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United States securities and exchange commission logo
August 27, 2021
Sam Lai
Chief Executive Officer
Hour Loop, Inc.
8201 164th Ave NE #200
Redmond, WA 98052-7615
Re: Hour Loop, Inc.
Draft Registration
Statement on Form S-1
Submitted July 29,
2021
CIK No. 0001874875
Dear Mr. Lai:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Draft Registration Statement on Form S-1
Cover Page
1. Please revise the cover
page to clearly reflect that you are seeking to register the offering
of Representative's
Warrants (including the underlying common shares), in addition to the
firm commitment public
offering of your common stock. Refer to Item 501(b)(2) of
Regulation S-K.
Sam Lai
FirstName
Hour Loop,LastNameSam Lai
Inc.
Comapany
August 27, NameHour
2021 Loop, Inc.
August
Page 2 27, 2021 Page 2
FirstName LastName
Prospectus Summary
Overview
Our Business, page 1
2. Please expand your disclosure to clarify the nature of your
third-party seller relationship
with Amazon and Walmart. In this regard, we note you disclose at page
F-11 that in
2019, approximately 100% of your revenue was through or with the
Amazon sales
platform and in 2020, 100% of your net revenue was through or with the
Amazon sales
platform. If appropriate, also make corresponding revisions to your
risk factor titled "Our
revenue is dependent upon maintaining our relationship with Amazon" at
page 21.
Continuous Process Optimization, page 5
3. Please expand your disclosure to explain your continuous process
optimization and how
you implement the same in your operations.
Improving Sales of Popular Items and Securing the Inventories Without Paying
Higher Storage
Fees by Partnering with Third Party Warehouses, page 9
4. Please expand your disclosure to clarify whether you have initiated
the process of
establishing relationships with third-party warehouses and, if so, the
current status of such
process.
Risk Factors
By purchasing common stock in this offering, you are bound by the fee-shifting
provision...,
page 26
5. Please revise your disclosure here and on page 90 to disclose the
scope of the fee-
shifting provision included in your bylaws, including the level of
recovery required by the
plaintiff to avoid payment. Disclose who is subject to the provision
(e.g., former and
current shareholders, legal counsel, expert witnesses) and who would
be allowed to
recover (e.g., company, directors, officers, affiliates). In addition,
please include risk
factor disclosure that the provision could discourage shareholder
lawsuits that might
otherwise benefit the company and its shareholders.
Use of Proceeds, page 36
6. Please revise to state with more specificity the approximate amount of
proceeds to be used
for each identified purpose. Also explain your references to the
potential acquisition of
"complementary compounds" and to the "pace of progress of our research
and
development."
7. We note the risk factor disclosure at page 35 that you "have not
allocated specific amounts
of the net proceeds from this offering for any of the foregoing
purposes" and that
"management will have significant discretion and flexibility in
applying the net proceeds
of this offering," but please see Instruction 7 to Item 504 of
Regulation S-K. If you have
Sam Lai
Hour Loop, Inc.
August 27, 2021
Page 3
no specific plan for the proceeds or a significant portion thereof,
disclose that and state the
principal reasons for the offering. See Item 504.
Capitalization, page 37
8. Please revise your capitalization table to also disclose your
accumulated other
comprehensive loss since this is also a component of your total
stockholders' equity.
Description of Business, page 39
9. You disclose at page 45 that your key competitor is Amazon Retail. You
state that it
frequently buys the same brands you sell and then sells them at a
loss. At page 40, you
state that among "9.7 million sellers on Amazon, we believe we have
two main
competitive advantages," one of which is your "strong operations and
sales teams." You
identify advertising as one of their areas of specialization. Disclose
in further detail how
and where you advertise your products. As part of the expanded
disclosure, please
explain how your advertising and the other listed areas of
specialization provide you with
a competitive advantage over your competition, including Amazon
Retail. Also explain
your strategy for competing against a larger entity which sells the
same products at a loss.
10. Under "Affiliated Loans" at page 49, you refer to $1.2M in loans
"previously advanced" to
the registrant from your founding officers who are husband and wife.
Please expand your
disclosure to clarify when Mr. Lai and Ms. Yu advanced these loans to
the registrant.
Also, please file the related agreements as exhibits or explain why
you have not filed
them. See Item 601(b)(10) of Regulation S-K.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations, page 52
11. Please expand your disclosure to discuss in greater detail the basis for
the changes in the
revenue and cost of goods sold between periods, quantifying each
underlying factor
identified. For example, expand your discussion of revenue to quantify
changes in price
and changes in volume. Please provide corresponding disclosure for your
net cash from
operating activities. In addition, revise to quantify the specific
impacts you have
experienced to your results of operations and relevant metrics resulting
from the COVID-
19 pandemic. In that regard, we note you disclose on page 56 that your
business
operations were negatively impacted by disruptions in your supply chain,
which limited
your ability to source merchandise, and limits on products fulfillment
placed by Amazon.
FirstName LastNameSam Lai
Management, page 60
Comapany NameHour Loop, Inc.
AugustPlease
12. disclose
27, 2021 Page 3Mr. Lenner's age. Refer to Item 401(a) of Regulation
S-K.
FirstName LastName
Sam Lai
FirstName
Hour Loop,LastNameSam Lai
Inc.
Comapany
August 27, NameHour
2021 Loop, Inc.
August
Page 4 27, 2021 Page 4
FirstName LastName
Executive Compensation, page 67
13. We note your disclosure in the Summary Compensation Table, including
bonuses which
comprised more than 75% of total compensation for both officers in
2020. Please provide
under "Elements of Compensation" a narrative description of the
bonuses paid to your
Chief Executive Officer and Senior Vice President, including an
explanation of how the
amounts were determined. Refer to Item 402(o) of Regulation S-K. In
addition, please
expand your description of your employment agreements to disclose the
guaranteed
bonuses to your executive officers in 2022. In that regard, we note
that Mr. Lai and Ms.
Yu are each guaranteed a $100,000 cash bonus on December 31, 2022.
Also disclose with regard to the referenced bonuses for each of the
husband and wife
officers (who comprise two of the four directors) how ties will be
broken in the event that
the two independent directors vote the opposite way from the couple
when determining
whether the listed milestones have been met "as determined by the
Board." You state that
because you qualify as a controlled company, you do not intend to have
a compensation
committee.
Security Ownership of Certain Beneficial Owners and Management, page 77
14. At page 79, you state that Sam Lai and Maggie Yu "who are husband and
wife,
beneficially owns 10,000,000 shares of the Company s common stock,
representing
100.00% of the voting power of the Company s outstanding common
stock. As a result,
the Company is a 'controlled company'" for purposes of the Nasdaq
Capital Market
corporate governance standards. Please revise the beneficial ownership
table to list each
as owners of all 10M shares, and provide a footnote explaining the
tabular presentation.
In the alternative, explain why you believe that the registrant should
be deemed a
"controlled company."
Hour Loop, Inc. Consolidated Financial Statements
Notes to Consolidated Financial Statements
Note 1 - Nature of Operations and Summary of Significant Accounting Policies
Reorganization, page F-7
15. Your disclosure indicates that on June 30, 2021, the Company completed
a corporate
reorganization to convert its status from an S Corporation to a C
Corporation with an
effective date of July 27, 2021. You also disclose that the retained
earnings as of July 27,
2021 will be distributed to the S Corporation shareholders consistent
with Internal
Revenue Code 1362. If the adjustments resulting from the conversion to
a C corporation
include adjustments for items in addition to income taxes, please
revise to disclose pro
forma income taxes, net earnings and earnings per share on the face of
your statements of
operations for the latest fiscal year and subsequent interim period
presented. Alternatively,
if the resultant adjustments only affect income taxes, revise to
disclose pro forma income
taxes, net earnings and earnings per share for all periods presented.
Additionally, a pro
Sam Lai
Hour Loop, Inc.
August 27, 2021
Page 5
forma balance sheet as of the latest period presented should be provided
alongside the
historical balance sheet giving effect to the distribution of retained
earnings to the S
Corporation shareholders. The notes to your financial statements should
also be revised to
explain the nature of your pro forma presentation. Your capitalization
table included on
page 37 of the filings should also be revised to include a separate
column showing the pro
forma effect of the distribution of retained earnings to the S
Corporation shareholders.
Revenue Recognition, page F-9
16. You disclose on page F-10 that you incurred shipping and handling costs
of $7,159,519
and $5,856,417 for 2020 and 2019, respectively. Please revise to explain
where these
costs have been classified in your consolidated statement of operations.
General
17. Please provide us supplemental copies of all written communications as
defined in Rule
405 under the Securities Act that you or anyone authorized to do so on
your behalf have
presented or expect to present to potential investors in reliance on
Section 5(d) of the
Securities Act, whether or not you retained or intend to retain copies
of these
communications. Please contact legal staff associated with the review of
this filing to
discuss how to submit the materials, if any, to us for review.
You may contact Tatiana Meadows, Staff Accountant, at (202) 551-3322 or
Linda
Cvrkel, Staff Accountant, at (202) 551-3813 if you have questions regarding
comments on the
financial statements and related matters. Please contact Karina Dorin, Staff
Attorney, at (202)
551-3763 or, in her absence, Timothy S. Levenberg, Special Counsel, at (202)
551-3707 with
any other questions.
Sincerely,
FirstName LastNameSam Lai
Division of
Corporation Finance
Comapany NameHour Loop, Inc.
Office of Trade &
Services
August 27, 2021 Page 5
cc: Laura Anthony, Esq.
FirstName LastName