Jerash Holdings US Inc

Previous wording

Revenue. Revenue increased by approximately $6.2 million, or 18%, to $40.9 million, for the three months ended June 30, 2024, from approximately $34.7 million for the same period in fiscal 2024. The increase was mainly due to increases in sales to our major customer in the U.S. and growth in business with some customers we obtained during the past two years.

Current wording

Revenue. Revenue increased by approximately $6.9 million, or 21%, to $40.2 million, for the three months ended September 30, 2024, from approximately $33.4 million for the same period in fiscal 2024. The increase was mainly due to more shipments to our two major customers in the U.S. with some customers we obtained during the past two years.

Previous wording

The increase of approximately 13% in sales to the U.S. during the three months ended June 30, 2024, was mainly attributable to the increase in sales to our major customer in the U.S.

Current wording

The increase of approximately 18% in sales to the U.S. during the three months ended September 30, 2024, was mainly attributable to more shipments delivered to our major customers in the U.S.

Previous wording

During the three months ended June 30, 2024, aggregate sales to Germany and other locations increased by 88% from $2.1 million to $3.9 million from the same period last year. This significant increase was mainly due to our expanded business relationships with customers we acquired in these regions over the past one to two years.

Current wording

During the three months ended September 30, 2024, aggregate sales to China, Germany, Jordan, and other locations increased by 38% from $4.1 million to $5.7 million from the same period last year. This increase was mainly due to higher demands of our production facility in the period.

Previous wording

For the three months ended June 30, 2023, we purchased 23%, 16%, and 10% of our total purchase in garments and raw materials from three major suppliers, respectively.

Current wording

For the three months ended September 30, 2024, we purchased 10% of our total purchase in garments and raw materials from one major supplier.

Previous wording

Other expenses, net. Other expenses, net were approximately $0.4 million for the three months ended June 30, 2024, as compared to other expenses, net of approximately $0.3 million for the same period in fiscal 2024. The increase was primarily due to higher interest expenses resulting from the supply chain financing programs introduced by our major customers. These programs allow us to receive fund early from invoices submitted to customers, and this arrangement typically incurs an interest expense in return for early receipt of payment.

Current wording

Other expenses, net. Other expenses, net were approximately $364,000 for the three months ended September 30, 2024, as compared to other expenses, net of approximately $167,000 for the same period in fiscal 2024. The increase was primarily due to higher interest expenses from customers’ supply chain financing programs and bank financing to support raw material purchases for the shipments in the latter half of the fiscal year.

Previous wording

Cost of goods sold. Following the increase in sales revenue, our cost of goods sold increased by approximately $7.1 million, or 24%, to approximately $36.3 million, for the three months ended June 30, 2024, from approximately $29.2 million for the same period in fiscal 2024. As a percentage of revenue, the cost of goods sold increased by approximately 5 percentage points, from 84% for the same period in fiscal 2024 to 89% for the three months ended June 30, 2024. The increase in the cost of goods sold as a percentage of revenue was primarily attributable to the higher logistic costs for importing raw material amid the Red Sea turmoil. Furthermore, we incurred extra production costs to adhere to customers’ delivery schedules and mitigate the impact of delayed arrivals of raw materials caused by the aforementioned logistic disruption. During the three months ended June 30, 2024, we did not experience substantial delays in shipments of products to our customers.

Current wording

Cost of goods sold. Following the increase in sales revenue, our cost of goods sold increased by approximately $12.3 million, or 22%, to approximately $69.5 million, for the six months ended September 30, 2024, from approximately $57.2 million for the same period in fiscal 2024. As a percentage of revenue, the cost of goods sold increased by approximately 2% points to 86% for the six months ended September 30, 2024 from 84% for the same period in fiscal 2024. The increase in cost of goods sold as a percentage of revenue was primarily attributable to the higher import logistic costs and more overtime work incurred in the first quarter to catch up with the garment delivery schedules of customers.

Previous wording

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.

Current wording

For the six months ended September 30, 2024 and 2023, we purchased 11% of our garments and raw materials from one major supplier.

Previous wording

Gross profit margin. Gross profit margin was approximately 11% for the three months ended June 30, 2024, which decreased by 5 percentage points from 16% for the same period in fiscal 2024. The decrease in gross profit margin was primarily driven by the higher raw material import costs caused by the Red Sea shipping disruption and the additional costs incurred to catch up with garment delivery schedules to our customers.

Current wording

Gross profit margin. Gross profit margin was approximately 14% for the six months ended September 30, 2024, which decreased by 2% points from 16% for the same period in fiscal 2024. The decrease in gross profit margin was primarily driven by higher logistic costs and over time work incurred in the first quarter to catch up with garment delivery schedules of customers.

Previous wording

***Income tax expenses.***Income tax expenses for the three months ended June 30, 2024, were approximately $0.1 million compared to income tax expenses of $0.3 million for the same period in fiscal 2024. The decrease in the income tax expenses was mainly due to the reduced operating profit derived from our Jordanian subsidiaries. The effective tax rate declined to (9%) for the three months ended June 30, 2024, as compared to 38% for the three months ended June 30, 2023.

Current wording

***Income tax expenses.***Income tax expenses for the six months ended September 30, 2024 were approximately $0.2 million compared to income tax expenses of approximately $0.7 million for the same period in fiscal 2024. The decrease in the income tax expenses was mainly due to the reduced operating profit derived from our Jordan subsidiaries. The effective tax rate was declined to (44.9%) for the six months ended September 30, 2024, as compared to 42.9% for the six months ended September 30, 2023.

Previous wording

Net loss/income. Net loss for the three months ended June 30, 2024, was approximately $1.4 million compared to net income of approximately $0.5 million for the same period in fiscal 2024. The decrease in net profit was mainly attributable to a decrease in profit margin due to the higher logistic costs amid the Red Sea turmoil and additional production costs to catch up with customers’ delivery schedules, as well as the higher stock-based compensation expenses during the period in fiscal 2025.

Current wording

Net (loss)/income. Net loss for the six months ended September 30, 2024 was approximately $0.7 million compared to net income of approximately $0.9 million for the same period in fiscal 2024. The decrease in net income was mainly attributable to a decrease in profit margin due to the higher logistic costs amid the Red Sea turmoil and additional production costs to catch up with customers’ delivery schedules, as well as the higher stock-based compensation expenses during the period in fiscal 2025.

Previous wording

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 Jordan and Hong Kongto 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 to meet our obligations to date. The subsidiaries generate most of revenue in our group.

Current wording

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 Jordan and Hong Kong 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 to meet our obligations to date. The subsidiaries generate most of revenue in our group.

Previous wording

As of June 30, 2024, we had cash of approximately $11.4 million and restricted cash of approximately $1.6 million compared to cash of approximately $12.4 million and restricted cash of approximately $1.6 million as of March 31, 2024. The decrease in total cash was mainly a result of an operational loss of $1.4 million and a dividend payment of $0.6 million, offset by proceeds from short-term loans.

Current wording

As of September 30, 2024, we had cash of approximately $16.3 million and restricted cash of approximately $1.5 million compared to cash of approximately $12.4 million and restricted cash of approximately $1.6 million as of March 31, 2024. The increase in total cash was mainly a result of more sales in the six-month period and a higher credit facility balance.

Previous wording

Our current assets as of June 30, 2024 were approximately $47.6 million and our current liabilities were approximately $13.1 million, which resulted in a ratio of approximately 3.6 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 to 1.

Current wording

Our current assets as of September 30, 2024 were approximately $51.6 million and our current liabilities were approximately $16.4 million, which resulted in a ratio of approximately 3.1 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 to 1.

Previous wording

Total equity as of June 30, 2024 was approximately $62.9 million compared to $64.4 million as of March 31, 2024.

Current wording

Total equity as of September 30, 2024 was approximately $63.5 million compared to $64.4 million as of March 31, 2024.

Previous wording

We had net working capital of $34.5 million and $36.1 million as of June 30, 2024 and March 31, 2024, respectively. Based on our current operating plan, we believe that cash on hand and cash generated from operating activities will be sufficient to support our working capital needs for the next 12 months from the date this Quarterly Report is released.

Current wording

We had net working capital of $35.2 million and $36.1 million as of September 30, 2024 and March 31, 2024, respectively. Based on our current operating plan, we believe that cash on hand and cash generated from operating activities will be sufficient to support our working capital needs for the next 12 months from the date this Quarterly Report is released.

Previous wording

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 type 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, 2024 and March 31, 2024, we had $2.1 million and $nil outstanding under this DBSHK facility, respectively.

Current wording

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 September 30, 2024 and March 31, 2024, we had $3.6 million and $nil outstanding under this DBSHK facility, respectively.

Previous wording

Net cash used in operating activities was approximately $2.2 million for the three months ended June 30, 2024, compared to cash provided by operating activities of approximately $25,000 for the same period in fiscal 2024. The decrease in net cash provided by operating activities was primarily attributable to the following factors:

Current wording

Net cash provided by operating activities was approximately $2.4 million for the six months ended September 30, 2024, compared to cash provided by operating activities of approximately $8.2 million for the same period in fiscal 2024. The decrease in net cash provided by operating activities was primarily attributable to the following factors:

Previous wording

Net cash used in investing activities was approximately $0.4 million for the three months ended June 30, 2024, compared to approximately $1.8 million in the same period in fiscal 2024. The net cash used in investing activities during the three months ended June 30, 2024 was mainly for purchases of property, plant, and equipment and deposits for fixed assets.

Current wording

Net cash used in investing activities was approximately $0.9 million for the six months ended September 30, 2024, compared to approximately $3.5 million in the same period in fiscal 2024. The net cash used in investing activities during the six months ended September 30, 2024 was mainly for investment in property, plant, and machinery and construction of a dormitory. The net cash used in investing activities in the six months ended September 30, 2023 was mainly used in investment in property, plant, and machinery including the ongoing construction of a dormitory and factory expansion.

Previous wording

Net cash provided by financing activities was approximately $1.5 million for the three months ended June 30, 2024, which was the net effect of net proceeds from short-term loans of approximately $2.1 million, offset by a dividend payment of $0.6 million. There was a net cash inflow of approximately $2.5 million in the same period in fiscal 2024 resulting from the dividend payments of approximately $0.6 million, and the net proceeds from short-term loans of approximately $3.1 million.

Current wording

Net cash provided by financing activities was approximately $2.3 million for the six months ended September 30, 2024, which was the net effect of proceeds from the DBSHK facility of approximately $3.6 million and the payments of $1.2 million of dividend. Net cash used in financing activities was approximately $1.2 million for the six months ended September 30, 2023, which was dividend payments in the period.

Previous wording

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 $413,821 and $410,847 as of June 30, 2024 and 2023, respectively.

Current wording

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 September 30, 2024 and 2023.

Previous wording

Total restricted net assets accounted for approximately 0.66% of our consolidated net assets as of June 30, 2024. 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.

Current wording

Total restricted net assets accounted for approximately 0.65% of our consolidated net assets as of September 30, 2024. 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.

Previous wording

We had capital expenditures of approximately $0.4 million and $1.8 million for the three months ended June 30, 2024 and 2023, for plant and machinery and the construction of a dormitory in both periods. For the three months ended June 30, 2024, payments for additional plant and machinery amounted to approximately $0.4 million. For the three months ended June 30, 2023, payments for additional plant and machinery, and construction of a dormitory and factory expansion, amounted to approximately $338,000 and $1.4 million, respectively.

Current wording

We had capital expenditures of approximately $0.9 million and $3.5 million for the six months ended September 30, 2024 and 2023, for plant and machinery and the construction of a dormitory in both periods. For the six months ended September 30, 2024, payments for additional plant and machinery and the construction of a dormitory amounted to approximately $0.6 million and $0.3 million respectively. For the six months ended September 30, 2023, payments for additional plant and machinery, and construction of a dormitory and factory expansion, amounted to approximately $0.9 million and $2.6 million, respectively.

Previous wording

On August 7, 2019, we completed a transaction to acquire 12,340 square meters (approximately three acres) of land in Al Tajamouat Industrial City, Jordan, from a third party to construct a dormitory for our employees with aggregate purchase price JOD863,800 (approximately $1,218,303). Management has revised the plan to construct both dormitory and production facilities on the land in order to capture the increasing demand for our capacity. We are conducting engineering design and study on this project with the business growth potential brought about by the new business collaboration with Busana Apparel Group. 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). The dormitory is expected to be fully completed in second quarter of fiscal year 2025. We have spent approximately $9.3 million in capital expenditures to build the dormitory. The dormitory’s kitchen is under construction at an estimated cost of approximately $0.9 million.

Current wording

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 potential brought about by the new business collaboration with Busana Apparel Group. 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 is completed in second quarter of fiscal year 2025. We have spent approximately $9.8 million in capital expenditures to build the dormitory. The dormitory’s kitchen is under construction at an estimated cost of approximately $0.9 million.