Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

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

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, 2025 and in subsequent reports that we file with 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, 2025, filed with the SEC on June 26, 2025. References to fiscal 2026 and fiscal 2025 in this Management's Discussion and Analysis of Financial Condition and Results of Operations refer to our fiscal year ending March 31, 2026, and fiscal year ended March 31, 2025, respectively.

Results of Operations

Three months ended June 30, 2025 and 2024

The following table summarizes the results of our operations during the three-month periods ended June 30, 2025 and 2024, 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 June 30, 2025								Three Months Ended June 30, 2024								Period over Period Increase (Decrease)
Statement of Income Data:		Amount				As % of Sales				Amount				As % of Sales				Amount				%
Revenue		$	39,629				100	%		$	40,936				100	%		$	(1,307)				(3)	%
Cost of goods sold			33,540				85	%			36,296				89	%			(2,756)				(8)	%
Gross profit			6,089				15	%			4,640				11	%			1,449				31	%
Selling, general, and administrative expenses			4,907				12	%			5,000				12	%			(93)				(2)	%
Stock-based compensation expenses			223				-	%			469				1	%			(246)				(52)	%
Other expenses, net			307				1	%			426				1	%			(119)				(28)	%
Net income (loss) before taxation		$	652				2	%		$	(1,255	)			(3)	%		$	1,907				152	%
Income tax expenses			329				1	%			112				0	%			217				194	%
Net income(loss)		$	323				1	%		$	(1,367	)			(3)	%		$	1,690				124	%

Revenue. Revenue decreased by approximately $1.3 million, or 3%, to $39.6 million, for the three months ended June 30, 2025, from approximately $40.9 million for the same period in fiscal 2025. The decrease was mainly due to the switching of some of the shipments to Aqaba Port in Jordan to avoid disruptions in Haifa Port that started in late June 2025 that delayed the shipments to July 2025.

The following table outlines the dollar amount and percentage of total sales to our customers for the three months ended June 30, 2025 and 2024.

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

		Three Months Ended June 30, 2025								Three Months Ended June 30, 2024
		Sales								Sales
		Amount				%				Amount				%
VF Corporation (1)		$	25,156				63	%		$	29,973				73	%
New Balance			4,796				12	%			4,066				10	%
Suzhou Unitex			3,781				10	%			1,278				3	%
Hugo Boss			537				1	%			1,120				3	%
Others			5,359				14	%			4,499				11	%
Total		$	39,629				100	%		$	40,936				100	%

(1)

A large portion of our products are sold under The North Face, Timberland, and Vans brands owned by VF Corporation.

Revenue by Geographic Area

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

		Three Months Ended June 30, 2025								Three Months Ended June 30, 2024								Period over Period Increase (Decrease)
Region		Amount				%				Amount				%				Amount				%
United States		$	32,052				81	%		$	37,034				90	%		$	(4,982	)			(13	)%
China and Hong Kong			6,127				15	%			1,510				4	%			4,617				306	%
Germany			537				2	%			1,120				3	%			(583	)			(52	)%
Jordan			456				1	%			740				2	%			(284	)			(38	)%
Others			457				1	%			532				1	%			(75	)			(14	)%
Total		$	39,629				100	%		$	40,936				100	%		$	(1,307	)			(3	)%

Between January 2010 and March 2025, all apparel manufactured in Jordan could 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 provided us with substantial competitiveness and benefit that allowed us to expand our garment export business in the U.S. Effective from April 5, 2025, the U.S. imposed a baseline tariff of 10% on imports from almost all countries, including Jordan. Then, effective from April 9, 2025, it had announced "reciprocal" tariffs of imports from specified countries, amongst them Jordan with a prevailing rate of then 20%. These "reciprocal" tariffs are postponed for 90 days, whilst the 10% baseline tariff persists. Up to the date of this report, the tariff has been modified to 15% according to an executive order of presidential actions on July 31, 2025. While the payment of the tariff is typically the responsibility of the importer (Jerash's customers), the impact of the tariff on customers demand would be affected by the comparative levels of the tariffs on imports from Jordan compared to other countries.

The decrease of approximately 13% in sales to the U.S. during the three months ended June 30, 2025, was mainly attributable to the delays in shipments because of switching shipping ports to Aqaba Port in Jordan as per customers' requests in June 2025.

During the three months ended June 30, 2025, aggregate sales to China and Hong Kong, Germany, Jordan, and other locations increased by 94% from $3.9 million to $7.6 million from the same period last year. This increase was mainly because demand of our capacity increased for customers in those regions.

Cost of goods sold. Following the decrease in sales revenue, our cost of goods sold decreased by approximately $2.8 million, or 8%, to approximately $33.5 million, for the three months ended June 30, 2025, from approximately $36.3 million for the same period in fiscal 2025. As a percentage of revenue, the cost of goods sold decreased by approximately four percentage points, from 89% for the same period in fiscal 2025 to 85% for the three months ended June 30, 2025. The decrease in the cost of goods sold as a percentage of revenue was primarily attributable to lower import logistic costs comparing to last year as more shipments to Aqaba Port in Jordan resumed and lower level of overtime work was required with better logistic and production planning.

For the three months ended June 30, 2025, we did not purchase more than 10% of our total purchase in garments and raw materials from any supplier.

For the three months ended June 30, 2024, we purchased 12% and 11% of our total purchase in garments and raw materials from two major suppliers, respectively.

Gross profit margin. Gross profit margin was approximately 15% for the three months ended June 30, 2025, which increased by four percentage points from approximately 11% for the same period in fiscal 2025. The increase in gross profit margin was primarily driven by better execution of logistic and production plans with import sea routes resuming to go to Aqaba Port in Jordan that shortened the lead time with lower costs.

Operating expenses. Operating expenses decreased by 6%, or approximately $0.3 million, from approximately $5.5 million for the same period in fiscal 2025, to approximately $5.1 million for the three months ended June 30, 2025. The decrease was primarily due to lower stock-based compensation expenses and lower expenses on repair and maintenance.

Other expenses, net. Other expenses, net were approximately $307,000 for the three months ended June 30, 2025, as compared to other expenses, net of approximately $426,000 for the same period in fiscal 2025. The decrease was primarily due to lower interest rates and lower sales to customers with supply chain financing programs, which caused net interest expenses to be lower.

Income tax expenses. Income tax expenses for the three months ended June 30, 2025, were approximately $329,000 compared to income tax expenses of approximately $112,000 for the same period in fiscal 2025. The increase in the income tax expenses was mainly due to an increase in net profit in Jordan and Hong Kong subsidiaries, offsetting federal tax provision adjustment compared to the same period in fiscal 2025. The effective tax rate increased to 50.4% for the three months ended June 30, 2025, as compared to (8.9%) for the same period in fiscal 2025.

Net income/loss. Net income for the three months ended June 30, 2025, was approximately $0.3 million compared to net loss of approximately $1.4 million for the same period in fiscal 2025. The increase in net income was mainly attributable to lower import logistic costs as more shipments to Aqaba Port in Jordan resumed and a lower level of overtime work with better logistic and production planning, lower stock-based compensation expenses and lower expenses on repair and maintenance, as well as lower interest rates and lower sales to customers with supply chain financing programs resulting in less interest expenses comparing to last year.

Liquidity and Capital Resources

Jerash Holdings is a holding company incorporated in Delaware. As a holding company, we rely on dividends and other distributions from our Jordanian and Hong Kong subsidiaries to satisfy our liquidity requirements. Current Jordanian regulations permit our Jordanian subsidiaries to pay dividends to us only out of their accumulated profits, if any, determined in accordance with Jordanian accounting standards and regulations. In addition, our Jordanian subsidiaries are required to set aside at least 10% of their respective accumulated profits each year until the reserve is equal to 100% of the entity's share capital, if any, to fund certain reserve funds. These reserves are not distributable as cash dividends. We have relied on direct payments of expenses by our subsidiaries to meet our obligations to date. To the extent payments are due in U.S. dollars, we have occasionally paid such amounts in JOD to an entity controlled by our management capable of paying such amounts in U.S. dollars. Such transactions have been made at prevailing exchange rates and have resulted in immaterial losses or gains on currency exchange.

As of June 30, 2025, we had cash of approximately $5.8 million and restricted cash of approximately $1.7 million compared to cash of approximately $13.3 million and restricted cash of approximately $1.7 million as of March 31, 2025. The total cash decreased mainly because more shipments were completed at the end of June 2025, and the receivables were not collected until early July 2025 through the supply chain financing programs of customers.

Our current assets as of June 30, 2025 were approximately $53.4 million and our current liabilities were approximately $18.8 million, which resulted in a ratio of approximately 2.8 to 1. Our current assets as of March 31, 2025 were approximately $54.4 million, and our current liabilities were approximately $19.8 million, which resulted in a current ratio of approximately 2.7 to 1.

The primary drivers in the decrease in current assets were lower cash balances attributable to some orders not shipped on time in mid-late June 2025 due to the disruption in export through Haifa Port in Israel. The primary driver in the decrease in current liabilities was lower accrual expenses and accounts payable.

Total equity as of June 30, 2025 was approximately $62.8 million compared to $62.9 million as of March 31, 2025.

We had net working capital of $34.6 million as of June 30, 2025 and March 31, 2025. 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 SOFR plus a spread. The arrangement allows us to have better liquidity without the need to incur administrative charges and handling fees as in bank financing. In March 2024, we participated in an additional supply chain financing program with one customer.

We have funded our working capital needs from operations. Our working capital requirements are influenced by the level of our operations, the numerical and dollar volume of our sales contracts, the progress of execution on our customer contracts, and the timing of accounts receivable collections.

Credit Facilities

DBS Facility Letter

Pursuant to the DBS facility letter dated January 12, 2022, DBSHK provided a bank facility of up to $5.0 million to Treasure Success, which was amended pursuant to a facility letter dated January 4, 2024. Pursuant to the amended agreement, DBSHK agreed to finance cargo receipt, trust receipt, account payable financing, and certain types of import and export invoice financing up to an aggregate of $5.0 million, subject to certain financial covenants. The DBSHK facility bears interest at 1.5% per annum over HIBOR for HKD bills and 1.1% to 1.3% per annum over DBSHK's cost of funds for foreign currency bills. The facility is guaranteed by Jerash Holdings and became available to the Company on June 17, 2022. As of June 30, 2025 and March 31, 2025, we had $4.8 million and $4.5 million outstanding under this DBSHK facility, respectively.

Three months ended June 30, 2025 and 2024

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

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

		Three Months Ended June 30,
		2025				2024
Net cash used in operating activities		$	(6,478	)		$	(2,201	)
Net cash used in investing activities			(715	)			(387	)
Net cash (used in) provided by financing activities			(379	)			1,516
Effect of exchange rate changes on cash and restricted cash			10				9
Net decrease in cash and restricted cash			(7,562	)			(1,063	)
Cash and restricted cash, beginning of three-month period			15,064				14,037
Cash and restricted cash, end of three-month period		$	7,502			$	12,974

Operating Activities

Net cash used in operating activities was approximately $6.5 million for the three months ended June 30, 2025, compared to cash used in operating activities of approximately $2.2 million for the same period in fiscal 2025. For the three months ended June 30, 2025, the increase in net cash used in operating activities was primarily attributable to an increase in accounts receivable and a decrease in inventory, partially offset by higher net profit, and a decrease in accounts payable, summarized with the following factors:

●

a decrease in inventory of $0.4 million in the three months ended June 30, 2025, compared to a decrease of $6.5 million in the same period in fiscal 2025, resulting from the delay in some of the shipments in mid to late June 2025;

●

an increase in accounts receivable of $6.9 million in the three months ended June 30, 2025, compared to an increase of $4.0 million in the same period in fiscal 2025, resulting from shipment being switched to be exported from Aqaba Port in Jordan instead of Haifa Port in Israel. The change caused some delay in export sailing dates towards the end of June and the receivables for those invoices under supply chain financing programs were collected in early July 2025;

●

an increase in advance to suppliers of $0.3 million, compared to an increase of $0.1 million in the same period in fiscal 2025, resulting from the increase in orders from new and existing customers for the rest of fiscal 2026;

●

a decrease in accounts payable of $0.3 million in the three months ended June 30, 2025, compared to a decrease of $3.0 million in the same period in fiscal 2025; and

●

net income of $0.3 million in the three months ended June 30, 2025, comparing to net loss of $1.4 million in the same period in fiscal 2025.

For the three months ended June 30, 2025, the cash used in operating activities was primarily attributable to the increase in accounts receivable and the decreases in accrual expenses, accounts payable, and other payables.

Investing Activities

Net cash used in investing activities was approximately $0.7 million for the three months ended June 30, 2025, compared to approximately $0.4 million in the same period in fiscal 2025. The net cash used in investing activities during the three months ended June 30, 2025 and 2024 was mainly for purchases of property, plant, and machineries, and deposit payments for fixed assets.

Financing Activities

Net cash used in financing activities was approximately $0.4 million for the three months ended June 30, 2025, which was the net proceeds of short-term loan of $0.3 million and $0.6 million of dividend payment. Net cash provided by financing activities was approximately $1.5 million for the three months ended June 30, 2024, which was the net proceeds from short-term loan of $2.1 million and $0.6 million dividend payment in the period.

Statutory Reserves

In accordance with the corporate law in Jordan, subsidiaries of Jerash Holdings in Jordan are required to make appropriations to certain reserve funds, based on net income determined in accordance with generally accepted accounting principles of Jordan. Appropriations to the statutory reserve are required to be 10% of net income until the reserve is equal to 100% of the entity's share capital. Jiangmen Treasure Success is required to set aside 10% of its net income as statutory surplus reserve until such reserve is equal to 50% of its registered capital. These reserves are not available for dividend distribution. The statutory reserve was $0.4 million and $0.4 million as of June 30, 2025 and 2024, 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 June 30, 2025 and 2024.

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

		As of June 30,
		2025				2024
Statutory Reserves		$	414			$	414
Total Restricted Net Assets		$	414			$	414
Consolidated Net Assets		$	62,790			$	62,927
Restricted Net Assets as Percentage of Consolidated Net Assets			0.66	%			0.66	%

Total restricted net assets accounted for approximately 0.66% of our consolidated net assets as of June 30, 2025. As our subsidiaries in Jordan are only required to set aside 10% of net profits to fund the statutory reserves with the maximum reserve equal to 100% of the entity's declared capital, we believe the potential impact of such restricted net assets on our liquidity is limited.

Capital Expenditures

We had capital expenditures of approximately $0.7 million and $0.4 million for the three months ended June 30, 2025 and 2024, respectively. For the three months ended June 30, 2025, our capital expenditures in payments for additional plant and machinery were approximately $0.7 million. For the three months ended June 30, 2024, payments for additional plant and machinery and construction of properties amounted to approximately $370,000 and $15,000, respectively.

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 JOD 863,800 (approximately $1,218,303). Management has revised the plan to construct both dormitory and production facilities on the land in order to capture the increasing demand for our capacity. We are conducting engineering design and study on this project with the business growth prospect of new customers to be introduced in the coming few years. On February 6, 2020, we completed a transaction to acquire 4,516 square meters (approximately 48,608 square feet) of land in Al Tajamouat Industrial City, Jordan, from a third party to construct a dormitory for our employee with aggregate purchase price JOD 313,501 (approximately $442,162). The dormitory and dormitory kitchen were completed in the second quarter and the fourth quarter of fiscal year 2025, respectively. We have spent approximately $10.6 million in capital expenditures to build the dormitory and the dormitory kitchen.

We project that there will be an aggregate of approximately $1.3 million and $7.8 million of capital expenditures in the fiscal years ending March 31, 2026 and 2027, respectively, for further enhancement of production capacity to meet future sales growth. The realization of these investments depends on the progress of our business development, including expanding our client base and securing increased commitments from existing customers. We expect that our capital expenditures will increase in the future as our business continues to develop and expand. We have used cash generated from 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 stockholders' equity, or that are not reflected in our consolidated financial statements.

Critical Accounting Estimates

We prepare our consolidated 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 two years, we continually evaluate these estimates and assumptions based on the most recently available information, our own historical experience and various other assumptions that we believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from our expectations as a result of changes in our estimates. We have not identified any critical accounting estimates.

Recent Accounting Pronouncements

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