535** | [NOTE 9 - Leases](index=16&type=section&id=NOTE%209%20-%20Leases) Hour Loop holds two operating leases for Taiwan office space, with increased right-of-use assets, liabilities, amortization, and lease payments | Metric | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :------------------ | | Operating lease right-of-use assets | $137,465 | $111,409 | | Operating lease liabilities-current | $75,897 | $114,540 | | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | | Amortization of operating lease right-of-use asset | $122,018 | $98,773 | | Lease payments | $125,712 | $92,899 | | Future Minimum Lease Payments | Amount | | :---------------------------- | :----- | | 2025 | $42,003 | | 2026 | $70,330 | | 2027 | $29,304 | | Total minimum lease payments | $141,637 | [NOTE 10 - Related Party Balances and Transactions](index=17&type=section&id=NOTE%2010%20-%20Related%20Party%20Balances%20and%20Transactions) Amounts due to related parties decreased due to repayments, and affiliated stockholder loans were extended to December 2025 at 5.5% interest | Metric | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :------------------ | | Due to related parties | $2,660,418 | $4,192,995 | - The company made repayments to related parties totaling **$1,532,577** for the six months ended June 30, 2025, which included **$839,000** in principal and **$693,577** in bonus[87](index=87&type=chunk) - The affiliated loan from stockholders bears an annual interest rate of **5.5%** and was extended to mature on December 31, 2025[86](index=86&type=chunk) [NOTE 11 - Disaggregation of Revenue](index=17&type=section&id=NOTE%2011%20-%20Disaggregation%20of%20Revenue) Revenue disaggregation shows slight six-month net revenue growth driven by U.S. and International sales, despite increased returns, while three-month net revenue decreased | Revenue Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue-U.S. | $28,308,512 | $29,285,554 | $54,911,059 | $54,745,245 | | Revenue-International | $1,138,830 | $889,278 | $2,090,269 | $1,758,973 | | Sales returns | $(2,198,454) | $(1,912,838) | $(3,966,013) | $(3,375,923) | | Discounts | $(183,149) | $(399,991) | $(434,740) | $(705,726) | | **Total** | **$27,103,106** | **$28,070,707** | **$52,940,196** | **$52,751,829** | [NOTE 12 - Income Tax](index=18&type=section&id=NOTE%2012%20-%20Income%20Tax) Total income tax expense and effective tax rate decreased for the six months, with a reduction in federal and state deferred tax assets and recognition of foreign deferred tax assets | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------- | :------------------------------- | :------------------------------- | | Total tax expense | $687,099 | $717,886 | | Effective Tax Rate | 27.28% | 29.51% | | Deferred Tax Assets Summary | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :------------------ | | Federal | $435,417 | $908,691 | | State | $58,271 | $151,413 | | Foreign (non-U.S.) | $19,464 | $-0- | | **Total** | **$513,152** | **$1,060,104** | - As of June 30, 2025, the Company recognized deferred tax assets of **$19,464** primarily related to deductible temporary differences at its foreign subsidiaries[93](index=93&type=chunk) [NOTE 13 - Stockholders' Equity](index=19&type=section&id=NOTE%2013%20-%20Stockholders'%20Equity) Common stock outstanding increased slightly due to shares issued as stock-based compensation to executives and directors in 2024 and 2025 | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :------------------ | | Common Stock Shares Outstanding | 35,160,190 | 35,143,460 | - The company issued **1,596 shares** of common stock on January 2, 2025, and **1,750 shares** on April 1, 2025, as stock-based compensation to executives and directors[100](index=100&type=chunk)[101](index=101&type=chunk) [NOTE 14 - Commitments and Contingencies](index=20&type=section&id=NOTE%2014%20-%20Commitments%20and%20Contingencies) As of June 30, 2025, Hour Loop had no material commitments or pending legal proceedings requiring financial statement accrual - The Company had no material or significant commitments outstanding as of June 30, 2025, and December 31, 2024[102](index=102&type=chunk) - No pending legal proceedings were identified that would require accrual in the unaudited consolidated financial statements as of June 30, 2025, and December 31, 2024[103](index=103&type=chunk) [NOTE 15 - Subsequent Events](index=20&type=section&id=NOTE%2015%20-%20Subsequent%20Events) On July 2, 2025, Hour Loop issued **2,275 shares** of common stock to five executives/directors as compensation for services - On July 2, 2025, the Company issued **2,275 shares** of common stock to each of Sam Lai, Maggie Yu, Michael Lenner, Alan Gao, and Hillary Bui as compensation for their services[104](index=104&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Hour Loop's financial performance, condition, e-commerce model, market opportunities, competitive advantages, and responses to external factors for the periods ended June 30, 2025 [Overview](index=21&type=section&id=Overview) Hour Loop, an online retailer primarily on Amazon, leverages a wholesale model, operational advantages, and proprietary software, while proactively managing tariff impacts [Our Business](index=21&type=section&id=Our%20Business) Hour Loop operates as a U.S. online retailer, primarily on Amazon and Walmart, managing over **100,000 SKUs** across diverse categories, with plans for expansion - Hour Loop operates as an online retailer in the U.S. market, primarily as a third-party seller on Amazon.com since 2013 and Walmart.com since 2020[110](index=110&type=chunk) - The company manages over **100,000 Stock-Keeping Units (SKUs)** across categories including home/garden décor, toys, kitchenware, apparel, and electronics[110](index=110&type=chunk) [Business Model](index=21&type=section&id=Business%20Model) Hour Loop utilizes a wholesale reselling model on Amazon, buying products in bulk for resale, offering advantages in scalability and brand presence - Hour Loop's business model is wholesale (reselling), involving buying products in bulk directly from brands or manufacturers at wholesale prices and selling them on Amazon[111](index=111&type=chunk) - Advantages of the wholesale model include purchasing lower unit quantities, easier scalability compared to retail arbitrage, and the ability to provide broader Amazon presence for brands[112](index=112&type=chunk) [Market Description/Opportunities](index=22&type=section&id=Market%20Description/Opportunities) The U.S. retail market reached **$7.42 trillion** in 2024, with e-commerce at **16.07%** of sales, and Amazon dominating **40%** of U.S. e-commerce | Metric | 2024 | 2023 | | :--------------------------------- | :----------- | :----------- | | Total U.S. retail sales | $7.42 trillion | $7.24 trillion | | Online spending with U.S. merchants | $1,192.29 billion | - | | E-commerce % of total U.S. retail sales | 16.07% | 15.45% | - Amazon accounts for approximately **40%** of all e-commerce in the United States[114](index=114&type=chunk) [Formation](index=22&type=section&id=Formation) Founded in 2013, Hour Loop achieved significant sales growth by 2024, incorporated in Washington, established a Taiwan subsidiary, and converted to a Delaware corporation - Hour Loop was founded in 2013 by Sam Lai and Maggie Yu, with sales growing from **$0** in 2013 to **$138,252,861** in 2024[115](index=115&type=chunk) - The company formed Flywheel Consulting Ltd., a wholly-owned subsidiary in Taiwan, in 2019 to provide exclusive business operating consulting services[116](index=116&type=chunk) [Competitive Advantage](index=22&type=section&id=Competitive%20Advantage) Hour Loop's competitive advantages include strong operations and sales teams, complemented by proprietary software that optimizes operations and inventory management - The Company's competitive advantages include strong operations and sales teams experienced in listing, shipment, advertising, reconciliation, and sales[120](index=120&type=chunk) - A proprietary software system provides an advantage by collecting and processing large amounts of data daily to optimize operations and sales, identifying product gaps and ensuring year-round stock[120](index=120&type=chunk) [Tariff Impact and Response Measures](index=22&type=section&id=Tariff%20Impact%20and%20Response%20Measures) Hour Loop responded to tariffs by expanding domestic inventory coverage, strategically front-loading China exports during a relief window, and implementing price increases to manage costs - In response to tariff increases, the Company expanded its domestic inventory procurement policy to keep inventory coverage from **1.5-2 months** to **3-6 months** as of April 2025[118](index=118&type=chunk)[121](index=121&type=chunk) - The Company initially suspended containerized exports from China but resumed and front-loaded 2025 sales-related inventory during a 90-day tariff relief window to avoid elevated duties[122](index=122&type=chunk) - Measured price increases were implemented on select finished goods inventory to offset increased input costs and reduce the risk of stockouts, successfully securing adequate inventory for 2025 sales projections[123](index=123&type=chunk)[124](index=124&type=chunk) [Our Financial Position](index=23&type=section&id=Our%20Financial%20Position) For Q2 2025, Hour Loop reported **$27.1 million** net revenues and **$1.18 million** net income, with **$901,539** cash used in operations; six-month figures were **$52.9 million** net revenues and **$1.83 million** net income | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | | Net revenues | $27,103,106 | $28,070,707 | | Net income | $1,177,001 | $649,150 | | Cash flow (used in) provided by operating activities | $(901,539) | $456,232 | | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | | Net revenues | $52,940,196 | $52,751,829 | | Net income | $1,831,518 | $1,714,964 | | Cash flow (used in) provided by operating activities | $(925,430) | $949,175 | - As of June 30, 2025, the company had retained earnings of **$1,236,343**[127](index=127&type=chunk) [Results of Operations](index=23&type=section&id=Results%20of%20Operations) Three-month revenues decreased by **3.45%** but net income rose by **81.3%** due to margin focus; six-month revenues increased by **0.36%** and net income by **6.8%** from growth and expense reductions [For the three months ended June 30, 2025 compared to the three months ended June 30, 2024](index=24&type=section&id=For%20the%20three%20months%20ended%20June%2030,%202025%20compared%20to%20the%20three%20months%20ended%20June%2030,%202024) Three-month revenues decreased by **3.45%** to **$27.1 million** due to a margin expansion strategy, yet net income increased by **81.3%** from reduced operating expenses | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Revenues, net | $27,103,106 | $28,070,707 | $(967,601) | -3.45% | | Total orders | 1,253,975 | 1,268,890 | (14,915) | -1.18% | | Net income | $1,177,001 | $649,150 | $527,851 | 81.3% | | Operating expenses | $13,876,501 | $14,688,214 | $(811,713) | -5.53% | - The decrease in revenues and orders was attributed to the Company's strategic shift toward prioritizing margin expansion in response to ongoing tariff uncertainties[130](index=130&type=chunk) - The decrease in operating expenses was caused by an increase in reimbursements paid by Amazon, reflecting enhanced recovery for lost shipments[132](index=132&type=chunk) [For the six months ended June 30, 2025 compared to the six months ended June 30, 2024](index=24&type=section&id=For%20the%20six%20months%20ended%20June%2030,%202025%20compared%20to%20the%20six%20months%20ended%20June%2030,%202024) Six-month revenues increased by **0.36%** to **$52.9 million** and net income by **6.8%**, driven by order growth, reduced operating expenses, and lower interest payments | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Revenues, net | $52,940,196 | $52,751,829 | $188,367 | 0.36% | | Total orders | 2,483,767 | 2,392,094 | 91,673 | 3.83% | | Net income | $1,831,518 | $1,714,964 | $116,554 | 6.8% | | Operating expenses | $27,100,934 | $27,602,248 | $(501,314) | -1.82% | | Other expenses, net | $23,099 | $42,518 | $(19,419) | -45.67% | - The increase in revenues was attributed to continued growth and maturity in the operating model, despite an overall e-commerce traffic slowdown and intense competition[135](index=135&type=chunk) - The decrease in other expenses, net, was due to the repayment of part of the loans from stockholders, leading to a reduction in interest expenses[138](index=138&type=chunk) [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) Hour Loop's cash balance decreased due to increased cash used in operating and financing activities, relying on revenues, debt, and equity for liquidity, with existing contractual obligations | Metric | June 30, 2025 | June 30, 2024 | | :--------------------------------- | :------------ | :------------ | | Cash at end of the period | $325,354 | $3,346,897 | - Primary uses of cash include inventory, payments to Amazon for sales and shipping, marketing and advertising, and employee salaries[141](index=141&type=chunk) - Liquidity is generated from ongoing business revenues, and from debt and equity issuances[142](index=142&type=chunk) [Net Cash Used in Operating Activities](index=26&type=section&id=Net%20Cash%20Used%20in%20Operating%20Activities) Cash used in operating activities for the six months ended June 30, 2025, totaled **$925,430**, a significant increase in outflow driven by inventory purchases | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | | Net cash (used in) provided by operating activities | $(925,430) | $949,175 | - The **$1,874,605** increase in cash used in operating activities was primarily driven by an increase in inventory purchases[144](index=144&type=chunk) [Net Cash Used in Investing Activities](index=26&type=section&id=Net%20Cash%20Used%20in%20Investing%20Activities) Cash used in investing activities significantly decreased to **$801** for the six months ended June 30, 2025, reflecting lower property and equipment purchases | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | | Net cash used in investing activities | $(801) | $(34,593) | - The decrease in cash used in investing activities primarily reflects lower purchases of property and equipment[145](index=145&type=chunk) [Net Cash Used in Financing Activities](index=26&type=section&id=Net%20Cash%20Used%20in%20Financing%20Activities) Cash used in financing activities totaled **$839,000** for the six months ended June 30, 2025, primarily due to repayments to related parties | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | | Net cash used in financing activities | $(839,000) | $-0- | - The increase in cash outflows from financing activities was primarily due to repayments made to related parties[146](index=146&type=chunk) [Off-balance sheet financing arrangements](index=26&type=section&id=Off-balance%20sheet%20financing%20arrangements) Hour Loop has no off-balance sheet arrangements, special purpose entities, guaranteed debts, or non-financial asset purchases - The Company has no obligations, assets, or liabilities considered off-balance sheet arrangements[147](index=147&type=chunk) [Contractual Obligations](index=26&type=section&id=Contractual%20Obligations) Contractual obligations include a **$683,760** line of credit with Taishin International Bank and **$2,660,418** in affiliated stockholder loans, both maturing in 2025 - The Taishin International Bank line of credit has an outstanding balance of **$683,760** as of June 30, 2025, and was extended to mature on November 19, 2025, bearing a **3.33%** annual interest rate[149](index=149&type=chunk)[150](index=150&type=chunk) - As of June 30, 2025, the Company had **$2,660,418** due to related parties from affiliated loans, which were extended to mature on December 31, 2025, with an annual interest rate of **5.5%**[151](index=151&type=chunk)[153](index=153&type=chunk) | Future Minimum Lease Payments | Amount | | :---------------------------- | :----- | | 2025 | $42,003 | | 2026 | $70,330 | | 2027 | $29,304 | | Total minimum lease payments | $141,637 | [Critical Accounting Policies and Estimates](index=28&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section reiterates Hour Loop's critical accounting policies and estimates, requiring significant management judgment across areas like revenue recognition, inventory, leases, and income taxes - The preparation of financial statements requires management to make estimates and assumptions affecting reported amounts, including collectability of accounts receivable, useful life of property and equipment, inventory valuation, and deferred tax assets[156](index=156&type=chunk)[27](index=27&type=chunk) - The Company's revenue recognition follows a five-step model, recognizing revenue when control of the product is transferred to the customer, typically at shipment date[171](index=171&type=chunk)[174](index=174&type=chunk) - The Company has only one operating segment, online retail (e-commerce), and uses the 'management approach' for determining reportable segments[178](index=178&type=chunk)[179](index=179&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=32&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Quantitative and qualitative disclosures regarding market risk are not applicable to Hour Loop, Inc - This item is not applicable to Hour Loop, Inc[190](index=190&type=chunk) [Item 4. Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) Hour Loop's disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting during the quarter - The Chief Executive Officer and Interim Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[191](index=191&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[192](index=192&type=chunk) [PART II - OTHER INFORMATION](index=34&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section provides additional information including legal proceedings, risk factors, equity sales, defaults, and other disclosures for Hour Loop, Inc [Item 1. Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) Hour Loop is involved in ordinary course legal actions, but management is unaware of any pending proceedings that would materially affect its business or financial position - There are no legal proceedings currently pending against Hour Loop, Inc. that management believes would have a material effect on its business, financial position, or results of operations[194](index=194&type=chunk) [Item 1A. Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors) As a smaller reporting company, Hour Loop is not required to update risk factors in this quarterly report, referring readers to its 2024 Annual Report on Form 10-K - As a smaller reporting company, Hour Loop is not required to disclose material changes to risk factors in this Quarterly Report on Form 10-Q[195](index=195&type=chunk) - Readers are referred to the Annual Report on Form 10-K for the year ended December 31, 2024, for risk factor disclosures[195](index=195&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=34&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) On July 2, 2025, Hour Loop issued **2,275 shares** of common stock to five executives/directors as compensation, exempt from registration requirements - On July 2, 2025, the Company issued **2,275 shares** of common stock to each of Sam Lai, Maggie Yu, Michael Lenner, Alan Gao, and Hillary Bui as compensation for services[196](index=196&type=chunk) - These shares were issued pursuant to an exemption from the registration requirements of the Securities Act available by Section 4(a)(2)[196](index=196&type=chunk) [Item 3. Defaults Upon Senior Securities](index=34&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There have been no material defaults on senior securities payments during the covered period - There have been no defaults in any material payments during the covered period[197](index=197&type=chunk) [Item 4. Mine Safety Disclosures](index=34&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Hour Loop, Inc - This item is not applicable to Hour Loop, Inc[198](index=198&type=chunk) [Item 5. Other Information](index=34&type=section&id=Item%205.%20Other%20Information) This section confirms no other material information, no changes to director nominee procedures, and no Rule 10b5-1 trading arrangement changes by directors or officers - There have been no material changes to the procedures by which security holders may recommend nominees to the Board of Directors[199](index=199&type=chunk) - No director or officer adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the registrant's last fiscal quarter[200](index=200&type=chunk) [Item 6. Exhibits](index=35&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with Form 10-Q, including Rule 13a-14(a) certifications, Section 1350 certifications, and Inline XBRL documents - Exhibits include Rule 13a-14(a) Certifications of Principal Executive Officer and Principal Financial Officer, and Certification Pursuant to 18 U.S.C. Section 1350[201](index=201&type=chunk) - Various Inline XBRL documents (Instance, Schema, Calculation, Definition, Labels, Presentation Linkbases) and the Cover Page Interactive Data File are also listed as exhibits[201](index=201&type=chunk) [Signatures](index=36&type=section&id=Signatures) The report was signed on August 12, 2025, by Sam Lai, serving as Chief Executive Officer, Interim Chief Financial Officer, and principal accounting officer - The report was signed on August 12, 2025, by Sam Lai, Chief Executive Officer and Interim Chief Financial Officer (principal executive officer, principal financial officer, and principal accounting officer)[207](index=207&type=chunk)