JERASH HOLDINGS (US), INC. Management report and analysis of the financial situation and operating results. (Form 10-K)

The following discussion of our financial condition and results of operations
should be read in conjunction with our consolidated financial statements and the
related notes included elsewhere in this filing.



                               EXECUTIVE OVERVIEW



Overview


Through our wholly-owned subsidiaries, we are principally engaged in the manufacture and export of customized ready-made sportswear and outerwear from knitted fabrics and PPE produced in our facilities Jordan.



We are an approved manufacturer of many well-known brands and retailers, such as
Walmart, Costco, New Balance, G-III (which owns brands such as Calvin Klein,
Tommy Hilfiger, DKNY, and Guess), American Eagle, VF Corporation (which operates
brands such as The North Face, Timberland, and Vans). Our production facilities
are made up of six factories and four warehouses and currently employ
approximately 5,700 people. The total annual capacity at our facilities is
approximately 14.0 million pieces (average for product categories including
t-shirts, polo shirts, pants, shorts, and jackets, and excluding PPE).



Impact of COVID-19 on our business

Collectability of receivables. We had accounts receivable of $11.0 million as of
March 31, 2022, out of which $10.4 million had been received through June 23,
2022. Two major customers have offered early payment alternatives since May and
July 2021, which have shortened payment terms to below 10 days from submission
of documents. See "-Liquidity and Capital Resources" for more details.



Inventory. We had an inventory of $28.3 million of the March 31, 2022primarily for orders scheduled to ship in fiscal year 2023.


                                       19





Investments. We acquired two pieces of land in fiscal 2020 for the construction
of dormitory and production facilities. Due to the COVID-19 pandemic, management
previously decided to hold off the construction to wait for a clearer picture on
customer demand. As customer orders recovered to a satisfactory level, in April
2021, management decided to begin work for the dormitory construction, which is
expected to be completed and ready for use in fiscal 2023. In June and July
2021, we entered into two Sale and Purchase Contracts to acquire a garment
factory and the physical land and building that the factory was leasing. The
acquisition of the garment factory was completed on October 7, 2021. We
accounted for the acquisition under the acquisition method of accounting. The
operating results of this garment factory since the completion of the
acquisition and the assets of this garment factory are included in the
consolidated financial statements as of and for the fiscal year ended March 31,
2022 included in elsewhere in this annual report. The acquisition of the land
and building of the factory is expected to close in the second quarter of fiscal
2023 due to personal reasons of the seller in relation to health and quarantine
requirements. See "Note 15-Commitments and Contingencies-Commitments."



Revenue. For fiscal 2022, our sales were $143.4 million, which represented an
approximate 58.9% increase from $90.2 million for fiscal 2021. We have been
proactively communicating with our existing customers to reconfirm their orders
and shipment schedules for fiscal 2023. However, our operating results are still
subject to the economies in the U.S. and the EU that would have significant
impact on both order fulfilment and delivery schedules and our operating results
may be adversely affected by the negative impact on the global economy and
capital markets resulting from the conflict in Ukraine or any other geopolitical
tensions, inflation, and a potential recession.



Liquidity/Going Concern. As of March 31, 2022, we had approximately $25.2
million of cash and net current assets of approximately $69.9 million with a
current ratio of 4.9 to 1. In addition, we had banking facilities with aggregate
limits of $3 million with $nil outstanding as of March 31, 2022. Given the
above, we believe that we will have sufficient financial resources to maintain
as a going concern in fiscal 2023. On October 4, 2021, we completed the
placement of one million new shares to independent investors with a net proceed
of approximately $6.3 million to further bolster our financial position for
further growth.



Capital Expenditures. In fiscal 2021, management decided to put on hold the
construction projects on the land acquired in fiscal 2020 to retain financial
resources to support our operations, and also to wait and see how the global
economy and customer demand recover after the COVID-19 pandemic. As customer
orders recovered to a satisfactory level, management decided to restart the
preparation work for the construction of the dormitory in April 2021. The
dormitory is expected to be completed and ready for use in fiscal 2023. In
fiscal 2022, the Company acquired five car parking spaces.



Seasonality of Sales



A significant portion of our revenue is received during the first six months of
our fiscal year. The majority of our VF Corporation orders are derived from
winter season fashions, the 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 our fiscal years reflect lower sales in anticipation
of the spring and summer seasons. 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.



                                       20





                             Results of Operations



The following table presents certain information from our statement of income
for fiscal years 2022 and 2021 and should be read, along with all of the
information in this management's discussion and analysis, in conjunction with
the consolidated financial statements and related notes included elsewhere in
this filing.



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



                                    Fiscal Years Ended March 31,
                                  2022                         2021                   Year over Year
Statement of Income                    As % of                      As % of
Data:                    Amount         Sales         Amount         Sales         Amount           %
Revenue                 $ 143,355            100 %   $  90,213            100 %   $  53,142            59 %
Cost of goods sold        116,023             81 %      74,214             82 %      41,809            56 %
Gross profit               27,332             19 %      15,999             18 %      11,333            71 %
Selling, general, and
administrative
expenses                   16,843             12 %      10,614             12 %       6,229            59 %
Other (expense)
income, net                   (45 )            0 %         109              0 %        (154 )        (141 )%
Net income before
taxation                $  10,444              7 %   $   5,494              6 %   $   4,950            90 %
Income tax expense          2,524              2 %       1,346              1 %       1,178            88 %
Net income              $   7,920              5 %   $   4,148              5 %   $   3,772            91 %




Revenue. Revenue increased by approximately $53.1 million, or 59%, to
approximately $143.4 million in fiscal 2022 from approximately $90.2 million in
fiscal 2021. The increase was mainly due to an increase in export sales to two
of our major U.S. customers. Strong recovery in the U.S. markets along with our
continued expansion of the cooperation with these two major customers generated
substantial order increases. All factories, including MK Garments and Paramount
(acquired in mid-2019), are fully booked until December 2022 and were operating
at or near capacity during fiscal 2022.



The following table shows the dollar amount and percentage of total sales to our customers for the years ended March 31, 2022 and 2021, respectively.



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



                                              Fiscal Year Ended            Fiscal Year Ended
                                                  March 31,                    March 31,
                                                     2022                         2021
                                             Sales                        Sales
                                             Amount           %           Amount           %
VF Corporation(1)                          $   96,450          67.3 %   $   55,994          62.1 %
New Balance                                    34,506          24.1 %       11,050          12.3 %
Jiangsu Guotai Huasheng Industrial Co
(HK)., Ltd                                      3,245           2.3 %        2,982           3.3 %
G-III                                           2,758           1.9 %        2,875           3.2 %
Dynamic Design Enterprise, Inc                  2,235           1.6 %      
 6,347           7.0 %
Soriana                                         1,487           1.0 %            -             - %
ARK Garments                                      829           0.6 %        2,896           3.2 %
Onset Time Limited                                  -             -          1,672           1.9 %
Others                                          1,845           1.2 %        6,397           7.0 %
Total                                      $  143,355         100.0 %   $   90,213         100.0 %




(1) A large portion of our products are sold under The North Face brand that is
    owned by VF Corporation.




                                       21





                           Revenue by Geographic Area

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



                       Fiscal Years Ended March 31,
                       2022                    2021              Year over Year
Region           Amount         %        Amount        %        Amount         %
United States   $ 136,068        95 %   $ 79,190        88 %   $  56,878        72 %
Jordan              1,950         1 %      5,703         6 %      (3,753 )     (66 )%
Others              5,337         4 %      5,320         6 %          17         0 %
Total           $ 143,355       100 %   $ 90,213       100 %   $  53,142        59 %




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 increase of approximately 72% in sales to the U.S. during fiscal year ended
March 31, 2022 was mainly attributable to the increase in the export sales to
two of our major customers in the U.S.



During the fiscal year ended March 31, 2022, aggregate sales to Jordan and other
locations, such as Hong Kong and China, decreased by 34% from approximately
$11.0 million to $7.3 million during the fiscal year ended March 31, 2022 as
more production capacity was allocated to export orders, which typically have a
higher profit margin.



Cost of goods sold. Following the increase in sales revenue, our cost of goods
sold increased by approximately $41.8 million, or 56%, to approximately $116.0
million in fiscal 2022 from approximately $74.2 million in fiscal 2021. As a
percentage of revenue, the cost of goods sold decreased by approximately 1%
points to 81% in fiscal 2022 from 82% in fiscal 2021. The decrease in cost of
goods sold as a percentage of revenue was primarily attributable to a full
resumption of production and a higher proportion of export orders in fiscal
2022.



For the fiscal year ended March 31, 2022, we purchased approximately 20% and 11%
of our garments and raw materials from two major suppliers, respectively. For
the fiscal year ended March 31, 2021, we purchased approximately 13% of our
garments from one major supplier.



Gross profit margin. Gross profit margin was approximately 19% in fiscal 2022,
which increased by approximately 1% points from 18% in fiscal 2021. The increase
in gross profit margin was primarily driven by higher proportion of export
orders that typically have higher margin.



Selling, general, and administrative expenses. Selling, general, and
administrative expenses increased by approximately 59% from approximately $10.6
million in fiscal 2021 to approximately $16.8 million in fiscal 2022. The
increase was mainly attributable to (i) increased costs for employing additional
migrant workers, (ii) the inclusion of approximately $0.9 million of stock-based
compensation expenses, (iii) an increase in headcounts from the completion of
acquisition of MK Garment in October 2021, and (iv) an increase in export
expenses in proportion to growth in sales in fiscal 2022.



Other (expenses)/ income, net. Other expenses, net were approximately $45,000 in
fiscal 2022 and other income, net was approximately $109,000 in fiscal 2021. The
increase in other expenses was primarily due to the absence of a realized gain
from short-term investments in the current period, compare with a $124,889
realized gain from short-term investments in the corresponding period of fiscal
2021.



Taxation. Income tax expenses for the fiscal 2022 were approximately $2.5
million compared to income tax expenses of approximately $1.3 million for fiscal
2021. The effective tax rate was slightly down to 24.2% for fiscal 2022,
compared to 24.5% for the fiscal 2021 as Treasure Success started to report
profit and the tax rate in Hong Kong is 16.5%, which is lower than 18% to 20% of
Jordan.



Net income. Net income for fiscal 2022 was approximately $7.9 million, a 91%
increase from approximately $4.1 million for fiscal 2021. The increase was
mainly attributable to the increase in sales and the improvement in the gross
profit margin discussed above.



                                       22





                        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, 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 March 31, 2022, we had cash of approximately $25.2 million and restricted
cash of approximately $1.4 million compared to cash of approximately $21.1
million and restricted cash of approximately $1.7 million as of March 31, 2021.
The increase in total cash was mainly a result of (i) the completion of a
placement in October 2021 that resulted in net proceeds of approximately $6.3
million, and (ii) the introduction of supply chain finance programs by two of
our major customers that reduce payment terms from 60 to 90 days to within 10
days from shipments, offsetting approximately $8.7 million used for the MK
Garments acquisition, purchases of property, plant, and machinery, and payments
for dormitory construction.



Our current assets as of March 31, 2022 were approximately $69.9 million, and
our current liabilities were approximately $14.1 million, which resulted in a
current ratio of approximately 4.9:1. Our current assets as of March 31, 2021
were approximately $64.7 million, and our current liabilities were approximately
$14.8 million, which resulted in a current ratio of approximately 4.4:1. The
primary drivers in the increase in current assets were the increase in cash as a
result of a share placement completed in October 2021 and the increase in
operating profit in the year. The primary driver in the decrease in current
liabilities was the decrease in accounts payable due to the earlier payments to
newly appointed suppliers, particularly for new customers introduced in recent
years, and the repayment of short-term bank loans in light of the strong cash
position. Total equity as of March 31, 2022 was approximately $69.3 million,
compared to $56.4 million as of March 31, 2021.



We had net working capital of $55.7 million and $49.8 million as of March 31,
2022 and 2021, respectively. Based on our current operating plan, we believe
that cash on hand and cash generated from operation will be sufficient to
support our working capital needs for the next 12 months from the date of this
Annually Report.


Since May and October 2021, we have participated in supply chain financing
programs of two of our major customers, respectively. The programs allow us to
receive early payments for approved sales invoices submitted by us through the
bank the customer cooperates with. For any early payments received, we are
subject to an early payment charge imposed by the customer's bank, for which the
rate is London Interbank Offered Rate ("LIBOR") 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.



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



SCBHK Facility Letter



Pursuant to the SCBHK facility letter dated June 15, 2018, and issued to
Treasure Success by SCBHK, SCBHK offered to provide an import facility of up to
$3.0 million to Treasure Success. The SCBHK facility covers import invoice
financing and pre-shipment financing under export orders with a combined limit
of $3 million. Borrowings under the SCBHK facility are due within 90 days of
each invoice or financing date. SCBHK charges interest at 1.3% per annum over
SCBHK's cost of funds. In consideration for arranging the SCBHK facility,
Treasure Success paid SCBHK HKD50,000. We were informed by SCBHK on January 31,
2019 that the SCBHK facility had been activated. As of March 31, 2022, there was
no amount outstanding under the SCBHK facility. In June 2022, we were informed
by SCBHK that the facility was cancelled due to persistently low usage and
zero
loan outstanding.



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. Pursuant to the
agreement, 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 ("HIBOR") 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.



                                       23




Closed fiscal years March 31, 2022 and 2021

The following table presents a summary of our cash flows for the years ended March 31, 2022 and 2021.



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



                                                                  For the fiscal years ended
                                                                           March 31,
                                                                   2022                2021
Net cash provided by (used in) operating activities            $       8,963       $      (1,499 )
Net cash used in investing activities                                 (8,673 )              (894 )
Net cash provided by (used in) financing activities                    3,289              (1,654 )
Effect of exchange rate changes on cash                                  144                  (8 )
Net increase (decrease) in cash                                        3,723              (4,055 )
Cash and restricted cash, beginning of year                           22,860              26,915
Cash and restricted cash, end of year                          $      26,583       $      22,860
Cash paid for interest                                                   211                   -
Income tax paid                                                        1,762                 773
Non-cash financing activities
Right of use assets obtained in exchange for operating lease
obligations                                                    $       1,022       $       1,352




Operating Activities


Net cash provided by operating activities was approximately $9.0 million in fiscal 2022, compared to net cash used in operating activities of approximately
$1.5 million in fiscal 2021. The increase in net cash provided by operating activities is mainly attributable to the following factors:

? an increase in inventory $3.2 million in fiscal 2022, compared to

increase of $2.4 million during the 2021 financial year;

? a decrease in accounts receivable of $0.8 million in fiscal 2022, compared

to an increase of $6.7 million during the 2021 financial year;

? an increase in prepaid expenses and other current assets of $0.9 million,

compared to a decrease in $0.4 million during the 2021 financial year;

? a decrease in advances to suppliers of $1.7 millioncompared to an increase of

$0.9 million during the 2021 financial year;

? a decrease in accounts payable of $3.1 million in fiscal 2022, compared to

an augmentation of $1.5 million during the 2021 financial year; and

? an increase in net income to $7.9 million during the 2022 financial year of a net result

   of $4.1 million in fiscal 2021.




Investing Activities



Net cash used in investing activities was approximately $8.7 million and $0.9
million for fiscal 2022 and 2021, respectively. The increase in net cash used in
investing activities was mainly attributable to $3.0 million used in the
acquisition of property, plant and machinery, $2.1 million for payments for the
construction of a dormitory, and $2.7 million for the acquisition of all the
share capital of MK Garments.



                                       24





Financing Activities



Net cash provided by financing activities was approximately $3.3 million for
fiscal 2022, from the net proceeds of $6.3 million in a placement completed in
October 2021 and outflows of dividend payments of approximately $2.4 million and
repayments of short-term loans of approximately $0.6 million. There was a net
cash outflow of $1.7 million in fiscal 2021 resulting from dividend payments and
proceeds from short-term loans.



Statutory Reserves



In accordance with the corporate Law in Jordan, Jerash Holdings' subsidiaries in
Jordan are required to make appropriations to certain reserve funds, based on
net income determined in accordance with generally accepted accounting
principles of Jordan. Appropriations to the statutory reserve are required to be
10% of net income until the reserve is equal to 100% of the entity's share
capital. Jiangmen Treasure Success is required to set aside 10% of its net
income as statutory surplus reserve until such reserve is equal to 50% of its
registered capital. These reserves are not available for dividend distribution.
The statutory reserve was $379,323 and $346,315 as of March 31, 2022 and 2021,
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 March 31, 2022 and
2021.



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



                                                                     As of March 31,
                                                                   2022          2021
Statutory Reserves                                               $     379     $     346
Total Restricted Net Assets                                      $     379     $     346
Consolidated Net Assets                                          $  69,304 

$56,391
Net assets allocated as a percentage of consolidated net assets 0.55% 0.61%




Total restricted net assets accounted for approximately 0.55% of our
consolidated net assets as of March 31, 2022. 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 $8.7 million and $1.0 million in
fiscal 2022 and 2021, respectively, for property, plant, and machinery, the
construction of a dormitory, and the acquisition of MK Garment. Additions in
property, plant, and machinery amounted to approximately $3.0 million and $0.8
million in fiscal 2022 and 2021, respectively. Payments for construction of a
dormitory and factory expansion amounted to $2.1 million in fiscal 2022, and
payment made for the acquisition of all the share capital of MK Garment was
$2.7
million in fiscal 2022.



In 2015, we commenced a project to build a 4,800 square-foot workshop in the
Tafilah Governorate of Jordan, which was initially intended to be used as a
sewing workshop for Jerash Garments, but which we now use as a dormitory to
house management and supervisory staff for the 54,000 square-foot workshop in
Al-Hasa County. Construction was temporarily suspended in March 2020 due to the
COVID-19 pandemic but subsequently completed, and the building was ready for use
as of September 30, 2021.


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.



                                       25





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 and we plan to begin construction in early
2022. On February 6, 2020, we completed a transaction to acquire 4,516 square
meters (approximately 48,608 square feet) of land in Al Tajamouat Industrial
City, Jordan, from a third party to construct a dormitory for our employee with
aggregate purchase price JOD313,501 (approximately $442,162). We expect to spend
approximately $8.2 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 in fiscal 2023.



We project that there will be an aggregate of approximately $16 million and $0.5
million of capital expenditures in the fiscal years ending March 31, 2023 and
2024, 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 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.



For Management's Discussion and Analysis of the fiscal years ended March 31,
2021 and 2020, please see our Annual Report on Form 10-K for the fiscal year
ended March 31, 2021, filed with the SEC on June 23, 2021.



                          Critical Accounting Policies



We prepare our financial statements in conformity with accounting principles
generally accepted by the United States of America, which require us to make
judgments, estimates, and assumptions that affect our reported amount of assets,
liabilities, revenue, costs and expenses, and any related disclosures. Although
there were no material changes made to the accounting estimates and assumptions
in the past two years, we continually evaluate these estimates and assumptions
based on the most recently available information, our own historical experience,
and various other assumptions that we believe to be reasonable under the
circumstances. Since the use of estimates is an integral component of the
financial reporting process, actual results could differ from our expectations
as a result of changes in our estimates.



We believe that certain accounting policies involve a higher degree of judgment
and complexity in their application and require us to make significant
accounting estimates. The policies that 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 audited financial statements.



Recent accounting pronouncements

See “Note 3 – Recent Accounting Pronouncements” in the notes to our audited financial statements for a discussion of recent accounting pronouncements.

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