UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
☒ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2026
or
☐TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-38474
Jerash Holdings (US), Inc.
(Exact name of registrant as specified in its charter)
277 Fairfield Road, Suite 338, Fairfield, New
Jersey07004
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including
area code: (201)285-7973
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, par value $0.001 per share JRSH The Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant
is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark whether the registrant
is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.
See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
Emerging growth company ☐
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report. ☐
If securities are registered pursuant to Section
12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction
of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error
corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s
executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the registrant’s common stock,
par value $0.001 per share, held by non-affiliates of the registrant, as computed by reference to the September 30, 2025 closing price
reported by Nasdaq, was approximately $21.9 million. Shares of voting stock held by executive officers, directors, holders owning more
than 10% of the outstanding voting stock, and stockholders affiliated with a director or an executive officer have been excluded from
this calculation because such persons may be deemed to be affiliates. Exclusion of such shares should not be construed to indicate that
any of such persons possesses the power, direct or indirect, to control the Registrant, or that any such person is controlled by or under
common control with the Registrant.
The number of the registrant’s shares of
common stock, $0.001 par value per share, outstanding on June 18, 2026 was 12,699,940.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s 2026 Proxy
Statement (as defined below) are incorporated by reference in Part III of this Annual Report on Form 10-K.
Table of Contents
Page
PART I 1
Item 1. Business 1
Item 1A. Risk Factors 7
Item 1B. Unresolved Staff Comments 19
Item 1C. Cybersecurity 19
Item 2. Properties 20
Item 3. Legal Proceedings 20
Item 4. Mine Safety Disclosures 20
Item 6. [Reserved] 21
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 27
Item 8. Financial Statements and Supplementary Data F-1
Item 9A. Controls and Procedures 28
Item 9B. Other Information 29
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 29
PART III 30
Item 10. Directors, Executive Officers and Corporate Governance 30
Item 11. Executive Compensation 30
Item 14. Principal Accounting Fees and Services 30
Item 15. Exhibits and Financial Statement Schedules 31
Signatures 34
i
PART I
Item 1. Business.
Overview
Jerash Holdings (US), Inc. (“Jerash Holdings”),
through its wholly owned operating subsidiaries (together, the “Group,” “we,” “us,” or “our”),
is principally engaged in the manufacturing and exporting of customized, ready-made sportswear and outerwear from knitted fabric produced
in its facilities in the Hashemite Kingdom of Jordan (“Jordan”). Our website address is http://www.jerashholdings.com. Information
available on our website is not a part of, and is not incorporated into, this Annual Report on Form 10-K.
We are a manufacturer for several well-known brands and retailers,
such as VF Corporation (which owns brands such as The North Face, Timberland, and Vans), New Balance, G-III (which owns DKNY and licenses
brands such as Calvin Klein, Tommy Hilfiger, and Nautica), Hugo Boss, American Eagle, and Acushnet (which owns brands such as Footjoy
and Titleist). Our production facilities include eight factories and six warehouses and we currently employ approximately 6,300 people.
The total annual capacity at our facilities was approximately 24 million pieces (average for product categories including t-shirts, polo
shirts, pants, shorts, and jackets) as of March 31, 2026.
Organizational Structure
Jerash Holdings is a holding company incorporated
in Delaware in January 2016. As of the date of this annual report, Jerash Holdings has the following wholly owned subsidiaries: (i) Jerash
Garments and Fashions Manufacturing Co., Ltd. (“Jerash Garments”), an entity formed under the laws of Jordan, (ii) Treasure
Success International Limited (“Treasure Success”), an entity formed under the laws of Hong Kong Special Administrative Region
of the People’s Republic of China (“Hong Kong”), (iii) Chinese Garments and Fashions Manufacturing Co., Ltd. (“Chinese
Garments”), an entity formed under the laws of Jordan and a wholly owned subsidiary of Jerash Garments, (iv) Jerash for Industrial
Embroidery Co., Ltd. (“Jerash Embroidery”), an entity formed under the laws of Jordan and a wholly owned subsidiary of Jerash
Garments, (v) Al-Mutafaweq Co. for Garments Manufacturing Ltd. (“Paramount”), an entity formed under the laws of Jordan and
a wholly owned subsidiary of Jerash Garments, (vi) Mustafa and Kamal Ashraf Trading Company (Jordan) for the Manufacture of Ready-Make
Clothes LLC (“MK Garments”), an entity formed under the laws of Jordan and a wholly owned subsidiary of Jerash Garments; (vii)
Jiangmen Treasure Success Business Consultancy Co., Ltd. (“Jiangmen Treasure Success”), an entity incorporated under the laws
of the People’s Republic of China (“China” or the “PRC”) and a wholly owned subsidiary of Treasure Success,
(viii) Jerash The First Medical Supplies Manufacturing Company Limited (“Jerash The First”), an entity formed under the laws
of Jordan and a wholly owned subsidiary of Jerash Garments, (ix) Jerash Supplies, LLC (“Jerash Supplies”), an entity formed
under the laws of the State of Delaware, (x) Kawkab Venus Dowalyah Lisenaet Albesah (“Kawkab Venus”), a limited liability
company established in Amman, Jordan and a wholly owned subsidiary of Jerash Garments, and (xi) Ever Winland Limited (“Ever Winland”),
a limited liability company organized in Hong Kong and a wholly owned subsidiary of Treasure Success. As of the date of this annual report,
Treasure Success owns 51% of the equity interests in J&B International Limited (“J&B”), a company with limited liability
incorporated under the laws of Hong Kong. P. T. Eratex (Hong Kong) Limited (“Eratex”), a company formed in Hong Kong, owns
the remaining 49%. To date, Treasure Success also owns 51% of the equity interests in Jerash Newtech (Hong Kong) Holdings Limited (“Jerash
Newtech”), a company incorporated under the laws of Hong Kong with limited liability, and Newtech Textile (HK) Limited, a company
incorporated in Hong Kong (“Newtech”), owns the remaining 49%.
This chart reflects our organizational structure as of the date of
this annual report:
1
Jerash Garments was established in Jordan on November
26, 2000 and operates out of our factory in Al Tajamouat Industrial City, a Development Zone in Amman, Jordan. Jerash Garments’
principal activities are to house management offices and to operate production lines and printing, sewing, ironing, packing, and quality
control units, as well as house our trims and finished products warehouses. We also operate our factory in Al-Hasa County (as discussed
below) under Jerash Garments.
Chinese Garments was established in Jordan on
June 13, 2013 and operated out of our factory in Al Tajamouat Industrial City. Chinese Garments’ principal activities were to house
administration, human resources, finance, and management offices and to operate additional production lines and sewing, ironing, and packing
units, as well as house our trims warehouse.
Jerash Embroidery was established in Jordan on
March 11, 2013 and operated out of our factory in Al Tajamouat Industrial City. Jerash Embroidery’s principal activities were to
perform the cutting and embroidery for our products.
Paramount was established in Jordan on October
24, 2004 and operated out of our factory in Al Tajamouat Industrial City. Paramount’s principal activities were to manufacture garments
per customer orders.
During the fiscal year 2026, principal activities
of Chinese Garments, Jerash Embroidery, Paramount were transferred to Jerash Garments. Chinese Garments, Jerash Embroidery, and Paramount
have no operation currently.
MK Garments was established in Jordan on January
23, 2003. On June 24, 2021, Jerash Garments and the sole shareholder of MK Garments entered into an agreement, pursuant to which Jerash
Garments acquired all of the outstanding stock of MK Garments. As of October 7, 2021, MK Garments became a subsidiary of Jerash Garments.
MK Garments operates out of our factory in Al Tajamouat Industrial City. MK Garments’ principal activities are to manufacture garments
per customer orders. The new facilities are an existing garment manufacturing operation adjacent to Jerash’s four largest manufacturing
centers. Jerash assumed ownership of all of the machinery and equipment owned by MK Garments through the acquisition.
Treasure Success was established in Hong Kong
on July 5, 2016 and operates in Hong Kong. Treasure Success’s primary activities are sales of garments and to employ sales and merchandising
staff and supporting personnel in Hong Kong to support the business of Jerash Garments and its subsidiaries.
Jiangmen Treasure Success was established in Jiangmen
City of Guangdong Province in the PRC on August 28, 2019 and operates in the PRC. Jiangmen Treasure Success’s primary activities
are to provide support in sales and marketing, sample development, merchandising, procurement, and other areas.
Jerash The First was established in Jordan on
July 6, 2020 and operate out of our factory in Al-Hasa County. Jerash The First’s principal activities were to manufacture and trade
personal protective equipment (“PPE”) products. Jerash The First has no operation currently.
Jerash Supplies was formed in Delaware on November
20, 2020. Jerash Supplies is engaged in the trading of PPE products.
Kawkab Venus was established in Amman, Jordan,
on January 15, 2015 with a declared capital of JOD 50,000. It holds land with factory premises, which are leased to MK Garments. On July
14, 2021, Jerash Garments and the sole shareholder of Kawkab Venus entered into an agreement, pursuant to which Jerash Garments acquired
all of the outstanding stock of Kawkab Venus. Apart from the land and factory premises, Kawkab Venus had no other significant assets or
liabilities and no operation activities or employees at the time of acquisition, so the acquisition was accounted for an asset acquisition.
As of August 21, 2022, Kawkab Venus became a subsidiary of Jerash Garments.
Ever Winland was organized in Hong Kong on December
3, 2020. It held office premises, which were leased to Treasure Success. On June 22, 2022, Treasure Success and the shareholders of Ever
Winland entered into an agreement, pursuant to which Treasure Success acquired all of the outstanding stock of Ever Winland. Apart from
the office premises used by Treasure Success, Ever Winland had no other significant assets or liabilities and no operating activities
or employees at the time of this acquisition, so this transaction was accounted for as an asset acquisition. As of August 29, 2022, Ever
Winland became a subsidiary of Treasure Success. Treasure Success acquired the office premises as of January 8, 2026.
2
J&B is a joint venture company established
in Hong Kong on January 10, 2023. On March 20, 2023, Treasure Success and Eratex entered into a Joint Venture and Shareholders’
Agreement, pursuant to which Treasure Success acquired 51% of the equity interests in J&B on April 11, 2023. J&B engages in the
business of garment trading and manufacturing for orders from customers. On June 16, 2025, Treasure Success and Eratex attended a meeting
of shareholders of J&B and approved the termination of J&B’s business operations and the dissolution of J&B, which is
expected to complete in April 2027.
Jerash Newtech is a joint venture company established
in Hong Kong on November 3, 2023. On October 10, 2023, Treasure Success and Newtech entered into a Joint Venture and Shareholders’
Agreement. Pursuant to this agreement, both parties agreed to form a joint venture company in Hong Kong named Jerash Newtech, of which
Treasure Success holds 51% of the equity interests and Newtech holds 49%. Jerash Newtech engages in the business of supplying fiber and
fabric printed with Cooltrans technology, and may engage any other businesses in the future as both parties shall agree from time to time.
On August 20, 2025, Treasure Success and Newtech Textile (HK) Limited attended a meeting of shareholders of Jerash Newtech and agreed
to and authorized an application to be made for the deregistration of Jerash Newtech.
Products
As a garment manufacturing group, we specialize
in manufacturing sportswear and outerwear. Our sportswear and outerwear product offering consists of jackets, polo shirts, t-shirts, pants,
and shorts. During fiscal 2026, our primary product offerings were vests, shorts and pants, which accounted for approximately 35% of our
total shipped pieces. During fiscal 2025, our primary product offering was crew neck, which accounted for approximately 37% of our total
shipped pieces.
Manufacturing and Production
Our production facilities are located in Al Tajamouat
Industrial City in the Amman Governorate, in the Al-Hasa District in the Tafilah Governorate, and in the Balama Sub-district in the Mafraq
Governorate of Jordan.
Our production facilities in Al Tajamouat Industrial City in the Amman
Governorate comprise six operating factories and six warehouses. Effective as of January 1, 2019, the government of the Hashemite Kingdom
of Jordan converted Al Tajamouat Industrial City into a Development Zone. Following this change, we continued to operate under benefits
similar to the Qualifying Industrial Zone designation, but were subject to a 10% corporate income tax plus a 1% social contribution. Starting
from January 1, 2020, the corporate income tax rate increased from 10% to 20% throughout the years. Effective January 1, 2024, we have
been subject to a 20% corporate income tax rate plus a 1% social contribution. Effective from October 1, 2025, Jerash Garments has been
granted tax concession at a corporate income tax rate 10% plus a 1% social contribution in accordance with the Jordanian Income Tax Law.
Currently, the first factory, which we own, employs approximately 1,550 people. Its primary functions are to house our management offices,
as well as production lines, trims warehouse, and printing, sewing, ironing, and packaging units. The second factory, which we lease,
employs approximately 1,800 people. Its primary function is to house our administrative and human resources personnel, merchandising and
accounting departments, embroidery, printing, additional production lines, trims and finished products warehouses, and sewing, ironing,
packing and quality control units. The third factory, which we lease, employs approximately 200 people. Its primary functions are to perform
the cutting for our products. The fourth factory (under Paramount), which we lease, currently employs approximately 1,400 people. Its
primary functions are to house additional production lines. The fifth factory (under MK Garments) currently employs approximately 650
people. Its primary function is to manufacture garments for orders from customers.
On February 2, 2026, the Housing Bank for Trade
and Finance (the “Housing Bank”) approved the Property Purchase Request submitted by Jerash Garments on January 20, 2026 for
the purchase of the property located on Property No. 1326, Basin No. 3 Abu Sawwana, Al-Ruqaim Village, from the lands of South Amman,
Jordan (“Property No. 1326”). The purchase was completed on February 19, 2026. Property No. 1326 will be our sixth factory
in Al Tajamouat Industrial City and production is scheduled to commence in fiscal 2027.
Our production facility in Al-Hasa County in the
Tafilah Governorate of Jordan comprises one factory, which currently employs approximately 550 people and its primary functions are to
manufacture garment products per customer orders. We commenced the construction of this factory in 2018 and we started operations in November 2019.
This is a joint project with the Jordanian Ministry of Labor and the Jordanian Education and Training Department. According to our agreement
with these government agencies, we used this factory without paying rent through December 2022. We have continued to use the factory without
paying rent since January 2023 as new arrangements with the Jordanian Ministry of Labor are still being made. See “Item 2. Properties”
below for more information regarding this factory.
3
Our production facility in Balama Sub-district
in the Mafraq Governorate comprises one factory, which currently employs approximately 150 people, and its primary functions are to manufacture
garment products per customer orders. According to our agreement with these government agencies, we are allowed to use this factory without
paying rent through February 2029.
In April 2021, we commenced construction of a
195,000-square-foot housing facility for our multi-national workforce, situated on a 49,000-square-foot site owned by us in Al Tajamouat
Industrial City. In fiscal 2025, the construction was completed and our workers moved in. To meet increasing demand, we are also finalizing
plans to construct an additional project on a nearby 133,000-square-foot parcel that we purchased in 2019 for $1.2 million. Two-thirds
of the land will be used for our factory and the remaining one-third will be used for housing. As of the date of this annual report, we
are working with engineering consultants on the architectural design of the building, taking into account the potential business growth
brought about by the new business expansion with new customers such as Hansoll Group. We will carefully plan the construction investment
to meet the progress of business developments.
Total annual capacity at our existing facilities
was approximately 24 million pieces (average for product categories including t-shirts, polo shirts, pants, shorts, and jackets) as of
March 31, 2026. Our production flow begins in the cutting department of our factory. Then the product is sent to the embroidery department
for embroidery if applicable. From there, the product moves to be processed by the sewing unit, finishing department, quality control,
and finally the ironing and packing units.
We do not have long-term supply contracts or arrangements
with our suppliers. Most of our ultimate suppliers for raw materials, such as fabric, zippers, and labels, are designated by customers
and we purchase such materials on a purchase order basis.
Employees
As of March 31, 2026, we had an aggregate of approximately
6,300 employees located in Jordan, Hong Kong, China, and the United States of America, all of which are full-time employees.
Customers
The following table outlines the dollar amount
and percentage of total sales to our customers for the fiscal years ended March 31, 2026 (“fiscal 2026”) and March 31, 2025
(“fiscal 2025”).
Sales Sales
(USD, in thousands) % (USD, in thousands) %
4
In fiscal 2026 and 2025, we depended on a few
key customers for our sales, and a large portion of our sales in fiscal 2026 and 2025 were to one customer, VF Corporation.
We started producing garments for VF Corporation
in 2012. A large portion of the products we manufacture are sold under The North Face, Timberland, and Vans brands which are owned by
VF Corporation. Currently, we manufacture primarily outerwear for The North Face. Approximately 52% and 65% of our sales in fiscal 2026
and 2025 were derived from the sale of manufactured products to VF Corporation, respectively. We are not party to any long-term contracts
with VF Corporation or our other customers, and our sales arrangements with our customers do not have minimum purchase requirements. As
is common in our industry, VF Corporation and our other customers place purchase orders with us after we complete detailed sample development
and approval processes that we and our customers have agreed upon for their purchase of the relevant manufactured garments. It is through
the sample development and approval processes that we and VF Corporation and our other customers agree on the purchase and manufacture
of the garments. For fiscal 2026, VF Corporation issued approximately 14,300 purchase orders to us in amounts ranging from approximately
$5 to $296,000. For fiscal 2025, VF Corporation issued approximately 14,700 purchase orders to us in amounts ranging from approximately
$6 to $929,000.
Our customers are in the retail industry, which
is subject to substantial cyclical variations. Consequently, there can be no assurance that sales to current customers will continue at
the current rate or at all. In addition, our annual and quarterly results may vary, which may cause our profits and the market price of
our common stock to decline.
We continue to seek to expand and strengthen our
relationship with our current customers and other brand names. However, we cannot assure you that these brands will continue to buy our
products in the same volumes or on the same terms as they did in the past or that we will be successful in expanding our relationship
with other brand names.
Competition
The markets for the manufacturing of sportswear
and outerwear are highly competitive. The competition in those markets focuses primarily on the price and quality of the product and the
level of customer service. Our products compete with products of other apparel manufacturers in Asia, Israel, Europe, the United States,
and South and Central America.
Competition with other manufacturers in the clothing
industry focuses on reducing production costs, reducing supply lead time, design, product quality, and efficiency of supply to the customer.
Since production costs depend to a large extent on labor costs, in recent years most production in the industry has been moved to countries
where labor costs are low. Some of our competitors have lower cost bases, longer operating histories, larger customer bases, and other
advantages over us which allow them to compete with us. As described in more detail under “—Conditions in Jordan—Trade
Agreements” below, we were able to sell our products manufactured at our facilities in Jordan to the United States free from customs
duties and import quotas under certain conditions prior to April 5, 2025. These favorable terms enabled us to remain competitive on the
basis of price. Effective from April 5, 2025, the U.S. imposed a baseline tariff of 10% on imports from almost all countries, including
Jordan. Then, effective from April 9, 2025, it had announced “reciprocal” tariffs of imports from specified countries, amongst
them Jordan with a prevailing rate of then 20%. These “reciprocal” tariffs are postponed for 90 days, whilst the 10% baseline
tariff persists. The tariff was modified to 15% according to an executive order of presidential actions on July 31, 2025. In February
2026, the U.S. Supreme Court ruled that the “reciprocal” tariffs were illegal, and the U.S. Customs has since then stopped
to impose the “reciprocal” tariff and established a new process to refund importers for voided “reciprocal” tariff.
Following the ruling, the U.S. Government then invoked Section 122 of the Trade Act of 1974 to impose an across the board 10% tariff for
a period of 150 days expiring in July 2026, including on the imports from Jordan. While the payment of the tariff is typically the responsibility
of the importer (Jerash’s customers), the impact of the tariff on customers’ demand would be affected by the comparative levels
of the tariffs on imports from Jordan compared to other countries.
5
According to the Association Agreement between
the European Union (the “EU”) and Jordan, which came into force in May 2002, and the joint initiative on rules of origin reviewed
and improved in December 2018 by the EU and Jordan, goods manufactured by us in Jordan that are subsequently shipped to EU countries are
shipped free from customs duties.
Conditions in Jordan
Our manufacturing facilities are located in Jordan.
Accordingly, we are directly affected by political, security, and economic conditions in Jordan.
From time to time, Jordan has experienced instances
of civil unrest, terrorism, and hostilities among neighboring countries, including Syria and Israel. A peace agreement between Israel
and Jordan was signed in 1994. Terrorist attacks, military activity, rioting, or civil or political unrest in the future could influence
the Jordanian economy and our operations by disrupting operations and communications and making travel within Jordan more difficult and
less desirable. Political or social tensions also could create a greater perception that investments in companies with Jordanian operations
involve a high degree of risk, which could adversely affect the market and price for our common stock. Furthermore, the escalation of
conflicts such as Russia-Ukraine, Israel-Hamas, and Israel/U.S.-Iran, as well as Houthi rebel attacks on commercial vessels in the Red
Sea, may increase geopolitical tensions globally. These political or social tensions could disrupt international trade, industrial supply
chains, and transportation, leading to market price volatility, and may adversely affect our business, increase operational costs, and
limit our ability to secure foreign financing for our operations and capital expenditures. See “Item 1A. Risk Factors—Risks
Related to Operations in Jordan—Our operations in Jordan may be adversely affected by social and political uncertainties or change,
military actions, health-related risks, acts of terrorism or other geopolitical instability.”
Jordan is a constitutional monarchy, but the King
holds wide executive and legislative powers. The ruling family has taken initiatives that support the economic growth of the country.
However, there is no assurance that such initiatives will be successful or will continue. The rate of economic liberalization could change,
and specific laws and policies affecting manufacturing companies, foreign investments, currency exchange rates, and other matters affecting
investments in Jordan could change as well.
Trade Agreements
Because of the Association Agreement between the
EU and Jordan, which came into force in May 2002, we are able to sell our products manufactured at our facilities in Jordan to EU countries
free from customs duties.
Because of the United States-Jordan Free Trade
Agreement, which came into force on December 17, 2001, and was implemented fully on January 1, 2010, we were able to sell our products
manufactured at our facilities in Jordan to the U.S. free from customs duties and import quotas under certain conditions prior to April
5, 2025. For tariff imposed by the U.S., please see “Item 1. Business— Competition.”
Income/Sales Tax Incentives
Effective January 1, 2019, Jordan’s government
converted the geographical area where Jerash Garments and its subsidiaries are located from a Free Zone to a Development Zone. Development
Zones are industrial parks that house manufacturing operations in Jordan. In accordance with applicable law, Jerash Garments and its subsidiaries
were subject to corporate income tax in Jordan at a rate of 19% or 20% plus a 1% social contribution between January 1, 2023 to December
31, 2023. Effective January 1, 2024, the income tax rate increased to 20%, plus a 1% social contribution. Effective from October 1, 2025,
Jerash Garments has been granted tax concession at a corporate income tax rate 10% plus a 1% social contribution in accordance with the
Jordanian Income Tax Law. For more information, see “Note 2—Summary of Significant Accounting Policies—Income and Sales
Taxes.”
6
In addition, Jerash Garments and its subsidiaries
are subject to local sales tax of 16% on purchases. However, Jerash Garments was granted a sales tax exemption from the Jordanian Investment
Commission for the period June 1, 2015 to June 1, 2018 that allowed Jerash Garments to make purchases with no sales tax charge. This exemption
was extended to February 5, 2027.
Government Regulation
Our manufacturing and other facilities in Jordan
and our subsidiaries outside of Jordan are subject to various local regulations relating to the maintenance of safe working conditions
and manufacturing practices. Management believes that we are currently in compliance in all material respects with all such regulations.
We are not subject to governmental approval of our products or manufacturing process.
Item 1A. Risk Factors.
The following are factors that could have a significant
impact on our operations and financial results and could cause actual results or outcomes to differ materially from those discussed in
any forward-looking statements.
Risks Related to Our Business and Our Industry
We rely on one key customer for a large
portion of our revenue. We cannot assure you that this customer or any other customer will continue to buy our products in the same volumes
or on the same terms.
Our sales to VF Corporation (which owns brands
such as The North Face, Timberland, and Vans), directly and indirectly, accounted for approximately 52% and 65% of our total sales in
fiscal 2026 and 2025, respectively. From an accounting perspective, we are considered the principal in our arrangement with VF Corporation.
We bear the inventory risk before the specified goods are transferred to a customer, and we have the right to determine the price and
to change our product during the sample development process with customers in which we determine factors including material usage and
manufacturing costs before confirming orders. Therefore, we present the sales and related manufacturing activities on a gross basis.
We are not party to any long-term contracts with
VF Corporation or our other customers, and our sales arrangements with our customers do not have minimum purchase requirements. As is
common in our industry, VF Corporation and our other customers place purchase orders with us after we complete detailed sample development
and approval processes. It is through these sample development and approval processes that we and VF Corporation agree on the purchase
and manufacture of the garments in question. In fiscal 2025, VF Corporation issued approximately 14,700 purchase orders to us in amounts
ranging from approximately $6 to $929,000. In fiscal 2026, VF Corporation issued approximately 14,300 purchase orders to us in amounts
ranging from approximately $5 to $296,000.
We cannot assure you that our customers will continue
to buy our products at all or in the same volumes or on the same terms as they have in the past. The failure of VF Corporation to continue
to buy our products in the same volumes and on the same terms as in the past may significantly reduce our sales and our earnings.
A material decrease in the quantity of sales made
to our principal customers, a material adverse change in the terms of such sales or a material adverse change in the financial condition
of our principal customers could significantly reduce our sales and our earnings.
We cannot assure you that VF Corporation will
continue to purchase our merchandise at the same historical rate, or at all, in the future, or that we will be able to attract new customers.
In addition, because of our reliance on VF Corporation as our key customer and their bargaining power with us, VF Corporation has the
ability to exert significant control over our business decisions, including prices.
Any adverse change in our relationship with
VF Corporation and its owned brands, or with their strategies or reputation, would have a material adverse effect on our results of operations.
A large portion of our products are sold under
The North Face, Timberland, and Vans brands, which are owned by VF Corporation. Any adverse change in our relationship with VF Corporation
would have a material adverse effect on our results of operations. In addition, our sales of those products could be materially and adversely
affected if the image, reputation, or popularity of either VF Corporation, The North Face, Timberland, or Vans were to be negatively impacted.
7
If we lose our key customer and are unable
to attract new customers, then our business, results of operations, and financial condition would be adversely affected.
If our key customer, VF Corporation, fails to
purchase our merchandise at the same historical rate, or at all, we will need to attract new customers and we cannot assure you that we
will be able to do so. We do not currently invest significant resources in marketing our products, and we cannot assure you that any new
investments in sales and marketing will lead to the acquisition of additional customers or increased sales or profitability consistent
with prior periods. If we are unable to attract new customers or customers that generate comparable profit margins to VF Corporation,
then our results of operations and financial condition could be materially and adversely affected.
If we lose our larger brand name customers,
or the customers fail to purchase our products at anticipated levels, our sales and operating results will be adversely affected.
Our results of operations depend to a significant
extent upon the commercial success of our larger brand name customers. If we lose these customers, these customers fail to purchase our
products at anticipated levels, or our relationships with these customers or the brands and retailers they serve diminishes, it may have
an adverse effect on our results and we may lose a primary source of revenue. In addition, we may not be able to recoup development and
inventory costs associated with these customers and we may not be able to collect our receivables from them, which would negatively impact
our financial condition and results of operations.
If the market share of our customers declines,
our sales and earnings may decline.
Our sales can be adversely affected in the event
that our direct and indirect customers do not successfully compete in the markets in which they operate. In the event that the sales of
one of our major customers decline for any reason, regardless of whether it is related to us or to our products, our sales to that customer
may also decline, which could reduce our overall sales and our earnings.
A natural disaster, catastrophe, pandemic,
or other unexpected events could adversely affect our financial conditions and business operations.
The occurrence of one or more unexpected events,
including war, acts of terrorism or violence, civil unrest, epidemics or pandemics, fires, tornadoes, hurricanes, earthquakes, floods,
and other forms of severe weather in the countries or regions in which we do business could adversely affect our operations and financial
performance.
We may require additional financing to fund
our operations and capital expenditures.
As of March 31, 2026, we had cash and cash equivalents of approximately
$10.8 million and restricted cash of approximately $1.7 million. There can be no assurance that our available cash, together with resources
from our operations, will be sufficient to fund our operations and capital expenditures. In addition, our cash position may decline in
the future, and we may not be successful in maintaining an adequate level of cash resources.
Pursuant to the DBS Bank (Hong Kong) Limited
(“DBSHK”) facility letter dated January 12, 2022, DBSHK provided a bank facility of up to $5.0 million to Treasure
Success, which was amended pursuant to a facility letter dated January 4, 2024. Pursuant to the amended agreement, DBSHK agreed to
finance cargo receipt, trust receipt, account payable financing, and certain type of import and export invoice financing up to an
aggregate of $5.0 million, with certain financial covenants. The DBSHK facility bears interest at 1.5% per annum over Hong Kong
Interbank Offered Rate (“HIBOR”) for Hong Kong dollar (“HKD”) bills and 1.1% to 1.3% per annum over
DBSHK’s cost of funds for foreign currency bills. The facility is guaranteed by Jerash Holdings and became available to the
Company on June 17, 2022. As of March 31, 2026 and 2025, the Company had $4,902,996 and $4,512,462 outstanding under the DBSHK
facility, respectively.
8
On July 31, 2025, Bank al Etihad offered to provide
a credit facility of up to $6.0 million to Jerash Garments. Pursuant to the facility, Bank al Etihad agreed to finance import invoices
of up to $6.0 million with condition that such invoices are secured by letter of credit issued by customers. The facility bears an interest
rate at the Prime Lending Rate announced by Bank al Etihad, currently 8% per annum. As of March 31, 2026, the Company had $nil outstanding
under the Bank al Etihad facility. The Bank al Etihad facility is reviewed annually.
On January 15, 2026, Housing Bank offered a credit facility of up to
$14.0 million to Jerash Garments. Pursuant to the facility, Housing Bank agreed to finance import invoices of up to $14.0 million, with
condition that such invoices are secured by letter of credit issued by customers. The facility bears an interest rate Secured Overnight
Financing Rate (“SOFR”) plus a spread, currently approximately 6.1% per annum. As of March 31, 2026, the Company had $nil
outstanding under the Housing Bank facility. The Housing Bank facility is reviewed annually.
On April 9, 2026, the Company signed a credit
facility agreement offered by Capital Bank of Jordan (“Capital Bank”). Pursuant to the facility, Capital Bank agreed to finance
import invoices of up to $7.5 million with condition that such invoices are secured by letter of credit issued by customers. The facility
bears an SOFR interest rate plus a spread, with minimum 5% interest rate annually. The Capital Bank facility is reviewed annually.
In connection with the Property Purchase Request
of Property No. 1326, on January 28, 2026, Jerash Garments entered into a loan agreement with the Housing Bank to finance the acquisition
of Property No. 1326. Pursuant to the loan agreement, the Housing Bank agreed to provide Jerash Garments with a loan in the principal
amount of JOD 2,000,000 (approximately $2,820,000). The loan bears interest at a rate of 8% per annum, calculated on the daily outstanding
balance and charged monthly. Following a grace period ending January 31, 2027, the loan is repayable in 96 monthly installments of JOD
20,833 each, with the first installment due on February 1, 2027. The loan is secured by a first-priority mortgage on Property No. 1326,
valued at JOD 5,500,000.
In addition, we may be required to seek additional
debt or equity financing in order to support our growing operations. We may not be able to obtain additional financing on satisfactory
terms, or at all, and any new equity financing could have a substantial dilutive effect on our existing stockholders. If we cannot obtain
additional financing, we may not be able to achieve our desired sales growth, and our results of operations would be negatively affected.
We may have conflicts of interest with our
affiliates and related parties, and in the past we have engaged in transactions and entered into agreements with affiliates that were
not negotiated at arms’ length.
We have engaged, and may in the future engage,
in transactions with affiliates and other related parties. These transactions may not have been, and may not be, on terms as favorable
to us as they could have been if obtained from non-affiliated persons. While an effort has been made and will continue to be made to obtain
services from affiliated persons and other related parties at rates and on terms as favorable as would be charged by others, there will
always be an inherent conflict of interest between our interests and those of our affiliates and related parties. See also “Note
11—Related Party Transactions.” If we engage in related party transactions on unfavorable terms, our operating results will
be negatively impacted.
We are dependent on a product segment comprised
of a limited number of products.
Presently, we generate revenue primarily from
manufacturing and exporting sportswear and outerwear. A shift in demand from such products may reduce the growth of new business for our
products, and reduce existing business in those products. If demand for sportswear and outerwear were to decline, we may endeavor to expand
or transition our product offerings to other segments of the clothing retail industry. There can be no assurance that we would be able
to successfully make such an expansion or transition, or that our sales and margins would not decline in the event we made such an expansion
or transition.
Our revenue and cash requirements are affected
by the seasonal nature of our business.
We used to have stronger seasonality due to higher
values of fall and winter orders normally shipped in the first two quarters of our fiscal years. We have been working on smoothing out
seasonality through expansions of customer base and product offerings. In fiscal 2026, we managed to reverse the trend to have higher
sales in the second half of the year through the introduction of a new customer and expansion in sales of some existing customers for
spring and summer season orders. Due to the nature of our relationships with customers and our use of purchase orders to conduct
our business, our revenue may vary from period to period.
9
Changes in our product mix and the geographic
destination of our products or source of our supplies may impact our cost of goods sold, net income, and financial position.
From time to time, we experience changes in the
product mix and the geographic destination of our products. To the extent our product mix shifts from higher revenue items, such as jackets,
to lower revenue items, such as pants, our cost of goods sold as a percentage of gross revenue will likely increase. In addition, if we
sell a higher proportion of products in geographic regions where we do not benefit from free trade agreements or tax exemptions, our gross
margins will fall. If we are unable to sustain consistent product mix and geographic destinations for our products, we could experience
negative impacts to our financial condition and results of operations.
Our direct and indirect customers are in
the clothing retail industry, which is subject to substantial cyclical variations and could have a material adverse effect on our results
of operations.
Our direct and indirect customers are in the clothing
retail industry, which is subject to substantial cyclical variations and is strongly affected by any downturn or slowdown in the general
economy. Factors in the clothing retail industry that may influence our operating results from quarter to quarter include:
● the volume and timing of customer orders we receive during the quarter;
● the timing and magnitude of our customers’ marketing campaigns;
● the loss or addition of a major customer or of a major retailer nomination;
● the availability and pricing of materials for our products;
● the increased expenses incurred in connection with introducing new products;
● currency fluctuations;
● political factors that may affect the expected flow of commerce; and
● delays caused by third parties.
In addition, uncertainty over future economic
prospects could have a material adverse effect on our results of operations. Many factors affect the level of consumer spending in the
clothing retail industry, including, among others:
● general business conditions;
● interest rates;
● the availability of consumer credit;
● taxation; and
● consumer confidence in future economic conditions.
Consumer purchases of discretionary items, including
our products, may decline during recessionary periods and also may decline at other times when disposable income is lower. Consequently,
our customers may have larger inventories of our products than expected, and to compensate for any downturn they may reduce the size of
their orders, change the payment terms, limit their purchases to a lower price range, and try to change their purchase terms, all of which
may have a material adverse effect on our financial condition and results of operations.
The clothing retail industry is subject
to changes in fashion preferences. If our customers misjudge a fashion trend or the price which consumers are willing to pay for our products
decreases, our revenue could be adversely affected.
The clothing retail industry is subject to changes
in fashion preferences. We design and manufacture products based on our customers’ judgment as to what products will appeal to consumers
and what price consumers would be willing to pay for our products. Our customers may not be successful in accurately anticipating consumer
preferences and the prices that consumers would be willing to pay for our products. Our revenue will be reduced if our customers are not
successful, particularly if our customers reduce the volume of their purchases from us or require us to reduce the prices at which we
sell our products.
10
If we experience product quality or late
delivery problems, or if we experience financial problems, our business will be negatively affected.
We may from time to time experience difficulties
in making timely delivery of products of acceptable quality. Such difficulties may result in cancellation of orders, customer refusal
to accept deliveries, or reductions in purchase prices, any of which could have a material adverse effect on our financial condition and
results of operations. There can be no assurance that we will not experience difficulties with manufacturing our products.
We face intense competition in the worldwide
apparel manufacturing industry.
We compete directly with a number of manufacturers
of sportswear and outerwear. Some of these manufacturers have lower cost bases, longer operating histories, larger customer bases, greater
geographical proximity to customers, or greater financial and marketing resources than we do. Increased competition, direct or indirect,
could reduce our revenue and profitability through pricing pressure, loss of market share, and other factors. We cannot assure you that
we will be able to compete successfully with existing or new competitors, as the market for our products evolves and the level of competition
increases. We believe that our business will depend upon our ability to provide apparel products of good quality and meeting our customers’
pricing and delivery requirements, and our ability to maintain relationships with our major customers. There can be no assurance that
we will be successful in this regard.
We have entered into joint ventures with
third parties, and we may continue to do so in the future. This may subject us to various risks, including limited decision-making authority,
reliance on our joint venture partners’ financial condition, the risk of disputes with our joint venture partners, and the risk
of failing to achieve profitability through such business.
As of the date of this annual report, we have
entered into two joint ventures with third parties, which joint ventures are in the process of being dissolved. Please refer to “Item
1. Business—Organizational structure” for more information. Once we enter into any joint ventures, we will have limited decision-making
authority and we may face the risk of disputes with our joint venture partners. This includes potential deadlocks in making major decisions
and restrictions on our ability to exit the joint venture. Any disputes that arise between us and any of our joint venture partners may
result in litigation or arbitration. We may also face risks associated with the financial condition of our joint venture partners, including
the risk of bankruptcy and/or failure to fund their share of required capital contributions. As a result, we may be exposed to liabilities
that exceed our share of any joint venture. Our joint venture partners may also have business interests or goals that are inconsistent
with ours and may be able to take actions contrary to our policies or objectives. In specific circumstances, we may be liable for the
actions of any joint venture partners. Any of these situations may have a material adverse effect on our business, financial condition,
and results of operations.
Furthermore, we cannot assure that we may succeed
in doing business through any future joint ventures. If any future joint venture does not achieve expected level of production or profitability,
we will not be able to adequately manage our growth following the establishment of such business, and our results of operations and financial
condition would be adversely affected.
Our results of operations are subject to fluctuations in currency
exchange rates.
Exchange rate fluctuations between the U.S. dollar
and Jordanian Dinar (“JOD”), Hong Kong dollar, or Chinese Yuan (“CNY”), as well as inflation in Jordan, Hong Kong,
or the PRC, may negatively affect our earnings. A substantial majority of our revenue and a substantial portion of our expenses are denominated
in U.S. dollars. However, a significant portion of the expenses associated with our Jordanian, Hong Kong, or PRC operations, including
personnel and facilities-related expenses, are incurred in JOD, HKD, or CNY, respectively. Consequently, inflation in Jordan, Hong Kong,
or the PRC will have the effect of increasing the dollar cost of our operations in Jordan, Hong Kong, or the PRC, respectively, unless
it is offset on a timely basis by a devaluation of JOD, HKD, or CNY, as applicable, relative to the U.S. dollar. We cannot predict any
future trends in the rate of inflation in Jordan, Hong Kong, or the PRC or the rate of devaluation of JOD, HKD, or CNY, as applicable,
against the U.S. dollar. In addition, we are exposed to the risk of fluctuation in the value of JOD, HKD, CNY vis-a-vis the U.S. dollar.
There can be no assurance that JOD or HKD will remain effectively pegged to the U.S. dollar. Any significant appreciation of JOD, HKD,
or CNY against the U.S. dollar would cause an increase in our JOD, HKD, or CNY expenses, as applicable, as recorded in our U.S. dollar
denominated financial reports, even though the expenses denominated in JOD, HKD, or CNY, as applicable, will remain unchanged. In addition,
exchange rate fluctuations in currency exchange rates in countries other than Jordan where we operate and do business may also negatively
affect our earnings.
11
We are subject to the risks of doing business
abroad.
Almost all of our products are manufactured outside
the United States, at our subsidiaries’ production facilities in Jordan. Foreign manufacturing is subject to a number of risks,
including work stoppages, transportation delays and interruptions, political instability, foreign currency fluctuations, economic disruptions,
expropriation, nationalization, the imposition of tariffs and import and export controls, changes in governmental policies (including
U.S. policies towards Jordan), and other factors, which could have an adverse effect on our business. In addition, we may be subject to
risks associated with the availability of and time required for the transportation of products from foreign countries. The occurrence
of certain of these factors may delay or prevent the delivery of goods ordered by customers, and such delay or inability to meet delivery
requirements would have a severe adverse impact on our results of operations and could have an adverse effect on our relationships with
our customers.
Our ability to benefit from the lower labor costs
in Jordan will depend on the political, social, and economic stability of Jordan and in the Middle East in general. We cannot assure you