Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations.
The following discussion of our financial condition
and results of operations should be read in conjunction with our consolidated financial statements and the related notes included elsewhere
in this annual report.
Executive Overview
Seasonality of Sales
We used to have strong seasonality due to higher
values of fall and winter orders, which are 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 introduction of a new customer and expansion in sales of some existing customers for
spring and summer season orders. We will continue our efforts in this direction in order to produce more consistent results throughout
a fiscal year. One of our strategies is to increase sales with other customers where clothing lines are stronger during the spring
months. This strategy also reflects our current plan to increase our number of customers to mitigate our current concentration risk with
VF Corporation.
Results of Operations
The following table presents certain information
from our consolidated statements of operations and comprehensive income (loss) for the fiscal years ended March 31, 2026 and 2025 and
should be read, along with all of the information in this management’s discussion and analysis, in conjunction with the consolidated
financial statements and related notes included elsewhere in this annual report.
21
(All amounts, other than percentages, in thousands
of U.S. dollars)
Fiscal Years Ended March 31,
As % of As % of Year over Year
Statement of Income Data: Amount Sales Amount Sales Amount %
Revenue. Our revenue was $166.3
million for fiscal 2026, compared to $145.8 million for fiscal 2025, an increase of $20.5 million, or 14%, primarily due to increases
in shipments to businesses from new customers such as Hansoll Group and growth in sales from some of the customers introduced in the past
few years such as Acushnet and Tharanco.
The following table outlines the dollar amount
and percentage of total sales to our customers for the fiscal years ended March 31, 2026 and 2025, respectively.
(All amounts, other than percentages, in thousands
of U.S. dollars)
Sales Sales
(Amount) % (Amount) %
Revenue by Geographic Area
(All amounts, other than percentages, in thousands
of U.S. dollars)
Fiscal Years Ended March 31,
Region Amount % Amount % Amount %
Republic of Korea (“Korea”) 6,952 4 % - 0 % 6,952 - %
22
Since January 2010, all apparel manufactured in
Jordan can be exported to the U.S. without customs duty being imposed, pursuant to the United States-Jordan Free Trade Agreement entered
into in December 2001. This free trade agreement provides us with substantial competitiveness and benefit that allowed us to expand our
garment export business in the U.S. 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 had been 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.
The increase of approximately 7% in sales to the
U.S. during fiscal 2026 was mainly attributable to an increase in sales to some of our U.S. customers introduced in the past few years,
including Acushnet, Tharanco, and American Eagle.
During fiscal 2026, aggregate sales to Jordan,
China and Hong Kong, Korea, and other locations, such as Germany, and Mexico, increased by 63% from approximately $17.2 million in fiscal
2025 to $28.1 million. This increase can be attributed mainly to the introduction of a new customer, Hansoll Group and an increase in
revenue from Suzhou Unitex.
Cost of goods sold. Our cost
of goods sold experienced an increase of approximately $16.0 million to approximately $139.5 million in fiscal 2026 from approximately
$123.5 million in fiscal 2025. As a percentage of revenue, the cost of goods sold decreased by approximately 1 percentage point to 84%
in fiscal 2026 from 85% in fiscal 2025. The decrease in the cost of goods sold as a percentage of revenue was primarily attributable to
improved efficiency from economy of scale, continued automation such as installation of hanging systems, and better control of import
costs.
For the fiscal year ended March 31, 2026 and 2025,
we purchased approximately 13% and 10% of our garments and raw materials from one major supplier, respectively.
Gross profit margin. Our gross profit
margin was approximately 16% in fiscal 2026, representing an increase by approximately 1 percentage point from 15% in fiscal 2025. The
increase in gross profit margin was primarily influenced by our improvements in efficiency through automation and economy of scale.
Selling, general, and administrative expenses.
Selling, general, and administrative expenses decreased by approximately 2% from approximately $20.9 million in fiscal 2025 to
$20.5 million in fiscal 2026. The decrease was mainly attributable to better control of the export logistic expenses and lower share-based
payment expenses in fiscal 2026.
Other expenses, net. Other
expenses, net were approximately $1.6 million in fiscal 2026, compared to other expenses, net of approximately $1.3 million in fiscal
2025. The increase in other expenses from fiscal 2025 to fiscal 2026 was primarily due to a currency exchange loss and lower interest
income in 2026.
Taxation. Income tax expenses
for fiscal 2026 were approximately $1.1 million, compared to income tax expenses of approximately $1.0 million for fiscal 2025. The
effective tax rate for fiscal 2026 decreased to 24%, compared to 656% for fiscal 2025. The decrease in the effective tax rate mainly
resulted from lower Subpart F income impacts, favorable foreign tax rate differentials, favorable return-to-provision and valuation
allowance adjustments, and the absence of uncertain tax position adjustments related to amended tax returns that were recorded in
fiscal 2025.
Net income (loss). Net income for
fiscal 2026 was $3.6 million, compared to net loss of approximately $0.8 million for fiscal 2025. The net income is mainly attributable
to the improvement in efficiency through automation and economy of scale, better control of the export logistic expenses and lower share-based
payment expenses and the lower effect tax rate in fiscal 2026.
23
Liquidity and Capital Resources
Jerash Holdings is a holding company incorporated
in Delaware. As a holding company, we rely on dividends and other distributions from our Jordanian and Hong Kong subsidiaries to satisfy
our liquidity requirements. Current Jordanian regulations permit our Jordanian subsidiaries to pay dividends to us only out of their accumulated
profits, if any, determined in accordance with Jordanian accounting standards and regulations. In addition, our Jordanian subsidiaries
are required to set aside at least 10% of their respective accumulated profits each year until the reserve is equal to 100% of the entity’s
share capital, if any, to fund certain reserve funds. These reserves are not distributable as cash dividends. We have relied on direct
payments of expenses by our subsidiaries to meet our obligations to date. To the extent payments are due in U.S. dollars, we have occasionally
paid such amounts in JOD to an entity controlled by our management capable of paying such amounts in U.S. dollars. Such transactions have
been made at prevailing exchange rates and have resulted in immaterial losses or gains on currency exchange.
As of March 31, 2026, our cash and cash equivalents
balance was approximately $10.8 million and restricted cash was approximately $1.7 million, compared to cash and cash equivalents of approximately
$13.3 million and restricted cash of approximately $1.7 million as of March 31, 2025. The decrease in total cash and cash equivalents
during fiscal 2026 was primarily due to the payment for new factory premises and plant and equipment, offsetting the bank loan of $2.8
million related to the premises in fiscal 2026.
Our current assets as of March 31, 2026 were approximately $58.4 million,
and our current liabilities were approximately $21.6 million, which resulted in a current ratio of approximately 2.7 to 1. Our current
assets as of March 31, 2025 were approximately $54.4 million, and our current liabilities were approximately $19.8 million, which resulted
in a current ratio of approximately 2.7:1. For fiscal 2026, the increase in current assets were primarily due to increases in accounts
receivable from shipments close to the year end, and increases in inventory and advances to suppliers for the shipments mostly planned
in early to mid-fiscal 2027, offsetting the decrease in cash balance.
We had net working capital of $36.7 million and $34.6 million as of
March 31, 2026 and 2025, respectively. Based on our current operating plan, we believe that cash on hand and cash generated from operation
will be sufficient to support our working capital needs for the next 12 months from the date of this Annual Report.
Since May and October 2021, we have participated in supply chain financing
programs of two of our major customers, respectively. The programs allow us to receive early payments for approved sales invoices submitted
by us through the bank the customer cooperates with. For any early payments received, we are subject to an early payment charge imposed
by the customer’s bank, for which the rate is SOFR plus a spread. The arrangement allows us to have better liquidity without the
need to incur administrative charges and handling fees as in bank financing. In March 2024, we participated in an additional supply chain
financing program with one customer.
We have funded our working capital needs from
operations. Our working capital requirements are influenced by the level of our operations, the numerical and dollar volume of our sales
contracts, the progress of execution on our customer contracts, and the timing of accounts receivable collections.
Credit Facilities and Bank Loan
DBS Facility Letter
Pursuant to the DBS 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 types of import and export invoice financing up to an aggregate of $5.0 million, subject to certain financial covenants. The DBSHK
facility bears interest at 1.5% per annum over HIBOR for 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 outstanding balances were $4.9 million and $4.5 million, respectively, under this DBSHK facility.
Bank al Etihad Credit Facility
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. As of March 31, 2026, the Company had $nil outstanding under the Bank al Etihad
facility. The Bank al Etihad facility is reviewed annually.
24
Housing Bank Credit Facility
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 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.
Capital Bank Facility
On April 9, 2026, the Company signed a credit
facility agreement offered by 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.
Bank Loan
In connection with the Property Purchase Request
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.
Fiscal Years ended March 31, 2026 and 2025
The following table sets forth a summary of our
cash flows for the fiscal years ended March 31, 2026 and 2025.
(All amounts in thousands of U.S. dollars)
For the fiscal years ended March 31,
Net cash provided by operating activities $ 2,494 $ 1,365
Net cash used in investing activities (5,794 ) (2,370 )
Net cash provided by financing activities 671 2,053
Effect of exchange rate changes on cash and restricted cash 32 (21 )
Cash, cash equivalents and restricted cash, beginning of year 15,064 14,037
Cash, cash equivalents and restricted cash, end of year $ 12,467 $ 15,064
Supplemental disclosure information
Non-cash investing and financing activities
Equipment obtained by utilizing long-term deposit $ 296 $ 668
Operating Activities
Net cash provided by operating activities was
approximately $2.5 million in fiscal 2026, compared to net cash provided by operating activities of approximately $1.4 million in fiscal
2025. The increase in net cash provided by operating activities was primarily attributable to the following factors:
25
Investing Activities
Net cash used in investing activities was approximately
$5.8 million and $2.4 million for fiscal 2026 and 2025, respectively. The increase in net cash used in fiscal year 2026 compared to 2025
was primarily due to acquisition of a factory premises in Jordan in fiscal 2026 for approximately $3.6 million.
Financing Activities
Net cash provided by financing activities was
$0.7 million in fiscal 2026, which was primarily related to the increase in long-term loan of approximately $2.8 million to finance the
acquisition of a factory premises in fiscal 2026 and the net draw down of short-term bank financing of approximately $0.4 million, offset
by the distribution of dividend of $2.5 million. Net cash provided by financing activities was approximately $2.1 million for fiscal 2025,
mainly due to the net draw down of short-term bank financing of $4.5 million, which was offset by the distribution of dividends of $2.4
million.
Statutory Reserves
In accordance with the corporate Law in Jordan,
Jerash Holdings’ subsidiaries in Jordan are required to make appropriations to certain reserve funds, based on net income determined
in accordance with generally accepted accounting principles of Jordan. Appropriations to the statutory reserve are required to be 10%
of net income until the reserve is equal to 100% of the entity’s share capital. Jiangmen Treasure Success is required to set aside
10% of its net income as statutory surplus reserve until such reserve is equal to 50% of its registered capital. These reserves are not
available for dividend distribution. The statutory reserve was $413,821 as of March 31, 2026 and 2025.
The following table provides the amount of our
statutory reserves, the amount of restricted net assets, consolidated net assets, and the amount of restricted net assets as a percentage
of consolidated net assets, as of March 31, 2026 and 2025.
(All amounts, other than percentages, in thousands
of U.S. dollars)
As of March 31,
Total Restricted Net Assets $ 414 $ 414
Restricted Net Assets as Percentage of Consolidated Net Assets 0.64 % 0.66 %
Total restricted net assets accounted for approximately
0.64% of our consolidated net assets as of March 31, 2026. As our subsidiaries in Jordan are only required to set aside 10% of net profits
to fund the statutory reserves with the maximum reserve equal to 100% of the entity’s capital, we believe the potential impact of
such restricted net assets on our liquidity is limited.
26
Capital Expenditures
We had capital expenditures of approximately $5.8
million and $2.4 million in fiscal 2026 and 2025, respectively. For the fiscal year ended March 31, 2026, our capital expenditures included
payments for additional plant and machinery of approximately $1.5 million and payments for acquisition of properties of approximately
$3.6 million. For the fiscal year ended March 31, 2025, our capital expenditures included payments for additional plant and machinery
of approximately $1.0 million and payments for construction of properties of approximately $1.1 million.
On August 7, 2019, we completed a transaction
to acquire 12,340 square meters (approximately three acres) of land in Al Tajamouat Industrial City, Jordan, from a third party to construct
a dormitory for our employees with aggregate purchase price JOD863,800 (approximately $1,218,303). Management has revised the plan to
construct both dormitory and production facilities on the land in order to capture the increasing demand for our capacity. We are conducting
engineering design and study on this project with the business growth prospect of new customers to be introduced in the coming few years.
On February 6, 2020, we completed a transaction to acquire 4,516 square meters (approximately 48,608 square feet) of land in Al Tajamouat
Industrial City, Jordan, from a third party to construct a dormitory for our employee with aggregate purchase price JOD313,501 (approximately
US$442,162). The dormitory and dormitory kitchen were completed in the second quarter and the fourth quarter of fiscal year 2025, respectively.
We have spent approximately $10.6 million in capital expenditures to build the dormitory and the dormitory kitchen.
We expect that our capital expenditures will increase
in the following two fiscal years to create additional capacity to underpin our long-term business plan. The realization of these investments
depends on the progress of our business development, including expanding our client base and securing increased commitments from existing
customers. We have used cash generated from operations of our subsidiaries to fund our capital commitments in the past. Our capital expenditure
plan is highly related to customer commitments and market responses to the demand of our capacity. If growth in demand is in line
with our projection, other than cash generated from the operations of our subsidiaries, we may also obtain further bank financing and
raise funds from the capital market to meet our capital expenditure plan and fund our capital commitments. As of the date of this
report, no material commitment has been made for the capital expenditure projections above.
Off-balance Sheet Commitments and Arrangements
We have not entered into any other financial guarantees
or other commitments to guarantee the payment obligations of any third parties. In addition, we have not entered into any derivative contracts
that are indexed to our own shares and classified as stockholders’ equity, or that are not reflected in our consolidated financial
statements.
For Management’s Discussion and Analysis
of the fiscal years ended March 31, 2025 and 2024, please see our Annual Report on Form 10-K for the fiscal year ended March 31, 2025,
filed with the SEC on June 26, 2025.
Critical Accounting Estimates
We prepare our consolidated financial statements
in conformity with accounting principles generally accepted by the United States of America, which require us to make judgments, estimates,
and assumptions that affect our reported amount of assets, liabilities, revenue, costs and expenses, and any related disclosures. Although
there were no material changes made to the accounting estimates and assumptions in the past two years, we continually evaluate these estimates
and assumptions based on the most recently available information, our own historical experience, and various other assumptions that we
believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process,
actual results could differ from our expectations as a result of changes in our estimates. We have not identified any critical accounting
estimates.
Recent Accounting Pronouncements
See “Note 3—Recent Accounting Pronouncements”
in the notes to our audited consolidated financial statements for a discussion of recent accounting pronouncements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
27
Item 8. Financial Statements and Supplementary Data.
JERASH HOLDINGS (US), INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID # 199) F-2
Consolidated Balance Sheets as of March 31, 2026 and 2025 F-3
Notes to Consolidated Financial Statements F-7–F-27
F-1
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of
Jerash Holdings (US), Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated
balance sheets of Jerash Holdings (US), Inc. (the “Company”) as of March 31, 2026 and 2025, the related consolidated statements
of operations and comprehensive income (loss), changes in equity and cash flows for each of the two years in the period ended March 31,
2026, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements
present fairly, in all material respects, the financial position of the Company as of March 31, 2026 and 2025, and the results of its
operations and its cash flows for each of the two years in the period ended March 31, 2026, in conformity with accounting principles generally
accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We
are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding
of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal
control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess
the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from
the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and
that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective, or complex judgments. We determined that there are no critical audit matters.
/s/ CBIZ CPAs P.C.
CBIZ CPAs P.C.
We have served as the Company’s auditor
since 2016 (such date takes into account the acquisition of the attest business of Marcum llp
by CBIZ CPAs P.C. effective November 1, 2024).
Costa Mesa, CA
June 18, 2026
F-2
JERASH HOLDINGS (US), INC.,
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
Current Assets:
LIABILITIES AND EQUITY
Current Liabilities:
Uncertain tax provision - 175,290
Bank loan - current 58,766 -
Deferred tax liabilities, net 73 120
Commitments and Contingencies (Note 16)
Equity
The accompanying notes are an integral part of these consolidated financial statements.
F-3
JERASH HOLDINGS (US), INC.,
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
For the Fiscal Year Ended March 31,
Other Income (Expenses):
Net income attributable to noncontrolling interest 89,802 8,440
Other Comprehensive Income (Loss):
Foreign currency translation gain (loss) 48,369 (20,803 )
Comprehensive income attributable to noncontrolling interest 89,802 8,440
Earnings (Loss) Per Share Attributable to Common Stockholders:
Weighted Average Number of Shares
Dividend per share $ 0.20 $ 0.20
The
accompanying notes are an integral part of these consolidated financial statements.
F-4
JERASH HOLDINGS (US), INC.,
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES
IN EQUITY
FOR THE FISCAL YEARS ENDED MARCH
31, 2026 AND 2025
Additional Accumulated Other
Foreign currency translation loss - - - - - - - - (20,803 ) - (20,803 )
Foreign currency translation gain - - - - - - - - 48,369 - 48,369
The accompanying notes are an integral
part of these consolidated financial statements.
F-5
JERASH HOLDINGS (US), INC.,
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Fiscal Year Ended March 31,
CASH FLOWS FROM OPERATING ACTIVITIES
Amortization of operating lease right-of-use assets 588,463 591,961
Uncertain tax provision - 175,290
Changes in operating assets:
Changes in operating liabilities:
Deferred tax liabilities (47 ) 120
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (5,128,453 ) (951,112 )
Payments for construction of properties - (1,089,484 )
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term loan 2,820,800 -
Supplemental disclosure information:
Non-cash investing and financing activities
Equipment obtained by utilizing long-term deposit $ 296,098 $ 667,567
The accompanying notes are an integral part of these consolidated financial statements.
F-6
JERASH HOLDINGS (US), INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
Jerash Holdings (US), Inc. (“Jerash Holdings”)
was incorporated under the laws of the State of Delaware on January 20, 2016. Jerash Holdings is a holding company with no operations.
Jerash Holdings and its subsidiaries are herein collectively referred to as the “Company.”
Jerash Garments and Fashions Manufacturing Company
Limited (“Jerash Garments”) is a wholly owned subsidiary of Jerash Holdings and was established in Amman, the Hashemite Kingdom
of Jordan (“Jordan”), as a limited liability company on November 26, 2000 with a declared capital of 150,000 Jordanian Dinar
(“JOD”) (approximately US$212,000).
Jerash for Industrial Embroidery Company (“Jerash Embroidery”)
and Chinese Garments and Fashions Manufacturing Company Limited (“Chinese Garments”) were both established in Amman, Jordan,
as limited liability companies on March 11, 2013 and June 13, 2013, respectively, each with a declared capital of JOD 50,000 (approximately
US$71,000). Jerash Embroidery and Chinese Garments are wholly owned subsidiaries of Jerash Garments. As of March 31, 2026, the principal
activities of Jerash Embroidery and Chinese Garment were transferred to Jerash Garment, and Jerash Embroidery and Chinese Garments
currently have no operation.
Al-Mutafaweq Co. for Garments Manufacturing Ltd.
(“Paramount”) is a contract garment manufacturer that was established in Amman, Jordan, as a limited liability company on
October 24, 2004 with a declared capital of JOD 100,000 (approximately US$141,000). On December 11, 2018, Jerash Garments and the sole
shareholder of Paramount entered into an agreement pursuant to which Jerash Garments acquired all of the outstanding shares of stock of
Paramount. Jerash Garments assumed ownership of all of the machinery and equipment owned by Paramount. Paramount 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 June 18, 2019, Paramount became a subsidiary of Jerash Garments. As of March 31, 2026, the principal activities
of Paramount were transferred to Jerash Garment, and Paramount currently has no operation.
Jerash The First for Medical Supplies Manufacturing
Company Limited (“Jerash The First”) was established in Amman, Jordan, as a limited liability company on July 6, 2020, with
a registered capital of JOD 150,000 (approximately US$212,000). Jerash The First was engaged in the production of medical supplies in
Jordan and is a wholly owned subsidiary of Jerash Garments.
Mustafa and Kamal Ashraf Trading Company (Jordan)
for the Manufacture of Ready-Make Clothes LLC (“MK Garments”) is a garment manufacturer that was established in Amman, Jordan,
as a limited liability company on January 23, 2003 with a declared capital of JOD 100,000 (approximately US$141,000). 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.
Kawkab Venus Dowalyah Lisenaet Albesah (“Kawkab
Venus”) was established in Amman, Jordan, as a limited liability company on January 15, 2015 with a declared capital of JOD 50,000
(approximately US$71,000). 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 as an asset acquisition. As of August 21, 2022,
Kawkab Venus became a subsidiary of Jerash Garments.
F-7
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS (CONTINUED)
Treasure Success International Limited (“Treasure
Success”) was organized on July 5, 2016 in Hong Kong Special Administrative Region of the People’s Republic of China (“Hong
Kong” or “HK”), as a limited liability company for the primary purpose of employing staff from the People’s Republic
of China (“China”) to support Jerash Garments’ operations and is a wholly owned subsidiary of Jerash Holdings.
Ever Winland Limited (“Ever Winland”) was organized in
Hong Kong, as a limited liability company. 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. The office premises were transferred to Treasure Success
as of January 8, 2026.
J&B International Limited (“J&B”)
is a joint venture company established in Hong Kong on January 10, 2023. On March 20, 2023, Treasure Success and P. T. Eratex (Hong Kong)
Limited (“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. The declared capital is 500,000 Hong Kong Dollars (“HKD”) (approximately
$64,000). J&B engaged in the garment trading and manufacturing business 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 (Hong Kong) Holdings Limited (“Jerash
Newtech”) is a joint venture company established in Hong Kong on November 3, 2023. On October 10, 2023, Treasure Success and Newtech
Textile (HK) Limited entered into a Joint Venture and Shareholder’s Agreement to establish a new joint venture for the establishment
of a fabric facility in Jordan. On November 3, 2023, Jerash Newtech was established according to the aforementioned Joint Venture and
Shareholder’s Agreement. Treasure Success owns 51% of the equity interests in Jerash Newtech. The declared capital of Jerash Newtech
is US$100,000. 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.
Jiangmen Treasure Success Business Consultancy
Company Limited (“Jiangmen Treasure Success”) was organized on August 28, 2019 under the laws of China in Jiangmen City of
Guangdong Province in China with a total registered capital of HKD15 million (approximately $1.9 million) to provide support in sales
and marketing, sample development, merchandising, procurement, and other areas. Treasure Success owns 100% of the equity interests in
Jiangmen Treasure Success.
F-8
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
(CONTINUED)
Jerash Supplies, LLC (“Jerash Supplies”)
was formed under the laws of the State of Delaware on November 20, 2020. Jerash Supplies is engaged in the trading of personal protective
equipment products and is a wholly owned subsidiary of Jerash Holdings.
The Company is engaged primarily in the manufacturing
and exporting of customized, ready-made sportswear and outerwear produced in its facilities in Jordan and sold in the United States, Jordan,
and other countries.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The Company’s consolidated financial statements
are prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and
pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”).
The consolidated financial statements include
the financial statements of Jerash Holdings, its wholly owned subsidiaries, and two non-wholly owned subsidiaries.
Non-wholly owned subsidiaries are entities that
the reporting parent entity does not own equity interests in full. Noncontrolling interest is evaluated with a depiction of the portion
of a non-wholly owned subsidiary’s net assets, net income, and net comprehensive income that is attributable to holders of equity-classified
ownership interests other than the reporting parent entity. As mentioned in Note 1, the Company holds 51% of equity interest in J&B
and Jerash Newtech through its wholly owned subsidiary, Treasure Success. The Company consolidates J&B and Jerash Newtech and reports
noncontrolling interest to reflect the portion of their equity that is not attributable to the Company as the controlling shareholder.
As of March 31, 2026 and 2025, noncontrolling interest was $142,583 and $52,781, respectively.
All significant intercompany balances and transactions
have been eliminated in consolidation.
Use of Estimates
The preparation of the consolidated financial
statements, in conformity with U.S. GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported
amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates.
Cash and Cash Equivalents
The Company’s cash consists of cash on hand
and cash deposited in financial institutions. The Company considers all highly liquid investment instruments with an original maturity
of three months or less from the original date of purchase to be cash equivalents. All cash and cash equivalents are unrestricted as to
withdrawal and use.
Restricted Cash
Restricted cash consists of cash used as security
deposits to obtain credit facilities from a bank and to secure customs clearance, labor import requirements, and other requirements of
local regulations. The Company is required to keep certain amounts on deposit that are subject to withdrawal restrictions. These security
deposits at the bank are refundable only when the bank facilities are terminated. The restricted cash is classified as a current asset
if the Company intends to terminate these bank facilities within one year, and as a non-current asset if otherwise.
F-9
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Accounts Receivable, Net
Accounts receivable are recognized and carried
at the original invoiced amount less an estimated allowance for credit loss. The Company usually grants extended payment terms to customers
with good credit standing and determines the adequacy of credit losses based on the historical level of credit loss, current economic
trends, and reasonable and supportable forecasts that affect the collectability of the future cash flows.
Inventories
Inventories are stated at the lower of cost or
net realizable value. Inventories include the cost of raw materials, freight, direct labor, and related production overhead. The cost
of inventories is determined using the First-in, First-out method. The Company periodically reviews its inventories for excess or slow-moving
items and makes provisions as necessary to properly reflect inventory value.
Advances to Suppliers, Net
Advances to suppliers consist of balances paid
to suppliers for services or materials purchased that have not been provided or received. Advances to suppliers for services and materials
are short-term in nature. Advances to suppliers are reviewed periodically to determine whether their carrying value has become impaired.
The Company considers the assets to be impaired if the performance of the suppliers becomes doubtful. At each reporting date, the Company
generally determines the adequacy of allowance for impairment by evaluating all available information and then records specific allowances
for those advances based on the specific facts and circumstances.
Credit Loss
The Company maintains expected loss methodology
that is referred to as the current expected credit loss methodology. The expected credit loss impairment model requires the entity to
recognize its estimate of expected credit losses for affected financial assets using an allowance for credit losses and requires consideration
of a broader range of reasonable and supportable information to inform credit loss estimates.
The Company’s accounts receivable and other
receivables, which are included in prepaid expenses and other current assets line items in the consolidated balance sheets, are within
the scope of ASC Topic 326. The Company measures expected credit losses of account receivables and other receivables, on a collective
basis when similar risk characteristics exist. The Company makes estimates of expected credit and collectability trends for the allowance
for credit losses based upon assessment of various factors, including historical experience, the age of the receivables, creditworthiness
of the customers and other debtors, current economic conditions, reasonable and supportable forecasts of future economic conditions, and
other factors that may affect its ability to collect from the customers and other debtors. The Company also provides specific provisions
for allowance when facts and circumstances indicate that the receivable is unlikely to be collected.
Expected credit losses are included in general
and administrative expenses in the consolidated statements of operations and comprehensive income (loss). After all attempts to collect
a receivable have failed, the receivable is written off against the allowance.
Property, Plant, and Equipment, Net
Property, plant, and equipment are recorded at
cost, reduced by accumulated depreciation and amortization. Depreciation and amortization expense related to property, plant, and equipment
is computed using the straight-line method based on the estimated useful lives of the assets, or in the case of leasehold improvements,
the shorter of the initial lease term or the estimated useful life of the improvements. The useful life and depreciation method are reviewed
periodically to ensure that the method and period of depreciation are consistent with the expected pattern of economic benefits from items
of property, plant, and equipment. The estimated useful lives of depreciation and amortization of the principal classes of assets are
as follows:
Useful life
Land Infinite
Property and buildings 15-25 years
Equipment and machinery 3-5 years
Office and electronic equipment 3-5 years
Automobiles 5 years
Leasehold improvements Lesser of useful life and lease term
F-10
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property, Plant, and Equipment, Net (Continued)
Expenditures for maintenance and repairs, which
do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and betterments
that substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation or amortization of
assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in the consolidated statements of
operations and comprehensive income (loss).
Impairment of Long-Lived Assets
The Company assesses its long-lived assets, including
property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group
may not be recoverable. Factors that may indicate potential impairment include a significant underperformance relative to the historical
or projected future operating results or a significant negative industry or economic trend. Recoverability of assets to be held and used
is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by that
asset. If impairment is indicated, a loss is recognized for any excess of the carrying value over the estimated fair value of the asset.
The fair value is estimated based on the discounted future cash flows or comparable market values, if available. The Company did not record
any impairment loss during the fiscal years ended March 31, 2026 and 2025.
Goodwill
Goodwill represents the excess purchase price
paid over the fair value of the net assets of acquired companies. Goodwill is not amortized. As of March 31, 2026 and 2025, the carrying
amount of goodwill was $499,282. Goodwill is tested for impairment on an annual basis, or in interim periods if indicators of potential
impairment exist, based on the one reporting unit. The Company has the option to perform a qualitative assessment to determine whether
it is necessary to perform the quantitative goodwill impairment test. When performing the quantitative impairment test, the Company compares
the fair value of its only reporting unit with the carrying amounts. The Company would recognize an impairment charge for the amount by
which the carrying amount exceeds the reporting unit’s fair value. The Company concluded that no impairment of its goodwill occurred
for the fiscal years ended March 31, 2026 and 2025.
Revenue Recognition
Substantially all of the Company’s revenue
is derived from product sales, which consist of sales of the Company’s customized ready-made outerwear for large brand-name retailers.
The Company considers purchase orders to be a contract with a customer. Contracts with customers are considered to be short-term when
the time between order confirmation and satisfaction of the performance obligations is equal to or less than one year. Virtually all of
the Company’s contracts are short-term. The Company has minimal incremental costs of obtaining a contract, which are expensed when
incurred. The Company recognizes revenue for the transfer of promised goods to customers in an amount that reflects the consideration
to which the Company expects to be entitled in exchange for those goods. The Company typically satisfies its performance obligations in
contracts with customers upon shipment of the goods. Generally, payment is due from customers within 14 to 150 days of the invoice date.
The contracts do not have significant financing components. Shipping and handling costs associated with outbound freight from Jordan export
dock are not an obligation of the Company. Returns and allowances are not a significant aspect of the revenue recognition process as historically
they have been immaterial.
The Company also derives revenue from rendering
cutting and making services to other apparel vendors who subcontract orders to the Company. Revenue is recognized when the service is
rendered. All of the Company’s contracts have a single performance obligation satisfied at a point in time and the transaction price
is stated in the contract, usually as a price per unit. All estimates are based on the Company’s historical experience, complete
satisfaction of the performance obligation, and the Company’s best judgment at the time the estimate is made. Historically, sales
returns have not significantly impacted the Company’s revenue.
F-11
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition (Continued)
The Company applies the “distinct”
guidance in ASC 606-10-25-19 through ASC 606-10-25-22 to identify the specified goods or services. The Company evaluates
the indicators in ASC 606-10-55-39 along with all relevant facts and circumstances in relation to our assessment. As the Company
is primarily responsible for fulfilling the promise to provide the specified good and service, the Company has inventory risk before the
specified good or service has been transferred to a customer, or after transfer of control to the customer; and the Company has discretion
in establishing the prices for the specified goods or service, the Company concluded that it is the principal of the sales transactions
and revenue should be recognized on a gross basis.
The Company does not have any contract assets
since the Company recognizes accounts receivable and revenue for the transfer of promised goods to customer in an amount that reflects
the consideration to which the Company expects to be entitled in exchange for those goods. The Company has an unconditional right to consideration
when the Company has satisfied its performance obligation and payment to the accounts receivable from customers is not contingent on a
future event. The Company had contract liabilities of $241,357 and $487,004 as of March 31, 2026 and 2025, respectively. As of March 31,
2026, $241,357 deferred revenue was expected to be recognized within fiscal year 2027.
Segment
The Company has one revenue generating reportable
geographic segment under ASC Topic 280 “Segment Reporting” and derives its sales primarily from its sales of customized ready-made
outerwear. Chief Operational Decision Makers (“CODM”), including Chief Executive Officer and Chief Financial Officer, are
making operating decisions and assessing performance as the source for determining the Company’s reportable segments. CODM reviews
operation results on the consolidated revenue, gross profit, selling, general, and administrative expenses, interest expenses, stock-based
compensation expense, and net income or loss regularly. In selling, general, and administration expense, CODM reviews staff payroll and
other related expenses, inventory export and related costs, depreciation, and others major items. The Company believes disaggregation