HOUR 10-K & 10-Q changes, risk factors and insider trading

Maintaining and enhancing our product listings is critical in expanding and growing our business. However, a significant portion of our perceived performance to the customer depends on third parties outside of our control, including suppliers and third-party delivery agents as well as online retailers such as Amazon and Walmart. Because our agreements with our online retail partners are generally terminable at will, we may be unable to maintain these relationships, and our results of operations could fluctuate significantly from period to period. Because Because we rely on third parties to deliver our products, we are subject to shipping delays or disruptions caused by inclement weather, natural natural disasters, labor activism, health epidemics or bioterrorism. We may also experience shipping delays or disruptions due to other carrier-related carrier-related issues relating to their own internal operational capabilities. Further, we rely on the business continuity plans of these third parties to operate during pandemics, like the COVID-19 pandemic, and we have limited ability to influence their plans, prevent delays, and/or cost increases due to reduced availability and capacity and increased required safety measures.

TheWe Company utilizesutilize Amazon’s FBA platform to store theirour products at the Amazon fulfillment center and to pack and distribute these products products to customers. If Amazon continues to increase its FBA fees, our profit margin could be adversely affected.

A change in one or more of theour Company’s vendors’ policies or the Company’sour relationship with those vendors could adversely affect the Company’sour results of operations.

TheWe Company isare dependent on itsour vendors to supply merchandise in a timely and efficient manner. If a vendor fails to deliver on its commitments, whether due to financial difficulties or other reasons, the Companywe could experience merchandise shortages that could lead to lost sales.

Historically, thewe Company hashave not experienced difficulty in obtaining satisfactory sources of supply and management believes that itwe will continue to have have access to adequate sources of supply. No individual vendor exceeded 15% of purchases in the year ended December 31, 2024.2025.

Loss of key personnel or the inability to attract, train and retain qualified employees could adversely affect the Company’sour results of operations.

TheWe Company believesbelieve that itsour future prospects depend, to a significant extent, on the services of itsour executive officers. Our future success will will also depend on our ability to attract and retain qualified key personnel. The loss of the services of certain of theour Company’s executive officers and other key management personnel could adversely affect the Company’sour results of operations.

In addition to our executive officers, the Company’sour business is dependent on our ability to attract, train and retain qualified team members. Our ability to meet our labor needs while controlling our costs is subject to external factors such as unemployment levels, health care costs and changing demographics. If we are unable to attract and retain adequate numbers of qualified team members, our operations and support functions could suffer. Those factors, together with increased wage and benefit costs, could adversely affect our results of operations.

The Company’sOur business is influenced by general economic conditions.

TheOur Company’s performance is subject to general economic conditions and their impact on levels of discretionary consumer spending. General economic economic conditions impacting discretionary consumer spending include, among others, wages and employment, consumer debt, reductions in net worth, residential real estate and mortgage markets, taxation, fuel and energy prices, interest rates, consumer confidence and other macroeconomic macroeconomic factors.

Disruption of global capital and credit markets may have a material adverse effect on the Company’sour liquidity and capital resources.

TheWe are Company is dependent upon access to capital for its liquidity needs.

TheWe Company must have sufficient sources of liquidity to fund itsour working capital requirements and indebtedness. The future availability of financing financing will depend on a variety of factors, such as economic and market conditions, the availability of credit and theour Company’s credit rating, as well as the Company’sour reputation with potential lenders. These factors could materially adversely affect theour Company’s ability to fund itsour working capital requirements, costs of borrowing, and the Company’sour financial position and results of operations would be adversely impacted.

The Our ability of the Company to satisfy itsour liabilities and to continue as a going concern will continue to be dependent on the implementation of several items, the success of which is not certain.

TheOur Company’s primary source of liquidity is available cash and cash equivalents, which is limited. Therefore, theour ability of the Company to meet itsour liabilities and to continue as a going concern is dependent on, among other things, improved profitability, the continued implementation of its business strategy, the availability of future funding, implementation of one or more corporate initiatives to reduce costs at the parent company level and other strategic alternatives, including selling all or part of theour remaining business or assets of the Company.assets.

Parties with whom the Companywe doesdo business may be subject to insolvency risks or may otherwise become unable or unwilling to perform their obligations to the Company.us.

TheWe Company isare a party to contracts, transactions and business relationships with various third parties, including partners, vendors, suppliers, service providers and lenders, pursuant to which such third parties have performance, payment and other obligations to the Company.us. In some cases, we the Company dependsdepend upon such third parties to provide essential products, services or other benefits, including with respect to merchandise, advertising, software development and support, logistics, other agreements for goods and services in order to operate the Company’sour business in the ordinary course, extensions of credit, credit card accounts and related receivables, and other vital matters. Economic, industry and market conditions could result in increased risks to the Company associated with the potential financial distress or insolvency of such third parties. If any of these third parties were to become subject to bankruptcy, receivership or similar proceedings, theour rights and benefits of the Company in relation to itsour contracts, transactions and business relationships with such third parties could be terminated, modified in a manner adverse to the Company, us, or otherwise impaired. The CompanyWe cannot make any assurances that it would be able to arrange for alternate or replacement contracts, transactions or business relationships on terms as favorable as the Company’sour existing contracts, transactions or business relationships, if at all. Any inability on theour part of the Company to do so could negatively affect the Company’sour cash flows, financial condition and results of operations.

Failure to comply with legal and regulatory requirements could adversely affect the Company’sour results of operations.

TheOur Company’s business is subject to a wide array of laws and regulations. Significant legislative changes that impact our relationship with our workforce (none of which is represented by unions) could increase our expenses and adversely affect our operations. Examples of possible legislative changes impacting our relationship with our workforce include changes to an employer’s obligation to recognize collective bargaining units, the process by which collective bargaining units are negotiated or imposed, minimum wage requirements, health care mandates, and changes in overtime regulations.

Section 21 of ourOur certificate of incorporation contains a forum selection clause and Section 7.4 of our bylaws provideprovides that “[u]nless the corporation consents in writing to the selection of an alternative forum, the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL, or (iv) any action asserting a claim governed by the internal affairs doctrine shall be a state or federal court located in the county in which the principal office of the corporation in the State of Delaware is established, in all cases subject to the court’s having personal jurisdiction over the indispensable parties named as defendants. If any action is brought by any party against another party, relating to or arising out of [the] Bylaws, or the enforcement hereof, the prevailing party shall be entitled to recover from the other party reasonable attorneys’ fees, costs and expenses incurred in connection with the prosecution or defense of such action, provided that the provisions of this sentence shall not apply with respect to “internal corporate claims” as defined in Section 115 of the DGCL or in connection with any other claim that a stockholder, acting in its capacity as a stockholder or in the right of the Corporation, has brought in an action, suit or proceeding…. Notwithstanding the foregoing, the exclusive forum provision will not apply to suits brought to enforce any liability or duty created by the Securities Exchange of 1934, as amendedamended, (the “Exchange Act”), the Securities Act of 1933, as amended (the “Securities Act”),amended, or any claim for which the federal courts have exclusive or concurrent jurisdiction. Unless the Corporation consents in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, including, in each case, any and all claims brought either directly or derivatively.” Therefore, the exclusive forum provision in our certificate of incorporation and our bylaws will not relieve us of our duty to comply with the federal securities laws and the rules and regulations thereunder, and stockholders will not be deemed to have waived our compliance with these laws, rules and regulations.

By purchasing our common stock, you are bound by the fee-shifting provision contained in our bylaws, which may discourage you from pursuing actions against us and could discourage stockholder lawsuits that might otherwise benefit the Companyus and itsour stockholders.

Section 7.4 of our bylaws provides that “[i]f any action is brought by any party against another party, relating to or arising out of these Bylaws, or the enforcement hereof, the prevailing party shall be entitled to recover from the other party reasonable attorneys’ fees, costs and expenses incurred in connection with the prosecution or defense of such action, provided that the provisions of this sentence shall not apply with respect to ‘“internal corporate claims’ claims” as defined in Section 109(b)115 of the DGCL.DGCL or in connection with any other claim that a stockholder, acting in its capacity as a stockholder or in the right of the Corporation, has brought in an action, suit or proceeding.”

Our business, results of operations, and financial condition may be materially adversely impacted if a public health outbreak, including theinterferes recent COVID-19 pandemic, interferes with our ability, or the ability of our employees, contractors, suppliers, and other business partners to perform our and their respective responsibilities and obligations relative to the conduct of our business.

The COVID-19 pandemic has adversely affected and may continue to adversely affect the economies and financial markets worldwide, resultingand any pandemics in the future that had the reach similar to COVID-19, may result in an economic downturn that could impact our business, financial condition and results of operations. As a result, our ability to fund through public or private equity offerings, debt financings, and through other means at acceptable terms, if at all, may be disrupted, in the event our financing needs for the foreseeable future are not able to be met by our balances of cash, cash equivalents and cash generated from operations.

In addition, the continuation of the COVID-19 pandemic and various governmental responses in the United States has adversely affected andour business operations. Any future pandemics may continue toalso adversely affect our business operations, including our ability to carry on business development activities, restrictions restrictions in business-related travel, delays or disruptions in our on-going projects, and unavailability of the employees of the Company or third parties with whom we conduct business, due to illness or quarantines, among others. Our business was previously negatively impacted by disruptions in our supply chain, which limited our ability to source merchandise, and limits on products fulfillment placed by Amazon. For example, we may be unable to launch new products, replenish inventory for existing products, ship into or receive inventory in our third-party third-party warehouses in each case on a timely basis or at all. The extent to which COVID-19future pandemics could impact our business will depend on future developments, which are highly uncertain and cannot be predicted with confidence, and will depend on many factors, including the duration of the outbreak, the effect of travel restrictions and social distancing efforts in the United States and other countries, the scope and length of business closures or business disruptions, and the actions taken by governments to contain and treat the disease. As such, we cannot presently predict the scope and extent of any potential business shutdowns or disruptions. Possible effects may include, but are not limited to, disruption to our customers and revenue, absenteeism in our labor workforce, unavailability of products and supplies used in our operations, shutdowns that may be mandated or requested by governmental authorities, and a decline in the value of our assets, including various long-lived assets.

TheOur Company’s certificate of incorporation and bylaws contain provisions that could have the effect of delaying or preventing changes in control or changes in our management without the consent of our board of directors. These provisions include:

All statements other than statements of historical fact included in this annual report on Form 10-K, including, without limitation, statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’sour financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. When used in this annual report, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and and similar expressions, as they relate to us or the Company’sour management, identify forward-looking statements. Such forward-looking statements statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, theour Company’s management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the SEC.

The following discussion discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this annual report on Form 10-K. Certain information contained in the discussion and analysis set set forth below includes forward-looking statements that involve risks and uncertainties. Unless the context otherwise requires, “Hour Loop,” “we,” “us,” “our,” or the “Company” refers to Hour Loop, Inc.Inc., andtogether with Flywheel Consulting Limited, its consolidated subsidiaries.wholly owned subsidiary (“Flywheel”).

TotalAccording to Marketplace Pulse (based on U.S. Census Bureau data), total U.S. retail sales increased 2.5%3.5% to approximately $7.68 trillion in 2025, from $7.42 trillion in 2024 from $7.24 trillion in 2023.2024. Consumers spent $1,192.29$1,233.7 billion online with U.S. merchants in 2024,2025, which isrepresents approximately around 16.07%16.4% of total U.S. retail sales for the yearyear, compared to 15.45%16.07% in 2023.2024.

Amazon accounted for approximately 40% of all e-commerce in the United States and that makes Amazon the biggest ecommercee-commerce giant currently in the market.

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

For the fiscal years ended December 31, 20242025 and 2023,2024, we generated net revenues of $138,252,861$142,440,236 and $132,124,202,$138,252,861, respectively, and reported net income (loss)of of $657,447$1,704,849 and $(2,429,694),$657,447, respectively, and cash flow provided by (used in) operating activities of $313,140$2,581,256 and $(2,063,375),$313,140, respectively. As noted in our consolidated financial statements, as of December 31, 2024,2025, we had retained earnings of $(595,175).$1,109,674.

WeThe Company generated $138,252,861 $142,440,236 in revenues in 2024,2025, as compared to $132,124,202$138,252,861 in revenues in the same period in 2023.2024. This represents an increase in revenues of $6,128,659, $4,187,375, or 4.64%.3.03%. 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 20242025 were approximately 6,337,492,6,588,014, as compared to 5,749,1076,337,492 orders in 2023,2024, representing an increase of 10.23%.3.95%. This surgegrowth in orders has played a pivotal role in driving the overall revenue growth. The substantialmeaningful 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’sour revenues during the period. The 10.23%3.95% 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.

Operating expenses for the year ended December 31, 2024 totaled $71,279,768, representing a $1,759,090, or 2.53%, increase from the $69,520,678 of operating expenses for the year ended December 31, 2023.2025 totaled $72,172,741, representing a $892,973, or 1.25%, increase from the $71,279,768 of operating expenses for the year ended December 31, 2024. This change was caused by an increase in platformoperating fees and fees paid to Amazon. The Amazon fees are proportional to revenues. The increase in revenues in 2024 over the same period in 2023 drove the increase in platform fees and higher Amazon fees.efficiency.

Other (Expenses) Expenses,Income, Net

Other (expenses) expenses,income, net for the year ended December 31, 2024 was $228,621, as compared to $(157,031) for the year ended December 31, 2023.2025 was $(63,345), as compared to $228,621 for the year ended December 31, 2024.

Total Comprehensive income (loss)Income

Total comprehensive income (loss) for the year ended December 31, 20242025 was $631,803,$1,774,116, as compared to $(2,432,291)$631,803 for the year ended December 31, 2023. 2024. The decrease increase in total comprehensive lossincome was attributed to an increase in the Company’sour gross revenues in 2024,2025, compared to 2023.2024.

Net Cash Provided by (used in) Operating Activities

For the fiscal year ended December 31, 2024,2025, cash provided by (used in) operating activities amounted to $313,140,$2,581,256, as compared to $(2,063,375)$313,140 for the year ended December 31, 2023.2024. This was driven by our net income (loss) of $657,447 $1,704,849 for the year ended December 31, 2024,2025, as compared to $(2,429,694) $657,447 for the same period in 2023.2024.

For the fiscal year ended December 31, 2024,2025, $35,996$75,097 in cash was used in investing activities, as compared to $14,823$35,996 in cash used in investing activities for the fiscal year ended December 31, 2023.2024. The increase primarily reflects higher purchases of property and equipment for the year ended December 31, 2025.

For the fiscal year ended December 31, 2024,2025, cash used in financing activities amounted to $671,000,$1,339,000, as compared to $-0-$671,000 cash used in financing activities for the fiscal year ended December 31, 2023.2024. The increase in cash outflows was primarily due to repayments made to related parties for the year ended December 31, 2025.

On August 18, 2022, Flywheel entered into a line of credit agreement in the amount of $6,940,063 with Taishin ofInternational AmericaBank Loa.(“Taishin”). TheAs line of credit initially maturedamended, on August 30, 2023. On August 11, 2023, the line of credit wasmatures extended for an additional year, revising the maturity date to August 30, 2024. Onon May 28,18, 2024,2026 theand termbears interest at a rate of the3.42% loanper was revised such that maturity date was extended to November 24, 2024.annum.

From time to time, thewe Company receivesreceive loans and advances from itsour stockholders to fund itsour operations. As of December 31, 2025, we had a total of $3,810,418 due to related parties, which included $2,660,418 in stockholder payables and $1,150,000 accrued for bonuses. As of December 31, 2024, the Companywe had a total of $4,192,995 due to related parties, which included $3,499,418 in stockholder payables and $693,577 accrued for bonuses. While stockholder payables are generally non-interest bearing and payable on demand, thewe Company and our stockholders entered into loan agreements for loans with terms over one year.

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 loan matures on December 31, 2026 and has an annual interest rate of the loan is 5.5%.4.75%.

TheWe have Company has fourtwo operating leases (Flywheel has fourtwo offices lease in Taiwan). The respective lease terms are February 9, 2023 to March 8, 2025, March 1, 2024 to June 30,10, 2025, June 1, 2024 to May 31, 2025, and August 1, 20242025 to July 31,9, 2025,2027, and December 1, 2025 to November 30, 2028, respectively.

Cash and Cash Equivalents -– The CompanyWe considersconsider 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 Receivable and Allowance for Credit Losses - Accounts receivable are stated at historical cost less allowance for doubtful accounts. 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 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, exist, primarily based on similar services or products offerings. We adopted the standard effective January 1, 2023. The impact of the adoption 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 7 days. TheWe Company performsperform on-going evaluations of itsour customers and maintains an allowance for credit losses as thewe Company deemsdeem necessary or appropriate. As of December 31, 20242025 and 2023,2024, the Companywe did not deem it necessary to have an allowance for credit loss.

Inventory and Cost of Goods Sold -– The Company’sOur 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’sOur costs include the amounts itwe payspay manufacturers for product, 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 theour receiving dock of the Company.dock. Management continually evaluates its estimates and judgments including those related to merchandise inventory.

Policy for inventory allowance: TheWe Companywrite 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 December 31, 20242025 and 2023,2024, $560,293 $447,841 and $675,886,$560,293, respectively, were written down from the cost of inventories to theirour 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. TheWe Company elected to expense any individual property and equipment items under $2,500.

The majority of the Company’sour property and equipment is computers, and the estimated useful life is 3three years.

Impairment of Long-lived Assets-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 CompanyWe did not record any impairment charges for the years ended December 31, 2024 2025 and 2023.2024.

The Company We typically utilizesutilize operating leases for itsour office space requirements. This means that thewe Company leaseslease office space, categorizing the lease arrangement as an operating lease. Under this arrangement, Thewe Company doesdo not hold ownership of the leased assets but instead pays rent for the right to use them.

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

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

The Company We 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 CompanyWe can, at any time, direct Amazon, similarly, other third-party logistics providers (“Logistics Providers”), to return the Company’sour inventories to any location specified by the Company. It is the Company’sour responsibility to make any returns made by customers directly to Logistics Providers and thewe Company retainsretain the back-end inventory risk. Further, thewe Company isare subject to credit risk (i.e., credit card chargebacks), establishes prices of its products, 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.

TheWe derive Company derives itsour revenue from the sale of consumer products. TheWe Companysell sells itsour products directly to consumers through online retail channels. The Company considersWe consider 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. expected. Revenues for the years ended December 31, 20242025 and 20232024 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’sour sales and distribution channels, revenue is recognized recognized when control of the product is transferred to the customer (i.e., when the Company’s performance obligation is satisfied), which which typically occurs at shipment date. As a result, thewe Company hashave a present and unconditional right to payment and record the amount due from the customer in accounts receivable.

From time to time, thewe Company offersoffer price discounts on certain selected items to stimulate the sales of those items. Revenue is measured as the amount of consideration for which thewe Company expectsexpect to be entitled in exchange for transferring goods. Consistent with this policy, thewe Company reducesreduce 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. TheWe Company treatstreat shipping and handling as fulfillment activities, not separate performance obligations. Costs for shipping and handling were $31,480,104$32,050,121 and $31,187,009 $31,480,104 for the years ended December 31, 2024 2025 and 2023,2024, respectively, recorded as selling and marketing expenses.

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

The Company usesWe use the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by theour Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining theour Company’s reportable segments. The Company’sOur 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 Companywe hashave determined that it has only one operating segment.

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

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

TheWe Company maintainsmaintain reserves for potential credit losses on customer accounts when deemed necessary. Significant customers are those which represent more than 10% of theour Company’s total net revenue or gross accounts receivable balance at the balance sheet date. DuringFor the years ended December 31, 20242025 and 2023,2024, the Companywe had no customer that accounted for 10% or more of total net revenues. In addition, as of December 31, 20242025 and 2023,2024, thewe Company had no customer that accounted for 10% or more of gross accounts receivable. As of December 31, 20242025 and 2023,2024, all of theour Company’s accounts receivable were held by the Company’sour sales platform agent, Amazon, which collects money on the Company’sour behalf from itsour customers. Therefore, the Company’sour accounts receivable are comprised of receivables due from Amazon and the reimbursement from Amazon to the Company usually takes less than 7seven days.

The Company’s Our business is reliant on one key vendor which currently provides the Companyus with itsour sales platform, logistics and fulfillment operations, including certain warehousing for the Company’sour net goods, and invoicing and collection of its revenue from the Company’sour end customers. During the years ended December 31, 20242025 and 2023,2024, approximately 99%98% and 99%, respectively, of the Company’sour revenue was through or with the Amazon sales platform.

Foreign Currency Exchange Risk - TheWe Company isare exposed to foreign currency exchange risk through itsour foreign subsidiary in Taiwan. TheWe Company doesdo not hedge foreign currency translation risk in the net assets and income reported from these sources.

Related Parties - TheWe Companyaccount accounts for related party transactions in accordance with FASB ASC Topic 850 (Related Party Disclosures). A party is considered to be related to the Companyus 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 our principal ownersowners, of the Company, itsour management, members of the immediate families families of our principal owners of the Company and itsour management and other parties with which the Companywe 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 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 - TheWe Companycompute 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 thewe Company reportsreport 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 share for the years ended December 31, 20242025 and 2023.2024. Therefore, the diluted earnings per share is the same as the basic earnings per share.

Beginning in 2026, the Company also faced additional cost pressures from Amazon’s labeling service discontinuation and changes to the commingled inventory policy. Prior to 2026, the Company contracted with Amazon to provide labeling and packaging (such as polybagging and bubble wrapping) services for the Company. Effective January 1, 2026, Amazon ceased providing these services for its sellers. Accordingly, sellers, including the Company, are now responsible for all inventory preparation prior to delivery at Amazon fulfillment centers. In response, the Company has, among other things, (i) engaged external fulfillment partners to manage labeling and preparation, resulting in an incremental increase in variable fulfillment costs per unit; and (ii) integrated FNSKU labeling and Amazon-compliant packaging directly into the manufacturing process at the source, which resulted in increases to cost of revenues and selling and marketing expenses. Labeling-related costs are expected to have an impact going forward. Although the impact is not considered material, the Company has disclosed the level of impact for transparency; however, the Company also successfully secured more advertising fund support and negotiated better vendor discounts. These measures helped offset rising costs and ensured that overall profitability remained stable for the threesix months ended June March 31,30, 2026.

On May February 24,15, 2026, the Company entered into Addendum No. 67 (the “Lai Addendum”) to Executive Employment Agreement, as amended, with Mr.Sam Lai (the “Lai Agreement”)., the Company’s Chairman of the Board, Chief Executive Officer, interim Chief Financial Officer, and majority stockholder. Pursuant to the terms of the Lai Addendum, Mr. Lai’s 2026 bonus targets and payments were set revised as follows:

Also on FebruaryMay 24,15, 2026, the Company entered into Addendum No. 67 (the “Yu Addendum”) to Executive Employment Agreement, as amended, with Ms.Sau Kuen (Maggie) Yu (the “Yu Agreement”)., the Company’s Senior Vice President, Director and majority stockholder. Pursuant to the terms of the Yu Addendum, Ms. Yu’s 2026 bonus targets and payments were setrevised as follows:

On July April 6,1, 2026, the Company issued 1,6001,586 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 $1.8745$1.8910 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.

DueOn August 10, 2026, the Company entered into the Fourth Amendment (the “Fourth Amendment”) to changesLoan in Amazon’s Disbursement Policy, daily remittances are now delayedAgreement by sevenand days.among Inthe April 2026,Company, Sam Lai,Lai (the Company’s Chairman of the Board, Chief Executive Officer and Interim Chief Financial Officer and a significant stockholder of the Company,Company) and Sau MaggieKuen Yu,Yu (the Company’s Senior Vice President, a member of the Company’s Board of Directors and a significant stockholder of the Company). Pursuant to the terms of the Company,Fourth advancedAmendment, athe totalCompany agreed to repay the loan in the principal amount of $1,601,000$3,410,418 to Mr. Lai and Ms. Yu through monthly settlements of $200,000, commencing August 31, 2026. As amended by the Fourth Amendment, the loan matures on December 31, 2026 and bears interest at an annual rate of 4.75%. The parties also agreed to discuss quarterly and make reasonable efforts, subject to the Company Company’s normal cash reserve and expansion plan, if any, to provideexplore support.the Atpossibility present,of noearly formalor contract has been entered into.delayed repayments.

For the three months ended MarchJune 31,30, 2026 and 2025, we generated net revenues of $29,930,342$33,944,191 and $25,837,090,$27,103,106, respectively, and reported net income of $823,482$1,051,685 and $654,517,$1,177,001, respectively, and cash flow used in operating activities of $2,201,403$1,337,564 and $23,891,$901,539, respectively. As noted in our unaudited consolidated financial statements, as of March 31, 2026, we had retained earnings of $1,933,156.

The following table shows a comparison of our unaudited income statements for the three and six months ended MarchJune 31,30, 2026 and 2025.

For the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025

The Company generated $29,930,342$33,944,191 in revenues, net in the three months ended MarchJune 31,30, 2026, as compared to $25,837,090$27,103,106 in revenues, net in the same period in 2025. This represents an increase in revenues, net of $4,093,252,$6,841,085, or 15.8%.25.2%. 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 MarchJune 31,30, 2026 were approximately 1,359,094,1,497,189, as compared to 1,229,7921,253,975 orders in the three months ended MarchJune 31,30, 2025, representing an increase of 10.5%.19.4%. The growth in order volume was the primary driver of revenue expansion. In addition, the higher average order value contributed to revenue growth exceeding the pace of order growth. While competitive pricing strategies and promotional discounts moderated unit pricing, the combination of increased order volume and sustained customer engagement resulted in meaningful revenue gains.

Cost of revenues for the three months ended MarchJune 31,30, 2026 totaled $13,912,567,$15,976,053, as compared to $11,691,792$11,605,754 for the three months ended June March 31,30, 2025. In the same period last year, the Company intentionally maintained a higher gross margin in response to tariff concerns by preserving lower-cost inventory and gradually adjusting retail prices to help customers adapt to higher price levels. Cost of revenues includes the cost of the merchandise sold and shipping costs, as well as estimated losses due to damage to goods. In 2026, Amazon implemented changes to its Fulfillment by Amazon (FBA) fee structure. Beginning January 15, 2026, fulfillment fees for certain product categories were adjusted, with increases for higher-priced standard-size items and reductions for select bulky items. In addition, effective April 17, 2026, Amazon introduced a 3.5% fuel and logistics surcharge applicable to FBA in the United States and Canada, as well as cross-border Remote Fulfillment programs. These changes, together with revised inventory and return handling policies, are expected to increase operating costs for sellers. The Company has assessed that the impact is not material; however, the level of impact has been disclosed for transparency.

Total operating expenses for the three months ended MarchJune 31,30, 2026 totaled $14,875,647,$16,683,752, representing a $1,651,214,$2,807,251, or 12.5%,20.2%, increase from the the $13,224,433$13,876,501 of total operating expenses for the three months ended MarchJune 31,30, 2025. This change was primarily caused by an increase in selling operating efficiency.and marketing expenses in line with the growth in revenues.

Total other expenses, net, for the three months ended MarchJune 31,30, 2026 was $8,988,$26,710, compared to total other income,expenses, net, of $15,071$38,170 for the three months ended MarchJune 31, 2025, representing a $24,059, or 159.6%, decrease in total other income, net. This decrease was due to the Company received a subsidy from the High-Value Industrial Promotion Fund in30, 2025.

Total comprehensive income for the three months ended MarchJune 31,30, 2026 was $805,866,$1,055,644, as compared to $640,981$1,331,940 for the three months ended MarchJune 31,30, 2025. The increasedecrease in total comprehensive income was attributedprimarily attributable to lower income from operations for the reasonsthree mentionedmonths ended above.June 30, 2026.

Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. We had cash of $992,886$985,404 and $3,792,033 as of MarchJune 31,30, 2026 and December 31, 2025, respectively.

The following table shows a summary of our cash flows for the threesix months ended MarchJune 31,30, 2026 and 2025.

For the threesix months ended MarchJune 31,30, 2026, net cash used in operating activities amounted to $3,556,564, as compared to $925,430 of net cash used in operating activities amounted to $2,201,403, as compared to $23,891 of net cash used in operating activities for the threesix months ended MarchJune 31,30, 2025. The increase in net cash used in operating activities was primarily driven by higher inventory purchases during 2026 and an increase in accounts receivable resulting from changes in Amazon’s Disbursement 2026.Policy, under which daily remittances are now delayed by seven days. As part of our strategy to ensure product availability and mitigate supply chain risks under evolving trade policies and in light of discontinuation of Amazon’s labeling service, we invested more heavily in inventory.

Despite the increase in revenues to $29,930,342$63,874,533 for the threesix months ended MarchJune 31,30, 2026, as compared to $25,837,090$52,940,196 for the threesix months ended March 31,June 30, 2025, the increase in revenues was offset by a corresponding increase in cost of revenues of $2,220,775$6,591,074 and an increase in operating expenses of $1,651,214.$4,458,465.

For the threesix months ended MarchJune 31,30, 2026, $5,662$5,705 in net cash was used in investing activities, compared to $720$801 in net cash used in investing investing activities for the threesix months ended MarchJune 31,30, 2025. The increase primarily reflects higher purchases of property and equipment for the three six months ended MarchJune 31,30, 2026.

Net Cash Provided by (Used in) Financing Activities

For the threesix months ended MarchJune 31,30, 2026, net cash usedprovided inby financing activities amounted to $600,000,$750,000, as compared to net cash used in financing financing activities of $839,000 for the threesix months ended MarchJune 31,30, 2025. The net cash inflow for the six months ended June 30, 2026 was primarily due to advances of $1,634,000 received from related parties, partially offset by repayments of $884,000 made to related parties. The cash outflow for the six months ended June 30, 2025 was primarily due to repayments made to related parties for the three months ended March 31, 2026 and 2025.parties.

On August 18, 2022, Flywheel entered into a line of credit agreement in the amount of $6,940,063 with Taishin International Bank (“Taishin”). As amended, the line of credit matures on MayNovember 18,13, 2026 and bears interest at a rate of 3.42% per annum. As of MarchJune 31,30, 2026 and December 31, 2025, the outstanding balance under the Taishin line of credit was $626,076$628,931 and $637,348, respectively.

From time to time, we receive loans and advances from our stockholders to fund our operations. As of MarchJune 31,30, 2026, we had a total of $3,410,418 $2,060,418 due to related parties, which included $2,060,418$3,410,418 in stockholder payables and $0 accrued for bonuses. As of December 31, 2025, we had a total of $3,810,418 due to related parties, which included $2,660,418 in stockholder payables and $1,150,000 accrued for bonuses. While stockholder payables are generally non-interest bearing and payable on demand, we and our stockholders have entered into loan agreements for loans with terms over one year.

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

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. The Company 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 MarchJune 31,30, 2026 and December 31, 2025, the Company did not deem it necessary to have an allowance for credit loss.

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 MarchJune 31,30, 2026 and December 31, 2025, $409,455$370,981 and $447,841, 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.

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 and six months ended March 31,June 30, 2026 and 2025.

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

The Company derives its revenues from the sale of consumer products. The Company sells its products directly to consumers through online retail 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 determining the net consideration expected. Revenues for the three and six months ended MarchJune 31,30, 2026 and 2025 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, revenues are 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 products within 30 days after the products are delivered and estimated sales returns are calculated based on the the expected returns. The rates of sales returns were 6.73%6.90% and 6.35%6.92% of gross sales for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively.

A performance obligation, defined as the promise to transfer a distinct good, is the unit of account in ASC Topic 606. The Company treats treats shipping and handling as fulfillment activities, not separate performance obligations. Costs for shipping and handling were $13,887,211 $6,407,406 and $5,748,972$11,659,356 for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively, recorded as selling and marketing expenses.

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 revenues or gross accounts receivable balance at the balance sheet date. During the three and six months ended MarchJune 31,30, 2026 and 2025, the Company had no customer that accounted for 10% or more of total net revenues. In In addition, as of MarchJune 31,30, 2026 and December 31, 2025, the Company had no customer that accounted for 10% or more of gross accounts receivable. receivable. As of MarchJune 31,30, 2026 and December 31, 2025, 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 receivable are comprised of receivables due from Amazon and the reimbursementdisbursement from Amazon to the Company usually takes approximately 14 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 revenues from the Company’s end customers. During the threesix months ended MarchJune 31,30, 2026 and 2025, approximately 98%97% and 99%, respectively, of the Company’s revenues revenues waswere through or with the Amazon sales platform.

Advertising and Promotion Expenses – The Company’s policy is to recognize advertising costs as they are incurred. Advertising and promotion expenses were $1,262,089$2,823,018 and $1,004,083$964,824 for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively.

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 share for the three and six months ended MarchJune 31,30, 2026 and 2025. Therefore, the diluted earnings per share is the same as the basic earnings per share.