UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

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)

Delaware |  | 81-4701719
(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)

277 Fairfield Road, Suite 338

Fairfield, New Jersey 07004

(Address of principal executive offices) (Zip Code)

(201) 285-7973

(Registrant’s telephone number, including area code)

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

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 13, 2023, there were 12,294,840 shares of common stock, par value $0.001 per share, outstanding.

Jerash Holdings (US), Inc.

Form 10-Q

For the Quarterly Period Ended September 30, 2023

Contents

Part I |  | Financial Information | 1
Item 1 |  | Financial Statements | 1
|  | Condensed Consolidated Balance Sheets as of September 30, 2023 (Unaudited) and March 31, 2023 | 1
|  | Condensed Consolidated Statements of Income and Comprehensive Income for the Three and Six Months Ended September 30, 2023 and 2022 (Unaudited) | 2
|  | Condensed Consolidated Statements of Changes in Equity for the Three and Six Months Ended September 30, 2023 and 2022 (Unaudited) | 3
|  | Condensed Consolidated Statements of Cash Flows for the Six Months Ended September 30, 2023 and 2022 (Unaudited) | 5
|  | Notes to Unaudited Condensed Consolidated Financial Statements | 6
Item 2 |  | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 25
Item 3 |  | Quantitative and Qualitative Disclosures about Market Risk | 33
Item 4 |  | Controls and Procedures | 33
Part II |  | Other Information | 35
Item 1 |  | Legal Proceedings | 35
Item 1A |  | Risk Factors | 35
Item 2 |  | Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities | 35
Item 3 |  | Defaults Upon Senior Securities | 35
Item 4 |  | Mine Safety Disclosures | 35
Item 5 |  | Other Information | 35
Item 6 |  | Exhibits | 36
Signatures | 37

i

JERASH HOLDINGS (US), INC.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

JERASH HOLDINGS (US), INC.,

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

|  | September 30, 2023 |  |  | March 31, 2023 |
|  | (Unaudited) |  |  |  |
ASSETS |
Current Assets: |  |  |  |  |  |
Cash |  | $ | 21,201,642 |  |  | $ | 17,801,614 |
Accounts receivable, net |  |  | 5,201,679 |  |  |  | 2,240,537 |
Bills receivable |  |  | - |  |  |  | 87,573 |
Tax recoverable |  |  | - |  |  |  | 16,763 |
Inventories |  |  | 18,713,863 |  |  |  | 32,656,833 |
Prepaid expenses and other current assets |  |  | 2,132,934 |  |  |  | 2,947,815 |
Advance to suppliers, net |  |  | 3,443,334 |  |  |  | 1,533,091 |
Total Current Assets |  |  | 50,693,452 |  |  |  | 57,284,226 |
Restricted cash - non-current |  |  | 1,608,074 |  |  |  | 1,609,989 |
Long-term deposits |  |  | 749,154 |  |  |  | 841,628 |
Deferred tax assets, net |  |  | 153,873 |  |  |  | 153,873 |
Property, plant and equipment, net |  |  | 24,682,883 |  |  |  | 22,355,574 |
Goodwill |  |  | 499,282 |  |  |  | 499,282 |
Right of use assets |  |  | 718,418 |  |  |  | 974,761 |
Total Assets |  | $ | 79,105,136 |  |  | $ | 83,719,333 |
LIABILITIES AND EQUITY |  |
Current Liabilities: |  |  |  |  |  |  |  |
Accounts payable |  | $ | 4,252,112 |  |  | $ | 5,782,570 |
Accrued expenses |  |  | 2,679,485 |  |  |  | 2,930,533 |
Income tax payable - current |  |  | 1,458,777 |  |  |  | 2,846,201 |
Other payables |  |  | 1,211,812 |  |  |  | 1,477,243 |
Deferred revenue |  |  | 232,387 |  |  |  | 928,393 |
Amount due to a noncontrolling interest |  |  | 31,677 |  |  |  | - |
Operating lease liabilities - current |  |  | 345,171 |  |  |  | 481,502 |
Total Current Liabilities |  |  | 10,211,421 |  |  |  | 14,446,442 |
Operating lease liabilities - non-current |  |  | 246,341 |  |  |  | 287,247 |
Income tax payable - non-current |  |  | 417,450 |  |  |  | 751,410 |
Total Liabilities |  |  | 10,875,212 |  |  |  | 15,485,099 |
Commitments and Contingencies (Note 16) |  |  |  |  |  |  |  |
Equity |  |  |  |  |  |  |  |
Preferred stock, $0.001 par value; 500,000 shares authorized; none issued and outstanding |  | $ | - |  |  | $ | - |
Common stock, $0.001 par value; 30,000,000 shares authorized; 12,534,318 shares issued, 12,294,840 shares outstanding |  |  | 12,534 |  |  |  | 12,534 |
Additional paid-in capital |  |  | 23,415,296 |  |  |  | 22,931,046 |
Treasury stock, 239,478 shares |  |  | (1,169,046 | ) |  |  | (1,169,046 | )
Statutory reserve |  |  | 410,847 |  |  |  | 410,847 |
Retained earnings |  |  | 45,804,741 |  |  |  | 46,172,082 |
Accumulated other comprehensive loss |  |  | (277,729 | ) |  |  | (123,229 | )
Total Jerash Holdings (US), Inc.’ Stockholders’ Equity |  |  | 68,196,643 |  |  |  | 68,234,234 |
Noncontrolling interest |  |  | 33,281 |  |  |  | - |
Total Equity |  |  | 68,229,924 |  |  |  | 68,234,234 |
Total Liabilities and Equity |  | $ | 79,105,136 |  |  | $ | 83,719,333 |

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

1

JERASH HOLDINGS (US), INC.,

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(UNAUDITED)

|  | For the Three Months Ended September 30, |  |  | For the Six Months Ended September 30, |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
Revenue, net |  | $ | 33,357,108 |  |  | $ | 37,825,695 |  |  | $ | 68,092,765 |  |  | $ | 71,262,256 |
Cost of goods sold |  |  | 27,985,077 |  |  |  | 30,907,908 |  |  |  | 57,153,194 |  |  |  | 57,722,102 |
Gross Profit |  |  | 5,372,031 |  |  |  | 6,917,787 |  |  |  | 10,939,571 |  |  |  | 13,540,154 |
Selling, general, and administrative expenses |  |  | 4,240,588 |  |  |  | 4,308,084 |  |  |  | 8,475,506 |  |  |  | 8,326,782 |
Stock-based compensation expenses |  |  | 243,448 |  |  |  | - |  |  |  | 484,250 |  |  |  | 294,822 |
Total Operating Expenses |  |  | 4,484,036 |  |  |  | 4,308,084 |  |  |  | 8,959,756 |  |  |  | 8,621,604 |
Income from Operations |  |  | 887,995 |  |  |  | 2,609,703 |  |  |  | 1,979,815 |  |  |  | 4,918,550 |
Other Income (Expenses): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest expenses |  |  | (359,234 | ) |  |  | (163,595 | ) |  |  | (748,185 | ) |  |  | (251,437 | )
Other income, net |  |  | 192,523 |  |  |  | 57,807 |  |  |  | 282,750 |  |  |  | 118,049 |
Total other expenses, net |  |  | (166,711 | ) |  |  | (105,788 | ) |  |  | (465,435 | ) |  |  | (133,388 | )
Net income before provision for income taxes |  |  | 721,284 |  |  |  | 2,503,915 |  |  |  | 1,514,380 |  |  |  | 4,785,162 |
Income tax expenses |  |  | 352,340 |  |  |  | 712,163 |  |  |  | 650,321 |  |  |  | 1,272,028 |
Net income |  |  | 368,944 |  |  |  | 1,791,752 |  |  |  | 864,059 |  |  |  | 3,513,134 |
Net gain attributable to noncontrolling interest |  |  | (3,327 | ) |  |  | - |  |  |  | (1,916 | ) |  |  | - |
Net income attributable to Jerash Holdings (US), Inc.’s Common Stockholders |  | $ | 365,617 |  |  | $ | 1,791,752 |  |  | $ | 862,143 |  |  | $ | 3,513,134 |
Net income |  | $ | 368,944 |  |  | $ | 1,791,752 |  |  | $ | 864,059 |  |  | $ | 3,513,134 |
Other Comprehensive Loss: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency translation loss |  |  | (59,841 | ) |  |  | (216,210 | ) |  |  | (154,500 | ) |  |  | (333,870 | )
Total Comprehensive Income |  |  | 309,103 |  |  |  | 1,575,542 |  |  |  | 709,559 |  |  |  | 3,179,264 |
Comprehensive loss attributable to noncontrolling interest |  |  | (3,327 | ) |  |  | - |  |  |  | (1,916 | ) |  |  | - |
Comprehensive Income Attributable to Jerash Holdings (US), Inc.’s Common Stockholders |  | $ | 305,776 |  |  | $ | 1,575,542 |  |  | $ | 707,643 |  |  | $ | 3,179,264 |
Earnings Per Share Attributable to Common Stockholders: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic and diluted |  | $ | 0.03 |  |  | $ | 0.14 |  |  | $ | 0.07 |  |  | $ | 0.28 |
Weighted Average Number of Shares |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  |  | 12,294,840 |  |  |  | 12,498,431 |  |  |  | 12,294,840 |  |  |  | 12,416,823 |
Diluted |  |  | 12,294,840 |  |  |  | 12,498,431 |  |  |  | 12,294,840 |  |  |  | 12,485,512 |
Dividend per share |  | $ | 0.05 |  |  | $ | 0.05 |  |  | $ | 0.10 |  |  | $ | 0.10 |

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2

JERASH HOLDINGS (US), INC.,

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

(UNAUDITED)

|  | Preferred Stock |  |  | Common Stock |  |  | Additional Paid-in |  |  | Treasury |  |  | Statutory |  |  | Retained |  |  | Accumulated Other Comprehensive Gain |  |  | Noncontrolling |  |  | Total |
|  | Shares |  |  | Amount |  |  | Shares |  |  | Amount |  |  | Capital |  |  | Stock |  |  | Reserve |  |  | Earnings |  |  | (Loss) |  |  | interest |  |  | Equity |
Balance at March 31, 2022 |  |  | - |  |  | $ | - |  |  |  | 12,334,318 |  |  | $ | 12,334 |  |  | $ | 22,517,346 |  |  | $ | - |  |  | $ | 379,323 |  |  | $ | 46,268,110 |  |  | $ | 127,145 |  |  | $ | - |  |  | $ | 69,304,258 |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | - |
Stock-based compensation expense for the restricted stock units issued under stock incentive plan |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 294,822 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 294,822 |
Issuance of common stocks upon vesting of restricted stock units |  |  | - |  |  |  | - |  |  |  | 200,000 |  |  |  | 200 |  |  |  | (200 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Share repurchase |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (547,713 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (547,713 | )
Net income |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 3,513,134 |  |  |  | - |  |  |  | - |  |  |  | 3,513,134 |
Dividend payments |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (1,243,432 | ) |  |  | - |  |  |  | - |  |  |  | (1,243,432 | )
Foreign currency translation loss |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (333,870 | ) |  |  | - |  |  |  | (333,870 | )
Balance at September 30, 2022 (unaudited) |  |  | - |  |  | $ | - |  |  |  | 12,534,318 |  |  | $ | 12,534 |  |  | $ | 22,811,968 |  |  | $ | (547,713 | ) |  | $ | 379,323 |  |  | $ | 48,537,812 |  |  | $ | (206,725 | ) |  | $ | - |  |  | $ | 70,987,199 |
Balance at March 31, 2023 |  |  | - |  |  | $ | - |  |  |  | 12,534,318 |  |  | $ | 12,534 |  |  | $ | 22,931,046 |  |  | $ | (1,169,046 | ) |  | $ | 410,847 |  |  | $ | 46,172,082 |  |  | $ | (123,229 | ) |  | $ | - |  |  | $ | 68,234,234 |
Stock-based compensation expense for the restricted stock units issued under stock incentive plan |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 484,250 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 484,250 |
Allocation of J&B shares |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 31,365 |  |  |  | 31,365 |
Net income |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 862,143 |  |  |  | - |  |  |  | 1,916 |  |  |  | 864,059 |
Dividend payments |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (1,229,484 | ) |  |  | - |  |  |  | - |  |  |  | (1,229,484 | )
Foreign currency translation loss |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (154,500 | ) |  |  | - |  |  |  | (154,500 | )
Balance at September 30, 2023 (unaudited) |  |  | - |  |  | $ | - |  |  |  | 12,534,318 |  |  | $ | 12,534 |  |  | $ | 23,415,296 |  |  | $ | (1,169,046 | ) |  | $ | 410,847 |  |  | $ | 45,804,741 |  |  | $ | (277,729 | ) |  | $ | 33,281 |  |  | $ | 68,229,924 |

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 (UNAUDITED)

|  | Preferred Stock |  |  | Common Stock |  |  | Additional Paid-in |  |  | Treasury |  |  | Statutory |  |  | Retained |  |  | Accumulated Other Comprehensive Gain |  |  | Noncontrolling |  |  | Total |
|  | Shares |  |  | Amount |  |  | Shares |  |  | Amount |  |  | Capital |  |  | Stock |  |  | Reserve |  |  | Earnings |  |  | (Loss) |  |  | interest |  |  | Equity |
Balance at June 30, 2022 (unaudited) |  |  | - |  |  | $ | - |  |  |  | 12,534,318 |  |  | $ | 12,534 |  |  | $ | 22,811,968 |  |  | $ | - |  |  | $ | 379,323 |  |  | $ | 47,372,776 |  |  | $ | 9,485 |  |  | $ | - |  |  | $ | 70,586,086 |
Share repurchase |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (547,713 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (547,713 | )
Net income |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,791,752 |  |  |  | - |  |  |  | - |  |  |  | 1,791,752 |
Dividend payment |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (626,716 | ) |  |  | - |  |  |  | - |  |  |  | (626,716 | )
Foreign currency translation loss |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (216,210 | ) |  |  | - |  |  |  | (216,210 | )
Balance at September 30, 2022 (unaudited) |  |  | - |  |  | $ | - |  |  |  | 12,534,318 |  |  | $ | 12,534 |  |  | $ | 22,811,968 |  |  | $ | (547,713 | ) |  | $ | 379,323 |  |  | $ | 48,537,812 |  |  | $ | (206,725 | ) |  | $ | - |  |  | $ | 70,987,199 |
Balance at June 30, 2023 (unaudited) |  |  | - |  |  | $ | - |  |  |  | 12,534,318 |  |  | $ | 12,534 |  |  | $ | 23,171,848 |  |  | $ | (1,169,046 | ) |  | $ | 410,847 |  |  | $ | 46,053,866 |  |  | $ | (217,888 | ) |  | $ | 29,954 |  |  | $ | 68,292,115 |
Stock-based compensation expense for the restricted stock units issued under stock incentive plan |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 243,448 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 243,448 |
Net income |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 365,617 |  |  |  | - |  |  |  | 3,327 |  |  |  | 368,944 |
Dividend payment |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (614,742 | ) |  |  | - |  |  |  | - |  |  |  | (614,742 | )
Foreign currency translation loss |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (59,841 | ) |  |  | - |  |  |  | (59,841 | )
Balance at September 30, 2023 (unaudited) |  |  | - |  |  | $ | - |  |  |  | 12,534,318 |  |  | $ | 12,534 |  |  | $ | 23,415,296 |  |  | $ | (1,169,046 | ) |  | $ | 410,847 |  |  | $ | 45,804,741 |  |  | $ | (277,729 | ) |  | $ | 33,281 |  |  | $ | 68,229,924 |

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4

JERASH HOLDINGS (US), INC.,

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

|  | For the Six Months Ended September 30, |
|  | 2023 |  |  | 2022 |
CASH FLOWS FROM OPERATING ACTIVITIES |  |  |  |  |  |
Net income |  | $ | 864,059 |  |  | $ | 3,513,134 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |  |  |  |  |
Depreciation and amortization |  |  | 1,224,322 |  |  |  | 1,184,940 |
Stock-based compensation expenses |  |  | 484,250 |  |  |  | 294,822 |
Bad debt recovery |  |  | (66,980 | ) |  |  | - |
Amortization of operating lease right-of-use assets |  |  | 416,090 |  |  |  | 548,849 |
Changes in operating assets: |  |  |  |  |  |  |  |
Accounts receivable |  |  | (2,894,162 | ) |  |  | 7,018,987 |
Bills receivable |  |  | 87,573 |  |  |  | - |
Inventories |  |  | 13,942,970 |  |  |  | (8,171,427 | )
Prepaid expenses and other current assets |  |  | 814,878 |  |  |  | 336,710 |
Advance to suppliers |  |  | (1,910,244 | ) |  |  | (986,600 | )
Changes in operating liabilities: |  |  |  |  |  |  |  |
Accounts payable |  |  | (1,530,458 | ) |  |  | 5,696,686 |
Accrued expenses |  |  | (251,048 | ) |  |  | 679,586 |
Other payables |  |  | (265,431 | ) |  |  | (749,837 | )
Amount due to noncontrolling interest |  |  | 312 |  |  |  | - |
Deferred revenue |  |  | (696,006 | ) |  |  | 465,405 |
Operating lease liabilities |  |  | (336,984 | ) |  |  | (455,604 | )
Income tax payable, net of recovery |  |  | (1,704,261 | ) |  |  | 262,106 |
Net cash provided by operating activities |  |  | 8,178,880 |  |  |  | 9,637,757 |
CASH FLOWS FROM INVESTING ACTIVITIES |  |  |  |  |  |  |  |
Purchases of property, plant, and equipment |  |  | (635,878 | ) |  |  | (379,600 | )
Payments for construction of properties |  |  | (2,575,669 | ) |  |  | (2,641,614 | )
Acquisition of Ever Winland |  |  | - |  |  |  | (5,100,000 | )
Acquisition of Kawkab Venus |  |  | - |  |  |  | (2,200,000 | )
Payment for long-term deposits |  |  | (247,610 | ) |  |  | (129,650 | )
Net cash used in investing activities |  |  | (3,459,157 | ) |  |  | (10,450,864 | )
CASH FLOWS FROM FINANCING ACTIVITIES |  |  |  |  |  |  |  |
Dividend payments |  |  | (1,229,484 | ) |  |  | (1,243,432 | )
Investment of noncontrolling interest |  |  | 31,365 |  |  |  | - |
Share repurchase |  |  | - |  |  |  | (547,713 | )
Repayment from short-term loan |  |  | (3,118,339 | ) |  |  | (901,055 | )
Repayment to a related party |  |  | - |  |  |  | (300,166 | )
Proceeds from short-term loan |  |  | 3,118,339 |  |  |  | 2,007,185 |
Net cash used in financing activities |  |  | (1,198,119 | ) |  |  | (985,181 | )
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND RESTRICTED CASH |  |  | (123,491 | ) |  |  | (334,064 | )
NET INCREASE (DECREASE) IN CASH AND RESTRICTED CASH |  |  | 3,398,113 |  |  |  | (2,132,352 | )
CASH, AND RESTRICTED CASH, BEGINNING OF THE PERIOD |  |  | 19,411,603 |  |  |  | 26,583,488 |
CASH, AND RESTRICTED CASH, END OF THE PERIOD |  | $ | 22,809,716 |  |  | $ | 24,451,136 |
CASH, AND RESTRICTED CASH, END OF THE PERIOD |  |  | 22,809,716 |  |  |  | 24,451,136 |
LESS: NON-CURRENT RESTRICTED CASH |  |  | 1,608,074 |  |  |  | 1,437,339 |
CASH, END OF THE PERIOD |  | $ | 21,201,642 |  |  | $ | 23,013,797 |
Supplemental disclosure information: |  |  |  |  |  |  |  |
Cash paid for interest |  | $ | 748,185 |  |  | $ | 251,437 |
Income tax paid |  | $ | 2,371,705 |  |  | $ | 1,096,934 |
Non-cash investing and financing activities |  |  |  |  |  |  |  |
Equipment obtained by utilizing long-term deposit |  | $ | 358,620 |  |  | $ | 232,877 |
Acquisition of Kawkab Venus by utilizing long-term deposit |  | $ | - |  |  | $ | 500,000 |
Right of use assets obtained in exchange for operating lease obligations |  | $ | 177,068 |  |  | $ | 68,932 |

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5

JERASH HOLDINGS (US), INC

NOTES TO UNAUDITED CONDENSED 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. Jerash Embroidery and Chinese Garments are wholly owned subsidiaries of Jerash Garments.

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. 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.

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. Jerash The First is 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. 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. 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.

Treasure Success International Limited (“Treasure Success”) was organized on July 5, 2016 in Hong Kong, the People’s Republic of China (“China”), as a limited liability company for the primary purpose of employing staff from China to support Jerash Garments’ operations and is a wholly-owned subsidiary of Jerash Holdings.

6

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS (continued)

Ever Winland Limited (“Ever Winland”) was organized in Hong Kong, China, as a limited liability company. It holds office premises, which are 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.

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 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 HK$500,000 (approximately $64,000). J&B engages in the garment trading and manufacturing business for orders from customers.

Jiangmen Treasure Success Business Consultancy Company Limited (“Jiangmen Treasure Success”) was organized on August 28, 2019 under the laws of China in Guangzhou City of Guangdong Province in China with a total registered capital of 15 million Hong Kong Dollars (“HKD”) (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.

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 and personal protective equipment (“PPE”) 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 unaudited condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included in the Company’s unaudited condensed consolidated financial statements. The consolidated balance sheet as of March 31, 2023 has been derived from the audited consolidated balance sheet at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2023, as filed with the U.S. Securities and Exchange Commission (the “SEC”). Operating results for the six months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending March 31, 2024.

Principles of Consolidation

The unaudited condensed consolidated financial statements include the financial statements of Jerash Holdings, its wholly owned subsidiaries, and a non-wholly owned subsidiary.

Non-wholly owned subsidiaries are entities that the reporting parent entity does not own equity instruments 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 indirectly. The Company consolidates J&B and reports noncontrolling interest to determine the primary beneficiary of the risks and rewards of the non-wholly owned subsidiary. As of September 30, 2023, noncontrolling interest was $33,281.

The unaudited condensed consolidated financial statements include the financial statements of Jerash Holdings and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

7

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Use of Estimates

The preparation of the unaudited condensed 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

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. As of September 30, 2023 and March 31, 2023, the Company had no cash equivalents.

Restricted Cash

Restricted cash consists of cash used as security deposits to obtain credit facilities from a bank and to secure customs clearance and labor import 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.

Accounts Receivable, Net

Accounts receivable are recognized and carried at original invoiced amount less an estimated allowance for uncollectible accounts. The Company usually grants extended payment terms to customers with good credit standing and determines the adequacy of reserves for doubtful accounts based on individual account analysis and historical collection trends. The Company establishes a provision for doubtful receivables when there is objective evidence that the Company may not be able to collect amounts due. The allowance is based on management’s best estimates of specific losses on individual exposures, as well as a provision on historical trends of collections. The provision is recorded against accounts receivables balances, with a corresponding charge recorded in the consolidated statements of income and comprehensive income. Actual amounts received may differ from management’s estimate of creditworthiness and the economic environment. Delinquent account balances are written off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable.

8

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Inventories

Inventories are stated at the lower of cost or net realizable value. Inventories include 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.

Advance to Suppliers, Net

Advance to suppliers consists of balances paid to suppliers for services or materials purchased that have not been provided or received. Advance to suppliers for services and materials is short-term in nature. Advance to suppliers is reviewed periodically to determine whether its carrying value has become impaired. The Company considers the assets to be impaired if the performance by the suppliers becomes doubtful. The Company uses the aging method to estimate the allowance for the questionable balances. In addition, at each reporting date, the Company generally determines the adequacy of allowance for doubtful accounts by evaluating all available information, and then records specific allowances for those advances based on the specific facts and circumstances.

Property, Plant, and Equipment

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 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

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 which 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 income and comprehensive income.

Construction in Progress

Construction in Progress (“CIP”) is recorded at cost for property, plant, and equipment where the asset is in construction or development. CIP accumulates cost of construction and transaction costs involved in the progress of acquiring the materials for construction or development. The Company does not commence depreciating the asset in CIP account because the asset has not yet been placed in service. Once an asset is placed in service, all costs associated with the asset that are recorded in the CIP account are transferred to property, plant, and equipment for the asset.

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 which 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 six months ended September 30, 2023 and 2022.

9

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Asset Acquisition

An asset acquisition is an acquisition of an asset, or a group of assets, that does not meet the definition of a business, as substantially all of the fair value of the gross assets acquired are concentrated in a single or group of similar, identifiable assets. Asset acquisitions are accounted for by using the cost accumulation model, whereby the cost of the acquisition, including certain transaction costs, is allocated to the assets acquired on a relative fair value basis. Determining and valuing intangible assets requires judgment.

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 September 30, 2023 and March 31, 2023, 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 six months ended September 30, 2023 and 2022.

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 and PPE. 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 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 seven 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 rendering cutting and making services to other apparel vendors who subcontract order 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.

The Company does not have any contract assets since the Company has an unconditional right to consideration when the Company has satisfied its performance obligation and payment from customers is not contingent on a future event. The Company had contract liabilities of $232,387 and $928,393 as of September 30, 2023 and March 31, 2023. For the six months ended September 30, 2023 and 2022, there was no revenue recognized from performance obligations related to prior periods. As of September 30, 2023, $232,387 deferred revenue was expected to be recognized within fiscal year 2024. All the receipts in advance as of March 31, 2023 were revenue recognized for the six months ended September 30, 2023.

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. The Company believes disaggregation of revenue by geographic region best depicts the nature, amount, timing, and uncertainty of its revenue and cash flows (see “Note 15—Segment Reporting”).

10

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

As of September 30, 2023, there were $232,387 receipts in advance from customers. As of March 31, 2023, there was $928,393 receipts in advance from a customer. The Company recorded the receipts in advance as deferred revenue on the consolidated balance sheet as of September 30, 2023 and March 31, 2023. These advances arose from $232,387 of deposits from customers for estimated shipments after the six months ended September 30, 2023.

Shipping and Handling

Proceeds collected from customers for shipping and handling costs are included in revenue. Shipping and handling costs are expensed as incurred and are included in operating expenses, as a part of selling, general and administrative expenses. Total shipping and handling expenses were $656,536 and $516,614 for the three months ended September 30, 2023 and 2022, respectively. Total shipping and handling expenses were $1,099,019 and $925,803 for the six months ended September 30, 2023 and 2022, respectively.

Income and Sales Taxes

The Company is subject to income taxes on an entity basis on income arising in or derived from the tax jurisdiction in which each entity is domiciled. Jerash Holdings and Jerash Supplies are incorporated/formed in the State of Delaware and are subject to federal income tax in the United States of America. Treasure Success, Ever Winland, and J&B are registered in Hong Kong and are subject to profit tax in Hong Kong. Jiangmen Treasure Success is incorporated in China and is subject to corporate income tax in China. Jerash Garments, Jerash Embroidery, Chinese Garments, Paramount, Jerash The First, MK Garments, and Kawkab Venus are subject to income tax in Jordan, unless an exemption is granted. In accordance with Development Zone law, Jerash Garments and its subsidiaries were subject to corporate income tax in Jordan at a rate of 18% or 20% plus a 1% social contribution starting from January 1, 2022 to December 31, 2022. Effective January 1, 2023, the income tax rate increased to 19% or 20%, plus a 1% social contribution.

Jerash Garments and its subsidiaries are subject to local sales tax of 16% on purchases. Jerash Garments was granted a sales tax exemption from the Jordanian Investment Commission for the period from June 1, 2015 to June 1, 2018 that allowed Jerash Garments to make purchases with no sales tax charge. The exemption has been extended to February 5, 2024.

The Company accounts for income taxes in accordance with ASC 740, “Income Taxes,” which requires the Company to use the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates applicable to future years to differences between financial statement carrying amounts and the tax bases of existing assets and liabilities and operating loss and tax credit carry forwards. Under this accounting standard, the effect on deferred income taxes of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion, or all of, a deferred tax asset will not be realized.

ASC 740 clarifies the accounting for uncertainty in tax positions. This interpretation requires that an entity recognize in its financial statements the impact of a tax position, if that position is more likely than not of being sustained upon examination, based on the technical merits of the position. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company has elected to classify interest and penalties related to unrecognized tax benefits, if and when required, as part of income tax expense in the consolidated statements of comprehensive income. No significant uncertainty in tax positions relating to income taxes was incurred during the six months ended September 30, 2023 and 2022.

11

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Foreign Currency Translation

The reporting currency of the Company is the U.S. dollar (“US$” or “$”). The Company uses JOD in Jordan companies, HKD in Treasure Success, Ever Winland and J&B, and Chinese Yuan (“CNY”) in Jiangmen Treasure Success as functional currency of each above-mentioned entity. The assets and liabilities of the Company have been translated into US$ using the exchange rates in effect at the balance sheet date, equity accounts have been translated at historical rates, and revenue and expenses have been translated into US$ using average exchange rates in effect during the reporting period. Cash flows are also translated at average translation rates for the periods. Therefore, amounts related to assets and liabilities reported on the consolidated statements of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheets. Translation adjustments arising from the use of different exchange rates from period to period are included as a separate component of accumulated other comprehensive income or loss. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the consolidated statements of income and comprehensive income as incurred, and the total amount of transaction gains and losses were immaterial for the six months ended September 30, 2023 and 2022.

The value of JOD against US$ and other currencies may fluctuate and is affected by, among other things, changes in Jordan’s political and economic conditions. Any significant revaluation of JOD, HKD, and CNY may materially affect the Company’s financial condition in terms of US$ reporting. The following table outlines the currency exchange rates that were used in creating the consolidated financial statements in this report:

|  |  | September 30, 2023 |  |  |  | March 31, 2023 |
Period-end spot rate |  |  | US$1=JOD0.7090 |  |  |  | US$1=JOD0.7090 |
|  |  | US$1=HKD7.8305 |  |  |  | US$1=HKD7.8496 |
|  |  | US$1=CNY7.2942 |  |  |  | US$1=CNY6.8666 |
Average rate |  |  | US$1=JOD0.7090 |  |  |  | US$1=JOD0.7090 |
|  |  | US$1=HKD7.8314 |  |  |  | US$1=HKD7.8383 |
|  |  | US$1=CNY7.1214 |  |  |  | US$1=CNY6.8506 |

Stock-Based Compensation

The Company measures compensation expense for stock-based awards based upon the awards’ initial grant-date fair value. The estimated grant-date fair value of the award is recognized as expense over the requisite service period using the straight-line method.

The Company estimates the fair value of stock options using a Black-Scholes model. This model is affected by the Company’s stock price on the date of the grant as well as assumptions regarding a number of highly complex and subjective variables. These variables include the expected term of the option, expected risk-free rates of return, the expected volatility of the Company’s common stock, and expected dividend yield, each of which is more fully described below. The assumptions for expected term and expected volatility are the two assumptions that significantly affect the grant date fair value.

| ● | Expected Term: the expected term of a warrant or a stock option is the period of time that the warrant or a stock option is expected to be outstanding.

| ● | Risk-free Interest Rate: the Company bases the risk-free interest rate used in the Black-Scholes model on the implied yield at the grant date of the U.S. Treasury zero-coupon issued with an equivalent term to the stock-based award being valued. Where the expected term of a stock-based award does not correspond with the term for which a zero-coupon interest rate is quoted, the Company uses the nearest interest rate from the available maturities.

12

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

| ● | Expected Stock Price Volatility: the Company utilizes the expected volatility of the Company’s common stock over the same period of time as the life of the warrant or stock option. When the Company’s own stock volatility information is unavailable for such period of time, the Company utilizes comparable public company volatility.

| ● | Dividend Yield: Stock-based compensation awards granted prior to November 2018 assumed no dividend yield, while any subsequent stock-based compensation awards will be valued using the anticipated dividend yield.

Earnings per Share

The Company computes earnings per share (“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC 260”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS (See “Note 14–Earnings per Share”).

Comprehensive Income

Comprehensive income consists of two components, net income and other comprehensive loss. The foreign currency translation loss resulting from translation of the financial statements expressed in JOD or HKD or CNY to US$ is reported in other comprehensive loss in the consolidated statements of comprehensive income.

Fair Value of Financial Instruments

ASC 825-10 requires certain disclosures regarding the fair value of financial instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

| ● | Level 1 - Quoted prices in active markets for identical assets and liabilities.

| ● | Level 2 - Quoted prices in active markets for similar assets and liabilities, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

| ● | Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

The Company considers the recorded value of its financial assets and liabilities, which consist primarily of cash, accounts receivable, bills receivable, other current assets, credit facilities, accounts payable, accrued expenses, income tax payables, other payables and operating lease liabilities to approximate the fair value of the respective assets and liabilities at September 30, 2023 and March 31, 2023 based upon the short-term nature of these assets and liabilities.

13

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Concentrations and Credit Risk

Credit risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash. As of September 30, 2023 and March 31, 2023, respectively, $7,881,037 and $7,264,247 of the Company’s cash was on deposit at financial institutions in Jordan, where there currently is no rule or regulation requiring such financial institutions to maintain insurance to cover bank deposits in the event of bank failure. As of September 30, 2023 and March 31, 2023, $306,337 and $172,939 of the Company’s cash was on deposit at financial institutions in China, respectively. Cash maintained in banks within China of less than CNY 0.5 million (equivalent to $68,548) per bank are covered by “deposit insurance regulation” promulgated by the State Council of the People’s Republic of China. As of September 30, 2023 and March 31, 2023, $14,334,696 and $11,700,512 of the Company’s cash was on deposit at financial institutions in Hong Kong, respectively, which are insured by the Hong Kong Deposit Protection Board subject to certain limitations. While management believes that these financial institutions are of high credit quality, it also continually monitors their creditworthiness. As of September 30, 2023 and March 31, 2023, $138,851 and $171,496 of the Company’s cash was on deposit in the United States, respectively, and are insured by the Federal Deposit Insurance Corporation up to $250,000.

Accounts receivable are typically unsecured and derived from revenue earned from customers, and therefore are exposed to credit risk. The risk is mitigated by the Company’s assessment of its customers’ creditworthiness and its ongoing monitoring of outstanding balances.

Advance to suppliers are typically unsecured and derived from deposit placed to suppliers to secure the quantity of raw materials and garments for production. The Company is exposed to credit risk in that the supplier will not deliver the required quantity to the Company. The risk is mitigated by the Company’s assessment of its production requirement and its suppliers’ creditworthiness and its ongoing monitoring of outstanding balances.

Customer and vendor concentration risk

The Company’s sales are made primarily in the United States. Its operating results could be adversely affected by U.S. government policies on importing business, foreign exchange rate fluctuations, and changes in local market conditions. The Company has a concentration of its revenue and purchases with specific customers and suppliers. For the three months ended September 30, 2023, one customer account for 73% of the Company’s total revenue. For six months ended September 30, 2023, two customers accounted for 69% and 13% of the Company’s total revenue, respectively. For the three and six months ended September 30, 2022, two end-customers accounted for 64% and 11%, and 65% and 16% of the Company’s total revenue, respectively. As of September 30, 2023, five customers accounted of 18%, 17%, 17%, 16%, and 14% of the Company’s total accounts receivable balance, respectively. As of March 31, 2023, four customers accounted for 50%, 13%, 10%, and 10% of the Company’s total accounts receivable balance, respectively.

For the three months ended September 30, 2023, there was no major supplier. For the six months ended September 30, 2023, the Company purchased approximately 11% of its garments from one major supplier. For the three months ended September 30, 2022, the Company purchased approximately 23%, 20%, and 10% of its raw materials form three major suppliers, respectively. For the six months ended September 30, 2022, the Company purchased approximately 15% and 13%, of its raw material from two major suppliers, respectively. As of September 30, 2023, accounts payable to the Company’s two major suppliers accounted for 18% and 16% of the total accounts payable balance, respectively. As of March 31, 2023, accounts payable to the Company’s one major supplier accounted for 36% of the total accounts payable balance.

Risks and Uncertainties

The principal operations of the Company are located in Jordan. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by political, economic, and legal environments in Jordan, as well as by the general state of the Jordanian economy. The Company’s operations in Jordan are subject to special considerations and significant risks not typically associated with companies in North America. These include risks associated with, among others, the political, economic, and legal environment, foreign currency exchange, and the recent conflict between Israel and Hamas. The Company’s results may be adversely affected by changes in the political, regulatory, and social conditions in Jordan. Although the Company has not experienced losses from these situations and believes that it is in compliance with existing laws and regulations including its organization and structure disclosed in Note 1, this may not be indicative of future results.

Since the inception of the turmoil in the Middle East, the Company has been closely monitoring the situation and keeping its customers informed. Currently, production is ongoing as usual, with no changes to customer orders or commitments, and both ports that the Company uses for import and export, in Aqaba and Haifa, are operating normally. However, in the event of any potential impact on the ports, the Company has prepared a contingency plan, approved by its major customers, to temporarily relocate production to alternate regions.

Reclassification

Certain prior period amounts have been reclassified to conform to the current period presentation. Such reclassifications had no effect on net income or cash flow as previously reported.

14

NOTE 3 – RECENT ACCOUNTING PRONOUNCEMENTS

The Company considers the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued.

In September 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This ASU is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. This ASU requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This ASU requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of the Company’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements. In November 2019, the FASB issued ASU 2019-10, which amended the effective dates of ASU 2016-13. For public business entities that meet the definition of an SEC filer, excluding entities eligible to be smaller reporting companies (“SRC”) as defined by the SEC, ASU 2016-13 will become effective for the fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. For all other entities, ASU 2016-13 will become effective for the fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company adopted ASU 2016-13 effective April 1, 2023 and the adoption did not have a material impact on the Company’s unaudited condensed consolidated financial statements and disclosures.

NOTE 4 – ACCOUNTS RECEIVABLE, NET

Accounts receivable consisted of the following:

|  | As of |  |  | As of |
|  | September 30, 2023 |  |  | March 31, 2023 |
Trade accounts receivable |  | $ | 5,356,282 |  |  | $ | 2,462,120 |
Less: allowances for doubtful accounts |  |  | 154,603 |  |  |  | 221,583 |
Accounts receivable, net |  | $ | 5,201,679 |  |  | $ | 2,240,537 |

NOTE 5 – INVENTORIES

Inventories consisted of the following:

|  | As of |  |  | As of |
|  | September 30, 2023 |  |  | March 31, 2023 |
Raw materials |  | $ | 7,767,360 |  |  | $ | 15,240,198 |
Work-in-progress |  |  | 1,946,332 |  |  |  | 2,932,519 |
Finished goods |  |  | 9,000,171 |  |  |  | 14,484,116 |
Total inventory |  | $ | 18,713,863 |  |  | $ | 32,656,833 |

As of September 30, 2023 and March 31, 2023, the Company had $nil inventory valuation reserve as the Company arranged its inventory based on 92.2% and 93.4% with actual orders received, respectively. 7.8% and 6.6% of inventories held on hand were associated with unfulfilled sales orders, respectively.

15

NOTE 6 – ADVANCE TO SUPPLIERS, NET

Advance to suppliers consisted of the following:

|  | As of |  |  | As of |
|  | September 30, 2023 |  |  | March 31, 2023 |
Advance to suppliers |  | $ | 3,443,334 |  |  | $ | 1,533,091 |
Less: allowances for doubtful accounts |  |  | - |  |  |  | - |
Advance to suppliers, net |  | $ | 3,443,334 |  |  | $ | 1,533,091 |

NOTE 7 – LEASES

The Company has 50 operating leases for manufacturing facilities, offices and staff dormitories. Some leases include one or more options to renew, which is typically at the Company’s sole discretion. The Company regularly evaluates the renewal options, and, when it is reasonably certain of exercise, it will include the renewal period in its lease term. New lease modifications result in measurement of the right of use (“ROU”) assets and lease liability. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. ROU assets and related lease obligations are recognized at commencement date based on the present value of remaining lease payments over the lease term.

All of the Company’s leases are classified as operating leases and primarily include office space and manufacturing facilities.

Supplemental balance sheet information related to operating leases was as follows:

|  | September 30, 2023 |  |  | March 31, 2023 |
ROU assets |  | $ | 718,418 |  |  | $ | 974,761 |
Operating lease liabilities – current |  | $ | 345,171 |  |  | $ | 481,502 |
Operating lease liabilities – non-current |  |  | 246,341 |  |  |  | 287,247 |
Total operating lease liabilities |  |  | 591,512 |  |  |  | 768,749 |

The weighted average remaining lease terms and discount rates for all of operating leases were as follows:

Remaining lease term and discount rate:

|  | September 30, 2023 |  |  | March 31, 2023 |
Weighted average remaining lease term (years) |  |  | 1.7 |  |  |  | 1.6 |
Weighted average discount rate |  |  | 6.1 | % |  |  | 6.1 | %

During the three months ended September 30, 2023 and 2022, the Company incurred total operating lease expenses of $653,933 and $626,994, respectively. During the six months ended September 30, 2023 and 2022, the Company incurred total operating lease expenses of $1,304,707 and $1,266,713, respectively

The following is a schedule, by fiscal years, of maturities of lease liabilities as of September 30, 2023:

2024 |  | $ | 315,977 |
2025 |  |  | 285,155 |
2026 |  |  | 151,180 |
2027 |  |  | 5,395 |
2028 |  |  | - |
Thereafter |  |  | - |
Total lease payments |  |  | 757,707 |
Less: imputed interest |  |  | (39,289 | )
Less: prepayments |  |  | (126,906 | )
Present value of lease liabilities |  | $ | 591,512 |

16

NOTE 8 – PROPERTY, PLANT, AND EQUIPMENT, NET

Property, plant, and equipment, net consisted of the following:

|  | As of |  |  | As of |
|  | September 30, 2023 |  |  | March 31, 2023 |
Land (3) |  | $ | 2,200,334 |  |  | $ | 2,200,334 |
Property and buildings (1)(3) |  |  | 10,540,962 |  |  |  | 9,308,426 |
Equipment and machinery |  |  | 12,408,532 |  |  |  | 11,853,445 |
Office and electric equipment |  |  | 1,036,061 |  |  |  | 992,735 |
Automobiles |  |  | 1,020,680 |  |  |  | 871,756 |
Leasehold improvements |  |  | 4,303,141 |  |  |  | 4,088,980 |
Subtotal |  |  | 31,509,710 |  |  |  | 29,315,676 |
Construction in progress (2) |  |  | 8,525,499 |  |  |  | 7,182,367 |
Less: Accumulated depreciation and amortization |  |  | (15,352,326 | ) |  |  | (14,142,469 | )
Property, plant and equipment, net |  | $ | 24,682,883 |  |  | $ | 22,355,574 |

(1) | In January 2022, the Company commenced a construction project of an expansion of the Company’s own premises in Al Tajamouat Industrial City, Jordan. Through September 30, 2023, the Company had paid approximately JOD 874,000 (approximately $1,233,000). The project is completed and start to use in July 2023.

(2) | In April 2022, the Company commenced a construction project to build a dormitory for employees. The construction is built on a land of 4,516 square meters (approximately 48,608 square feet) in Al Tajamouat Industrial City, Jordan, which was acquired by the Company in 2020. The dormitory is expected to cost $8.8 million. Through September 30, 2023, the Company had spent approximately JOD 6.0 million (approximately $8.5 million) for the construction. The dormitory is expected to be completed and ready for use by end of 2023.

(3) | In August 2022, the Company completed the acquisitions of Ever Winland and Kawkab Venus. Ever Winland holds office premises of HKD 39.6 million (approximately $5.1 million), which are classified as property and buildings. Kawkab Venus holds land with factory premises, which are classified as land and property and buildings of approximately $370,000 and approximately $2.3 million, respectively. Ever Winland and Kawkab Venus only contain fixed assets (buildings and land) and neither of these two entities had any other assets or liabilities, operations, or employees as of their respective acquisition dates, so the acquisitions of Ever Winland and Kawkab Venus were accounted as asset acquisitions.

For the three months ended September 30, 2023 and 2022, depreciation and amortization expenses were $615,546 and $553,941, respectively. For the six months ended September 30, 2023 and 2022, depreciation and amortization expenses were $1,224,322 and $1,184,940, respectively.

17

NOTE 9 – EQUITY

Preferred Stock

The Company has 500,000 shares of preferred stock, par value of $0.001 per share, authorized; none were issued and outstanding as of September 30, 2023 and March 31, 2023. The preferred stock can be issued by the board of directors of Jerash Holdings (the “Board of Directors”) in one or more classes or one or more series within any class, and such classes or series shall have such voting powers, full or limited, or no voting powers, and such designations, preferences, rights, qualifications, limitations, or restrictions of such rights as the Board of Directors may determine from time to time.

Common Stock

The Company had 12,294,840 shares of common stock outstanding as of September 30, 2023 and March 31, 2023, respectively.

On June 24, 2021, the Board of Directors approved the grant of 200,000 Restricted Stock Units (“RSUs”) under the Plan to 32 executive officers and employees of the Company, with a one-year vesting period. All RSUs were vested and 200,000 additional shares were issued on June 30, 2022.

On June 13, 2022, the Board of Directors authorized a share repurchase program, under which the Company may repurchase up to $3.0 million of its outstanding shares of common stock. The share repurchase program was effective through March 31, 2023. As of September 30, 2023, 239,478 shares had been repurchased at market rate with a total consideration of $1,169,046.

Statutory Reserve

In accordance with the corporate law in Jordan, Jerash Garments, Jerash Embroidery, Chinese Garments, Paramount, Jerash The First, MK Garments, and Kawkab Venus 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. This reserve is not available for dividend distribution. In addition, PRC companies are required to set aside at least 10% of their after-tax net profits each year, if any, to fund the statutory reserves until the balance of the reserves reaches 50% of their registered capital. The statutory reserves are not distributable in the form of cash dividends to the Company and can be used to make up cumulative prior-year losses.

Dividends

During the fiscal year ending March 31, 2024, the Board of Directors declared a cash dividend of $0.05 per share of common stock on August 4 and May 23, 2023, respectively. Two cash dividends of $614,742 each were paid in full on August 23, 2023 and June 9, 2023.

During the fiscal year ended March 31, 2023, the Board of Directors declared a cash dividend of $0.05 per share of common stock on February 3, 2023, November 4, 2022, August 5, 2022, and May 16, 2022, respectively. The cash dividends of $618,886, $621,809, $626,716, and $616,716 were paid in full on February 21, 2023, November 28, 2022, August 24, 2022, and June 3, 2022, respectively.

18

NOTE 10 – STOCK-BASED COMPENSATION

Warrants issued for services

From time to time, the Company issues warrants to purchase its common stock. These warrants are valued using the Black-Scholes model and using the volatility, market price, exercise price, risk-free interest rate, and dividend yield appropriate at the date the warrants were issued. The major assumptions used in the Black Scholes model included the followings: the expected term is five years; risk-free interest rate is 1.8% to 2.8%; and the expected volatility is 50.3% to 52.2%. All of the outstanding warrants were fully vested. 137,210 and 57,200 warrants expired in fiscal 2023 and 2024, respectively.

All stock warrants activities are summarized as follows:

|  | Option to |  |  | Weighted Average |
|  | Acquire Shares |  |  | Exercise Price |
Stock warrants outstanding at March 31, 2023 |  |  | 57,200 |  |  | $ | 8.75 |
Granted |  |  | - |  |  |  | - |
Exercised |  |  | - |  |  |  | - |
Expired |  |  | (57,200 | ) |  |  | 8.75 |
Stock warrants outstanding at September 30, 2023 |  |  | - |  |  | $ | - |

Stock Options

On March 21, 2018, the Board of Directors adopted the Jerash Holdings (US), Inc. 2018 Stock Incentive Plan (the “Plan”), pursuant to which the Company may grant various types of equity awards. 1,484,250 shares of common stock of the Company were reserved for issuance under the Plan. In addition, on July 19, 2019, the Board of Directors approved an amendment and restatement of the Plan, which was approved by the Company’s stockholders at its annual meeting of stockholders on September 16, 2019. The amended and restated Plan increased the number of shares reserved for issuance under the Plan by 300,000, to 1,784,250, among other changes. On September 30, 2023, the Company had 1,029,150 of shares remaining available for future issuance under the Plan.

All stock option activities are summarized as follows:

|  | Option to |  |  | Weighted Average |
|  | Acquire Shares |  |  | Exercise Price |
Stock options outstanding at March 31, 2023 |  |  | 1,136,500 |  |  | $ | 6.90 |
Granted |  |  | - |  |  |  | - |
Exercised |  |  | - |  |  |  | - |
Expired |  |  | (986,500 | ) |  |  | 7.00 |
Stock options outstanding at September 30, 2023 |  |  | 150,000 |  |  | $ | 6.25 |

All these outstanding options were fully vested and exercisable. As of September 30, 2023, there were 986,500 stock options expired and 150,000 stock options outstanding. The weighted average remaining life of the options is 5.3 years.

Restricted Stock Units

On June 24, 2021, the Board of Directors approved the grant of 200,000 RSUs under the Plan to 32 executive officers’ and employees of the Company, with a one-year vesting period. The fair value of these RSUs on June 24, 2021 was $1,266,000, based on the market price of the Company’s common stock as of the date of the grant. On June 30, 2022, all 200,000 RSUs were vested.

19

NOTE 10 – STOCK-BASED COMPENSATION (continued)

On February 9, 2023, the Board of Directors approved the grant of 405,800 RSUs under the Plan to 37 executive officers and employees of the Company, with a two-year vesting period. The fair value of these RSUs on February 15, 2023 was $1,937,695, based on the market price of the Company’s common stock as of the date of the grant. As of September 30, 2023, there were $1,331,025 unrecognized stock-based compensation expenses to be recognized to February 2025 and 405,100 RSUs remained.

RSU activities are summarized as follows:

|  | Number of Shares |  |  | Weighted- Average Grant Date Fair Value Per Share |
RSU outstanding at March 31, 2023 |  |  | 405,100 |  |  | $ | 4.78 |
Granted |  |  | - |  |  |  | - |
Vested |  |  | - |  |  |  | - |
Forfeited |  |  | - |  |  |  | - |
RSU outstanding at September 30, 2023 |  |  | 405,100 |  |  | $ | 4.78 |

Total expenses related to the RSU issued were $243,448 and $nil for the three months ended September 30, 2023 and 2022, respectively. Total expenses related to the RSU issued were $484,250 and $294,822 for the six months ended September 30, 2023 and 2022, respectively.

NOTE 11 – RELATED PARTY TRANSACTIONS

The relationship and the nature of related party transactions are summarized as follow:

Name of Related Party |  | Relationship to the Company |  | Nature of Transactions
Yukwise Limited (“Yukwise”) |  | Wholly owned by the Company’s President, Chief Executive Officer, and Chairman, and a significant stockholder |  | Consulting Services
Multi-Glory Corporation Limited (“Multi-Glory”) |  | Wholly owned by a significant stockholder |  | Consulting Services
Victory Apparel (Jordan) Manufacturing Company Limited (“Victory Apparel”) |  | Affiliate, controlled by the Company’s President, Chief Executive Officer, Chairman, and a significant stockholder |  | Borrowings

20

NOTE 11 – RELATED PARTY TRANSACTIONS (continued)

a. Consulting agreements

On January 12, 2018, Treasure Success and Yukwise entered into a consulting agreement, pursuant to which Mr. Choi will serve as Chief Executive Officer and provide high-level advisory and general management services for $300,000 per annum. The agreement renews automatically for one-month terms. This agreement became effective as of January 1, 2018. Total consulting fees under this agreement were $75,000 and $150,000 for the three and six months ended September 30, 2023 and 2022, respectively.

On January 16, 2018, Treasure Success and Multi-Glory entered into a consulting agreement, pursuant to which Multi-Glory will provide high-level advisory, marketing, and sales services to the Company for $300,000 per annum. The agreement renews automatically for one-month terms. The agreement became effective as of January 1, 2018. Total consulting fees under this agreement were $75,000 and $150,000 for the three and six months ended September 30, 2023 and 2022, respectively.

b. Borrowings from a related party

As of September 30, 2023 and March 31, 2023, the Company had outstanding balances due to Victory Apparel of $nil and $nil, respectively. The advances of $300,166 as of March 31, 2022 were non-interest bearing and due on demand. The advances were repaid in the first quarter of fiscal 2023.

NOTE 12 – CREDIT FACILITIES

On January 31, 2019, Standard Chartered Bank (Hong Kong) Limited (“SCBHK”) offered to provide an import facility of up to $3.0 million to Treasure Success pursuant to a facility letter dated June 15, 2018. Pursuant to the agreement, SCBHK agreed to finance import invoice financing and pre-shipment financing of export orders up to an aggregate of $3.0 million. The SCBHK facility bears interest at 1.3% per annum over SCBHK’s cost of funds. As of September 30, 2023 and March 31, 2023, the Company had $nil outstanding in import invoice financing under the SCBHK facility. In June 2022, the Company was informed by SCBHK that the facility was cancelled due to persistently low usage and zero loan outstanding.

Starting from May and October 2021, the Company has participated in a financing program with two customers, in which the Company may receive early payments for approved sales invoices submitted by the Company through the bank the customer cooperates with. For any early payments received, the Company is subject to an early payment charge imposed by the customer’s bank, for which the rate is revised based on Secured Overnight Financing Rate (“SOFR”) plus a spread. In certain scenarios, the Company submits the sales invoice and receives payments prior to the shipment of the relative products. In that case, instead of recording the cash receipts as a reduction to accounts receivables, the Company records the cash receipts as receipts in advance from a customer until products are entitled to transfer. The Company records the early payment charge in interest expenses consolidated statements of income and comprehensive income. For the three months ended September 30, 2023 and 2022, the early payment charge was $340,699 and $163,595 respectively. For the six months ended September 30, 2023 and 2022, the early payment charge was $696,946 and $251,437, respectively. Due to the rising interest rate, the Company has suspended participation in one of the above supply chain financing programs.

On January 12, 2022, DBS Bank (Hong Kong) Limited (“DBSHK”) offered to provide a banking facility of up to $5.0 million to Treasure Success pursuant to a facility letter dated January 12, 2022. Pursuant to the facility, DBSHK agreed to finance cargo receipt, trust receipt, account payable financing, and certain type of import 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 for HKD bills and 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 September 30, 2023 and March 31, 2023, the Company had $nil outstanding under the DBSHK facility, respectively. The DBSHK facility is reviewed annually.

On June 1, 2023, the Company received documents from Capital Bank of Jordan for a credit facility of $10 million, and entered into the credit facility after reviewing the documents. Execution is still in process and the credit facility is not effective as of the date of this quarterly report.

21

NOTE 13 – NONCONTROLLING INTEREST

On March 20, 2023, Treasure Success and P.T. Eratex (Hong Kong) Limited entered into a Joint Venture and Shareholders’ Agreement, pursuant to which Treasure Success and P.T Eratex (Hong Kong) Limited acquired 51% and 49% of the equity interest in J&B, respectively, on April 11, 2023. The net income generated by J&B was $6,790 and $3,910 for the three and six months ended September 30, 2023. Noncontrolling interest as of September 30, 2023 was $33,281.

NOTE 14 – EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share for the three and six months ended September 30, 2023 and 2022. As of September 30, 2023, 555,100 RSUs and stock options were outstanding. For the three and six months ended September 30, 2023, all RSUs and stock options were excluded from the EPS calculation as the result would be anti-dilutive. For the three months ended September 30, 2022, all RSUs, warrants and stock options were excluded from the EPS calculation as the result would be anti-dilutive. For the six months ended September 30, 2022, 1,193,700 warrants, and stock options were excluded from the EPS calculation as the result would be anti-dilutive.

|  | Three Months Ended September 30, (Unaudited) |  |  | Six Months Ended September 30, (Unaudited) |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
Numerator: |  |  |  |  |  |  |  |  |  |  |  |
Net income attributable to Jerash Holdings (US), Inc.’s Common Stockholders |  | $ | 365,617 |  |  | $ | 1,791,752 |  |  | $ | 862,143 |  |  | $ | 3,513,134 |
Denominator: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Denominator for basic earnings per share (weighted-average shares) |  |  | 12,294,840 |  |  |  | 12,498,431 |  |  |  | 12,294,840 |  |  |  | 12,416,823 |
Dilutive securities – unexercised RSUs, warrants, and options |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 68,689 |
Denominator for diluted earnings per share (adjusted weighted-average shares) |  |  | 12,294,840 |  |  |  | 12,498,431 |  |  |  | 12,294,840 |  |  |  | 12,485,512 |
Basic and diluted earnings per share |  | $ | 0.03 |  |  | $ | 0.14 |  |  | $ | 0.07 |  |  | $ | 0.28 |

NOTE 15 – SEGMENT REPORTING

ASC 280, “Segment Reporting,” establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure as well as information about geographical areas, business segments, and major customers in financial statements for details on the Company’s business segments. The Company uses the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision-maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. Management, including the chief operating decision maker, reviews operation results by the revenue of the Company’s products. The Company’s major product is outerwear. For the three months ended September 30, 2023 and 2022, outerwear accounted for approximately 89.7% and 93.8% of total revenue, respectively. For the six months ended September 30, 2023 and 2022, outerwear accounted for approximately 92.0% and 93.6% of total revenue, respectively. Based on management’s assessment, the Company has determined that it has only one operating segment as defined by ASC 280.

22

NOTE 15 – SEGMENT REPORTING (continued)

The following table summarizes sales by geographic areas for the three months ended September 30, 2023 and 2022, respectively.

|  | For the Three Months Ended September 30, |
|  | 2023 |  |  | 2022 |
United States |  | $ | 29,224,793 |  |  | $ | 35,101,055 |
Hong Kong |  |  | 2,325,999 |  |  |  | 736,642 |
Germany |  |  | 845,956 |  |  |  | - |
Jordan |  |  | 320,490 |  |  |  | 1,278,313 |
Others |  |  | 639,870 |  |  |  | 709,685 |
Total |  | $ | 33,357,108 |  |  | $ | 37,825,695 |

The following table summarizes sales by geographic areas for the six months ended September 30, 2023 and 2022, respectively.

|  | For the Six Months Ended September 30, |
|  | 2023 |  |  | 2022 |
United States |  | $ | 61,887,222 |  |  | $ | 66,508,460 |
Hong Kong |  |  | 2,556,046 |  |  |  | 742,103 |
Germany |  |  | 1,290,495 |  |  |  | - |
Jordan |  |  | 625,127 |  |  |  | 2,755,527 |
Others |  |  | 1,733,875 |  |  |  | 1,256,166 |
Total |  | $ | 68,092,765 |  |  | $ | 71,262,256 |

73.7% and 25.5% of long-lived assets were located in Jordan and Hong Kong, respectively, as of September 30, 2023.

23

NOTE 16 – COMMITMENTS AND CONTINGENCIES

Commitments

On August 28, 2019, Jiangmen Treasure Success was incorporated under the laws of the People’s Republic of China in Jiangmen City, Guangdong Province, China, with a total registered capital of HKD 3 million (approximately $385,000). On December 9, 2020, shareholders of Jiangmen Treasure Success approved to increase its registered capital to HKD 15 million (approximately $1.9 million). The Company’s subsidiary, Treasure Success, as a shareholder of Jiangmen Treasure Success, is required to contribute HKD 15 million (approximately $1.9 million) as paid-in capital in exchange for 100% ownership interest in Jiangmen Treasure Success. As of September 30, 2023, Treasure Success had made capital contribution of HKD 10 million (approximately $1.3 million). Pursuant to the articles of incorporation of Jiangmen Treasure Success, Treasure Success is required to complete the remaining capital contribution before December 31, 2029 as Treasure Success’ available funds permit.

Contingencies

From time to time, the Company is a party to various legal actions arising in the ordinary course of business. The Company accrues costs associated with these matters when they become probable and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. The Company’s management does not expect any liability from the disposition of such claims and litigation individually or in the aggregate would not have a material adverse impact on the Company’s consolidated financial position, results of operations, and cash flows.

NOTE 17 – INCOME TAX

Jerash Garments, Jerash Embroidery, Chinese Garments, Paramount, Jerash The First, MK Garments, and Kawkab Venus are subject to the regulations of the Income Tax Department in Jordan. In accordance with the Investment Encouragement Law, Jerash Garments’ export sales to overseas customers were entitled to a 100% income tax exemption for a period of 10 years commencing on the first day of production. This exemption had been extended for five years until December 31, 2018. Effective January 1, 2019, the Jordanian government reclassified the area where Jerash Garments and its subsidiaries are to a Development Zone. In accordance with the Development Zone law, Jerash Garments and its subsidiaries were subject to income tax at income tax rate of 18% or 20% plus a 1% social contribution from January 1, 2022 to December 31, 2022. Effective from January 1, 2023, the income tax rate raised to 19% or 20% plus 1% social contribution.

On December 22, 2017, the U.S. Tax Cuts and Jobs Act (the “Tax Act”) was enacted. The Tax Act imposed tax on previously untaxed accumulated earnings and profits (“E&P”) of foreign subsidiaries (the “Toll Charge”). The Toll Charge is based in part on the amount of E&P held in cash and other specific assets as of December 31, 2017. The Toll Charge can be paid over an eight-year period, starting in 2018, and will not accrue interest. Additionally, under the provisions of the Tax Act, for taxable years beginning after December 31, 2017, the foreign earnings of Jerash Garments and its subsidiaries are subject to U.S. taxation at the Jerash Holdings level under the new Global Intangible Low-Taxed Income (“GILTI”) regime.

Interim income tax expenses or benefit is recognized based on the Company’s estimated annual effective tax rate, which is based upon the tax rate expected for the full fiscal year applied to the pretax income or loss of the interim period. The Company’s consolidated effective tax rate for the three and six months ended September 30, 2023 was 48.8% and 42.9%, respectively, and differed from the effective statutory federal income tax rate of 21.0%, primarily due to GILTI adjustments, foreign tax rate differentials, and valuation allowance adjustments.

NOTE 18 – SUBSEQUENT EVENTS

On November 3, 2023, the Board of Directors approved the payment of a dividend of $0.05 per share, payable on November 28, 2023 to stockholders of record as of the close of business on November 14, 2023.

On October 10, 2023, Treasure Success entered into an agreement with Newtech Textile (HK) Limited to form a jointly own subsidiary Jerash Newtech (Hong Kong) Holdings Limited (“Jerash Newtech”). Pursuant to the agreement, the share capital of Jerash Newtech will be $100,000. Treasure Success, as a shareholder of Jerash Newtech, is required to contribute $51,000 to acquire 51% of the equity interests in Jerash Newtech. Jerash Newtech will establish a fabric facility in Jordan and approximate $29.9 million of capital expenditure is forecasted. Treasure Success and Newtech Textile (HK) Limited will inject capital expenditures in two phases according to their respective shareholding proportions and conditions.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements.” All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to: any projections of earnings, revenue, or other financial items; any statements regarding the adequacy, availability, and sources of capital, any statements of the plans, strategies, and objectives of management for future operations; any statements concerning proposed new products, services, or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Forward-looking statements may include the words “may,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect,” “plan,” “project,” or “anticipate,” and other similar words. In addition to any assumptions and other factors and matters referred to specifically in connection with such forward-looking statements, factors that could cause actual results or outcomes to differ materially from those contained in the forward-looking statements include those factors set forth in the “Risk Factors” section included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2023 and in subsequent reports that we file with the U.S. Securities and Exchange Commission (the “SEC”).

Although we believe that the expectations reflected in our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent risks and uncertainties, such as those disclosed in this Quarterly Report. We do not intend, and undertake no obligation, to update any forward-looking statement, except as required by law.

The information included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our unaudited condensed consolidated financial statements and the notes included in this Quarterly Report, and the audited consolidated financial statements and notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the fiscal year ended March 31, 2023, filed with the SEC on June 28, 2023 and amended on October 5, 2023. References to fiscal 2024 and fiscal 2023 in this Management’s Discussion and Analysis of Financial Condition and Results of Operations refer to our fiscal year ending March 31, 2024, and fiscal year ended March 31, 2023, respectively.

Results of Operations

Three months ended September 30, 2023 and 2022

The following table summarizes the results of our operations during the three-month periods ended September 30, 2023 and 2022, and provides information regarding the dollar and percentage increase or (decrease) during such periods.

(All amounts, other than percentages, in thousands of U.S. dollars)

|  | Three Months Ended September 30, 2023 |  |  | Three Months Ended September 30, 2022 |  |  | Period over Period Increase (Decrease) |
Statement of Income Data: |  | Amount |  |  | As % of Sales |  |  | Amount |  |  | As % of Sales |  |  | Amount |  |  | % |
Revenue |  | $ | 33,357 |  |  |  | 100 | % |  | $ | 37,825 |  |  |  | 100 | % |  | $ | (4,468 | ) |  |  | (12 | )%
Cost of goods sold |  |  | 27,985 |  |  |  | 84 | % |  |  | 30,908 |  |  |  | 82 | % |  |  | (2,923 | ) |  |  | (9 | )%
Gross profit |  |  | 5,372 |  |  |  | 16 | % |  |  | 6,917 |  |  |  | 18 | % |  |  | (1,545 | ) |  |  | (22 | )%
Selling, general, and administrative expenses |  |  | 4,241 |  |  |  | 13 | % |  |  | 4,308 |  |  |  | 11 | % |  |  | 67 |  |  |  | 2 | %
Stock-based compensation expenses |  |  | 243 |  |  |  | 1 | % |  |  | - |  |  |  | 0 | % |  |  | 243 |  |  |  | - | %
Other expenses, net |  |  | 167 |  |  |  | 0 | % |  |  | 105 |  |  |  | 0 | % |  |  | 62 |  |  |  | 59 | %
Net income before taxation |  | $ | 721 |  |  |  | 2 | % |  | $ | 2,504 |  |  |  | 7 | % |  | $ | (1,783 | ) |  |  | (71 | )%
Income tax expense |  |  | 352 |  |  |  | 1 | % |  |  | 712 |  |  |  | 2 | % |  |  | (360 | ) |  |  | (51 | )%
Net income |  | $ | 369 |  |  |  | 1 | % |  | $ | 1,792 |  |  |  | 5 | % |  | $ | (1,423 | ) |  |  | (79 | )%

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Revenue. Revenue decreased by approximately $4.5 million, or 12%, to $33.4 million, for the three months ended September 30, 2023, from approximately $37.8 million for the same period in fiscal 2023. The decrease was mainly due to the decrease in sales to our customers in one of our major markets, the U.S.

The following table outlines the dollar amount and percentage of total sales to our customers for the three months ended September 30, 2023 and 2022.

(All amounts, other than percentages, in thousands of U.S. dollars)

|  | Three Months Ended September 30, 2023 |  |  | Three Months Ended September 30, 2022 |
|  | Sales |  |  |  |  |  | Sales |  |  |  |
|  | Amount |  |  | % |  |  | Amount |  |  | % |
VF Corporation (1) |  | $ | 24,403 |  |  |  | 73 | % |  | $ | 24,292 |  |  |  | 64 | %
G-III |  |  | 2,533 |  |  |  | 8 | % |  |  | 2,482 |  |  |  | 7 | %
Easy Long International Limited |  |  | 1,627 |  |  |  | 5 | % |  |  | - |  |  |  | 0 | %
New Balance |  |  | 1,388 |  |  |  | 4 | % |  |  | 3,881 |  |  |  | 10 | %
Hugo Boss |  |  | 846 |  |  |  | 3 | % |  |  | - |  |  |  | 0 | %
Jiangsu Guotai |  |  | 699 |  |  |  | 2 | % |  |  | 729 |  |  |  | 2 | %
American Eagle Outfitter |  |  | 505 |  |  |  | 1 | % |  |  | 411 |  |  |  | 1 | %
Soriana |  |  | 336 |  |  |  | 1 | % |  |  | 548 |  |  |  | 1 | %
Dynamic |  |  | - |  |  |  | 0 | % |  |  | 3,979 |  |  |  | 11 | %
Others |  |  | 1,020 |  |  |  | 3 | % |  |  | 1,503 |  |  |  | 4 | %
Total |  | $ | 33,357 |  |  |  | 100 | % |  | $ | 37,825 |  |  |  | 100 | %

(1) | A large portion of our products are sold under The North Face and Timberland brands that are owned by VF Corporation.

Revenue by Geographic Area

(All amounts, other than percentages, in thousands of U.S. dollars)

|  | Three Months Ended September 30, 2023 |  |  | Three Months Ended September 30, 2022 |  |  | Period over Period Increase (Decrease) |
Region |  | Amount |  |  | % |  |  | Amount |  |  | % |  |  | Amount |  |  | % |
United States |  | $ | 29,225 |  |  |  | 88 | % |  | $ | 35,101 |  |  |  | 93 | % |  | $ | (5,876 | ) |  |  | (17 | )%
Hong Kong |  |  | 2,326 |  |  |  | 7 | % |  |  | 737 |  |  |  | 2 | % |  |  | 1,589 |  |  |  | 216 | %
Germany |  |  | 846 |  |  |  | 2 | % |  |  | - |  |  |  | 0 | % |  |  | 846 |  |  |  | - | %
Jordan |  |  | 320 |  |  |  | 1 | % |  |  | 1,278 |  |  |  | 3 | % |  |  | (958 | ) |  |  | (75 | )%
Others |  |  | 640 |  |  |  | 2 | % |  |  | 709 |  |  |  | 2 | % |  |  | (69 | ) |  |  | (10 | )%
Total |  | $ | 33,357 |  |  |  | 100 | % |  | $ | 37,825 |  |  |  | 100 | % |  | $ | (4,468 | ) |  |  | (12 | )%

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.

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The decrease of approximately 17% in sales to the U.S. during the three months ended September 30, 2023, was mainly attributable to fewer shipments, amid a high inflation environment being delivered to some of our U.S. customers and more shipments being delivered to other locations, including Hong Kong and Germany.

During the three months ended September 30, 2023, aggregate sales to Hong Kong, Germany, and other locations, increased by 52% from approximately $2.7 million to $4.1 million from the same period last year as we were diversifying our client base in different geographic areas.

Cost of goods sold. Following the decrease in sales revenue, our cost of goods sold decreased by approximately $2.9 million, or 9%, to approximately $28.0 million, for the three months ended September 30, 2023, from approximately $30.9 million for the same period in fiscal 2023. As a percentage of revenue, the cost of goods sold increased by approximately 2% points to 84% for the three months ended September 30, 2023 from 82% for the same period in fiscal 2023. The increase in cost of goods sold as a percentage of revenue was primarily attributable to a different product mix following our diversification in our client base to different geographic areas with the increase in some orders with lower margin.

For the three months ended September 30, 2023, we did not have a major supplier for our garments and raw materials. For the three months ended September 30, 2022, we purchased 23%, 20%, and 10% of our raw materials from three major suppliers, respectively.

Gross profit margin. Gross profit margin was approximately 16% for the three months ended September 30, 2023, which decreased by 2% points from 18% for the same period in fiscal 2023. The decrease in gross profit margin was primarily driven by a shift in customer mix with more orders that generate lower profit margin.

Operating expenses. Operating expenses for the three months ended September 30, 2023 increased by 4%, or approximately $0.2 million, to approximately $4.5 million, compared to the same period in fiscal 2023. The increase was primarily due to a stock-based payment compensation of $0.2 million in fiscal 2024 while there was none in the same period in fiscal 2023, offset by a write back of $67,000 from the provision for doubtful debt upon receipt of the amount.

Other expenses, net. Other expenses, net were approximately $167,000 for the three months ended September 30, 2023, as compared to other expenses, net of approximately $105,000 for the same period in fiscal 2023. The increase was primarily due to higher interest incomes from fixed deposits in banks, offset by the interest expenses arisen from participating in supply chain financing programs of certain customers.

Income tax expenses. Income tax expenses for the three months ended September 30, 2023 were approximately $0.4 million compared to income tax expenses of $0.7 million for the same period in fiscal 2023. The increase in the effective tax rate mainly resulted from the higher proportion of the operating loss of a Hong Kong subsidiary and our holding company in our group profit and the increase of corporate income tax rate in Jordan from a combined rate of 19% to 20% or 21% since January 1, 2023. The effective tax rate was up to 48.8% for the three months ended September 30, 2023, as compared to 28.4% for the three months ended September 30, 2022.

Net income. Net income for the three months ended September 30, 2023 was approximately $0.4 million compared to net income of approximately $1.8 million for the same period in fiscal 2023. The decrease was mainly attributable to the lower sales and gross profit margin while we were diversifying our customer base to different geographic locations.

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Six months ended September 30, 2023 and 2022

The following table summarizes the results of our operations during the six-month periods ended September 30, 2023 and 2022, and provides information regarding the dollar and percentage increase or (decrease) during such periods.

(All amounts, other than percentages, in thousands of U.S. dollars)

|  | Six Months Ended September 30, 2023 |  |  | Six Months Ended September 30, 2022 |  |  | Period over Period Increase (Decrease) |
Statement of Income Data: |  | Amount |  |  | As % of Sales |  |  | Amount |  |  | As % of Sales |  |  | Amount |  |  | % |
Revenue |  | $ | 68,093 |  |  |  | 100 | % |  | $ | 71,262 |  |  |  | 100 | % |  | $ | (3,169 | ) |  |  | (4 | )%
Cost of goods sold |  |  | 57,153 |  |  |  | 84 | % |  |  | 57,722 |  |  |  | 81 | % |  |  | (569 | ) |  |  | (1 | )%
Gross profit |  |  | 10,940 |  |  |  | 16 | % |  |  | 13,540 |  |  |  | 19 | % |  |  | (2,600 | ) |  |  | (19 | )%
Selling, general, and administrative expenses |  |  | 8,476 |  |  |  | 12 | % |  |  | 8,327 |  |  |  | 12 | % |  |  | 149 |  |  |  | 2 | %
Stock-based compensation expenses |  |  | 484 |  |  |  | 1 | % |  |  | 295 |  |  |  | 0 | % |  |  | 189 |  |  |  | 64 | %
Other expenses, net |  |  | 466 |  |  |  | 1 | % |  |  | 133 |  |  |  | 0 | % |  |  | 333 |  |  |  | 250 | %
Net income before taxation |  | $ | 1,514 |  |  |  | 2 | % |  | $ | 4,785 |  |  |  | 7 | % |  | $ | (3,271 | ) |  |  | (68 | )%
Income tax expense |  |  | 650 |  |  |  | 1 | % |  |  | 1,272 |  |  |  | 2 | % |  |  | (622 | ) |  |  | (49 | )%
Net income |  | $ | 864 |  |  |  | 1 | % |  | $ | 3,513 |  |  |  | 5 | % |  | $ | (2,649 | ) |  |  | (75 | )%

Revenue. Revenue decreased by approximately $3.2 million, or 4%, to $68.1 million, for the six months ended September 30, 2023, from approximately $71.3 million for the same period in fiscal 2023. The decrease was mainly due to the decrease in shipments, amid a high inflation environment to our customers in one of our major markets, the U.S., which was only partially compensated by the increase in sales to other locations.

The following table outlines the dollar amount and percentage of total sales to our customers for the six months ended September 30, 2023 and 2022, respectively.

(All amounts, other than percentages, in thousands of U.S. dollars)

|  | Six Months Ended September 30, 2023 |  |  | Six Months Ended September 30, 2022 |
|  | Sales |  |  |  |  |  | Sales |  |  |  |
|  | Amount |  |  | % |  |  | Amount |  |  | % |
VF Corporation (1) |  | $ | 47,183 |  |  |  | 69 | % |  | $ | 46,359 |  |  |  | 65 | %
New Balance |  |  | 8,680 |  |  |  | 13 | % |  |  | 11,478 |  |  |  | 16 | %
G-III |  |  | 4,715 |  |  |  | 7 | % |  |  | 3,952 |  |  |  | 6 | %
Easy Long International Limited |  |  | 1,627 |  |  |  | 2 | % |  |  | - |  |  |  | 0 | %
Hugo Boss |  |  | 1,290 |  |  |  | 2 | % |  |  | - |  |  |  | 0 | %
Jiangsu Guotai |  |  | 930 |  |  |  | 1 | % |  |  | 729 |  |  |  | 1 | %
Soriana |  |  | 927 |  |  |  | 1 | % |  |  | 954 |  |  |  | 1 | %
American Eagle Outfitter |  |  | 505 |  |  |  | 1 | % |  |  | 515 |  |  |  | 1 | %
Dynamic |  |  | 167 |  |  |  | 1 | % |  |  | 4,073 |  |  |  | 6 | %
Others |  |  | 2,069 |  |  |  | 3 | % |  |  | 3,202 |  |  |  | 4 | %
Total |  | $ | 68,093 |  |  |  | 100 | % |  | $ | 71,262 |  |  |  | 100 | %

(1) | A large portion of our products are sold under The North Face and Timberland brands that are owned by VF Corporation.

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Revenue by Geographic Area

(All amounts, other than percentages, in thousands of U.S. dollars)

|  | Six Months Ended September 30, 2023 |  |  | Six Months Ended September 30, 2022 |  |  | Period over Period Increase (Decrease) |
Region |  | Amount |  |  | % |  |  | Amount |  |  | % |  |  | Amount |  |  | % |
United States |  | $ | 61,887 |  |  |  | 91 | % |  | $ | 66,508 |  |  |  | 93 | % |  | $ | (4,621 | ) |  |  | (7 | )%
Hong Kong |  |  | 2,556 |  |  |  | 4 | % |  |  | 742 |  |  |  | 1 | % |  |  | 1,814 |  |  |  | 244 | %
Germany |  |  | 1,290 |  |  |  | 2 | % |  |  | - |  |  |  | 0 | % |  |  | 1,290 |  |  |  | - | %
Jordan |  |  | 625 |  |  |  | 1 | % |  |  | 2,756 |  |  |  | 4 | % |  |  | (2,131 | ) |  |  | (77 | )%
Others |  |  | 1,735 |  |  |  | 2 | % |  |  | 1,256 |  |  |  | 2 | % |  |  | 479 |  |  |  | 38 | %
Total |  | $ | 68,093 |  |  |  | 100 | % |  | $ | 71,262 |  |  |  | 100 | % |  | $ | (3,169 | ) |  |  | (4 | )%

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.

The decrease of approximately 7% in sales to the U.S. during the six months ended September 30, 2023, was mainly attributable to fewer shipments being delivered to some of our major customers in the U.S.

During the six months ended September 30, 2023, aggregate sales to Hong Kong, Germany, and other locations increased by 31% from approximately $4.8 million to $6.2 million from the same period last year as we were diversifying our customer bases to different geographic locations.

Cost of goods sold. Following the decrease in sales revenue, our cost of goods sold decreased by approximately $0.6 million, or 1%, to approximately $57.2 million, for the six months ended September 30, 2023, from approximately $57.7 million for the same period in fiscal 2023. As a percentage of revenue, the cost of goods sold increased by approximately 3% points to 84% for the six months ended September 30, 2023 from 81% for the same period in fiscal 2023. The increase in cost of goods sold as a percentage of revenue was primarily attributable to our diversification in customer base with some orders with lower profit margin.

For the six months ended September 30, 2023, we purchased 11% of our garments from one major supplier. For the six months ended September 30, 2022, we purchased 15% and 13% of our garments and raw materials from two major suppliers, respectively.

Gross profit margin. Gross profit margin was approximately 16% for the six months ended September 30, 2023, which decreased by 3% points from 19% for the same period in fiscal 2023. The decrease in gross profit margin was primarily driven by a shift in customer mix with more orders that generate lower profit margin.

Operating expenses. Operating expenses for the six months ended September 30, 2023 increased by 4%, or approximately $0.3 million, to approximately $9.0 million, compared to the same period in fiscal 2023. The increase was primarily due to an increase in an increase in stock-based compensation expenses of $189,000 and an increase in selling expenses, offset by a write back of $67,000 from the provision for doubtful debt upon receipt of the amount.

Other expenses, net. Other expenses, net was approximately $466,000 for the six months ended September 30, 2023, as compared to other expenses, net of approximately $133,000 for the same period in fiscal 2023. The increase was primarily due to higher interest expenses arisen from participating in supply chain financing programs of certain customers, which was only partially offset by the interest income from fixed deposits in banks.

Income tax expenses. Income tax expenses for the six months ended September 30, 2023 were approximately $0.7 million compared to income tax expenses of $1.3 million for the same period in fiscal 2023. The increase in the effective tax rate mainly resulted from the higher proportion of the operating loss of a Hong Kong subsidiary and our holding company in our group profit and the increase of corporate income tax rate in Jordan form a combined rate of 19% to 20% or 21% since January 1, 2023. The effective tax rate was up to 42.9% for the six months ended September 30, 2023, as compared to 26.6% for the six months ended September 30, 2022.

Net income. Net income for the six months ended September 30, 2023 was approximately $0.9 million compared to net income of approximately $3.5 million for the same period in fiscal 2023. The decrease was mainly attributable to lower sales and profit margin following our diversification of our customer base.

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Liquidity and Capital Resources

Jerash Holdings (US), Inc. 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, 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 (which generate revenue) 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 but no other profit.

As of September 30, 2023, we had cash of approximately $21.2 million and restricted cash of approximately $1.6 million compared to cash of approximately $17.8 million and restricted cash of approximately $ 1.6 million as of March 31, 2023. The increase in total cash was mainly a result of a decrease in inventory of $14 million in the six months ended September 30, 2023.

Our current assets as of September 30, 2023 were approximately $50.7 million and our current liabilities were approximately $10.2 million, which resulted in a ratio of approximately 5.0 to 1. As of March 31, 2023, our current assets were approximately $ 57.3 million and our current liabilities were $ 14.4 million, resulting in a ratio of 4.0 to 1.

The primary drivers in the decrease in current assets were the decrease in inventory and prepaid expenses and other current assets.

The primary driver in the decrease in current liabilities was the decrease in accounts payable for raw material purchases, income tax payables, and deferred revenue.

Total equity as of September 30, 2023 was approximately $68.2 million compared to $68.2 million as of March 31, 2023.

We had net working capital of $40.5 million and $42.8 million as of September 30, 2023 and March 31, 2023, respectively. Based on our current operating plan, we believe that cash on hand and cash generated from operating activities will be sufficient to support our working capital needs for the next 12 months from the date this Quarterly Report is released.

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 Secured Overnight Financing Rate 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. Due to the rising interest rate, we have suspended our participation in one of the above supply chain financing programs.

We have funded our working capital needs from our 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

DBSHK Facility Letter

Pursuant to the DBSHK facility letter dated January 12, 2022, DBSHK provided a bank facility of up to $5.0 million to Treasure Success. Pursuant to the facility, DBSHK agreed to finance cargo receipt, trust receipt, account payable financing, and certain type of import invoice financing up to an aggregate of $5.0 million. The DBSHK facility bears interest at 1.5% per annum over Hong Kong Interbank Offered Rate for HKD bills and 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. We had nil outstanding under this DBSHK facility as of both of September 30, 2023 and March 31, 2023. The DBSHK facility is reviewed annually.

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Capital Bank of Jordan Credit Facility

We received documents from Capital Bank of Jordan for a credit facility of $10 million, and entered into the credit facility on June 1, 2023 after reviewing the documents. As of the date of this quarterly report, the execution is still in process and the credit facility is not yet effective. Further details of the credit facility will be provided once the execution is complete and the facility becomes effective.

Six months ended September 30, 2023 and 2022

The following table sets forth a summary of our cash flows for the periods indicated:

(All amounts in thousands of U.S. dollars)

|  | Six months ended September 30, |
|  | 2023 |  |  | 2022 |
Net cash provided by operating activities |  | $ | 8,179 |  |  | $ | 9,638 |
Net cash used in investing activities |  |  | (3,459 | ) |  |  | (10,451 | )
Net cash used in financing activities |  |  | (1,198 | ) |  |  | (985 | )
Effect of exchange rate changes on cash and restricted cash |  |  | (124 | ) |  |  | (334 | )
Net increase (decrease) in cash and restricted cash |  |  | 3,398 |  |  |  | (2,132 | )
Cash and restricted cash, beginning of six-month period |  |  | 19,412 |  |  |  | 26,583 |
Cash and restricted cash, end of six-month period |  | $ | 22,810 |  |  | $ | 24,451 |

Operating Activities

Net cash provided by operating activities was approximately $8.2 million for the six months ended September 30, 2023, compared to cash provided by operating activities of approximately $9.6 million for the same period in fiscal 2023. The decrease in net cash provided by operating activities was primarily attributable to the following factors:

| ● | a decrease in inventory of $13.9 million in the six months ended September 30, 2023 compared to an increase of $8.2 million in the same period in fiscal 2023;
| ● | an increase in accounts receivable of $2.9 million in the six months ended September 30, 2023 compared to a decrease of $7.0 million in the same period in fiscal 2023;
| ● | an increase of advances to suppliers of $1.9 million compared to an increase of $1.0 million in the same period in fiscal 2023;
| ● | a decrease of accounts payable of $1.5 million in the six months ended September 30, 2023 compared to an increase of $5.7 million in the same period in fiscal 2023; and
| ● | a decrease of net income to $0.9 million in the six months ended September 30, 2023 from a net income of $3.5 million in the same period in fiscal 2023.

Investing Activities

Net cash used in investing activities was approximately $3.5 million for the six months ended September 30, 2023, compared to approximately $10.5 million in the same period in fiscal 2023. The net cash used in investing activities in the six months ended September 30, 2023 was mainly used in investment in property, plant, and machinery including the ongoing construction of a dormitory and factory expansion. The net cash used in investing activities in the six months ended September 30, 2022 also included the acquisitions of Ever Winland and Kawkab Venus for $7.3 million.

31

Financing Activities

Net cash used in financing activities was approximately $1.2 million for the six months ended September 30, 2023, which was dividend payments in the period. Net cash used in financing activities in the six months ended September 30, 2022 was primarily dividend payments and share repurchases, partially offset by net proceeds from short-term loans.

Statutory Reserves

In accordance with the corporate law in Jordan, our 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, in accordance with corporate laws in China. These reserves are not available for dividend distribution. The statutory reserves were approximately $0.4 million and approximately $0.4 million as of September 30, 2023 and 2022, respectively.

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 September 30, 2023 and 2022.

(All amounts, other than percentages, in thousands of U.S. dollars)

|  | As of September 30, |
|  | 2023 |  |  | 2022 |
Statutory Reserves |  | $ | 411 |  |  | $ | 379 |
Total Restricted Net Assets |  | $ | 411 |  |  | $ | 379 |
Consolidated Net Assets |  | $ | 68,230 |  |  | $ | 70,987 |
Restricted Net Assets as Percentage of Consolidated Net Assets |  |  | 0.60 | % |  |  | 0.53 | %

Total restricted net assets accounted for approximately 0.60% of our consolidated net assets as of September 30, 2023. As our subsidiaries in Jordan are only required to set aside 10% of net profits to fund the statutory reserves, we believe the potential impact of such restricted net assets on our liquidity is limited.

Capital Expenditures

We had capital expenditures of approximately $3.5 million and approximately $10.5 million for the six months ended September 30, 2023 and 2022, for plant and machinery, the construction of a dormitory and factory expansion in both periods, and the acquisitions of Ever Winland and Kawkab in fiscal 2023. For the six months ended September 30, 2023, payments for additional plant and machinery, and construction of a dormitory and factory expansion, amounted to approximately $0.6 million and $2.6 million, respectively. For the six months ended September 30, 2022, payments for additional plant and machinery, construction of a dormitory and factory expansion, and the acquisition of Ever Winland and Kawkab amounted to approximately $0.4 million, $2.6 million and $7.3 million, respectively.

In 2018, we commenced another project to build a 54,000 square-foot factory in Al-Hasa County in the Tafilah Governorate of Jordan, which started operation in November 2019 with approximately 240 workers. This project was constructed in conjunction with the Jordanian Ministry of Labor and the Jordanian Education and Training Department.

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 potential brought about by the new business collaboration with Busana Apparel Group.

32

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 an aggregate purchase price JOD313,501 (approximately $442,162). We expect to spend approximately $8.8 million in capital expenditures to build the dormitory. Due to the ongoing COVID-19 pandemic, management decided to put on hold the construction project in fiscal 2021 to retain financial resources to support our operations, and also to wait and see how the global economy and customer demand recover after the outbreak. The preparation work resumed in early 2021 and construction work commenced in April 2021. The dormitory is expected to be completed and ready for use by the end of 2023.

We project that there will be an aggregate of approximately $3.7 million and $12.6 million of capital expenditures in the fiscal years ending March 31, 2024 and 2025, respectively, for further enhancement of production capacity to meet future sales growth. We expect that our capital expenditures will increase in the future as our business continues to develop and expand. We have used cash generated from the operations of our subsidiaries to fund our capital commitments in the past and anticipate using such funds to fund capital expenditure commitments in the future.

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 shareholders’ equity, or that are not reflected in our consolidated financial statements.

Critical Accounting Policies

We prepare our financial statements in conformity with accounting principles generally accepted by the United States of America (“U.S. GAAP”), 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 three 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 believe that our accounting policies involve a higher degree of judgment and complexity in their application and require us to make significant accounting estimates. Accordingly, the policies we believe are the most critical to understanding and evaluating our consolidated financial condition and results of operations are summarized in “Note 2—Summary of Significant Accounting Policies” in the notes to our unaudited condensed consolidated financial statements.

Recent Accounting Pronouncements

See “Note 3—Recent Accounting Pronouncements” in the notes to our unaudited condensed consolidated financial statements for a discussion of recent accounting pronouncements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

As a smaller reporting company, we are not required to provide this information.

Item 4. Controls and Procedures

33

Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in the Securities Exchange Act of 1934, as amended (the “Exchange Act”) Rule 15d-15(e)) are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this report, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), based on their evaluation of our disclosure controls and procedures as of September 30, 2023, concluded that our disclosure controls and procedures were ineffective as of that date based on reasons set forth below.

In the annual report for fiscal 2023 filed on June 28, 2023, the management concluded that, as of March 31, 2023, our internal control over financial reporting was not effective due to certain control deficiencies that are deemed as material weaknesses, including:

- | We failed to maintain effective controls over period-end financial reporting, specifically related to income taxes and the reconciliation of account level balances that resulted in errors; and

- | There were ineffective information technology general controls in the areas of privileged user access and the review of user access over certain information technology systems that support our financial reporting processes.

Based on the above, we have implemented measures to address the weaknesses by:

- | improving the checking and documentation of account level balance reconciliation;

- | communicating with external professional consultant to strengthen our work and review on US tax issues; and

- | rolling out a password control mechanism to exercise control and check on the work of the privileged user access for all information technology systems supporting our financial reporting processes.

While we believe the Company’s remediation efforts to-date have improved and will continue to improve our disclosure controls and procedures, remediation of the material weaknesses will require validation and testing of the operating effectiveness of our disclosure controls over a sustained period of financial reporting cycles. As the Company continues to evaluate and work to improve its internal control over financial reporting, management may determine additional measures are necessary to address control deficiencies or determine that it is necessary to modify the remediation plan described above. Management cannot provide assurance as to when the Company will remediate such weaknesses, nor can management be certain of whether additional actions will be required or the costs of any such actions.

Our remediation efforts are ongoing and are subject to continued management review supported by ongoing design and testing. Notwithstanding the material weaknesses, our management has concluded that the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report present fairly, in all material respects, our financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America.

Changes in Internal Control Over Financial Reporting

Other than our ongoing remediation efforts with respect to our disclosure controls and procedures, which extend to our internal control over financial reporting, there were no changes in our internal control over financial reporting (as the term is defined in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act) during the quarter ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

34

JERASH HOLDINGS (US), INC.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We are not currently involved in any material legal proceedings. From time-to-time we are, and we anticipate that we will be, involved in legal proceedings, claims, and litigation arising in the ordinary course of our business and otherwise. The ultimate costs to resolve any such matters could have a material adverse effect on our financial statements. We could be forced to incur material expenses with respect to these legal proceedings, and in the event that there is an outcome in any that is adverse to us, our financial position and prospects could be harmed.

Item 1A. Risk Factors

As a smaller reporting company, we are not required to provide the information required by this item.

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

None.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

35

Item 6. Exhibits

The exhibits listed below are filed as part of this Quarterly Report on Form 10-Q.

Index to Exhibits

Exhibit |  |  |  | Incorporated by Reference (Unless Otherwise Indicated)
Number |  | Exhibit Title |  | Form |  | File |  | Exhibit |  | Filing Date
3.1 |  | Amended and Restated Certificate of Incorporation |  | POS AM |  | 333-222596 |  | 3.1 |  | September 19, 2018
3.2 |  | Amended and Restated Bylaws |  | 8-K |  | 001-38474 |  | 3.1 |  | July 24, 2019
4.1 |  | Specimen Certificate for Common Stock |  | S-1 |  | 333-218991 |  | 4.1 |  | June 27, 2017
10.1 |  | Shareholders’ Agreement dated October 10, 2023, by and between Treasure Success and Newtech Textile (HK) Limited |  | 8-K |  | 001-38474 |  | 10.1 |  | October 12, 2023
31.1 |  | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |  | — |  | — |  | — |  | Filed herewith
31.2 |  | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |  | — |  | — |  | — |  | Filed herewith
32.1* |  | Certification of Principal Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |  | — |  | — |  | — |  | Furnished herewith
32.2* |  | Certification of Principal Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |  | — |  | — |  | — |  | Furnished herewith
101.INS |  | Inline XBRL Instance Document |  | — |  | — |  | — |  | Filed herewith
101.SCH |  | Inline XBRL Taxonomy Extension Schema Document |  | — |  | — |  | — |  | Filed herewith
101.CAL |  | Inline XBRL Taxonomy Extension Calculation Linkbase Document |  | — |  | — |  | — |  | Filed herewith
101.DEF |  | Inline XBRL Taxonomy Extension Definition Linkbase Document |  | — |  | — |  | — |  | Filed herewith
101.LAB |  | Inline XBRL Taxonomy Extension Label Linkbase Document |  | — |  | — |  | — |  | Filed herewith
101.PRE |  | Inline XBRL Taxonomy Extension Presentation Linkbase Document |  | — |  | — |  | — |  | Filed herewith
104 |  | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |  | — |  | — |  | — |  | Filed herewith

* | In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release No. 34-47986, the certifications furnished in Exhibits 32.1 and 32.2 herewith are deemed to accompany this Form 10-Q and will not be deemed filed for purposes of Section 18 of the Exchange Act. Such certifications will not be deemed to be incorporated by reference into any filings under the Securities Act or the Exchange Act.

36

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: November 14, 2023 | Jerash Holdings (US), Inc.
| By: | /s/ Gilbert K. Lee
|  | Gilbert K. Lee
|  | Chief Financial Officer (Principal Financial Officer)

37

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