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

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 annual report.

Executive Overview

Seasonality of Sales

We used to have strong seasonality due to higher values of fall and winter orders, which are normally shipped in the first two quarters of our fiscal years. We have been working on smoothing out seasonality through expansions of customer base and product offerings. In fiscal 2026, we managed to reverse the trend to have higher sales in the second half of the year through introduction of a new customer and expansion in sales of some existing customers for spring and summer 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.

Results of Operations

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 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 annual report.

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

		Fiscal Years Ended March 31,
		2026								2025
						As % of								As % of				Year over Year
Statement of Income Data:		Amount				Sales				Amount				Sales				Amount				%
Revenue		$	166,264				100	%		$	145,812				100	%		$	20,452				14	%
Cost of goods sold			139,481				84	%			123,493				85	%			15,988				13	%
Gross profit			26,783				16	%			22,319				15	%			4,464				20	%
Selling, general, and administrative expenses			20,456				12	%			20,872				14	%			(416	)			(2	)%
Other expenses, net			1,580				1	%			1,296				1	%			284				22	%
Net income before taxation		$	4,747				3	%		$	151				0	%		$	4,596				3,044	%
Income tax expense			1,120				1	%			991				1	%			129				13	%
Net income (loss)		$	3,627				2	%		$	(840	)			(1	)%		$	4,467				532	%

Revenue. Our revenue was $166.3 million for fiscal 2026, compared to $145.8 million for fiscal 2025, an increase of $20.5 million, or 14%, primarily due to increases in shipments to businesses from new customers such as Hansoll Group and growth in sales from some of the customers introduced in the past few years such as Acushnet and Tharanco.

The following table outlines the dollar amount and percentage of total sales to our customers for the fiscal years ended March 31, 2026 and 2025, respectively.

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

		Fiscal 2026								Fiscal 2025
		Sales								Sales
		(Amount)				%				(Amount)				%
VF Corporation(1)		$	87,020				52.3	%		$	94,151				64.6	%
New Balance			22,760				13.7	%			17,872				12.2	%
Suzhou Unitex			10,332				6.2	%			5,696				3.9	%
Tharanco			7,663				4.6	%			4,673				3.2	%
Hansoll			6,952				4.2	%			-				0	%
SWC Inc.			5,532				3.3	%			5,049				3.5	%
G-III			3,799				2.3	%			2,352				1.6	%
Hugo Boss			1,315				0.8	%			4,018				2.8	%
Others			20,891				12.6	%			12,001				8.2	%
Total		$	166,264				100.0	%		$	145,812				100.0	%

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

Revenue by Geographic Area

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

		Fiscal Years Ended March 31,
		2026								2025								Year over Year
Region		Amount				%				Amount				%				Amount				%
United States		$	138,158				83	%		$	128,577				88	%		$	9,581				7	%
China and Hong Kong			16,851				10	%			8,941				6	%			7,910				88	%
Republic of Korea ("Korea")			6,952				4	%			-				0	%			6,952				-	%
Jordan			2,198				2	%			3,081				2	%			(883	)			(29	)%
Others			2,105				1	%			5,213				4	%			(3,108	)			(60	)%
Total		$	166,264				100	%		$	145,812				100	%		$	20,452				14	%

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. The tariff had been modified 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 established a new process to refund importers for voided "reciprocal" tariff. Following the ruling, 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 be affected by the comparative levels of the tariffs on imports from Jordan compared to other.

The increase of approximately 7% in sales to the U.S. during fiscal 2026 was mainly attributable to an increase in sales to some of our U.S. customers introduced in the past few years, including Acushnet, Tharanco, and American Eagle.

During fiscal 2026, aggregate sales to Jordan, China and Hong Kong, Korea, and other locations, such as Germany, and Mexico, increased by 63% from approximately $17.2 million in fiscal 2025 to $28.1 million. This increase can be attributed mainly to the introduction of a new customer, Hansoll Group and an increase in revenue from Suzhou Unitex.

Cost of goods sold. Our cost of goods sold experienced an increase of approximately $16.0 million to approximately $139.5 million in fiscal 2026 from approximately $123.5 million in fiscal 2025. As a percentage of revenue, the cost of goods sold decreased by approximately 1 percentage point to 84% in fiscal 2026 from 85% in fiscal 2025. The decrease in the cost of goods sold as a percentage of revenue was primarily attributable to improved efficiency from economy of scale, continued automation such as installation of hanging systems, and better control of import costs.

For the fiscal year ended March 31, 2026 and 2025, we purchased approximately 13% and 10% of our garments and raw materials from one major supplier, respectively.

Gross profit margin. Our gross profit margin was approximately 16% in fiscal 2026, representing an increase by approximately 1 percentage point from 15% in fiscal 2025. The increase in gross profit margin was primarily influenced by our improvements in efficiency through automation and economy of scale.

Selling, general, and administrative expenses. Selling, general, and administrative expenses decreased by approximately 2% from approximately $20.9 million in fiscal 2025 to $20.5 million in fiscal 2026. The decrease was mainly attributable to better control of the export logistic expenses and lower share-based payment expenses in fiscal 2026.

Other expenses, net. Other expenses, net were approximately $1.6 million in fiscal 2026, compared to other expenses, net of approximately $1.3 million in fiscal 2025. The increase in other expenses from fiscal 2025 to fiscal 2026 was primarily due to a currency exchange loss and lower interest income in 2026.

Taxation. Income tax expenses for fiscal 2026 were approximately $1.1 million, compared to income tax expenses of approximately $1.0 million for fiscal 2025. The effective tax rate for fiscal 2026 decreased to 24%, compared to 656% for fiscal 2025. The decrease in the effective tax rate mainly resulted from lower Subpart F income impacts, 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 2025.

Net income (loss). Net income for fiscal 2026 was $3.6 million, compared to net loss of approximately $0.8 million for fiscal 2025. The net income is mainly attributable to the improvement in efficiency through automation and economy of scale, better control of the export logistic expenses and lower share-based payment expenses and the lower effect tax rate in fiscal 2026.

Liquidity and Capital Resources

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

As of March 31, 2026, our cash and cash equivalents balance was approximately $10.8 million and restricted cash was approximately $1.7 million, compared to cash and cash equivalents of approximately $13.3 million and restricted cash of approximately $1.7 million as of March 31, 2025. The decrease in total cash and cash equivalents during fiscal 2026 was primarily due to the payment for new factory premises and plant and equipment, offsetting the bank loan of $2.8 million related to the premises 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 2.7:1. For fiscal 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 for the shipments mostly planned in early to mid-fiscal 2027, offsetting the decrease in cash balance.

We had net working capital of $36.7 million and $34.6 million as of March 31, 2026 and 2025, 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 Annual 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 SOFR plus a spread. The arrangement allows us to have better liquidity without the need to incur administrative charges and handling fees as in bank financing. In March 2024, we participated in an additional supply chain financing program with one customer.

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

Credit Facilities and Bank Loan

DBS Facility Letter

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

Bank al Etihad Credit Facility

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. As of March 31, 2026, the Company had $nil outstanding under the Bank al Etihad facility. The Bank al Etihad facility is reviewed annually.

Housing Bank Credit Facility

On January 15, 2026, Housing Bank offered a credit facility of up to $14.0 million to Jerash Garments. Pursuant to the facility, Housing Bank agreed to finance import invoices of up to $14.0 million, with condition that such invoices are secured by letter of credit issued by customers. The facility bears an interest rate SOFR plus a spread, currently approximately 6.1% per annum. As of March 31, 2026, the Company had $nil outstanding under the Housing Bank facility. The Housing Bank facility is reviewed annually.

Capital Bank Facility

On April 9, 2026, the Company signed a credit facility agreement offered by Capital Bank. Pursuant to the facility, Capital Bank agreed to finance import invoices of up to $7.5 million with condition that such invoices are secured by letter of credit issued by customers. The facility bears an SOFR interest rate plus a spread, with minimum 5% interest rate annually. The Capital Bank facility is reviewed annually.

Bank Loan

In connection with the Property Purchase Request Property No. 1326 on January 28, 2026, Jerash Garments entered into a loan agreement with the Housing Bank to finance the acquisition of Property No. 1326. Pursuant to the loan agreement, the Housing Bank agreed to provide Jerash Garments with a loan in the principal amount of JOD 2,000,000 (approximately $2,820,000). The loan bears interest at a rate of 8% per annum, calculated on the daily outstanding balance and charged monthly. Following a grace period ending January 31, 2027, the loan is repayable in 96 monthly installments of JOD 20,833 each, with the first installment due on February 1, 2027. The loan is secured by a first-priority mortgage on Property No. 1326, valued at JOD 5,500,000.

Fiscal Years ended March 31, 2026 and 2025

The following table sets forth a summary of our cash flows for the fiscal years ended March 31, 2026 and 2025.

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

		For the fiscal years ended March 31,
		2026				2025
Net cash provided by operating activities		$	2,494			$	1,365
Net cash used in investing activities			(5,794	)			(2,370	)
Net cash provided by financing activities			671				2,053
Effect of exchange rate changes on cash and restricted cash			32				(21	)
Net (decrease) increase in cash, cash equivalents and restricted cash			(2,597	)			1,027
Cash, cash equivalents and restricted cash, beginning of year			15,064				14,037
Cash, cash equivalents and restricted cash, end of year		$	12,467			$	15,064
Supplemental disclosure information
Cash paid for interest		$	1,625			$	1,720
Income tax paid		$	1,273			$	1,399
Non-cash investing and financing activities
Equipment obtained by utilizing long-term deposit		$	296			$	668
Operating lease right of use assets obtained in exchange for operating lease obligations		$	765			$	187

Operating Activities

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

	●	net income of $3.6 million during fiscal 2026, compared to a net loss of $0.8 million during fiscal 2025;
	●	an increase of $1.2 million in accrual expenses during fiscal 2026, compared to an increase of $0.2 million during fiscal 2025;
	●	an increase of $2.7 million in accounts receivable during fiscal 2026, compared to a decrease of $2.4 million during fiscal 2025;

●

an increase of $2.3 million in inventory during fiscal 2026, compared to an increase of $0.5 million during fiscal 2025;

●

an increase of $2.0 million in advances to suppliers during fiscal 2026, compared to an increase of $3.6 million during fiscal 2025; and

●

a decrease of $0.2 million of deferred revenue during fiscal 2026, compared to an increase of $0.5 million during fiscal 2025.

Investing Activities

Net cash used in investing activities was approximately $5.8 million and $2.4 million for fiscal 2026 and 2025, respectively. The increase in net cash used in fiscal year 2026 compared to 2025 was primarily due to acquisition of a factory premises in Jordan in fiscal 2026 for approximately $3.6 million.

Financing Activities

Net cash provided by financing activities was $0.7 million in fiscal 2026, which was primarily related to the increase in long-term loan of approximately $2.8 million to finance the acquisition of a factory premises in fiscal 2026 and the net draw down of short-term bank financing of approximately $0.4 million, offset by the distribution of dividend of $2.5 million. Net cash provided by financing activities was approximately $2.1 million for fiscal 2025, mainly due to the net draw down of short-term bank financing of $4.5 million, which was offset by the distribution of dividends of $2.4 million.

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 $413,821 as of March 31, 2026 and 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 March 31, 2026 and 2025.

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

		As of March 31,
		2026				2025
Statutory Reserves		$	414			$	414
Total Restricted Net Assets		$	414			$	414
Consolidated Net Assets		$	64,909			$	62,869
Restricted Net Assets as Percentage of Consolidated Net Assets			0.64	%			0.66	%

Total restricted net assets accounted for approximately 0.64% of our consolidated net assets as of March 31, 2026. As our subsidiaries in Jordan are only required to set aside 10% of net profits to fund the statutory reserves with the maximum reserve equal to 100% of the entity's capital, we believe the potential impact of such restricted net assets on our liquidity is limited.

Capital Expenditures

We had capital expenditures of approximately $5.8 million and $2.4 million in fiscal 2026 and 2025, respectively. For the fiscal year ended March 31, 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.

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 prospect of new customers to be introduced in the coming few years. On February 6, 2020, we completed a transaction to acquire 4,516 square meters (approximately 48,608 square feet) of land in Al Tajamouat Industrial City, Jordan, from a third party to construct a dormitory for our employee with aggregate purchase price JOD313,501 (approximately US$442,162). The dormitory and dormitory kitchen were completed in the second quarter and the fourth quarter of fiscal year 2025, respectively. We have spent approximately $10.6 million in capital expenditures to build the dormitory and the dormitory kitchen.

We expect that our capital expenditures will increase in the following two fiscal years to create additional capacity to underpin our long-term 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 have used cash generated from operations of our subsidiaries to fund our capital commitments in the past. Our 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 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.

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, 2025 and 2024, please see our Annual Report on Form 10-K for the fiscal year ended March 31, 2025, filed with the SEC on June 26, 2025.

Critical Accounting Estimates

We prepare our consolidated 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 have not identified any critical accounting estimates.

Recent Accounting Pronouncements

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