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

As of March 31, 2025,2026, we had cash and cash equivalents of approximately $13.3$10.8 million and restricted cash of approximately $1.7 million. There can be no assurance that our available cash, together with resources from our operations, will be sufficient to fund our operations and capital expenditures. In addition, our cash position may decline in the future, and we may not be successful in maintaining an adequate level of cash resources.

Pursuant to the DBS Bank (Hong Kong) Limited (“DBSHK”) facility letter dated January 12, 2022, DBSHK provided a bank facility of up to $5.0 million to Treasure Success, which was amended pursuant to a facility letter dated January 4, 2024. Pursuant to the amended agreement, DBSHK agreed to finance cargo receipt, trust receipt, account payable financing, and certain type of import and export invoice financing up to an aggregate of $5.0 million, with certain financial covenants. The DBSHK facility bears interest at 1.5% per annum over Hong Kong Interbank Offered Rate (“HIBOR”) for Hong Kong dollar (“HKD”) bills and 1.1% to 1.3% per annum over DBSHK’s cost of funds for foreign currency bills. The facility is guaranteed by Jerash Holdings and became available to the Company on June 17, 2022. As of March 31, 2026 and 2025, the Company had $4,902,996 and $4,512,462 outstanding under the DBSHK facility, respectively.

We have engaged, and may in the future engage, in transactions with affiliates and other related parties. These transactions may not have been, and may not be, on terms as favorable to us as they could have been if obtained from non-affiliated persons. While an effort has been made and will continue to be made to obtain services from affiliated persons and other related parties at rates and on terms as favorable as would be charged by others, there will always be an inherent conflict of interest between our interests and those of our affiliates and related parties. Through his wholly owned entity Merlotte Enterprise Limited, Mr. Choi, our chairman, chief executive officer, president, treasurer, and a significant stockholder, has an indirect ownership interest in Jiangmen V-Apparel Manufacturing Limited, with which we have entered into, or in the future may enter into, agreements or arrangements. See also “Note 11—Related Party Transactions.” If we engage in related party transactions on unfavorable terms, our operating results will be negatively impacted.

Presently, we generate revenue primarily from manufacturing and exporting sportswear and outerwear. A shift in demand from such products may reduce the growth of new business for our products, and reduce existing business in those products. If demand infor sportswear and outerwear were to decline, we may endeavor to expand or transition our product offerings to other segments of the clothing retail industry. There can be no assurance that we would be able to successfully make such an expansion or transition, or that our sales and margins would not decline in the event we made such an expansion or transition.

AWe significantused portionto have stronger seasonality due to higher values of ourfall revenueand iswinter received duringorders normally shipped in the first sixtwo monthsquarters of our fiscal year,years. orWe fromhave Aprilbeen working on smoothing out seasonality through September. A majorityexpansions of ourcustomer VFbase Corporationand ordersproduct areofferings. derivedIn from winterfiscal season2026, fashions,we managed to reverse the trend to have higher sales of which occur in the spring and summer and are merchandized by VF Corporation during the autumn months (September through November). As such, the second half of our fiscalthe year traditionallythrough reflectthe lowerintroduction of a new customer and expansion in sales in anticipation of thesome existing customers for spring and summer seasons.season Inorders. addition, dueDue to the nature of our relationships with customers and our use of purchase orders to conduct our business, our revenue may vary from period to period.

As of the date of this annual report, we have entered into two joint ventures with third parties.parties, which joint ventures are in the process of being dissolved. Please refer to “Item 1. Business—Organizational structure” for more information. Once we enter into any joint ventures, we will have limited decision-making authority and we may face the risk of disputes with our joint venture partners. This includes potential deadlocks in making major decisions and restrictions on our ability to exit the joint venture. Any disputes that arise between us and any of our joint venture partners may result in litigation or arbitration. We may also face risks associated with the financial condition of our joint venture partners, including the risk of bankruptcy and/or failure to fund their share of required capital contributions. As a result, we may be exposed to liabilities that exceed our share of any joint venture. Our joint venture partners may also have business interests or goals that are inconsistent with ours and may be able to take actions contrary to our policies or objectives. In specific circumstances, we may be liable for the actions of any joint venture partners. Any of these situations may have a material adverse effect on our business, financial condition, and results of operations.

Furthermore, we cannot assure that we may succeed in doing business through these two joint ventures or any future joint ventures. If theany twofuture joint venturesventure dodoes not achieve expected levels level of production or profitability, we will not be able to adequately manage our growth following the establishment of such business, and our results of operations and financial condition would be adversely affected.

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 annual report, the 90tariff dayswas postponementmodified to 15% according to an executive order of presidential actions on July 31, 2025. In February 2026, the U.S. Supreme Court ruled that the “reciprocal” tariffs were illegal, and the U.S. Customs has since then stopped to impose the “reciprocal” tariff and hasestablished nota expired.new process to refund importers for voided “reciprocal” tariff. Following the ruling, the U.S. Government invoked Section 122 of the Trade Act of 1974 to impose an across the board 10% tariff for a period of 150 days expiring in July 2026. Imports from Jordan are also subject to this tariff. 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.

Since June 2025, the conflict between Israel and Iran has escalated. In March 2026, military conflict involving the United States, Israel and Iran increased geopolitical instability internationally and, to date, increased armed conflicts in the Middle East, which has had a significant effect on global energy and capital markets. These direct military engagements, proxy activities, and broader regional tensions could have significant adverse effects on Jordan’s political and economic environment, and consequently, on our business operations. Further intensification of the conflict could result in regional economic instability, potentially disrupting trade routes, supply chains, and cross-border commerce. Heightened military activity could also create security risks for our facilities, employees, and customers, potentially leading to business interruptions, increased operating costs, or damage to physical assets. In response to regional threats, the government of Jordan may implement new regulations, restrictions, or emergency measures, which could affect our ability to conduct business as usual. Currently, both of the ports of Aqaba in Jordan and Haifa in Israel, which are the main ports for Jerash’s imports of raw materials and export of garment products, are operating as normal.

While we do not have any employees, staff, consultants, operations, materials, or equipment located in Israel, Iran, Ukraine, Russia, or Belarus, all of our manufacturing processes are performed in in a complex of production facilities located in Jordan. This situation could adversely affect our business or the services being provided to us due to concerns about conflict in the Palestinian territories.territories and broader regional instability. For example, when Hamas launched its attack on October 7, 2023, it had an unfavorable impact on the Jordanian street and the country’s national security. Similarly, escalating tensions involving Iran, including disruptions to strategic airspaces and critical maritime routes, such as the Strait of Hormuz and the Red Sea, have contributed to increases in the price of oil and gas, disruptions to global supply chains, and heightened market uncertainty. Despite bilateral cooperation between Jordan and the United States that may contribute to assisting the conflicting parties in ultimately achieving peace and security, we cannot assure that our business operations will not be adversely impacted by such disputes.

Our ongoing compliance efforts will increase general and administrative expenses and may divert management’s time and attention from the development of our business, which may adversely affect our financial condition and results of operations.

In connection with the preparation and external audit of our consolidated financial statements for the fiscal year ended March 31, 2024,2025, we identified certain material weaknesses in our internal control over financial reporting and have formulated plans for remedial measures. AlthoughIn somethe remedialassessment measuresin havefiscal been implemented,2026, ourthe management concluded thatthat, as of March 31, 2026, our internal control over financial reporting was stilleffective ineffectiveafter asreview ofand March 31, 2025 as sometesting of the material weaknesses aroundeffectiveness of the informationremedial technology environment have not been sufficiently remediated.actions. See “Item 9A. Controls and Procedures.”

We are currently operating in a period of economic uncertainty and capital market disruption, which has been significantly impacted by geopolitical instability due to the ongoing military conflict between Russia and Ukraine. Our business, financial condition, and results of operations could be materially adversely affected by any negative impact on the global economy and capital markets resulting from the conflict in Ukraine or any other geopolitical tensions, including the ongoing confrontations in the Middle East, such as the conflicts between the United States, Iran and Israel and between Israel and Hamas.

U.S. and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and Ukraine. On February 24, 2022, a full-scale military invasion of Ukraine by Russian troops was reported. Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in Ukraine could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, and supply chain interruptions. In March 2026, military conflict involving the United States, Israel and Iran increased geopolitical instability internationally and, to date, increased armed conflicts in the Middle East, which has had a significant effect on global energy and capital markets.

Although our business has not been materially impacted by the ongoing military conflict between Russian and Ukraine and military actions in the Middle East to date, it is impossible to predict the extent to which our operations, or those of our suppliers and manufacturers, will be impacted in the short and long term, or the ways in which the conflict may impact our business. The extent and duration of the military action, sanctions, and resulting market disruptions are impossible to predict, but could be substantial. Any such disruptions may also magnify the impact of other risks described in this annual report.

AWe significantused portionto have strong seasonality due to higher values of ourfall revenueand iswinter received duringorders, which are normally shipped in the first sixtwo monthsquarters of our fiscal year.years. TheWe majorityhave been working on smoothing out seasonality through expansions of ourcustomer VFbase Corporationand ordersproduct areofferings. derivedIn fromfiscal winter2026, seasonwe fashions,managed to reverse the trend to have higher sales of which occur in Spring and Summer and are merchandized by VF Corporation during the months of September through November. As such, the second half of ourthe fiscalyear yearsthrough reflectintroduction lowerof a new customer and expansion in sales in anticipation of thesome existing customers for spring and summer seasons.season orders. We will continue our efforts in this direction in order to produce more consistent results throughout a fiscal year. One of our strategies is to increase sales with other customers where clothing lines are stronger during the spring months. This strategy also reflects our current plan to increase our number of customers to mitigate our current concentration risk with VF Corporation.

The following table presents certain information from our consolidated statements of operations and comprehensive income (loss) for the fiscal years ended March 31, 2026 and 2025 and 2024 and should be read, along with all of the information in this management’s discussion and analysis, in conjunction with the consolidated financial financial statements and related notes included elsewhere in this annual report.

Revenue. Our revenue was $166.3 million for fiscal 2026, compared to $145.8 million for fiscal 2025, compared to $117.2 million for fiscal 2024, an increase of $28.6$20.5 million, or 24%,14%, primarily due to increases in shipments to twobusinesses from new customers such as Hansoll Group and growth in sales from some of our majorthe customers introduced in the U.S.,past few whichyears issuch ouras mainAcushnet exportand market.Tharanco.

Since January 2010, all apparel manufactured in Jordan can be exported to the U.S. without customs duty being imposed, pursuant to the United States-Jordan Free Trade Agreement entered into in December 2001. This free trade agreement provides us with substantial competitiveness and benefit that allowed us to expand our garment export business in the U.S. Effective from April 5, 2025, the U.S. imposed a baseline tariff of 10% on imports from almost all countries, including Jordan. Then, effective from April 9, 2025, it had announced “reciprocal” tariffs of imports from specified countries, amongst them Jordan with a prevailing rate of then 20%. These “reciprocal” tariffs are postponed for 90 days, whilst the 10% baseline tariff persists. UpThe tariff had been modified to the15% dateaccording to an executive order of thispresidential annualactions report,on July 31, 2025. In February 2026, the 90U.S. daysSupreme postponementCourt ofruled that the “reciprocal” tariffs were illegal, and the U.S. Customs has since then stopped to impose the “reciprocal” tariff and established a new process to refund importers for voided “reciprocal” hastariff. notFollowing expired.the Impactruling, the U.S. Government then invoked Section 122 of the Trade Act of 1974 to impose an across the board 10% tariff for a period of 150 days expiring in July 2026, including on the imports from Jordan. While the payment of the tariff is typically the responsibility of the importer (Jerash’s customers), the impact of the tariff on customers’ demand would also be affected by the comparative levels of the tariffs ofon imports from Jordan andcompared otherto countries.other.

The increase of approximately 25%7% in sales to the the U.S. during fiscal 20252026 was mainly attributable to increasesan increase in shipmentssales to twosome of our majorU.S. customers introduced in the U.S.past Somefew shipmentsyears, deferredincluding toAcushnet, theTharanco, firstand quarterAmerican of fiscal 2025, from the fourth quarter of fiscal 2024 due to disruptions in the logistic route in the Red Sea turmoil.Eagle.

During fiscal 2025,2026, aggregate sales to Jordan, China and Hong Kong, Germany,Korea, and other locations, such as MexicoGermany, and Indonesia,Mexico, increased by 18%63% from approximately $14.7$17.2 million in fiscal fiscal 20242025 to $17.2$28.1 million. This increase can be attributed mainly to growththe inintroduction businessesof witha customersnew incustomer, theseHansoll countriesGroup introducedand an increase in therevenue pastfrom fewSuzhou years.Unitex.

Cost of goods sold. Our cost of goods sold experienced an increase of approximately $23.2$16.0 million to approximately $139.5 million in fiscal 2026 from approximately $123.5 million in fiscal 2025 from approximately $100.3 million in fiscal 2024.2025. As a percentage of revenue, the cost of goods sold decreased by approximately 1 percentage point to 85%84% in fiscal 20252026 from 86%85% in fiscal 2024.2025. The decrease in the cost of goods sold as a percentage of revenue was primarily attributable to higherimproved productionefficiency and shipment volume that generated higher margin throughfrom economy of scale.scale, continued automation such as installation of hanging systems, and better control of import costs.

For the fiscal year ended March 31, 20252026 and 2024,2025, we purchased approximately 13% and 10% of our garments and raw materials from one major supplier.supplier, respectively.

Gross profit margin. Our gross profit margin was approximately 15%16% in fiscal 2025,2026, representing an increase by approximately 1 percentage point from 14%15% in fiscal 2024.2025. The increase in gross profit margin was primarily influenced by betterour planningimprovements in efficiency through automation and executioneconomy of logistic and production that resulted in higher production and shipment volume that brought down unit cost of production.scale.

Selling, general, and administrative expenses. Selling, general, and administrative expenses increaseddecreased by approximately 19%2% from approximately $17.6 million in fiscal 2024 to $20.9 million in fiscal 2025.2025 to $20.5 million in fiscal 2026. The increasedecrease was mainly attributable to higherbetter shipmentcontrol costsof duethe toexport higherlogistic sales volumeexpenses and alsolower someshare-based payment air shipping costs for garmentsexpenses in the first quarter of fiscal 2025 due to logistic hiccups in early 2024 and an increase in share-based compensation expenses of $772,000.2026.

Other expenses, net. Other expenses, net were approximately $1.3$1.6 million in fiscal 2025,2026, compared to other expenses, net of approximately $0.7$1.3 million in fiscal 2024.2025. The increase in other expenses from fiscal 20242025 to fiscal 20252026 was primarily due to increasea currency exchange loss and lower interest income in interest expenses from the supply chain financing programs of our major customers, more proceeds from short-term loan from credit facility and higher interest rate in fiscal 2025.2026.

Taxation. Income tax expenses for for fiscal 20252026 were approximately $1.0$1.1 million, compared to income tax expenses of approximately $0.7$1.0 million for fiscal 2024.2025. The effective effective tax rate for fiscal 20252026 increaseddecreased to 656%,24%, compared to -49.1%656% for fiscal 2024.2025. The increasedecrease in the effective tax rate mainly resulted resulted from the increase in operating profit in a Hong Kong subsidiary and $175,290 amendment of federal tax returns for the fiscal years ended March 31, 2022 and March 31, 2023, related to the inclusion oflower Subpart F income duringimpacts, favorable foreign tax rate differentials, favorable return-to-provision and valuation allowance adjustments, and the absence of uncertain tax position adjustments related to amended tax returns that were recorded in fiscal year.2025.

Net loss.income (loss). Net lossincome for fiscal 2025 2026 was $0.8$3.6 million, compared to net loss of approximately $2.0$0.8 million for fiscal 2024.2025. The net lossincome is mainly attributable to higherthe logistic costsimprovement in efficiency through automation and laboreconomy costsof incurredscale, better control of the export logistic expenses and lower share-based payment expenses and the lower effect tax rate in earlyfiscal to mid-2024 arisen from the logistic hiccups in the short period after the Red Sea crisis broke out.2026.

As of March 31, 2025,2026, our cash and cash equivalents balance was approximately $13.3 $10.8 million and restricted cash was approximately $1.7 million, compared to cash and cash equivalents of approximately $12.4 $13.3 million and restricted cash of approximately $1.6$1.7 million as of March 31, 2024.2025. The increasedecrease in total cash and cash equivalents during fiscal 20252026 was primarily due to the utilization ofpayment for new factory premises and plant and equipment, offsetting the supplybank chain financing programsloan of our$2.8 million majorrelated customers that expedited receivable collections and alsoto the drawdown of $4.5 million of short-term bank financing to support purchases of raw materials for orders to be shippedpremises in fiscal 2026.

Our current assets as of March 31, 2026 were approximately $58.4 million, and our current liabilities were approximately $21.6 million, which resulted in a current ratio of approximately 2.7 to 1. Our current assets as of March 31, 2025 were approximately $54.4 million, and our current liabilities were approximately $19.8 million, which resulted in a current ratio of approximately 2.7 to 1. Our current assets as of March 31, 2024 were approximately $50.9 million, and our current liabilities were approximately $14.8 million, which resulted in a current ratio of approximately 3.4:1. For fiscal 2025,2026, the increase in current assets were primarily due to increases in accounts receivable from shipments close to the year end, and increases in inventory and advances to suppliers tofor supportthe rawshipments materialmostly purchases, prepaid expenses, cash, and inventory, which was offset partially by decreasesplanned in accounts receivable balance dueearly to mid-fiscal 2027, offsetting the usedecrease ofin customers’cash supply chain financing programs.balance.

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 (“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.

Credit Facilities and Bank Loan

Pursuant to the DBS facility letter dated January 12, 2022, DBSHK provided a bank facility of up to $5.0 million to Treasure Success, which was amended pursuant to a facility letter dated January 4, 2024. Pursuant to the amended agreement, DBSHK agreed to finance cargo receipt, trust receipt, account payable financing, and certain types of import and export invoice financing up to an aggregate of $5.0 million, subject to certain financial covenants. The DBSHK facility bears interest at 1.5% per annum over HIBOR for HKD bills and 1.1% to 1.3% per annum over DBSHK’s cost of funds for foreign currency bills. The facility is guaranteed by Jerash Holdings and became available to the Company on June 17, 2022. As of March 31, 20252026 and 2024,2025, the outstanding balances were $4.5$4.9 million and $nil,$4.5 million, respectively, under this DBSHK facility. The increase in short-term bank financing was to support purchases of raw materials to support orders to be shipped in fiscal 2026.

Net cash provided by operating activities was approximately $1.4$2.5 million in fiscal 2025,2026, compared to net cash provided by operating activities of approximately $2.5$1.4 million in fiscal 2024.2025. The decreaseincrease in net cash provided by operating activities was primarily attributable to the following factors:

Net cash used in investing activities was approximately $2.4$5.8 million and $5.1$2.4 million for fiscal 20252026 and 2024,2025, respectively. The decreaseincrease in net cash used in fiscal year 20252026 compared to 20242025 was primarily due to the capital expenditures for the dormitory constructionacquisition of $3.6a millionfactory andpremises $1.1in millionJordan in fiscal 2024 and fiscal 2025, respectively. There was a slight decrease in capital expenditures in property, plant, and equipment2026 for expansionsapproximately in$3.6 fiscal 2025.million.

We had capital expenditures of approximately $2.4$5.8 million and $5.1$2.4 million in fiscal 20252026 and 2024,2025, respectively. For the fiscal year ended March 31, 2025,2026, our capital expenditures included payments for additional plant and machinery of approximately $1.5 million and payments for acquisition of properties of approximately $3.6 million. For the fiscal year ended March 31, 2025, our capital expenditures included payments for additional plant and machinery of approximately $1.0 million and payments for construction of properties of approximately $1.1 million. For the fiscal year ended March 31, 2024, payments for additional plant and machinery, and construction of a dormitory and factory expansion, amounted to approximately $1.2 million and $3.6 million, respectively.

We projectexpect that there will be an aggregate of approximately $1.3 million and $7.8 million ofour capital expenditures will increase in the following two fiscal years endingto Marchcreate 31, 2026 and 2027, respectively, for further enhancement of productionadditional capacity to meetunderpin futureour saleslong-term growth.business plan. The realization of these investments depends on the progress of our business development, including expanding our client base and securing increased commitments from existing customers. We 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 pastpast. and anticipate using such funds to fundOur capital expenditure plan is highly related to customer commitments and market responses to the demand of our capacity. If growth in demand is in line with our projection, other than cash generated from the future.operations of our subsidiaries, we may also obtain further bank financing and raise funds from the capital market to meet our capital expenditure plan and fund our capital commitments. As of the date of this report, no material commitment has been made for the capital expenditure projections above.

Three months ended DecemberJune 31,30, 2026 and 2025 and 2024

The following table summarizes the results of our operations during the three-month periods ended DecemberJune 31,30, 20252026 and 2024,2025, and provides information regarding the dollar and percentage increase or (decrease) during such periods.

Revenue. Revenue increased by approximately $6.4$10.6 million, or 18%,27%, to $41.8$50.2 million, for the three months ended DecemberJune 31,30, 2025,2026, from approximately $35.4$39.6 million for the same period in fiscal 2025.2026. The increase was mainly due to increasesan increase in shipments to someour oftwo themajor customersbuyers in the U.S. and the introduction of a new new customer in Korea.

The following table outlines the dollar amount and percentage of total sales to our customers for the three months ended DecemberJune 31,30, 20252026 and 2024.2025.

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, theThe tariff hashad been modified to 15% according to an executive order of presidential actions on July 31, 2025. WhileIn February 2026, the paymentU.S. Supreme Court ruled that the “reciprocal” tariffs were illegal, and the U.S. Customs has since then stopped to impose the “reciprocal” tariff and established a new process to refund importers for voided “reciprocal” tariff. Following the ruling, the U.S. Government then invoked Section 122 of the tariffTrade isAct typicallyof 1974 to impose an across the responsibilityboard 10% tariff for a period of 150 days that expired in July 2026, including on the imports from Jordan. On July 21, 2026, the U.S. Government and Jordanian Government entered into an agreement intending to enhance reciprocity in their bilateral relationship by securing preferential trade arrangements and addressing tariff and non-tariff barriers including, inter alia, the United States commits to provide preferential tariff treatment for originating goods of Jordan in future tariff actions with certain exceptions. On July 28, 2026, after the tariff imposed under Section 122 of the importer (Jerash’sTrade customers),Act of 1974 expired, the impactOffice of the tariffUnited States Trade Representative (the Trade Representative) issued a Notice of Actions in Section 301 investigations of acts, policies, and practices of various economies related to the failure of each economy to impose and effectively enforce a prohibition on customersthe demandimportation wouldof begoods affectedproduced bywith forced labor (the Notice). Based on the comparativefindings levelsin the investigation of Jordan and other factors, the Trade Representative has determined to impose 10 percent tariffs on products of Jordan, except as provided in Annex I and Annex II, Parts A, N, and O, of the tariffsNotice. onThese importsexceptions from Jordan comparedapply to otheritems countries.of specific Harmonized Tariff Schedule of the United States (HTSUS) codes. Most of the garment categories that Jerash manufactures fall within the HTSUS codes in the exceptions and thus are not subject to the tariff.

The increase of approximately 2%21% in sales to the the U.S. during the ninethree months ended DecemberJune 31,30, 2025,2026, was mainly attributable to a generalthe increase in shipments to sometwo of our major customersbuyers in the U.S.

During the ninethree months ended DecemberJune 31,30, 2025, 2026, aggregate sales to China,China and Hong Kong, Korea, Jordan, and other locations increased by 34%50% from approximately $13.9$7.6 million to $18.6$11.3 million from the same period last year,year. This asincrease wewas diversifiedmainly because of our customereffort mixin bydiversification introducingof newclient customersbase in bringing in new locationsbuyers suchand asexpanding Koreabusinesses duringwith buyers thein nine monthsmultiple ended December 31, 2025.regions.

Cost of goods sold. Following the increase in sales revenue, our cost of goods sold increased by approximately $4.5$8.4 million, or 4%,25%, to approximately $103.9$42.0 million, for the ninethree months ended DecemberJune 31,30, 2025,2026, from approximately $99.5$33.5 million for the same period in fiscal 2025.2026. As a percentage of revenue, the cost of goods sold decreased by approximately 1%1 pointpercentage to 84% for the nine months ended December 31, 2025point, from 85% for the same period in fiscal 2025.2026 to 84% for the three months ended June 30, 2026. The decrease in the cost of goods sold as a percentage of revenue was primarily attributable to changesa in product mix followinggeneral the introduction of new customers and the improvement in efficiency throughresulting economiesfrom economy of scale.scale and continuous automation.

For the ninethree months ended DecemberJune 31,30, 2025 and 2024,2026, we purchased 14% 18% and 12%13% of our total purchase in garments and raw materials from onetwo major supplier,suppliers, respectively.

Gross profit margin. Gross profit profit margin was approximately 16% for the ninethree months ended DecemberJune 31,30, 2025,2026, which increased by 1%1 percentage point from approximately 15% for the same period in fiscal 2025.2026. The increase in gross profit margin was primarily driven by increase in shipments to our U.S. customers that typically generated higher margin and an overall improvement in productivityefficiency fromthrough changes in product mix and economies of scale.automation.

OperatingSelling, general and administrative expenses. Operating expenses expenses for the nine months ended December 31, 2025 decreasedincreased by 4%,10%, or approximately $0.6$0.5 million, tofrom approximately $15.4$5.1 million,million comparedfor to the same period in fiscal 2025.2026, to approximately $5.6 million for the three months ended June 30, 2026. The decreaseincrease was primarily due to betteran control over export costs, the decreaseincrease in stock-baseddelivery compensationexpenses to customers expenses,following sales growth, and reducedan spendingincrease in repairheadcounts and related expenses and maintenance to cope with growth in fiscal 2026.business.

Other expenses, net. Other expenses, expenses, net waswere approximately $1.2 million$546,000 for the ninethree months ended DecemberJune 31,30, 2025,2026, as compared to other expenses, net of approximately $1.0 million$307,000 for the same period in fiscal 2025.2026. The increase was primarily due to exchangehigher lossrevenue offsettingfrom interestingtwo ratemajor decreasecustomers participating in net interest expenses for higher utilization of bank facility and customers’ supply chain financing programs that allow us to copereceive withearly businesspayments growth.and increases in interest expense in letter of credit financing for raw material purchases of a new buyer.

Income tax expenses. Income tax tax expenses for the ninethree months ended DecemberJune 31,30, 20252026, were approximately $851,000$404,000 compared to income tax expenses of approximately $667,000$329,000 for the same period in fiscal 2025.2026. The increase in the income tax expenses was mainly due to higheran operatingincrease in net profit of Jerash Garments offsetting tax concession to decrease corporation income tax rate from 20% to 10% in Jordan effective from October 1, 2025, and offsetting federal tax provision adjusted to the same period in fiscal 2026. The effective tax rate declineddecreased to 30.3%19.4% for the ninethree months ended June December30, 31,2026, 2025, as compared to (2,339.6%)50.4% for the ninesame monthsperiod ended December 31, 2024. The decrease in effective tax rate primarily related to uncertain tax provision, which was provided in the prior year and subsequently amended in connection with the overstatement of approximately $150,000 in fiscal 2026.

Net income (loss).income. Net income for the nine three months ended DecemberJune 31,30, 20252026, was approximately $2.0$1.7 million compared to net lossincome of approximately $0.7$0.3 million for the same period in fiscal 2025.2026. The increase in net income was mainly attributable to improvementan increase in productivityshipments and improvements in efficiency through changesautomation that generated overall profit margins, offsetting the increase in productoperating mix andexpense, economies of scale, better control over logistics costs, lower interestother expenses benefit from the decrease in SOFR, and lowerincome stock-basedtax compensation expenses during the period.expenses.

Jerash Holdings is a holding company incorporated in Delaware. As a holding company, we rely on dividends and other distributions from our subsidiaries formed in JordanJordanian and Hong Kong subsidiaries to satisfy 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 subsidiaries are required to set aside at least 10% of their respective accumulated profits each year,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 DecemberJune 31,30, 2025,2026, we had cash and cash equivalents of approximately $11.5 $12.4 million and restricted cash of approximately $1.7 million compared to cash and cash equivalents of approximately $13.3 $10.8 million and restricted cash of approximately $1.7 million as of March 31, 2025.2026. The decreasetotal increase in totalcash and cash equivalents was mainly adue resultto ofmore highershipments accountcompleted with more accounts receivable balances arisingcollected from salesour madetwo closermajor to the end of the quarter, which were mostly collected in early fourth quartercustomers through customers’their supplier supply chain financing programs.

Our current assets as of DecemberJune 31,30, 20252026 were approximately $56.8$56.2 million and our current liabilities were approximately $20.4$18.1 million, which resulted in a ratio of approximately 2.8 3.1 to 1. Our current assets as of March 31, 20252026 were approximately $54.4$58.4 million, and our current liabilities were approximately $19.8$21.6 million, which resulted in a current ratio of approximately 2.7 to 1.

The primary drivers ofin the increasedecrease in current assets were thea increasedecrease of $3.4 million in accountsinventory receivable and advancesdue to suppliers.more shipments completed in the period which was partially offset by an increase in cash of $1.6 million. The primary driver ofin the increasedecrease in current liabilities was the increasea indecrease creditof facilities$4.0 which were offset partially by decreasesmillion in accounts payable,payable due accruedto expensesintroduction andof othernew payables,suppliers and incomecatering taxfor payable.new businesses that typically started with stricter payment terms.

Total equity as of DecemberJune 31,30, 20252026 was approximately $63.7$66.2 million compared to $62.9$64.9 million as of March 31, 2025.2026.

We had net working capital of $36.4$38.1 million and $34.6 $36.7 million as of June December30, 31, 20252026 and March 31, 2025, respectively.2026. Based on our current operating plan, we believe that cash on hand and cash generated from operating activities operation will be sufficient to support our working capital needs for the next 12 months from the date this Quarterly Report is released.

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 sales contracts, the progress of execution on our customer contracts, and the timing of accounts receivable collections.

Credit Facilities and Bank Loan

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 DecemberJune 31,30, 2026 2025 and March 31, 2025,2026, we had $4.5$5.0 million and $4.5$4.9 million outstanding under this DBSHK facility, respectively.

On July 31, 2025, Bank al Etihad offered to provide a credit facility of up to $6.0 million to Jerash Garments. Pursuant to the facility, Bank al Etihad agreed to finance import invoices of up to $6.0 million with condition that such invoices are secured by letter of credit issued by customers. The facility bears an interest rate at the Prime Lending Rate announced by Bank al Etihad, currently 8% per annum.Etihad. As of DecemberJune 30, 2026 and March 31, 2025,2026, the Company had $4.8 million$nil outstanding under the the Bank al Etihad facility. The Bank al Etihad facility is reviewed annually.

NineThree months ended DecemberJune 31,30, 2026 and 2025 and 2024

Net cash usedprovided inby operating activities was approximately approximately $3.5$2.5 million for the ninethree months ended DecemberJune 31,30, 2025,2026, compared to net cash used in operating activities of approximately $6.5 $581,000million for the same period in fiscal 2025.2026. The increase in net cash usedprovided inby operating activities was primarily attributable to the following factors:

Net cash used in investing activities was approximately $1.4$0.7 million for the ninethree months ended DecemberJune 31,30, 2025,2026 compared to approximately $1.7 million in the same period in fiscaland 2025. The net cash used in investing activities during the nine months ended December 31, 2025 was mainly for investments in property, plant, and equipment. The net cash used in investing activities during the ninethree months ended June December30, 31,2026 2024and 2025 was mainly for investmentpurchases inof property, plant, and equipmentmachineries, and thedeposits constructionfor offixed a dormitory.assets.

Net cash provided byused in financing activities was approximately approximately $2.9 million$153,000 for the ninethree months ended DecemberJune 31,30, 2025,2026, which was the net proceeds of $4.8short-term million from bank financing facilities and dividend paymentsloan of $1.9$482,000 millionand $635,000 of dividend payment in the period. Net cash providedused byin financing activities was approximately $3.1 million$379,000 for the nine three months ended DecemberJune 31,30, 2024,2025, which was the net effectproceeds of proceedsshort-term from credit facilitiesloan of approximately $5.0 million$256,000 and the dividend payments$635,000 of approximatelydividend $1.8payment million.in the period.

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 as of DecemberJune 31,30, 20252026 and 2024.2025.

The following table provides the amount of our statutory reserves, the amount of restricted net assets, consolidated net assets, and the amount of restricted net assets as a percentage of consolidated net assets, as of DecemberJune 31,30, 20252026 and 2024.2025.

Total restricted net assets accounted for approximately 0.65%0.63% of our consolidated net assets as of DecemberJune 31,30, 2025.2026. As our subsidiaries in Jordan are only required to set aside 10% of net profits profits to fund the statutory reserves,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.

We expect that our capital expenditures will increase in the futurefollowing as our business continues to develop and expand. We project that there will be an aggregate of approximately $7.8 million, $17.9 million, $18.0 million, $2.8 million, and $2 million of capital expenditures, respectively, in each of the fivetwo fiscal years from the fiscal year ending March 31, 2026 to thecreate fiscal year ending March 31, 2030, for further enhancement of productionadditional capacity to meet futureunderpin salesour growthlong-term basedbusiness on the current market response and communication with key customers.plan. The realization of these investments depends depends on the progress of our business development, including expanding our client base and securing increased commitments from existing customers. customers. We have used cash generated from operations of our subsidiaries to fund our capital commitments in the past. Our capital expenditure plan plan is highly related to customer commitments and market responses to the demand of our capacity. If growth in demand is in line with our projection, other than cash generated from the operations of our subsidiaries, we may also obtain further bank financing and raise funds from the capital market to meet our capital expenditure plan and fund our capital commitments. As of the date of this report, no no material commitment has been made for the capital expenditure projections above.

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