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

As of MarchJune 31,30, 2026 ,2026, the Company maintained senior secured credit facilities with Line Financial, consisting of a $7.0 million revolving revolving credit facility and a $0.7 million term loan. The facilities are secured by substantially all Company assets.

Borrowings under the Revolving Credit Facility bear interest at the prime rate + 7.82% (14.57% as of MarchJune 31,30, 2026) while the term loan bears interest at the prime rate plus 1.45% and is repaid in monthly installments of approximately $15,000. The facilities include standard financial and operational covenants, including a minimum tangible net worth requirement of $4.0 million, with which the Company was in compliance as of MarchJune 31,30, 2026.

At MarchJune 31,30, 2026, the company had $6.7$4.6 million outstanding on the revolving facility and $0.5$0.45 million on the term loan, with $0.3$2.4 million of remaining borrowing capacity.

For the three-month period ended MarchJune 31,30, 2026 and 2025, net sales by product category were as follows:

Foil Balloons. Revenues from the sale of foil balloons decreased during the three-month period ended MarchJune 31,30, 2026 to $3,487,000$2,618,000 compared to $4,234,000$3,012,000 during the same period of 2025. The decrease is related to the timing of ordersorder and shipments. In the second half of 2025 one of our large mass retail customers made some adjustments to their replenishment system due to a surplus in their supply chain.

Films.Revenues Revenues from the sale of commercialfoil filmsballoons decreased during the three-monthsix-month period ended MarchJune 31,30, 2026 to $39,000$6,105,000 compared to $427,000$7,245,000 during during the same period of 2025. SalesThe indecrease thisis arearelated haveto beenthe inconsistenttiming of orders and shipments. In the second half of 2025 one of our large mass retail customers made some adjustments to their replenishment system due to a smallsurplus numberin oftheir customerssupply and a significant number of competitors.chain.

Other Revenues: OtherRevenues revenues increased to $2,628,000 forfrom the three-monthsale periodof other products were $1,074,000 and $3,702,000 during the three and six month periods ended MarchJune 30, 31, 2026,2026 compared to $141,000$2,095,000 forand $2,237,000 during the same period in 2025. The primary reason for the increase was the timingperiods of spring product shipments, which occurred in first quarter of 2026 rather than the second quarter in 2025. Other revenues during these periods primarily consisted of: (i) sales of balloon-inspired gift products, including candy and small inflated balloons packaged in small containers; and (ii) sales of accessories and supply items related to balloon products. SalesThe main reason for the fluctuation of the sales is due to a limited numbertiming of customersValentine’s Day continuerelated shipments, which occurred in December 2024 compared to representQ1 a2025 largefor percentagethe offollowing our net sales.year.

Sales to a limited number of customers continue to represent a large percentage of our net sales. The table below illustrates the impact on sales of our top three and ten customers for the three-monththree and six month periods ended MarchJune 31,30, 2026 and 2025.

Cost of Sales. During the three-monththree periodand six month periods ended MarchJune 31,30, 2026, the cost of sales was $5,138,000,$3,362,000 and $8,502,000 compared to $4,479,000 $3,936,000and for$8,415,000 the same period of 2025. The gross margin for March 31, 2026 is 17% compared to 18%respectively for the same periodperiods of 2025, with the decreasechange driven largely by changes in grosssales marginvolume. As a ispercentage relatedof sales, cost of sales was 86% and 85% during the three and six months ended June 30, 2026, compared to 82% during the three and six months ended June 30, 2025. The increase in componentcost pricesof andsales rawis materialsattributed to increased purchase costs due to escalatinginflationary trends fuelin prices.the US market.

Selling,General Advertising and Marketing.Administrative. During the three-monththree periodand six month periods ended MarchJune 31,30, 2026, selling, advertisinggeneral and marketingadministrative expenses were $190,000$675,000 and $1,598,000 as compared to $205,000$754,000 and $1,593,000, respectively, for the same periodperiods inof 2025.

Other Income (Expense).: During the three-monththree periodand six month periods ended MarchJune 31,30, 2026, the Company incurred interest expense of $242,000$225,000 and $467,000 as compared to interest expense of $237,000$227,000 and $465,000, respectively, during the same periodperiods of 2025.

Operating Activities. During the threesix months ended MarchJune 31,30, 2026, net cash provided by operations was $236,000, $2,535,000, compared to net cash provided in by operations during the threesix months ended MarchJune 31,30, 2025 of $970,000.$1,714,000.

Significant changes in working capital items during the threesix months ended MarchJune 31,30, 2026 included:

Investing Activity. During the threesix months ended MarchJune 31,30, 2026, cash used in investing activity was $27,000,$30,000, compared to cash used in investing activity for the same period of 2025 in the amount of $20,000.$42,000.

Financing Activities. During the threesix months ended MarchJune 31,30, 2026, cash used in financing activities was $128,000$2,282,000 compared to cash used in financing activities for the same period of 2025 in the amount of $998,000.$1,874,000. Financing activity during 2026 consisted principally of changes in the balances of revolving and long-termprincipal repayments on term loan debt.

At MarchJune 31,30, 2026, the Company had cash balances of $178,000$320,000 compared to cash balances of $172,000$18,000 for the same period of 2025.

The ability of the Company to continue as a going concern is dependent on the Company executing its business plan and, if unable to do so, in obtaining adequate capital on acceptable terms to fund any operating losses. Management’s plans to continue as a going concern include executingraising itsadditional businesscapital, plan,including through a potential registered offering of equity securities, as well as borrowings, continuing to focus on achievingattaining profitable operations, and exploring alternative funding sources on an as needed basis. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. The supply chain constraints, inflationary pressures and tariffs are expected to impact to some extent our operations and reduced access to capital. The ability of the Company to continue as a going concern is dependent upon its ability to successfully generate or otherwise secure other sources of financing and attain profitable operations. There is substantial doubt about the ability of the Company to continue as a going concern for one year from the issuance of the accompanying consolidated financial statements. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.