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FORM
CURRENT REPORT
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Item 2.02. Results of Operations and Financial Condition.
On November 14, 2022, Hour Loop, Inc. (the “Company”) issued a press release announcing its financial results for the quarter ended September 30, 2022. A copy of this press release is attached hereto as Exhibit 99.1 and incorporated herein by reference. The information contained in the website is not a part of this current report on Form 8-K.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit No. | Description | |
| 99.1 | Press release issued by the registrant on November 14, 2022. | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| HOUR LOOP, INC. | ||
| Dated: November 14, 2022 | By: | /s/ Sam Lai |
| Name: | Sam Lai | |
| Title: | Chief Executive Officer and Interim Chief Financial Officer | |
Exhibit 99.1
Hour Loop Reports Third Quarter 2022 Results
Demonstrates Strong Execution Despite Challenging Macroeconomic Environment and Unfavorable e-Commerce Environment
Raises Full Year 2022 Revenue Guidance Range of $91 million to $100 million
Redmond, WA, Nov 14, 2022 – Hour Loop, Inc. (NASDAQ: HOUR) (“Hour Loop”), a leading online retailer, announces its financial and operational results for the third quarter ended September 30, 2022.
Financial Highlights for Third Quarter 2022:
| ● | Total revenues increased 68.4% and 18.6% to $17.6 million, compared to $10.4 million in the year-ago period and $14.8 million for the second quarter of 2022, respectively. |
| ● | Net income totaled $0.15 million, compared to $0.30 million in the year-ago period and net loss of $0.31 million for the second quarter of 2022. |
| ● | Cash used in operating activities for the nine months ended September 30, 2022, was $14.5 million, compared to cash provided by operating activities $1.6 million in the year-ago period. |
Management Commentary
“We are pleased to report our strong third quarter results, in which we saw accelerated revenue growth and a return to profitability,” said Sam Lai, CEO of Hour Loop, “We take the long term view on growth, which is why we strategically front loaded our investment in the first half of the year. Our headcount grew from 67 to 191 and our inventories grew from $7 million to $21 million. This put tremendous pressure on our bottom line in a very challenging year for e-commerce. Nevertheless, we executed well and continue to position the business for long-term growth and value creation.”
Third Quarter 2022 Financial Results
Total revenues in the third quarter of 2022 were $17.6 million compared to $10.4 million in the year-ago period and $14.8 million for the second quarter of 2022, respectively. The increase was primarily due to continued growth and maturity in our operating model, despite a continuation in overall e-commerce traffic slowdown.
Gross profit percentage increased 1.58% to 54.43%, compared to 52.85% of total revenues in the comparable period a year ago but decreased from 56.46% for the second quarter of 2022. The quarter-over-quarter increase was a function of our aggressive growth initiatives and a heightened inflationary environment causing higher cost of goods sold, increased FBA fees, and strong competition.
Operating expenses increased 78.8% to $9.5 million compared to $5.3 million in the year- ago period. This was a function of increased platform fees paid to Amazon, and a significant increase in our labor force.
Net income in the third quarter was $0.15 million, or $0.005 per diluted share, compared to $0.30 million, or $0.009 per diluted share, in the comparable year-ago period. The decrease was driven by increased costs and expenses as a result of the reasons mentioned above. Nevertheless, the Company was able to quickly bounce back to profitability after net loss for consecutive two quarters.
As of September 30, 2022, the Company had $1.7 million in cash and cash equivalents, compared to $10.6 million as of December 31, 2021. This decrease was driven by the growth of inventory and labor force.
Inventories as of September 30, 2022, were $21.4 million compared to $7.0 million as of December 31, 2021. The Company intentionally invested heavily in inventories for strategic reasons.
Full Year 2022 Financial Outlook
For the full year 2022, the Company is raising its guidance for gross revenue to be in the range of $91 million to $100 million, representing 36% to 50% year-over-year growth.
About Hour Loop, Inc.
Hour Loop is an online retailer engaged in e-commerce retailing in the U.S. market. It has operated as a third-party seller on www.amazon.com and has sold merchandise on its website at www.hourloop.com since 2013. The Company expanded its operations to www.walmart.com in October 2020. To date, the Company has generated practically all of its revenue as a third-party seller on www.amazon.com and only a negligible amount of revenue from its own website and Walmart. Hour Loop manages more than 100,000 stock-keeping units (“SKUs”). Product categories include home/garden décor, toys, kitchenware, apparels, and electronics. The Company’s primary strategy is to bring most of its vendors product selections to the customers. It has advanced software that assists the Company in identifying product gaps so it can keep such products in stock year-round including the entirety of the last quarter (holiday season) of the calendar year. In upcoming years, Hour Loop plans to expand its business rapidly by increasing the number of business managers, vendors and SKUs.
Forward-Looking Statements
This press release contains statements that constitute “forward-looking statements” including with respect to the Company’s business strategy, product development and industry trends. Forward-looking statements are subject to numerous conditions, many of which are beyond the control of the Company. While the Company believes these forward-looking statements are reasonable, undue reliance should not be placed on any such forward-looking statements, which are based on information available to the Company on the date of this release. These forward-looking statements are based upon current estimates and assumptions and are subject to various risks and uncertainties, including, without limitation, those set forth in the Company’s filings with the Securities and Exchange Commission, as the same may be updated from time to time. Thus, actual results could be materially different. The Company undertakes no obligation to update these statements whether as a result of new information, future events or otherwise, after the date of this release, except as required by law.
Investor Contact
Finance Department
finance@hourloop.com
HOUR LOOP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
As of Sep 30, 2022 (Unaudited) and December 31, 2021
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 1,704,106 | $ | 10,592,572 | ||||
| Accounts receivable, net | 263,425 | 125,991 | ||||||
| Inventory, net | 21,358,386 | 7,041,864 | ||||||
| Prepaid expenses and other current assets | 856,543 | 965,298 | ||||||
| Total current assets | 24,182,460 | 18,725,725 | ||||||
| Property and equipment, net | 238,403 | 15,667 | ||||||
| Deferred tax assets | 312,197 | 45,488 | ||||||
| Right-of-use lease assets | 518,575 | 30,111 | ||||||
| TOTAL ASSETS | $ | 25,251,635 | $ | 18,816,991 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Short-term debt | $ | 630,915 | $ | - | ||||
| Accounts payable | 11,013,769 | 9,539,258 | ||||||
| Accrued expenses and other current liabilities | 1,129,555 | 1,282,161 | ||||||
| Due to related parties | 4,316,211 | 5,214,794 | ||||||
| Income taxes payable | 126,333 | 126,333 | ||||||
| Current operating lease liabilities | 372,579 | - | ||||||
| Total current liabilities | 17,589,362 | 16,162,546 | ||||||
| Non-current liabilities | ||||||||
| Long-term operating lease liabilities | 151,314 | - | ||||||
| Total liabilities | 17,740,676 | 16,162,546 | ||||||
| Commitments and contingencies | - | |||||||
| Stockholders’ equity | ||||||||
| Preferred stock: $0.0001 par value, 10,000,000 shares authorized, none issued and outstanding as of September 30, 2022 and December 31, 2021 | - | - | ||||||
| Common stock: $0.0001 par value, 300,000,000 shares authorized, 35,047,828 and 33,300,000 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively | 3,505 | 3,330 | ||||||
| Additional paid-in capital | 5,660,321 | 4,291 | ||||||
| Retained earnings | 1,846,605 | 2,654,695 | ||||||
| Accumulated other comprehensive income (loss) | 528 | (7,871 | ) | |||||
| Total stockholders’ equity | 7,510,959 | 2,654,445 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 25,251,635 | $ | 18,816,991 | ||||
The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
HOUR LOOP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
For the Periods Ended September 30, 2022 and 2021
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenues, net | $ | 17,556,053 | $ | 10,425,111 | $ | 44,710,554 | $ | 31,391,254 | ||||||||
| Cost of revenues | (7,999,769 | ) | (4,915,116 | ) | (20,340,948 | ) | (13,855,109 | ) | ||||||||
| Gross profit | 9,556,284 | 5,509,995 | 24,369,606 | 17,536,145 | ||||||||||||
| Operating expenses | ||||||||||||||||
| Selling and marketing | 7,779,145 | 4,427,774 | 19,785,872 | 13,058,566 | ||||||||||||
| General and administrative | 1,740,427 | 896,993 | 5,692,033 | 2,359,500 | ||||||||||||
| Total operating expenses | 9,519,572 | 5,324,767 | 25,477,905 | 15,418,066 | ||||||||||||
| Income (loss) from operations | 36,712 | 185,228 | (1,108,299 | ) | 2,118,079 | |||||||||||
| Other (expenses) income | ||||||||||||||||
| Other expense | (6,651 | ) | (877 | ) | (16,045 | ) | (5,501 | ) | ||||||||
| Interest expense | (22,876 | ) | (20,005 | ) | (127,001 | ) | (30,333 | ) | ||||||||
| Other income | 155,983 | 106,990 | 176,676 | 161,494 | ||||||||||||
| Total other income (expenses), net | 126,456 | 86,108 | 33,630 | 125,660 | ||||||||||||
| Income (loss) before income taxes | 163,168 | 271,336 | (1,074,669 | ) | 2,243,739 | |||||||||||
| Income tax (expense) benefit | (12,963 | ) | 24,770 | 266,579 | 24,770 | |||||||||||
| Net income (loss) | 150,205 | 296,106 | (808,090 | ) | 2,268,509 | |||||||||||
| Other comprehensive income (loss) | ||||||||||||||||
| Foreign currency translation adjustments | 12,441 | (6,750 | ) | 8,399 | (6,301 | ) | ||||||||||
| Total comprehensive income (loss) | $ | 162,646 | $ | 289,356 | $ | (799,691 | ) | 2,262,208 | ||||||||
| Basic and diluted income (loss) per common share | $ | 0.01 | $ | 0.01 | $ | (0.02 | ) | 0.07 | ||||||||
| Weighted-average number of common shares outstanding | 33,300,058 | 33,300,000 | 34,973,580 | 33,300,000 | ||||||||||||
The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
HOUR LOOP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2022 and 2021
(Unaudited)
| Nine Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Cash flows from operating activities | ||||||||
| Net (loss) income | $ | (808,090 | ) | $ | 2,268,509 | |||
| Reconciliation of net (loss) income to net cash (used in) provided by operating activities: | ||||||||
| Depreciation expenses | 39,993 | - | ||||||
| Noncash lease expenses | 212,126 | 52,668 | ||||||
| Distribution to director and supervisor | 76,013 | - | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (137,434 | ) | 68,422 | |||||
| Inventory | (14,316,522 | ) | (1,146,755 | ) | ||||
| Prepaid expenses and other current assets | (734,121 | ) | (167,231 | ) | ||||
| Accounts payable | 1,474,511 | 1,132,211 | ||||||
| Accrued expenses and other current liabilities | (152,606 | ) | (598,828 | ) | ||||
| Operating lease liabilities | (179,701 | ) | (34,532 | ) | ||||
| Net cash (used in) provided by operating activities | (14,525,831 | ) | 1,574,464 | |||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | (268,342 | ) | - | |||||
| Net cash used in investing activities | (268,342 | ) | - | |||||
| Cash flows from financing activities: | ||||||||
| Net advances from related parties | (898,583 | ) | 67,291 | |||||
| Capital contribution | - | 2,800 | ||||||
| Distribution to stockholders | - | (2,132,000 | ) | |||||
| Issuance of shares | 5,580,192 | - | ||||||
| Prepaid expenses | 576,168 | - | ||||||
| Net change in line of credit | 630,915 | (27,012 | ) | |||||
| Net cash provided by (used in) financing activities | 5,888,692 | (2,088,921 | ) | |||||
| Effect of changes in foreign currency exchange rates | 17,015 | (134 | ) | |||||
| Net change in cash and cash equivalents | (8,888,466 | ) | (514,591 | ) | ||||
| Cash and cash equivalents at beginning of year | 10,592,572 | 4,968,064 | ||||||
| Cash and cash equivalents at end of year | $ | 1,704,106 | $ | 4,453,473 | ||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for interest | $ | - | $ | - | ||||
| Cash paid for income tax | $ | - | $ | - | ||||
| Noncash investing and financing activities: | ||||||||
| Right-of-use of assets and operating lease liabilities recognized | $ | 688,440 | $ | - | ||||
| Noncash distribution to stockholders | $ | 76,013 | $ | - | ||||
The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.