Hour Loop, Inc

Previous wording

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’s 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 similar expressions, as they relate to us or the Company’s management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, the 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.

Current wording

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 our 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 similar expressions, as they relate to us or our management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, our 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.

Previous wording

The following 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 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. and its consolidated subsidiaries.

Current wording

The following 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 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., together with Flywheel Consulting Limited, its wholly owned subsidiary (“Flywheel”).

Previous wording

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

Current wording

According to Marketplace Pulse (based on U.S. Census Bureau data), total U.S. retail sales increased 3.5% to approximately $7.68 trillion in 2025, from $7.42 trillion in 2024. Consumers spent $1,233.7 billion online with U.S. merchants in 2025, which represents approximately 16.4% of total U.S. retail sales for the year, compared to 16.07% in 2024.

Previous wording

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

Current wording

The Company was founded in 2013 by Sam Lai and Maggie Yu. With their vision, leadership, and software development skills, the Company grew rapidly. From 2013 to 2025, sales grew from $0 to $142,440,236.

Previous wording

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

Current wording

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, to provide business operating consulting services exclusively to Hour Loop. On April 7, 2021, Hour Loop converted from a Washington corporation to a Delaware corporation.

Previous wording

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

Current wording

For the fiscal years ended December 31, 2025 and 2024, we generated net revenues of $142,440,236 and $138,252,861, respectively, and reported net income of $1,704,849 and $657,447, respectively, and cash flow provided by operating activities of $2,581,256 and $313,140, respectively. As noted in our consolidated financial statements, as of December 31, 2025, we had retained earnings of $1,109,674.

Previous wording

We generated $138,252,861 in revenues in 2024, as compared to $132,124,202 in revenues in the same period in 2023. This represents an increase in revenues of $6,128,659, or 4.64%. 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 2024 were approximately 6,337,492, as compared to 5,749,107 orders in 2023, representing an increase of 10.23%. This surge in orders has played a pivotal role in driving the overall revenue growth. The substantial increase in order quantity indicates a rising demand for our products, leading to a corresponding increase in revenue generated from these sales. As a result, the increase in orders has directly contributed to the overall growth in the Company’s revenues during the period. The 10.23% 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.

Current wording

The Company generated $142,440,236 in revenues in 2025, as compared to $138,252,861 in revenues in the same period in 2024. This represents an increase in revenues of $4,187,375, or 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 2025 were approximately 6,588,014, as compared to 6,337,492 orders in 2024, representing an increase of 3.95%. This growth in orders has played a pivotal role in driving the overall revenue growth. The meaningful 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 our revenues during the period. The 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.

Previous wording

Cost of goods sold for the year ended December 31, 2024 totaled $66,242,153, as compared to $65,606,947 for the year ended December 31, 2023. Cost of goods sold includes the cost of the merchandise sold and shipping costs, as well as estimated losses due to damage to goods.

Current wording

Cost of goods sold for the year ended December 31, 2025 totaled $67,806,565, as compared to $66,242,153 for the year ended December 31, 2024. Cost of goods sold includes the cost of the merchandise sold and shipping costs, as well as estimated losses due to damage to goods.

Previous wording

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. This change was caused by an increase in platform 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.* *

Current wording

Operating expenses for the year ended December 31, 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 operating efficiency.

Previous wording

Other expenses, net for the year ended December 31, 2024 was $228,621, as compared to $(157,031) for the year ended December 31, 2023.

Current wording

Other (expenses) income, net for the year ended December 31, 2025 was $(63,345), as compared to $228,621 for the year ended December 31, 2024.

Previous wording

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

Current wording

Total comprehensive income for the year ended December 31, 2025 was $1,774,116, as compared to $631,803 for the year ended December 31, 2024. The increase in total comprehensive income was attributed to an increase in our gross revenues in 2025, compared to 2024.

Previous wording

Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. We had cash of $2,119,581 and $2,484,153 as of December 31, 2024 and 2023, respectively.

Current wording

Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. We had cash of $3,792,033 and $2,119,581 as of December 31, 2025 and 2024, respectively.

Previous wording

Net Cash Provided by (used in) Operating Activities

Current wording

Net Cash Provided by Operating Activities

Previous wording

For the fiscal year ended December 31, 2024, cash provided by (used in) operating activities amounted to $313,140, as compared to $(2,063,375) for the year ended December 31, 2023. This was driven by our net income (loss) of $657,447 for the year ended December 31, 2024, as compared to $(2,429,694) for the same period in 2023.

Current wording

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

Previous wording

Despite the increase in revenue to $138,252,861 for the year ended December 31, 2024, as compared to $132,124,202 for the year ended December 31, 2023, the revenue increase was offset by a corresponding increase in cost of goods sold of $635,206 and an increase in operating expenses of $1,759,090.

Current wording

Despite the increase in revenue to $142,440,236 for the year ended December 31, 2025, as compared to $138,252,861 for the year ended December 31, 2024, the revenue increase was offset by a corresponding increase in cost of goods sold of $1,564,412 and an increase in operating expenses of $892,973.

Previous wording

For the fiscal year ended December 31, 2024, $35,996 in cash was used in investing activities, as compared to $14,823 in cash used in investing activities for the fiscal year ended December 31, 2023.

Current wording

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

Previous wording

For the fiscal year ended December 31, 2024, cash used in financing activities amounted to $671,000, as compared to $-0- cash used in financing activities for the fiscal year ended December 31, 2023.

Current wording

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

Previous wording

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

Current wording

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 May 18, 2026 and bears interest at a rate of 3.42% per annum.

Previous wording

From time to time, the Company receives loans and advances from its stockholders to fund its operations. As of December 31, 2024, the Company 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, the Company and stockholders entered into loan agreements for loans with terms over one year.

Current wording

From time to time, we receive loans and advances from our stockholders to fund our 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, we 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, we and our stockholders entered into loan agreements for loans with terms over one year.

Previous wording

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

Current wording

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

Previous wording

The Company has four operating leases (Flywheel has four offices lease in Taiwan). The respective lease terms are February 9, 2023 to March 8, 2025, March 1, 2024 to June 30, 2025, June 1, 2024 to May 31, 2025, and August 1, 2024 to July 31, 2025, respectively.

Current wording

We have two operating leases (Flywheel has two offices lease in Taiwan). The respective lease terms are June 10, 2025 to July 9, 2027, and December 1, 2025 to November 30, 2028, respectively.

Previous wording

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

Current wording

Cash and Cash Equivalents – We consider 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.

Previous wording

Accounts 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, primarily based on similar services or products offerings. We adopted the standard effective January 1, 2023. The impact of the adoption was not considered material to the financial statements and primarily resulted in new/enhanced disclosures only. A receivable is considered past due if the Company has not received payments based on agreed-upon terms. The Company generally does not require any security or collateral to support its receivables. The collection is primarily through Amazon and the collection period is usually less than 7 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 December 31, 2024 and 2023, the Company did not deem it necessary to have an allowance for credit loss.

Current wording

Accounts 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, primarily based on similar services or products offerings. We adopted the standard effective January 1, 2023. The impact of the adoption was not considered material to the financial statements and primarily resulted in new/enhanced disclosures only. A receivable is considered past due if the Company has not received payments based on agreed-upon terms. The Company generally does not require any security or collateral to support its receivables. The collection is primarily through Amazon and the collection period is usually less than 7 days. We perform on-going evaluations of our customers and maintains an allowance for credit losses as we deem necessary or appropriate. As of December 31, 2025 and 2024, we did not deem it necessary to have an allowance for credit loss.

Previous wording

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

Current wording

Inventory and Cost of Goods Sold – Our 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. Our costs include the amounts we pay manufacturers for product, tariffs and duties associated with transporting product across national borders, and freight costs associated with transporting the product from its manufacturers to its warehouses, as applicable. The merchandise with terms of FOB shipping point from vendors was recorded as the inventory-in-transit when inventory left the shipping dock of the vendors but not yet reached our receiving dock. Management continually evaluates its estimates and judgments including those related to merchandise inventory.

Previous wording

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 December 31, 2024 and 2023, $560,293 and $675,886, 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.

Current wording

Policy for inventory allowance: We write 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, 2025 and 2024, $447,841 and $560,293, respectively, were written down from the cost of inventories to our net realizable values. Full inventory allowance is recorded for the inventory SKU not sold for more than one year.

Previous wording

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

Current wording

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. We elected to expense any individual property and equipment items under $2,500.

Previous wording

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

Current wording

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

Previous wording

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 years ended December 31, 2024 and 2023.

Current wording

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. We did not record any impairment charges for the years ended December 31, 2025 and 2024.

Previous wording

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

Current wording

We typically utilize operating leases for our office space requirements. This means that we lease office space, categorizing the lease arrangement as an operating lease. Under this arrangement, we do not hold ownership of the leased assets but instead pays rent for the right to use them.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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. We can, at any time, direct Amazon, similarly, other third-party logistics providers (“Logistics Providers”), to return our inventories to any location specified by the Company. It is our responsibility to make any returns made by customers directly to Logistics Providers and we retain the back-end inventory risk. Further, we are subject to credit risk (i.e., credit card chargebacks), establishes prices of its products, can determine who fulfills the goods to the customer (Amazon or the Company) and can limit quantities or stop selling the goods at any time. Based on these considerations, the Company is the principal in this arrangement.

Previous wording

The Company derives its revenue from the sale of consumer products. The Company sells its products directly to consumers through online retail channels. The Company considers customer order confirmations to be a contract with the customer. For each contract, the promise to transfer products is identified as the sole performance obligation. Transaction prices are evaluated for potential refunds or adjustments, determining the net consideration expected. Revenues for the years ended December 31, 2024 and 2023 were recognized at a point in time. Customer confirmations are executed at the time an order is placed through third-party online channels. For all of the Company’s sales and distribution channels, revenue is recognized when control of the product is transferred to the customer (i.e., when the Company’s performance obligation is satisfied), which typically occurs at shipment date. As a result, the Company has a present and unconditional right to payment and record the amount due from the customer in accounts receivable.

Current wording

We derive our revenue from the sale of consumer products. We sell our products directly to consumers through online retail channels. We 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. Revenues for the years ended December 31, 2025 and 2024 were recognized at a point in time. Customer confirmations are executed at the time an order is placed through third-party online channels. For all of our sales and distribution channels, revenue is recognized when control of the product is transferred to the customer (i.e., when the Company’s performance obligation is satisfied), which typically occurs at shipment date. As a result, we have a present and unconditional right to payment and record the amount due from the customer in accounts receivable.

Previous wording

The customer can return the products within 30 days after the products are delivered and estimated sales returns are calculated based on the expected returns. The rates of sales returns were 7.19% and 6.45% of gross sales for the years ended December 31, 2024 and 2023, respectively.

Current wording

The customer can return the products within 30 days after the products are delivered and estimated sales returns are calculated based on the expected returns. The rates of sales returns were 7.26% and 7.19% of gross sales for the years ended December 31, 2025 and 2024, respectively.

Previous wording

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

Current wording

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

Previous wording

A performance obligation, defined as the promise to transfer a distinct good, is the unit of account in ASC Topic 606. The Company treats shipping and handling as fulfillment activities, not separate performance obligations. Costs for shipping and handling were $31,480,104 and $31,187,009 for the years ended December 31, 2024 and 2023, respectively, recorded as selling and marketing expenses.

Current wording

A performance obligation, defined as the promise to transfer a distinct good, is the unit of account in ASC Topic 606. We treat shipping and handling as fulfillment activities, not separate performance obligations. Costs for shipping and handling were $32,050,121 and $31,480,104 for the years ended December 31, 2025 and 2024, respectively, recorded as selling and marketing expenses.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

We use the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by our chief operating decision maker for making operating decisions and assessing performance as the source for determining our reportable segments. Our 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, we have determined that it has only one operating segment.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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