Hour Loop, Inc
For the period ended Mar 31, 2026. Filed May 12, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2026 · Filed May 12, 2026
HOUR$1.46-3.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-09-30; filed 2025-11-12.
0001493152-25-021740
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-03-31; filed 2026-05-12.
0001493152-26-022489
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 117 previous paragraphs and 123 current paragraphs.
49 unchanged; 34 reworded; 40 added; 29 removed; 5 previous and 0 current paragraphs rearranged.
Tables are not compared: 10 previous and 18 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (40)
Current report
In the first quarter of 2026, the global trade environment shifted significantly following the U.S. Supreme Court’s February 20, 2026 ruling that the International Emergency Economic Powers Act (“IEEPA”) does not authorize the imposition of tariffs, thereby invalidating the reciprocal tariff regime in place throughout 2025. Shortly thereafter, on February 24, 2026, President Donald Trump invoked Section 122 of the Trade Act of 1974, as amended, imposing a temporary 10% global import surcharge on most goods entering the United States for an initial period of 150 days. Concurrently, the suspension of the “de minimis” exemption for low-value shipments ($800 or less) remained in effect, requiring formal entry and duty payment on all parcels. On March 11, 2026, the Office of the U.S. Trade Representative initiated new Section 301 investigations into manufacturing overcapacity and forced labor across 16 economies, including China, which may result in additional, non-timebound tariff measures.
Current report
Our proactive inventory positioning in 2025 provided a temporary buffer during the early months of 2026. However, the Section 122 surcharge and the loss of de minimis treatment have materially increased landed costs and compliance requirements. In response, the Company has undertaken supply chain diversification initiatives, adjusted logistics and customs processes, and implemented selective price increases to mitigate margin pressure. We continue to monitor ongoing trade policy developments, including the potential outcomes of the Section 301 investigations, and remain prepared to adopt further pricing or sourcing adjustments to preserve supply chain continuity and financial resilience in this evolving regulatory environment.
Current report
Pricing Strategy and Policies
Current report
In an ideal world, we would like to price our products at key stone pricing or double wholesale cost. However, we operate in a hypercompetitive environment and we must stay competitive. Therefore, we must draw a good balance between gross margin and revenue. Our main objectives focus on increasing volume and maximizing profits, which is achieved with a customized auto pricing system we developed internally, in combination with well-trained business managers’ judgment on pricing skills, as well as constant monitoring. One principal feature of the pricing system is that it automatically syncs public data of competing offers from Amazon regularly, so business managers can set and adjust pricing based on accurate data, and thus be able to set optimal selling prices for products. In addition, the system is constantly improved with new features and optimizations.
Current report
At a high level, our automated pricing tool helps us stay competitive while our business managers mainly focus on increasing gross margins. Our proprietary repricing tool analyzes sales trends, projected sales, inventory age, inventory cost, potential profits, Fulfillment by Amazon (“FBA”) fees, competing offers, and seasonality and determines an urgency level. Then, depending on the level of urgency, it automatically adjusts prices accordingly.
Current report
Business managers, after establishing the bases for prices, begin to develop pricing strategies for each product, while taking current market conditions and Company goals (e.g., increasing short-term or long-term profits) and strategies into consideration. Furthermore, business managers consider different marketing segments, such as costs and competition, in order to develop effective pricing strategies and policies.
Current report
The following subsections provide more insight into various pricing strategies we have developed over the years. Our internal training mainly focuses on competition-based and value-based pricing policies.
Current report
Buy Box onamazon.com is the top right section on a product page where customers can directly add items to their shopping carts. Since many sellers on Amazon can sell the same product, they must compete to “win the Buy Box” for a certain product. Winning the Amazon Buy Box simply means that you were chosen for the Buy Box placement. When you win this placement, customers have a button to directly add your product to their carts, giving you an advantage over competing sellers. For a seller to be eligible for the Buy Box, they must meet a set of performance-based requirements, including order defect rate, customer shopping experience, time and experience on the Amazon selling platform, and status as a professional seller.
Current report
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 three months ended March 31, 2026.
Current report
Recent Developments
Current report
Executive Officer Cash Bonuses
Current report
On January 28, 2026, the Company’s Audit Committee and the Board of Directors approved the payment of cash bonuses to Sam Lai, the Company’s Chairman of the Board, Chief Executive Officer and Interim Chief Financial Officer, and Maggie Yu, the Company’s Senior Vice President and a member of the Board of Directors, in the amount of $500,000 and $450,000, respectively. Mr. Lai and Ms. Yu are husband and wife, and together beneficially own approximately 94.84% of the voting power of the Company’s outstanding common stock. The Company paid such cash bonuses to Mr. Lai and Ms. Yu on March 25 and March 18, 2026, respectively.
Current report
Addendum No. 6 to Lai Employment Agreement
Current report
On February 24, 2026, the Company entered into Addendum No. 6 (the “Lai Addendum”) to Executive Employment Agreement, as amended, with Mr. Lai (the “Lai Agreement”). Pursuant to the terms of the Lai Addendum, Mr. Lai’s bonus targets and payments were set as follows:
Current report
The satisfaction of the above conditions will be determined at the end of the 2026 fiscal year. For the avoidance of doubt, only one of the above bonus amounts, if at all, will be payable.
Current report
In addition, pursuant to the terms of the Lai Addendum, Mr. Lai is entitled to receive a guaranteed bonus of $100,000 on December 22, 2026.
Current report
Addendum No. 6 to Yu Employment Agreement
Current report
Also on February 24, 2026, the Company entered into Addendum No. 6 (the “Yu Addendum”) to Executive Employment Agreement, as amended, with Ms. Yu (the “Yu Agreement”). Pursuant to the terms of the Yu Addendum, Ms. Yu’s bonus targets and payments were set as follows:
Current report
The satisfaction of the above conditions will be determined at the end of the 2026 fiscal year. For the avoidance of doubt, only one of the above bonus amounts, if at all, will be payable.
Current report
In addition, pursuant to the terms of the Yu Addendum, Ms. Yu is entitled to receive a guaranteed bonus of $100,000 on December 22, 2026.
Current report
Bylaws Amendment
Current report
On March 16, 2026, the Company’s Board of Directors adopted an amendment (the “Bylaws Amendment”) to the Company’s bylaws (the “Bylaws”).
Current report
Prior to adoption of the Bylaws Amendment, the second sentence of Section 7.4 of the Bylaws provided that “[i]f 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 109(b) of the [Delaware General Corporation Law]”, and Section 7.5 of the Bylaws provided (and continues to provide following adoption of the Bylaws Amendment) that “[a]ll powers, duties and responsibilities provided for in [the] Bylaws, whether or not explicitly so qualified, are qualified by the provisions of the [Company’s certificate of incorporation] and applicable law”.
Current report
The Bylaws Amendment had the effect of amending and restating the second sentence of Section 7.4 of the Bylaws to read as follows: “If 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” 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.” In addition, the Bylaws Amendment added a new sentence to the end of Section 7.4 of the Bylaws, providing as follows: “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.”
Current report
The Bylaws Amendment was intended to (i) clarify that, consistent with Section 7.5 of the Bylaws and the provisions of the Delaware General Corporation Law, including Section 109(b) thereof, the Bylaws do not contain any provision that would impose liability on a stockholder for the attorneys’ fees or expenses of the Company or any other party in connection with an internal corporate claim, or in connection with any other claim that a stockholder, acting in its capacity as a stockholder or in the right of the Company, has brought in an action, suit or proceeding; and (ii) provide that all direct and derivative claims related to the Securities Act or the Exchange Act must be brought solely in a U.S. federal court.
Current report
Director Equity Issuances
Current report
On April 6, 2026, the Company issued 1,600 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 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.
Current report
Executive Officer Advance
Current report
Due to changes in Amazon’s Disbursement Policy, daily remittances are now delayed by seven days. In April 2026, Sam Lai, the Company’s Chairman of the Board, Chief Executive Officer and Interim Chief Financial Officer and a significant stockholder of the Company, and Maggie Yu, the Company’s Senior Vice President, a member of the Company’s Board of Directors and a significant stockholder of the Company, advanced a total of $1,601,000 to the Company to provide support. At present, no formal contract has been entered into.
Current report
Revenues, Net
Current report
Our total orders in the three months ended March 31, 2026 were approximately 1,359,094, as compared to 1,229,792 orders in the three months ended March 31, 2025, representing an increase of 10.5%. 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.
Current report
Cost of Revenues
Current report
Total Operating Expenses
Current report
Total Other (Expenses) Income, Net
Current report
Total other expenses, net, for the three months ended March 31, 2026 was $8,988, compared to total other income, net, of $15,071 for the three months ended March 31, 2025, representing a $24,059, or 159.6%, decrease in total other income, net. This decrease wasdue to the Company received a subsidy from the High-Value Industrial Promotion Fund in 2025.
Current report
For the three months ended March 31, 2026, 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 three months ended March 31, 2025. The increase in net cash used in operating activities was primarily driven by higher inventory purchases during 2026. 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.
Current report
Despite the increase in revenues to $29,930,342 for the three months ended March 31, 2026, as compared to $25,837,090 for the three months ended March 31, 2025, the increase in revenues was offset by a corresponding increase in cost of revenues of $2,220,775 and an increase in operating expenses of $1,651,214.
Current report
We have two operating leases (Flywheel has two office leases in Taiwan). The respective lease terms are June 10, 2025 to July 9, 2027, and December 1, 2025 to November 30, 2028, respectively.
Current report
Significant estimates, include but not limited to, estimates associated with the collectability of accounts receivable, useful life of property and equipment, impairment of long-lived assets, valuation allowance for deferred tax assets, inventory valuation and inventory provision.
Current report
Presentation of Sales Taxes - Governmental authorities impose sales tax on all of the Company’s sales to nonexempt customers. The Company collects sales tax from customers and remits the entire amount to the governmental authorities. The Company’s accounting policy is to exclude the tax collected and remitted from revenues and cost of revenues.
Removed paragraphs (29)
Previous report
Market Description/Opportunities
Previous report
Total U.S. retail sales increased 2.5% to $7.42 trillion in 2024, from $7.24 trillion in 2023. Consumers spent $1,192.29 billion online with U.S. merchants in 2024, which represents approximately 16.07% of total U.S. retail sales for the year, compared to 15.45% in 2023.
Previous report
Amazon accounted for approximately 40% of all e-commerce in the United States, which makes Amazon the biggest ecommerce giant currently in the market.
Previous report
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.
Previous report
In the first quarter ended March 31, 2025, the U.S. presidential administration’s announcement of additional tariff increases—particularly on China-origin goods—introduced elevated volatility and uncertainty across global supply chains. In response, the Company undertook a strategic reassessment of its procurement and inventory management policies, anticipating both rising import costs and the risk of inventory shortages driven by accelerated market stockpiling.
Previous report
As of April 2025, our policy for domestic inventory procurement was expanded to keep our inventory coverage from 1.5-2 months to 3-6 months. This adjustment was made to safeguard fulfillment continuity and buffer against potential mid-year disruptions, including indirect tariff spillover effects or local supply tightness caused by global volatility.
Previous report
In parallel, the Company initially suspended all containerized exports for shipments originating from China when the new tariff policy was originally enacted, as we were unwilling to incur significantly higher import costs. Following the implementation of a 90-day tariff relief window under a temporary U.S.–China trade agreement, we promptly resumed exports and front-loaded the remainder of our 2025 sales-related inventory within that window. This approach allowed us to avoid elevated duties while reducing exposure to future trade uncertainties in a still-fluid regulatory environment.
Previous report
To offset increased input costs and reduce the risk of stockouts, we implemented measured price increases on select finished goods inventory. These actions were designed to support margin stability and ensure product availability in a highly dynamic trade environment.
Previous report
These proactive measures have successfully enabled the Company to secure adequate inventory to meet its 2025 sales projection. Therefore, we do not foresee any material impact from future tariff changes in the immediate term, although we will continue to monitor trade policy developments and stand prepared to adjust our strategy as required.
Previous report
Due to recent policy changes affecting exports from China—specifically, tighter customs regulations that have significantly increased clearance costs, combined with ongoing uncertainty over U.S. import tariffs—Hour Loop has decided to modify the Incoterms for all shipments originating from China.
Previous report
Although this adjustment is expected to result in higher overall costs, it ensures continuity and stability across our supply chain.
Previous report
At present, all import and export operations remain active, and the Company will continue to make flexible adjustments once further updates on U.S.–China tariff policies become available.
Previous report
Revenues
Previous report
The Company generated $33,424,703 in revenues in the three months ended September 30, 2025, as compared to $31,075,498 in revenues in the same period in 2024. This represents an increase in revenues of $2,349,205, or 7.56%. Our total orders in the three months ended September 30, 2025 were approximately 1,656,681, as compared to 1,472,515 orders in the three months ended September 30, 2024, representing an increase of 12.51%. We attribute both increases to the Company’s strategic focus on converting inventory into sales. During the three months ended September 30, 2025, sales growth was primarily driven by inventory procured three to six months earlier. We intentionally raised inventory levels to avoid stockouts and to mitigate potential cost and price impacts associated with tariff concerns. Supported by improvements in both metrics, this strategy resulted in higher profitability compared to the three months ended September 30, 2024.
Previous report
Cost of Goods Sold
Previous report
Operating Expenses
Previous report
Other Expenses, Net
Previous report
Other expenses, net, for the three months ended September 30, 2025 was $28,075, compared to other expenses, net, of $34,445 for the three months ended September 30, 2024.
Previous report
For the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024
Previous report
Revenues
Previous report
Cost of Goods Sold
Previous report
Operating Expenses
Previous report
Other Expenses, Net
Previous report
Other expenses, net, for the nine months ended September 30, 2025 was $51,174, compared to other expense, net, of $76,963 for the nine months ended September 30, 2024. The decrease in other expenses represents the repayment of part of the loans from stockholders for the nine months ended September 30, 2025, which led to a reduction in interest expenses.
Previous report
Total Comprehensive Income
Previous report
Total comprehensive income for the nine months ended September 30, 2025 was $2,464,931, as compared with $2,175,986 for the nine months ended September 30, 2024. The increase in total comprehensive income was attributed to reasons mentioned above.
Previous report
For the nine months ended September 30, 2025, cash used in operating activities amounted to $425,000, as compared to $1,231,885 of cash provided by operating activities for the nine months ended September 30, 2024. The decrease in cash used in operating activities was driven by our strategic policy to front-load our inventory since the second quarter of 2025.
Previous report
We have one operating lease (via Flywheel, with its one office lease in Taiwan). The lease term is June 10, 2025 to July 9, 2027.
Previous report
Critical Accounting Policies and Estimates
Reworded paragraphs (34)
Previous wording
We are an online retailer engaged in e-commerce retailing in the U.S. market. We have operated as a third-party seller onwww.amazon.com(“Amazon”) since 2013, and onwww.walmart.com (“Walmart”) since 2020. We have also sold merchandise on our website atwww.hourloop.com since 2013. To date, we have generated practically all of our revenue as a third-party seller on Amazon and only a negligible amount of revenue from our operations on our website atwww.hourloop.com and as a third-party seller on Walmart. We manage more than 100,000 stock-keeping units (“SKUs”). Product categories include home/garden décor, toys, kitchenware, apparel, and electronics. Our primary strategy is to bring most of our vendors’ product selections to the customers. We have advanced software that assists us in identifying product gaps so we can keep such products in stock year-round including the entirety of the fourth quarter (holiday season) of the calendar year. In upcoming years, we plan to expand our business rapidly by increasing the number of business managers, vendors and SKUs.
Current wording
We are an online retailer engaged in e-commerce retailing in the U.S. market. We have operated as a third-party seller onwww.amazon.com (“Amazon”) since 2013, and onwww.walmart.com (“Walmart”) since 2020. We have also sold merchandise on our website atwww.hourloop.com since 2013. To date, we have generated practically all of our revenues as a third-party seller on Amazon and only a negligible amount of revenues from our operations on our website atwww.hourloop.com and as a third-party seller on Walmart. We manage more than 100,000 stock-keeping units (“SKUs”). Product categories include home/garden décor, toys, kitchenware, apparel, and electronics. Our primary strategy is to bring most of our vendors’ product selections to the customers. We have advanced software that assists us in identifying product gaps so we can keep such products in stock year-round including the entirety of the fourth quarter (holiday season) of the calendar year. In upcoming years, we plan to expand our business rapidly by increasing the number of business managers, vendors and SKUs.
Previous wording
We were 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
We were founded in 2013 by Sam Lai, our Chairman of the Board, Chief Executive Officer, interim Chief Financial Officer and significant stockholder, and Maggie Yu, our Senior Vice President, a member of our Board of Directors and a significant stockholder. Mr. Lai and Ms. Yu are husband and wife. With their vision, leadership, and software development skills, the Company grew rapidly. From 2013 to 2025, net sales grew from $0 to $142,440,236.
Previous wording
For the nine months ended September 30, 2025 and 2024, we generated net revenues of $86,364,899 and $83,827,327, respectively, and reported net income of $2,362,109 and $2,184,611, and cash flow used in operating activities of $425,000 and $1,231,885, respectively.
Current wording
For the three months ended March 31, 2026 and 2025, we generated net revenues of $29,930,342 and $25,837,090, respectively, and reported net income of $823,482 and $654,517, respectively, and cash flow used in operating activities of $2,201,403 and $23,891, respectively. As noted in our unaudited consolidated financial statements, as of March 31, 2026, we had retained earnings of $1,933,156.
Previous wording
The following table shows comparisons of our unaudited income statements for the three and nine months ended September 30, 2025 and 2024.
Current wording
The following table shows a comparison of our unaudited income statements for the three months ended March 31, 2026 and 2025.
Previous wording
The Company generated $86,364,899 in revenues in the nine months ended September 30, 2025, as compared to $83,827,327 in revenues in the same period in 2024. This represents an increase in revenues of $2,537,572, 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 the nine months ended September 30, 2025 were approximately 4,140,448, as compared to 3,864,609 orders in the nine months ended September 30, 2024, representing an increase of 7.14%. This increase in orders played a pivotal role in driving the overall revenue growth. The increase in orders demonstrates 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 7.14% 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 did not match this proportion.
Current wording
The Company generated $29,930,342 in revenues, net in the three months ended March 31, 2026, as compared to $25,837,090 in revenues, net in the same period in 2025. This represents an increase in revenues, net of $4,093,252, or 15.8%. We attribute this increase to our continued growth and maturity in our operating model, despite an overall e-commerce traffic slowdown and intense competition.
Previous wording
Cost of goods sold for the three months ended September 30, 2025 totaled $16,249,395, as compared to $14,036,187 for the three months ended September 30, 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.
Current wording
Cost of revenues for the three months ended March 31, 2026 totaled $13,912,567, as compared to $11,691,792 for the three months ended March 31, 2025. 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.
Previous wording
Operating expenses for the three months ended September 30, 2025 totaled $16,433,302, representing a $115,834, or 0.71%, increase from the $16,317,468 of operating expenses for the three months ended September 30, 2024. This change was caused by an increase in operating efficiency.
Current wording
Total operating expenses for the three months ended March 31, 2026 totaled $14,875,647, representing a $1,651,214, or 12.5%, increase from the $13,224,433 of total operating expenses for the three months ended March 31, 2025. This change was caused by an increase in operating efficiency.
Previous wording
Total comprehensive income for the three months ended September 30, 2025 was $492,010, as compared with $485,613 for the three months ended September 30, 2024. The increase in total comprehensive income was attributed to a the reasons mentioned above.
Current wording
Total comprehensive income for the three months ended March 31, 2026 was $805,866, as compared to $640,981 for the three months ended March 31, 2025. The increase in total comprehensive income was attributed to the reasons mentioned above.
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 $796,307 and $1,194,239 as of September 30, 2025 and 2024, 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 $992,886 and $3,792,033 as of March 31, 2026 and December 31, 2025, respectively.
Previous wording
We generate liquidity from revenues generated by our ongoing business, and from debt and equity issuances to fund our operations.
Current wording
We generate liquidity from the profitability of our ongoing business, and from debt to fund our operations.
Previous wording
The following table shows a summary of our cash flows for the nine months ended September 30, 2025 and 2024.
Current wording
The following table shows a summary of our cash flows for the three months ended March 31, 2026 and 2025.
Previous wording
For the nine months ended September 30, 2025, $48,963 in cash was used in investing activities, compared to $35,031 in cash used in investing activities for the nine months ended September 30, 2024. The increase primarily reflects higher purchases of property and equipment for the nine months ended September 30, 2025.
Current wording
For the three months ended March 31, 2026, $5,662 in net cash was used in investing activities, compared to $720 in net cash used in investing activities for the three months ended March 31, 2025. The increase primarily reflects higher purchases of property and equipment for the three months ended March 31, 2026.
Previous wording
For the nine months ended September 30, 2025, cash used in financing activities amounted to $839,000, as compared to cash provided by financing activities of $-0- for the nine months ended September 30, 2024. The increase in cash outflows was primarily due to repayments made to related parties for the nine months ended September 30, 2025.
Current wording
For the three months ended March 31, 2026, net cash used in financing activities amounted to $600,000, as compared to net cash used in financing activities of $839,000 for the three months ended March 31, 2025. The cash outflow was primarily due to repayments made to related parties for the three months ended March 31, 2026 and 2025.
Previous wording
On August 18, 2022, Flywheel entered into a line of credit agreement in the amount of $6,940,063 with Taishin International Bank. The line of credit initially matured on August 30, 2023, but was subsequently extended to November 19, 2025. The line of credit bears interest at a rate of 3.33% per annum.
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. As of March 31, 2026 and December 31, 2025, the outstanding balance under the Taishin line of credit was $626,076 and $637,348, respectively.
Previous wording
From time to time, we receive loans and advances from our stockholders to fund our operations. As of September 30, 2025, we had a total of $2,660,418 due to related parties.
Current wording
From time to time, we receive loans and advances from our stockholders to fund our operations. As of March 31, 2026, we had a total of $2,060,418 due to related parties, which included $2,060,418 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.
Previous wording
On July 27, 2021, we entered into a loan agreement with Mr. Lai and Ms. Yu for 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. As subsequently amended, the loan agreement provides for an annual interest rate of 5.5%, with a maturity date of December 31, 2025.
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 preparation of consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates.
Current wording
Use of Estimates - The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
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 - The Company considers all highly liquid financial instruments purchased with original maturities of three months or less to be cash. The Company’s 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. The Company’s 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 credit loss. On a periodic basis, management evaluates its accounts receivable and determines whether to provide an allowance for credit losses in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 326. Credit losses are provided based on a past history of write-offs, collections, current credit conditions, current economic conditions, reasonable and supportable forecasts of future economic conditions. The evaluation is performed on a collective basis where similar characteristics exist, primarily based on similar services or products offerings. We adopted the standard effective January 1, 2023. The impact of the adoption was not considered material to the financial statements and primarily resulted in new/enhanced disclosures only. A receivable is considered past due if the Company has not received payments based on agreed-upon terms. The Company generally does not require any security or collateral to support its receivables. The collection is primarily through Amazon and the collection period is usually less than seven days. The Company performs on-going evaluations of its customers and maintains an allowance for credit losses as the Company deems necessary or appropriate. As of September 30, 2025 and December 31, 2024, 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 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 March 31, 2026 and December 31, 2025, the Company did not deem it necessary to have an allowance for credit loss.
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 September 30, 2025 and December 31, 2024, $499,752 and $560,293, respectively, were written down from the cost of inventories to their net realizable values. Full inventory allowance is recorded for the inventory SKU not sold for more than one year.
Current 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 March 31, 2026 and December 31, 2025, $409,455 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.
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 three and nine months ended September 30, 2025 and 2024.
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. The Company did not record any impairment charges for the three months ended March 31, 2026 and 2025.
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 - The Company accounts for revenues in accordance with ASC Topic 606, Revenue from Contracts with Customers. 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.
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
The Company recognizes revenues in accordance with ASC Topic 606, which provided a five-step model for recognizing revenues 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
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 revenues 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.
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 three and nine months ended September 30, 2025 and 2024 were recognized at a point in time. Customer confirmations are executed at the time an order is placed through third-party online channels. For all of the Company’s sales and distribution channels, revenue is recognized when control of the product is transferred to the customer (i.e., when the Company’s performance obligation is satisfied), which typically occurs at shipment date. As a result, the Company has a present and unconditional right to payment and record the amount due from the customer in accounts receivable.
Current wording
The Company derives its revenues from the sale of consumer products. The Company sells its products directly to consumers through online retail channels. The Company considers customer order confirmations to be a contract with the customer. For each contract, the promise to transfer products is identified as the sole performance obligation. Transaction prices are evaluated for potential refunds or adjustments, determining the net consideration expected. Revenues for the three months ended March 31, 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.
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 7.09% and 6.00% of gross sales for the nine months ended September 30, 2025 and 2024, respectively.
Current wording
The customer can return products within 30 days after the products are delivered and estimated sales returns are calculated based on the expected returns. The rates of sales returns were 6.73% and 6.35% of gross sales for the three months ended March 31, 2026 and 2025, 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, the Company offers price discounts on certain selected items to stimulate the sales of those items. Revenues are 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 revenues to calculate the net revenues 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 $19,232,988 and $18,749,793 for the nine months ended September 30, 2025 and 2024, 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. The Company treats shipping and handling as fulfillment activities, not separate performance obligations. Costs for shipping and handling were $6,407,406 and $5,748,972 for the three months ended March 31, 2026 and 2025, respectively, recorded as selling and marketing expenses.
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 (“CODM”) for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. The Company’s CODM 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 CODM 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
The Company uses the “management approach” to determine reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker (“CODM”) for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. The Company’s CODM 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 CODM 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.
Previous wording
Deferred tax assets represent amounts available to reduce income taxes payable in future periods. Deferred tax assets are evaluated for future realization and reduced by a valuation allowance to the extent we believe they will not be realized. We consider many factors when assessing the likelihood of future realization of our deferred tax assets, including recent cumulative loss experience and expectations of future earnings, capital gains and investment in such jurisdiction, the carry-forward periods available to us for tax reporting purposes, and other relevant factors.
Current wording
Deferred tax assets represent amounts available to reduce income taxes payable in future periods. Deferred tax assets are evaluated for future realization and reduced by a valuation allowance to the extent the Company believe they will not be realized. The Company considers many factors when assessing the likelihood of future realization of its deferred tax assets, including recent cumulative loss experience and expectations of future earnings, capital gains and investment in such jurisdiction, the carry-forward periods available to the Company’s for tax reporting purposes, and other relevant factors.
Previous wording
The Company maintains reserves for potential credit losses on customer accounts when deemed necessary. Significant customers are those which represent more than 10% of the Company’s total net revenue or gross accounts receivable balance at the balance sheet date. During the three and nine months ended September 30, 2025 and 2024, the Company had no customer that accounted for 10% or more of total net revenues. In addition, as of September 30, 2025 and December 31, 2024, the Company had no customer that accounted for 10% or more of gross accounts receivable. As of September 30, 2025 and December 31, 2024, all of the Company’s accounts receivable were held by the Company’s sales platform agent, Amazon, which collects money on the Company’s behalf from its customers. Therefore, the Company’s accounts receivable are comprised of receivables due from Amazon and the reimbursement from Amazon to the Company usually takes less than seven days.
Current wording
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 months ended March 31, 2026 and 2025, the Company had no customer that accounted for 10% or more of total net revenues. In addition, as of March 31, 2026 and December 31, 2025, the Company had no customer that accounted for 10% or more of gross accounts receivable. As of March 31, 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 are comprised of receivables due from Amazon and the reimbursement from Amazon to the Company usually takes approximately 14 days.
Previous wording
The Company’s business is reliant on one key vendor which currently provides the Company with its sales platform, logistics and fulfillment operations, including certain warehousing for the Company’s net goods, and invoicing and collection of its revenue from the Company’s end customers. During the nine months ended September 30, 2025 and 2024, approximately 99% and 99%, respectively, of the Company’s revenue was through or with the Amazon sales platform.
Current wording
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 three months ended March 31, 2026 and 2025, approximately 98% and 99%, respectively, of the Company’s revenues was through or with the Amazon sales platform.
Previous wording
Advertising and Promotion Expenses – Our policy is to recognize advertising costs as they are incurred. Advertising and promotion expenses were $3,190,480 and $3,096,997 for the nine months ended September 30, 2025 and 2024, respectively.
Current wording
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 and $1,004,083 for the three months ended March 31, 2026 and 2025, respectively.
Previous wording
**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 nine months ended September 30, 2025 and 2024. Therefore, the diluted earnings per share is the same as the basic earnings per share.
Current wording
**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 months ended March 31, 2026 and 2025. Therefore, the diluted earnings per share is the same as the basic earnings per share.
Rearranged previous paragraphs (5)
Previous report — wording carried elsewhere
For the three months ended September 30, 2025 and 2024, we generated net revenues of $33,424,703 and $31,075,498, respectively, and reported net income of $530,591 and $469,647, respectively.
Previous report — wording carried elsewhere
As noted in our unaudited consolidated financial statements, as of September 30, 2025, we had retained earnings of $1,766,934.
Previous report — wording carried elsewhere
Cost of goods sold for the nine months ended September 30, 2025 totaled $39,546,941, as compared to $36,710,400 for the nine months ended September 30, 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 report — wording carried elsewhere
Operating expenses for the nine months ended September 30, 2025 totaled $43,534,236, representing a $385,480, or 0.88%, decrease from the $43,919,716 of operating expenses for the nine months ended September 30, 2024. This change was caused by an increase in operating efficiency.
Previous report — wording carried elsewhere
As of September 30, 2025 and December 31, 2024, the outstanding balance under the Taishin line of credit was $658,003 and $610,967, respectively.