Filed pursuant to Rule 424(b)(3)
File No. 333-222596
Prospectus Supplement No. 2 Dated November 19,
2018
(To Prospectus Dated September 27, 2018, as updated
and supplemented by Prospectus Supplement No. 1, dated September 28, 2018)
JERASH HOLDINGS (US), INC.
57,200 Shares of Common Stock Issuable
Upon Exercise of Warrants
This Prospectus Supplement No. 2 (the “Prospectus
Supplement”) updates and supplements the prospectus of Jerash Holdings (US), Inc. (the “Company,” “we,”
“us,” or “our”) dated September 27, 2018, as updated and supplemented by Prospectus Supplement No. 1, dated
September 28, 2018 (collectively, the “Prospectus”). The purpose of this Prospectus Supplement is to update the Prospectus
with the attached document, which we filed with the Securities and Exchange Commission:
|
A.
|
Our Quarterly Report on Form 10-Q filed on November 13, 2018.
|
This Prospectus Supplement should be read
in conjunction with the Prospectus, which is required to be delivered with this Prospectus Supplement. This Prospectus Supplement
updates, amends and supplements the information included in the Prospectus. If there is any inconsistency between the information
in the Prospectus and this Prospectus Supplement, you should rely on the information in this Prospectus Supplement.
This Prospectus Supplement is not complete
without, and may not be delivered or used except in connection with, the Prospectus, including any amendments or supplements to
it.
The purchase of the securities offered
through the Prospectus involves a high degree of risk. Before making any investment in our common stock, you should carefully consider
the risk factors section beginning on page 6 of the Prospectus.
You should rely only on the information
contained in the Prospectus, as supplemented or amended by this Prospectus Supplement and any other prospectus supplement or amendment
thereto. We have not authorized anyone to provide you with different information.
Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of
the Prospectus. Any representation to the contrary is a criminal offense.
The date of this Prospectus Supplement is
November 19, 2018.
Index to Filings
|
Annex
|
Quarterly Report on Form 10-Q for the Quarter Ended September 30, 2018, filed with the Securities and Exchange Commission on November 13, 2018
|
A
|
Annex A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
|
x
|
QUARTERLY REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended September
30, 2018
OR
|
¨
|
TRANSITION REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the transition period from
to
Commission File Number: 001-38474
Jerash Holdings (US), Inc.
(Exact name of registrant as specified in
its charter)
Delaware
|
|
81-4701719
|
(State or other jurisdiction of
incorporation or organization)
|
|
(I.R.S. Employer Identification No.)
|
Jerash Holdings (US), Inc.
147 W. 35
th
Street, Room #1603
New York, New York 10001
(Registrant’s telephone number, including
area code)
(212) 575-9085
Indicate by check mark whether the registrant;
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes
x
No
¨
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes
x
No
¨
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth
company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:
Large accelerated filer
|
|
¨
|
|
Accelerated filer
|
|
¨
|
Non-accelerated filer
|
|
x
|
|
Smaller reporting company
|
|
x
|
|
|
|
|
Emerging growth company
|
|
x
|
If an emerging growth company, indicate
by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act.
x
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
¨
No
x
As of November 12, 2018, there were outstanding 11,325,000
shares of common stock, par value $0.001 per share.
Jerash Holdings (US), Inc.
Form 10-Q
For the
Second
Quarter and Six Months Ended September 30, 2018
Contents
JERASH HOLDINGS (US), INC.
PART I - FINANCIAL INFORMATION
Item 1.
Financial Statements
JERASH HOLDINGS (US), INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
September 30,
|
|
|
March 31,
|
|
|
|
2018
(Unaudited)
|
|
|
2018
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
26,779,644
|
|
|
$
|
8,597,830
|
|
Accounts receivable
|
|
|
15,687,636
|
|
|
|
5,247,090
|
|
Accounts receivable - related party
|
|
|
-
|
|
|
|
50,027
|
|
Inventories
|
|
|
8,741,996
|
|
|
|
20,293,392
|
|
Prepaid expenses and other current assets
|
|
|
1,065,504
|
|
|
|
1,533,868
|
|
Advance to suppliers
|
|
|
72,100
|
|
|
|
1,128,079
|
|
Total Current Assets
|
|
|
52,346,880
|
|
|
|
36,850,286
|
|
|
|
|
|
|
|
|
|
|
Restricted cash
|
|
|
3,681,308
|
|
|
|
3,598,280
|
|
Property, plant and equipment, net
|
|
|
2,863,998
|
|
|
|
2,819,715
|
|
Total Assets
|
|
$
|
58,892,186
|
|
|
$
|
43,268,281
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Credit facilities
|
|
$
|
2,154,756
|
|
|
$
|
980,195
|
|
Accounts payable
|
|
|
1,715,767
|
|
|
|
4,776,812
|
|
Accrued expenses
|
|
|
1,111,544
|
|
|
|
1,175,427
|
|
Income tax payable
|
|
|
1,463,000
|
|
|
|
112,000
|
|
Other payables
|
|
|
1,065,890
|
|
|
|
878,987
|
|
Total Current Liabilities
|
|
|
7,510,957
|
|
|
|
7,923,421
|
|
|
|
|
|
|
|
|
|
|
Income tax payable – non-current
|
|
|
1,591,000
|
|
|
|
1,288,000
|
|
Total Liabilities
|
|
|
9,101,957
|
|
|
|
9,211,421
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies (See Note 13)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value; 500,000 shares authorized; none issued and outstanding
|
|
|
-
|
|
|
|
-
|
|
Common stock, $0.001 par value; 30,000,000 and 15,000,000 shares authorized; 11,325,000 shares and 9,895,000 shares issued and outstanding as of September 30, 2018 and March 31, 2018.
|
|
|
11,325
|
|
|
|
9,895
|
|
Additional paid-in capital
|
|
|
14,762,813
|
|
|
|
2,742,158
|
|
Statutory reserve
|
|
|
71,699
|
|
|
|
71,699
|
|
Retained earnings
|
|
|
34,649,535
|
|
|
|
30,948,006
|
|
Accumulated other comprehensive loss
|
|
|
(14,875
|
)
|
|
|
(24,502
|
)
|
Total Shareholder's Equity
|
|
|
49,480,497
|
|
|
|
33,747,256
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interest
|
|
|
309,732
|
|
|
|
309,604
|
|
Total Equity
|
|
|
49,790,229
|
|
|
|
34,056,860
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Equity
|
|
$
|
58,892,186
|
|
|
$
|
43,268,281
|
|
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
JERASH HOLDINGS (US), INC.,
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(UNAUDITED)
|
|
For the Three Months
Ended September 30,
|
|
|
For the Six Months Ended
September 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue, net
|
|
$
|
33,464,397
|
|
|
|
27,549,479
|
|
|
|
51,827,482
|
|
|
|
48,899,637
|
|
Cost of goods sold
|
|
|
25,115,416
|
|
|
|
20,334,639
|
|
|
|
38,818,710
|
|
|
|
36,832,253
|
|
Gross Profit
|
|
|
8,348,981
|
|
|
|
7,214,840
|
|
|
|
13,008,772
|
|
|
|
12,067,384
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses (including share based compensation expenses for the three
months ended September 30, 2018 and 2017 of $193,954 and $0, respectively and for the six months ended September 30, 2018 and
2017 of $3,399,934 and $116,578, respectively).
|
|
|
2,292,396
|
|
|
|
1,458,097
|
|
|
|
7,477,016
|
|
|
|
2,875,653
|
|
Total Operating Expenses
|
|
|
2,292,396
|
|
|
|
1,458,097
|
|
|
|
7,477,016
|
|
|
|
2,875,653
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Operations
|
|
|
6,056,585
|
|
|
|
5,756,743
|
|
|
|
5,531,756
|
|
|
|
9,191,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense, net
|
|
|
6,832
|
|
|
|
4,612
|
|
|
|
1,252
|
|
|
|
10,928
|
|
Total other expense, net
|
|
|
6,832
|
|
|
|
4,612
|
|
|
|
1,252
|
|
|
|
10,928
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income before provision for income tax
|
|
|
6,049,753
|
|
|
|
5,752,131
|
|
|
|
5,530,504
|
|
|
|
9,180,803
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
1,463,000
|
|
|
|
—
|
|
|
|
1,829,000
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
4,586,753
|
|
|
|
5,752,131
|
|
|
|
3,701,504
|
|
|
|
9,180,803
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to noncontrolling interest
|
|
|
17
|
|
|
|
1
|
|
|
|
25
|
|
|
|
2,819
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Jerash Holdings (US), Inc.'s Common Shareholders
|
|
$
|
4,586,770
|
|
|
$
|
5,752,132
|
|
|
$
|
3,701,529
|
|
|
$
|
9,183,622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
4,586,753
|
|
|
$
|
5,752,131
|
|
|
$
|
3,701,504
|
|
|
$
|
9,180,803
|
|
Other Comprehensive Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation gain
|
|
|
817
|
|
|
|
45,860
|
|
|
|
9,780
|
|
|
|
23,544
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Comprehensive Income
|
|
|
4,587,570
|
|
|
|
5,797,991
|
|
|
|
3,711,284
|
|
|
|
9,204,347
|
|
Comprehensive income (loss) attributable to noncontrolling interest
|
|
|
(17
|
)
|
|
|
467
|
|
|
|
128
|
|
|
|
(2,620
|
)
|
Comprehensive Income Attributable to Jerash Holdings (US), Inc.'s Common Shareholders
|
|
$
|
4,587,587
|
|
|
$
|
5,797,524
|
|
|
$
|
3,711,156
|
|
|
$
|
9,206,967
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Share Attributable to Common Shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.41
|
|
|
$
|
0.60
|
|
|
$
|
0.33
|
|
|
$
|
0.96
|
|
Diluted
|
|
$
|
0.40
|
|
|
$
|
0.60
|
|
|
$
|
0.33
|
|
|
$
|
0.96
|
|
Weighted Average Number of Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
11,325,000
|
|
|
|
9,577,172
|
|
|
|
11,074,945
|
|
|
|
9,577,172
|
|
Diluted
|
|
|
11,380,314
|
|
|
|
9,577,172
|
|
|
|
11,230,299
|
|
|
|
9,577,172
|
|
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
JERASH HOLDINGS (US), INC.,
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN EQUITY
FOR THE SIX MONTHS ENDED SEPTEMBER 30,
2018 AND 2017
(UNAUDITED)
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Additional
Paid-in
|
|
|
Statutory
|
|
|
Retained
|
|
|
Accumulated
Other
Comprehensive
|
|
|
Noncontrolling
|
|
|
Total
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Reserve
|
|
|
Earnings
|
|
|
Loss
|
|
|
Interest
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2017
|
|
|
-
|
|
|
$
|
-
|
|
|
|
8,787,500
|
|
|
$
|
8,788
|
|
|
$
|
1,091,212
|
|
|
$
|
71,699
|
|
|
$
|
20,537,889
|
|
|
$
|
(8,395
|
)
|
|
$
|
316,597
|
|
|
$
|
22,017,790
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reverse recapitalization
|
|
|
-
|
|
|
|
-
|
|
|
|
712,500
|
|
|
|
712
|
|
|
|
288
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,000
|
|
Private placement – common stock and warrants issued, net of stock issuance costs of $444,475
|
|
|
-
|
|
|
|
-
|
|
|
|
395,000
|
|
|
|
395
|
|
|
|
1,534,080
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,534,475
|
|
Stock-based compensation expense for the warrants issued to the board observer
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
116,578
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
116,578
|
|
Net income (loss)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,183,622
|
|
|
|
-
|
|
|
|
(2,819
|
)
|
|
|
9,180,803
|
|
Foreign currency translation loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
23,345
|
|
|
|
199
|
|
|
|
23,544
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2017 (unaudited)
|
|
|
-
|
|
|
$
|
-
|
|
|
|
9,895,000
|
|
|
$
|
9,895
|
|
|
$
|
2,742,158
|
|
|
$
|
71,699
|
|
|
$
|
29,721,511
|
|
|
$
|
14,950
|
|
|
$
|
313,977
|
|
|
$
|
32,874,190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 201
8
|
|
|
-
|
|
|
$
|
-
|
|
|
|
9,895,000
|
|
|
$
|
9,895
|
|
|
$
|
2,742,158
|
|
|
$
|
71,699
|
|
|
$
|
30,948,006
|
|
|
$
|
(24,502
|
)
|
|
$
|
309,604
|
|
|
$
|
34,056,860
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued net of stock issuance costs of $1,387,879
|
|
|
-
|
|
|
|
-
|
|
|
|
1,430,000
|
|
|
|
1,430
|
|
|
|
8,620,691
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,622,121
|
|
Stock-based compensation expense for the warrants issued under stock incentive plan
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,399,934
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,399,934
|
|
Warrants issued to the underwriter
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
30
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
30
|
|
Net income (loss)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,701,529
|
|
|
|
-
|
|
|
|
(25
|
)
|
|
|
3,701,504
|
|
Foreign currency translation gain
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,627
|
|
|
|
153
|
|
|
|
9,780
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
September 30
, 2018 (unaudited)
|
|
|
-
|
|
|
$
|
-
|
|
|
|
11,325,000
|
|
|
$
|
11,325
|
|
|
$
|
14,762,813
|
|
|
$
|
71,699
|
|
|
$
|
34,649,535
|
|
|
$
|
(14,875
|
)
|
|
$
|
309,732
|
|
|
$
|
49,790,229
|
|
The accompanying notes
are an integral part of these unaudited condensed consolidated financial statements.
JERASH HOLDINGS (US), INC.,
SUBSIDIARIES AND AFFILIATE
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
(UNAUDITED)
|
|
For the Six Months Ended September 30,
|
|
|
|
2018
|
|
|
2017
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
3,701,504
|
|
|
$
|
9,180,803
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
653,542
|
|
|
|
588,324
|
|
Stock-based compensation expense
|
|
|
3,399,934
|
|
|
|
116,578
|
|
Income tax paid
|
|
|
(175,000
|
)
|
|
|
-
|
|
Changes in operating assets:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(10,435,721
|
)
|
|
|
(10,071,211
|
)
|
Accounts receivable- related party
|
|
|
50,040
|
|
|
|
(3,757,365
|
)
|
Inventories
|
|
|
11,559,013
|
|
|
|
13,735,903
|
|
Prepaid expenses and other current assets
|
|
|
160,848
|
|
|
|
(22,930
|
)
|
Advance to suppliers
|
|
|
1,056,316
|
|
|
|
-
|
|
Changes in operating liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
(3,062,764
|
)
|
|
|
(7,916,065
|
)
|
Accrued expenses
|
|
|
(6
4,450
|
)
|
|
|
(3,028
|
)
|
Other payables
|
|
|
186,427
|
|
|
|
(140,258
|
)
|
Income tax payable
|
|
|
1,829,000
|
|
|
|
-
|
|
Net cash provided by operating activities
|
|
|
8,8
58,689
|
|
|
|
1,710,751
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment
|
|
|
(716,728
|
)
|
|
|
(671,742
|
)
|
Other receivable - related party
|
|
|
-
|
|
|
|
336,746
|
|
Net cash used in investing activities
|
|
|
(716,728
|
)
|
|
|
(334,996
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Proceeds from short-term loan
|
|
|
1,173,825
|
|
|
|
350,150
|
|
Due from shareholders
|
|
|
-
|
|
|
|
692,500
|
|
Net proceeds from private placement
|
|
|
-
|
|
|
|
1,772,845
|
|
Net proceeds from Common stock
|
|
|
8,930,300
|
|
|
|
-
|
|
Warrants issued to the underwriter
|
|
|
30
|
|
|
|
-
|
|
Net cash provided by
financing activities
|
|
|
10,104,155
|
|
|
|
2,815,495
|
|
|
|
|
|
|
|
|
|
|
EFFECT OF EXCHANGE RATE CHANGES ON CASH
|
|
|
18,726
|
|
|
|
5,081
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH AND RESTRICTED CASH
|
|
|
18,264,842
|
|
|
|
4,196,
331
|
|
|
|
|
|
|
|
|
|
|
CASH AND RESTRICTED CASH, BEGINNING OF THE PERIOD
|
|
|
12,196,110
|
|
|
|
4,132,761
|
|
|
|
|
|
|
|
|
|
|
CASH AND RESTRICTED CASH, END OF THE PERIOD
|
|
$
|
30,460,952
|
|
|
$
|
8,32
9,092
|
|
|
|
|
|
|
|
|
|
|
CASH AND RESTRICTED CASH, END OF THE PERIOD
|
|
$
|
30,460,
952
|
|
|
$
|
8,32
9,092
|
|
LESS: NON-CURRENT RESTRICTED CASH
|
|
|
3,681,308
|
|
|
|
3,476,281
|
|
CASH, END OF PERIOD
|
|
$
|
26,779,644
|
|
|
$
|
4,852,
811
|
|
|
|
|
|
|
|
|
|
|
Non-cash financing activities
|
|
|
|
|
|
|
|
|
Warrants issued to underwriters in connection with the IPO in fiscal 2019 and the private placement in fiscal 2018
|
|
$
|
160,732
|
|
|
$
|
161,926
|
|
Prepaid stock issuance cost netted with proceeds from the IPO in fiscal 2019 and the private placement in fiscal 2018
|
|
$
|
308,179
|
|
|
$
|
239,105
|
|
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
JERASH HOLDINGS (US), INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION
AND DESCRIPTION OF BUSINESS
Jerash Holdings (US), Inc. (“Jerash Holdings”)
is a corporation established under the laws of the State of Delaware on January 20, 2016. Jerash Holdings is a parent holding company
with no operations.
Global Trend Investment Limited (“GTI”) was a limited company that was incorporated in the
British Virgin Islands (“BVI”) on July 5, 2000 and was owned by two individuals and a BVI corporation, Merlotte Enterprise
Limited, which was wholly owned by the Chairman of the Board of GTI and Jerash Garments and Fashions Manufacturing Company Limited
(“Jerash Garments”). Previously, GTI was wholly-owned by Wealth Choice Limited (“WCL”), a BVI corporation,
and the Chairman of the Board of Jerash Garments is also one of the beneficial owners of WCL and its subsidiaries. In September
2016, WCL transferred its ownership in GTI and its subsidiaries to Merlotte Enterprise Limited and an individual shareholder, and
in October 2016, the individual shareholder transferred approximately 22% of its shares to another individual shareholder.
Jerash Garments is a wholly owned subsidiary
of Jerash Holdings and was the wholly owned subsidiary of GTI prior to the Merger described below. Jerash Garments was established
in Amman, the Hashemite Kingdom of Jordan (“Jordan”) as a limited liability company on November 26, 2000 with declared
capital of 50,000 Jordanian Dinar (“JOD”) (approximately US $70,500).
Jerash for Industrial Embroidery Company (“Jerash Embroidery”) and Chinese Garments and Fashions
Manufacturing Company Limited (“Chinese Garments”) were both incorporated in Amman, Jordan as limited liability companies
on March 11, 2013 and June 13, 2013, respectively, with declared capital of JOD 50,000 each. Jerash Embroidery and Chinese Garments
were initially established under the name of Jerash Garments’ nominated agent but were in fact controlled and fully funded
by Jerash Garments. On January 1, 2015, the nominated agent entered into an equity transfer agreement with Jerash Garments, in
which the nominated agent agreed to transfer 100% ownership interests of Jerash Embroidery and Chinese Garments to Jerash Garments
(the “Equity Transfer”). Subsequent to the Equity Transfer, Jerash Embroidery and Chinese Garments became wholly owned
subsidiaries of Jerash Garments. Jerash Garments, Jerash Embroidery and Chinese Garments were effectively controlled by the same
controlling shareholders before and after the Equity Transfer. Thus, this transaction is considered a reorganization of entities
under common control. The consolidations of Jerash Embroidery and Chinese Garments have been accounted for at their carrying amounts
as of the beginning of the first period presented in the accompanying consolidated financial statements.
Victory Apparel
(Jordan) Manufacturing Company Limited (“Victory Apparel”) was incorporated as a limited liability company in
Amman, Jordan on September 18, 2005 with declared capital of JOD 50,000, as a wholly owned subsidiary of WCL. Jerash Garments
is the sole user of the land, building and equipment being held by Victory Apparel and had a lease agreement with Victory
Apparel related to the use of these assets before GTI and its subsidiaries were acquired by WCL in March 2012. The land and
building were not registered in Victory Apparel’s name, and Jerash Garments continued to hold the land and building in
its name in trust for Victory Apparel. The declaration of trust was never registered with the Land Registry of Jordan, and on
June 30, 2016, Victory Apparel and Jerash Garments dissolved the sale agreement, resulting in the property and equipment
being owned free and clear by Jerash Garments. Victory Apparel has no significant assets or liabilities as well as no
significant operating activities of its own and WCL intends to dissolve the entity.
Although Jerash Garments does not own the
equity interest of Victory Apparel, our president, director and significant shareholder, Mr. Choi, is also a director of Victory
Apparel and controls all decision-making for Victory Apparel along with our other significant shareholder, Mr. Lee Kian Tjiauw,
who have the ability to control Victory Apparel’s financial affairs. In addition, Victory Apparel's equity at risk is not
sufficient to permit it to operate without additional subordinated financial support from Mr. Choi. Based on these facts, we concluded
that Jerash Garments has effective control over Victory Apparel due to Mr. Choi’s roles at both organizations and therefore
Victory Apparel is considered a Variable Interest Entity (“VIE”) under Accounting Standards Codification (“ASC”)
810-10-05-08A. Accordingly, Jerash Garments consolidates Victory Apparel’s operating results, assets and liabilities.
Treasure Success International Limited (“Treasure Success”) was incorporated on July 5, 2016
in Hong Kong, China, whose 100% equity interest is registered under the name of the Chairman of the Board of Jerash Garments, with
the primary purpose to employ staff from China to support Jerash Garments' operations. On October 31, 2016, the Chairman of the
Board of Jerash Garments transferred his 100% equity interest in Treasure Success to GTI. Treasure
NOTE 1 – ORGANIZATION AND DESCRIPTION
OF BUSINESS
(Continued)
Success was inactive until October 2016. Treasure Success was consolidated as a VIE before October 31,
2016. The transfer was accounted for as a transfer between entities under common control.
On May 11, 2017, the shareholders of GTI contributed
100% of their outstanding capital stock in GTI to Jerash Holdings in exchange for an aggregate of 8,787,500 shares of common stock
of Jerash Holdings. Immediately prior to this transaction, Jerash Holdings had 712,500 shares of common stock outstanding with
a par value of $0.001 per share. Immediately following this transaction, GTI merged with and into Jerash Holdings, with Jerash
Holdings being the surviving entity, as a result of which Jerash Holdings became the direct parent of GTI’s wholly owned
subsidiaries, Jerash Garments, including its wholly owned subsidiaries, and Treasure Success. The transactions described above
are collectively referred to as the “Merger.”
The Merger was accounted for as a reverse recapitalization.
Under reverse capitalization accounting, GTI is recognized as the accounting acquirer, and Jerash Holdings is the legal acquirer
or accounting acquiree. As such, following the Merger, the historical financial statements of GTI and its subsidiaries are treated
as the historical financial statements of the combined company.
Consequently, the consolidated financial statements
of Jerash Holdings reflect the operations of the accounting acquirer and a recapitalization of the equity of the accounting acquirer.
Jerash Holdings, its subsidiaries and VIE (herein collectively referred to as the “Company”)
are engaged in manufacturing customized ready-made outerwear from knitted fabric and exporting produced apparel for large brand-name
retailers. The Company is diversifying its range of products to include additional pieces such as trousers and urban styling outerwear
and different types of natural and synthetic materials. The Company is also expanding its workforce in Jordan with workers from
other countries, including Bangladesh, Sri Lanka, India, Myanmar and Nepal.
NOTE 2 – SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared
and presented in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and pursuant
to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). Certain information and footnote
disclosures, which are normally included in annual financial statements prepared in accordance with U.S. GAAP, have been omitted
pursuant to those rules and regulations. The unaudited interim condensed consolidated financial statements should be read in conjunction
with the audited consolidated financial statements and the notes thereto for the fiscal year ended March 31, 2018.
In the opinion of management, all adjustments
(which include normal recurring adjustments) necessary to present a fair presentation of the Company's financial position as of
September 30, 2018, its results of operations and its cash flows for the six months ended September 30, 2018 and 2017, as applicable,
have been made. The unaudited interim results of operations are not necessarily indicative of the operating results for the full
fiscal year or any future periods.
Principles of Consolidation
The unaudited condensed consolidated financial
statements include the financial statements of Jerash Holdings, its subsidiaries and VIE. All significant intercompany balances
and transactions have been eliminated in consolidation.
In accordance with accounting standards regarding
consolidation of variable interest entities, VIEs are generally entities that lack sufficient equity to finance their activities
without additional financial support from other parties or whose equity holders lack adequate decision-making ability. All VIEs
with which the Company is involved must be evaluated to determine the primary beneficiary of the risks and rewards of the VIEs.
The primary beneficiary is required to consolidate the VIE for financial reporting purposes.
As described in Note 1, management of the Company
has concluded that Victory Apparel is a VIE, and that Jerash Garments is considered the primary beneficiary because Mr. Choi, our
president, director and significant shareholder absorbs the risks and rewards of Victory Apparel; therefore, we consolidate Victory
Apparel for financial reporting purposes. Noncontrolling interests result from the consolidation of Victory Apparel, which is 100%
owned by WCL.
Principles of Consolidation
The following table sets forth the carrying
amounts of the assets and liabilities of the VIE, Victory Apparel, which was included in the Company’s consolidated balance
sheets:
|
|
September 30, 2018
|
|
|
March 31, 2018
|
|
Current assets
|
|
$
|
2,045
|
|
|
$
|
2,069
|
|
Intercompany receivables*
|
|
|
307,687
|
|
|
|
311,527
|
|
Total assets
|
|
|
309,732
|
|
|
|
313,596
|
|
|
|
|
|
|
|
|
|
|
Third party current liabilities
|
|
|
-
|
|
|
|
(3,992
|
)
|
Total liabilities
|
|
|
-
|
|
|
|
(3,992
|
)
|
Net assets
|
|
$
|
309,732
|
|
|
$
|
309,604
|
|
* Receivables from Jerash Garments are eliminated upon
consolidation.
Victory Apparel did not generate any income but incurred certain expenses for each of three and six month
periods ended September 30, 2018 and 2017. The loss was $17 and $1 for the three months ended September 30, 2018 and 2017, respectively.
The loss was $25 and $2,819 for the six months ended
September 30, 2018 and 2017, respectively.
NOTE 2 – SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Use of Estimates
The preparation of the unaudited condensed
consolidated financial statements, in conformity with U.S. GAAP, requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the unaudited
condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. The
Company’s most significant estimates include allowance for doubtful accounts, valuation of inventory reserve and useful lives
of buildings and other property. Actual results could differ from these estimates.
Cash
The Company considers all highly liquid investment instruments with an original maturity of three months
or less from the original date of purchase to be cash equivalents. As of September 30, 2018 and March 31, 2018, the Company had
no cash equivalents.
Restricted Cash
Restricted cash consists of cash used as security
deposits to obtain credit facilities of the Company from a bank and to secure custom clearance under the requirements of local
regulations. The Company is required to keep certain amounts on deposit that are subject to withdrawal restrictions. These security
deposits at the bank are refundable only when the bank facilities are terminated. The restricted cash is classified as a non-current
asset since the Company has no intention to terminate these bank facilities within one year.
Accounts Receivable
Accounts receivable are recognized and carried
at original invoiced amount less an estimated allowance for uncollectible accounts. The Company usually grants credit to customers
with good credit standing for a maximum of 90 days and determines the adequacy of reserves for doubtful accounts based on individual
account analysis and historical collection trends. The Company establishes a provision for doubtful receivables when there is objective
evidence that the Company may not be able to collect amounts due. The allowance is based on management's best estimates of specific
losses on individual exposures, as well as a provision on historical trends of collections. The provision is recorded against accounts
receivables balances, with a corresponding charge recorded in the unaudited condensed consolidated statements of income and comprehensive
income. Actual amounts received may differ from management's estimate of credit worthiness and the economic environment. Delinquent
account balances are written off against the allowance for doubtful accounts after management has determined that the likelihood
of collection is not probable. No allowance was considered necessary as of September 30, 2018 and March 31, 2018.
Inventories
Inventories are stated at the lower of cost
or net realizable value. Inventories include cost of raw materials, freight, direct labor and related production overhead. The
cost of inventories is determined using the First in, First-out (“FIFO”) method. The Company periodically reviews its
inventories for excess or slow-moving items and makes provisions as necessary to properly reflect inventory value.
NOTE 2 – SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Property, Plant and Equipment
Property, plant and equipment are recorded
at cost, reduced by accumulated depreciation and amortization. Depreciation and amortization expense related to property, plant
and equipment is computed using the straight-line method based on estimated useful lives of the assets, or in the case of leasehold
improvements, the shorter of the initial lease term or the estimated useful life of the improvements. The useful life and depreciation
method are reviewed periodically to ensure that the method and period of depreciation are consistent with the expected pattern
of economic benefits from items of property, plant and equipment. The estimated useful lives of depreciation and amortization of
the principal classes of assets are as follows:
|
|
Useful life
|
Land
|
|
Infinite
|
Property and buildings
|
|
15 years
|
Equipment and machinery
|
|
3-5 years
|
Office and electronic equipment
|
|
3-5 years
|
Automobiles
|
|
5 years
|
Leasehold improvements
|
|
Lesser of useful life and lease term
|
Expenditures for maintenance and repairs, which
do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and
betterments which substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation
or amortization of assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in the unaudited
condensed consolidated statements of income and comprehensive income.
Impairment of Long-Lived Assets
The Company assesses its long-lived assets,
including property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount
of an asset group may not be recoverable. Factors which may indicate potential impairment include a significant underperformance
relative to the historical or projected future operating results or a significant negative industry or economic trend. Recoverability
of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows
expected to be generated by that asset. If impairment is indicated, a loss is recognized for any excess of the carrying value over
the estimated fair value of the asset. The fair value is estimated based on the discounted future cash flows or comparable market
values, if available. The Company did not record any impairment loss during the three and six months ended September 30, 2018 and
2017.
Revenue Recognition
The Company adopted ASC 606 in the first quarter of fiscal year 2019 using the modified retrospective
approach. ASC 606, Revenue from Contracts with Customers, establishes principles for reporting information about the nature, amount,
timing and uncertainty of revenue and cash flows arising from the entity's contracts to provide goods or services to customers.
The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount
that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as
performance obligations are satisfied.
The Company has assessed the impact of the guidance by reviewing its existing customer contracts and current
accounting policies and practices to identify differences that will result from applying the new requirements, including the evaluation
of its performance obligations, transaction price, customer payments, transfer of control and principal versus agent considerations.
Based on the assessment, the Company concluded that there was no change to the timing and pattern of revenue recognition for its
current revenue streams in the scope of Topic 606 and therefore there were no material changes to the Company’s consolidated
financial statements upon adoption of ASC 606.
NOTE 2 – SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Revenue Recognition
(Continued)
The table below presents the impact of applying the new revenue recognition standard to the components
of total revenue within the unaudited condensed consolidated statement of income and comprehensive income for the three and six
months ended September 30, 2018. The Company evaluated its revenue recognition policy for all revenue streams within the scope
of the ASU under previous standards and using the five-step model under the new guidance and concluded that there were no differences
in the pattern of revenue recognition:
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
September 30,
|
|
|
|
|
|
|
(in millions of dollars)
|
|
|
|
As reported
|
|
|
Financial Results
prior to Adoption of
Revenue Recognition
Standard
|
|
|
Impact of
Adoption of
Revenue
Recognition
Standard
|
|
Revenue:
|
|
$
|
33,464,397
|
|
|
$
|
33,464,397
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
September 30,
|
|
|
|
|
|
|
(in millions of dollars)
|
|
|
|
As reported
|
|
|
Financial Results
prior to Adoption of
Revenue Recognition
Standard
|
|
|
Impact of
Adoption of
Revenue
Recognition
Standard
|
|
Revenue:
|
|
$
|
51,827,482
|
|
|
$
|
51,827,482
|
|
|
|
-
|
|
Substantially all of the Company’s
revenue is derived from product sales, which consist of sales of the Company’s customized ready-made outerwear for large
brand-name retailers. The Company considers purchase orders to be a contract with a customer. Contracts with customers are considered
to be short-term when the time between order confirmation and satisfaction of the performance obligations is equal to or less than
one year, and virtually all of the Company’s contracts are short-term. The Company recognizes revenue for the transfer of
promised goods to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange
for those goods. The Company typically satisfies its performance obligations in contracts with customers upon shipment of the goods.
Generally, payment is due from customers within 45 to 90 days of the invoice date, and the contracts do not have significant financing
components. Shipping and handling costs associated with outbound freight are not an obligation of the Company.
All of the Company’s contracts have
a single performance obligation satisfied at a point in time and the transaction price is stated in the contract, usually as a
price per unit. All estimates are based on the Company's historical experience, complete satisfaction of the performance obligation,
and the Company's best judgment at the time the estimate is made. Estimates for variable consideration are reassessed each reporting
period and are included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue
recognized will not occur upon resolution of uncertainty associated with the variable consideration.
The contract assets are recorded on the Condensed
Consolidated Balance Sheet as accounts receivable as of September 30, 2018 and March 31, 2018, respectively. For the three and
six months ended September 30, 2018 and 2017, there was no revenue recognized from performance obligations related to prior periods.
As of September 30, 2018, there was no revenue expected to be recognized in any future periods related to remaining performance
obligations.
NOTE 2 – SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Revenue Recognition
(Continued)
The Company has one revenue generating reportable
geographic segment under ASC Topic 280 “Segment Reporting” and derives its sales primarily from its sales of customized
ready-made outerwear. The Company believes disaggregation of revenue by geographic region best depicts the nature, amount, timing,
and uncertainty of its revenue and cash flows (see Note 12).
Shipping and Handling
Proceeds collected from customers for shipping
and handling costs are included in revenues. Shipping and handling costs are expensed as incurred and are included in operating
expenses, as a part of selling, general and administrative expenses. Total shipping and handling expenses were $281,270 and $272,048
for the three months ended September 30, 2018 and 2017, respectively. Total shipping and handling expenses were $416,152 and $396,999
for the six months ended September 30, 2018 and 2017, respectively.
Income Taxes
The Company is subject to income taxes
on an entity basis on income arising in or derived from the tax jurisdiction in which each entity is domiciled. Jerash Holdings
was incorporated in the State of Delaware and is subject to federal income tax in the United States of America. GTI was incorporated
in the BVI and is not subject to income taxes under the current laws of BVI. Treasure Success was registered in Hong Kong and has
no operating profit for current tax liabilities. Jerash Garments, Jerash Embroidery, Chinese Garments and Victory Apparel are subject
to the regulations of the Income Tax Department in Jordan. The corporate income tax rate in Jordan is 14% for the industrial sector.
In accordance with the Investment Encouragement Law, Jerash Garments' export sales to overseas customers is entitled to a 100%
income tax exemption for a period of 10 years commencing at the first day of production. This exemption has been extended for 5
years until December 31, 2018. Jerash Garments can apply for further extension of the tax exemption upon expiration. The estimated
tax savings as a result of the tax exemption for Jerash Garments totaled $936,691 and $828,157 for the three months ended September
30, 2018 and 2017, respectively. Per share effect of the tax exemption was $0.08 and $0.09 for the three months ended September
30, 2018 and 2017.
The estimated tax savings as a result of
the tax exemption for Jerash Garments totaled $1,362,230 and $1,332,832 for the six months ended September 30, 2018 and 2017, respectively.
Per share effect of the tax exemption were $0.12 and $0.14 for the six months ended September 30, 2018 and 2017.
Local sales of Jerash Garments are subject to income tax at a fixed rate of 14%. No tax provision was
provided for the three and six months ended September 30, 2018 and 2017 because there was no net income generated from local sales.
The Company accounts for income taxes in accordance
with ASC 740, “Income Taxes,” which requires the Company to use the asset and liability method of accounting for income
taxes. Under the asset and liability method, deferred income taxes are recognized for the tax consequences of temporary differences
by applying enacted statutory tax rates applicable to future years to differences between financial statement carrying amounts
and the tax bases of existing assets and liabilities and operating loss and tax credit carry forwards. Under this accounting standard,
the effect on deferred income taxes of a change in tax rates is recognized in income in the period that includes the enactment
date. A valuation allowance is recognized if it is more likely than not that some portion, or all of, a deferred tax asset will
not be realized. Deferred income taxes were immaterial, and accordingly, no deferred tax assets or liabilities were recognized
as of September 30, 2018 and March 31, 2018.
ASC 740 clarifies the accounting for uncertainty
in tax positions. This interpretation requires that an entity recognizes in its financial statements the impact of a tax position,
if that position is more likely than not of being sustained upon examination, based on the technical merits of the position. Recognized
income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition
or measurement are reflected in the period in which the change in judgment occurs. The Company has elected to classify interest
and penalties related to unrecognized tax benefits, if and when required, as part of income tax
NOTE 2 – SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Income Taxes
(Continued)
expense in the consolidated statements of
income and comprehensive income. There were no uncertain tax positions for our Jordan income taxes, and our tax returns
in Jordan prior to 2015 are not subject to examination by any applicable tax authorities.
On December 22, 2017, the Tax Cuts and Jobs Act (the “
Tax
Act”) was enacted. Under the provisions of the Tax Act, the U.S. corporate tax rate decreased from 35% to 21%. As the Company
has a March 31 fiscal year-end, the lower corporate income tax rate will be phased in, resulting in a U.S. statutory federal rate
of approximately 28% for our fiscal year ended March 31, 2018, and 21% for subsequent fiscal years. Additionally, the Tax Act imposes
a one-time transition tax on deemed repatriation of historical earnings of foreign subsidiaries, and future foreign earnings are
subject to U.S. taxation. The change has caused the Company to record one-time income tax payable to be paid over 8 years.
The Company has evaluated the impacts of the
new Global Intangible Low-Taxed Income (GILTI) tax rules provision of the Tax Act and the application of ASC 740, Income Taxes.
Under U.S. GAAP, the Company is allowed to make an accounting policy choice of either (1) treating taxes due on future U.S. inclusions
in taxable income related to GILTI as a current-period expense when incurred (the “period cost method”) or (2) factoring
such amounts into the Company’s measurement of its deferred taxes (the “deferred method”). The Company has selected
the period cost method as its accounting policy with respect to the new GILTI tax rules.
Foreign Currency Translation
The reporting currency of the Company is
the U.S. dollar and the Company and its subsidiaries use the Jordanian Dinar (“JOD”) as their functional currency,
except for Treasure Success, which uses the Hong Kong Dollar (“HKD”) as its functional currency. The assets and liabilities
of the Company have been translated into U.S. dollars using the exchange rates in effect at the balance sheet date, equity accounts
have been translated into U.S. dollars at historical rates, and revenue and expenses have been translated into U.S. dollars using
average exchange rates in effect during the reporting period. Cash flows are also translated at average translation rates for the
periods. Therefore, amounts related to assets and liabilities reported on the consolidated statements of cash flows will not necessarily
agree with changes in the corresponding balances on the consolidated balance sheets. Translation adjustments arising from the use
of different exchange rates from period to period are included as a separate component of accumulated other comprehensive income
(loss). Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other
than the functional currency are included in the results of operations as incurred.
The value of the JOD against U.S.
dollars
and other currencies may fluctuate and is affected by, among other things, changes in the Jordan’s political and economic
conditions. Any significant revaluation of the JOD may materially affect the Company’s financial condition in terms of reporting
in U.S. dollars. The following table outlines the currency exchange rates that were used in creating the consolidated financial
statements in this report:
|
|
September 30, 2018
|
|
March 31, 2018
|
|
September 30, 2017
|
Period-end spot rate
|
|
US$1=JOD 0.7090
|
|
US$1=JOD 0.7094
|
|
US$1=JOD 0.7086
|
|
|
US$1=HKD 7.8286
|
|
US$1=HKD 7.8490
|
|
US$1=HKD 7.8125
|
Average rate
|
|
US$1=JOD 0.7092
|
|
US$1=JOD 0.7092
|
|
US$1=JOD 0.7094
|
|
|
US$1=HKD 7.8465
|
|
US$1=HKD 7.8091
|
|
US$1=HKD 7.8003
|
NOTE 2 – SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Stock-Based Compensation
The Company measures compensation expense
for stock-based awards to employees, non-employee contractors and directors based upon the awards’ initial grant-date fair
value. The estimated grant-date fair value of the award is recognized as expense over the requisite service period using the straight-line
method. The fair value of awards is then marked-to-market each reporting period until vesting criteria are met.
The Company estimates the fair value of stock warrants using the Black-Scholes model. This model is affected
by the Company\'s stock price on the date of the grant as well as assumptions regarding a number of highly complex and subjective
variables. These variables include the expected term of the warrant, the expected risk-free rates of return, the expected volatility
of the Company's common stock, and the expected dividend yield, each of which is more fully described below. The assumptions for
expected term and expected volatility are the two assumptions that significantly affect the grant date fair value.
|
·
|
Expected Term: the expected term of a warrant is the period of time that the warrant is expected
to be outstanding.
|
|
·
|
Risk-free Interest Rate: the Company bases the risk-free interest rate used in the Black-Scholes
model on the implied yield at the grant date of the U.S. Treasury zero-coupon issue with an equivalent term to the stock-based
award being valued. Where the expected term of a stock-based award does not correspond with the term for which a zero-coupon interest
rate is quoted, the Company's uses the nearest interest rate from the available maturities.
|
|
·
|
Expected Stock Price Volatility: the Company utilizes comparable public company volatility over
the same period of time as the life of the warrant.
|
|
·
|
Dividend Yield: At the time of grant, the Company's did not
expect to pay a dividend in the foreseeable future, and accordingly, a 0% dividend yield was used in valuing the stock-based awards.
Any subsequent stock-based compensation awards will be valued using the expected dividend yield as noted in Note 15.
|
Earnings per Share
The Company computes earnings per share (“EPS”)
in accordance with ASC 260, “Earnings per Share” (“ASC 260”). ASC 260 requires companies with complex
capital structures to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average common
shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of
potential common shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of
the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that
increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. (See Note 11.)
Comprehensive Income
Comprehensive income consists of two components, net income and other comprehensive income (loss). The
foreign currency translation gain or loss resulting from translation of the financial statements expressed in JOD or HKD to U.S.
dollars is reported in other comprehensive income (loss) in the unaudited condensed consolidated statements of income and comprehensive
income.
NOTE 2 – SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Fair Value of Financial Instruments
ASC 825-10 requires certain disclosures regarding
the fair value of financial instruments. Fair value is defined as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy
prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and
minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
|
·
|
Level 1 - Quoted prices in active markets
for identical assets and liabilities.
|
|
·
|
Level 2 - Quoted prices in active markets
for similar assets and liabilities, or other inputs that are observable for the asset or liability, either directly or indirectly,
for substantially the full term of the financial instrument.
|
|
·
|
Level 3 - Unobservable inputs that are
supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes
certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
|
The Company considers the recorded value of
its financial assets and liabilities, which consist primarily of cash, including restricted cash, accounts receivable, other receivables,
due from related parties, due from shareholders, accounts payable, accrued expenses, other payables and short-term loan to approximate
the fair value of the respective assets and liabilities at September 30, 2018 and March 31, 2018 based upon the short-term nature
of these assets and liabilities.
Concentrations and Credit Risk
Credit risk
Financial instruments that potentially
subject the Company to significant concentrations of credit risk consist primarily of cash. As of September 30, 2018 and March
31, 2018, $3,052,649 and $4,793,527 of the Company’s cash was on deposit at financial institutions in Jordan, where there
currently is no rule or regulation requiring such financial institutions to maintain insurance to cover bank deposits in the event
of bank failure. As of September 30, 2018 and March 31, 2018, $27,148,976 and $7,400,111 of the Company’s cash was on deposit
at financial institutions in Hong Kong, which are insured by the Hong Kong Deposit Protection Board subject to certain limitations.
While management believes that these financial institutions are of high credit quality, it also continually monitors their credit
worthiness. As of September 30, 2018 and March 31, 2018, $259,327 and $2,472 of the Company’s cash was on deposit in the
United States and insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Concentrations and Credit Risk
(Continued)
Credit risk
(Continued)
Accounts receivable are typically unsecured
and derived from revenue earned from customers, and therefore are exposed to credit risk. The risk is mitigated by the Company's
assessment of its customers' creditworthiness and its ongoing monitoring of outstanding balances.
Customer and vendor concentration risk
Prior to August 2016, substantially all
of the Company’s sales were made to end-customers through its affiliate (see Note 9) that are located primarily in the United
States (see Note 12). Thereafter, the Company began selling directly to its customers. The Company’s operating results could
be adversely affected by U.S. government policy on exporting business, foreign exchange rate fluctuations, and change of local
market conditions. The Company has a concentration of its revenues and purchases with specific customers and suppliers. For the
three months ended September 30, 2018, two end-customers accounted for 78% and 11% of total revenue. For the six months ended September
30, 2018, two end-customers accounted for 83% and 7%, of total revenue. For the three months ended September 30, 2017, two end-customers
accounted for 85% and 7% of total revenue. For the six months ended September 30, 2017, two end-customers accounted for 84% and
9% of total revenue. As of September 30, 2018, two customers accounted for 67% and 24% of the total accounts receivable balance.
As of March 31, 2018, two customers accounted for 57% and 22% of the total accounts receivable balance.
For the three months ended September 30,
2018, the Company purchased approximately 14% and 11% of its raw materials from two major suppliers. For the six months ended September
30, 2018, the Company purchased approximately 19% and 13% of its raw materials from two major suppliers. For the three months ended
September 30, 2017, the Company purchased approximately 97% of its raw materials from one major supplier. For the six months ended
September 30, 2017, the Company purchased approximately 97% of its raw materials from one major supplier. As of September 30, 2018,
four suppliers accounted for 23%, 15%, 12% and 11% of the total accounts payable balance. As of March 31, 2018, there was a net
prepaid balance to the major supplier.
A loss of any of these customers or suppliers could adversely affect the operating results or cash flows
of the Company.
Risks and Uncertainties
The principal operations of the Company are located in Jordan. Accordingly, the Company’s business,
financial condition, and results of operations may be influenced by the political, economic, and legal environments in Jordan,
as well as by the general state of the Jordanian economy. The Company’s operations in Jordan are subject to special considerations
and significant risks not typically associated with companies in North America. These include risks associated with, among others,
the political, economic and legal environment and foreign currency exchange. The Company’s results may be adversely affected
by changes in the political, regulatory and social conditions in Jordan. Although the Company has not experienced losses from these
situations and believes that it is in compliance with existing laws and regulations including its organization and structure disclosed
in Note 1, this may not be indicative of future results.
NOTE 3 – RECENT ACCOUNTING PRONOUNCEMENTS
The Company considers the applicability and
impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that
are issued.
New Accounting Pronouncements Recently Adopted
As disclosed in Note 2 – Summary
of Significant Accounting Policies – Revenue Recognition above, the Company adopted ASU 2014-09, Revenue from Contracts with
Customers (Topic 606) effective April 1, 2018 using the retrospective transition method. This new accounting standard outlines
a single comprehensive model to use in accounting for revenue arising from contracts with customers. This standard supersedes existing
revenue recognition requirements and eliminates most industry-specific guidance from U.S. GAAP. The core principle of the new accounting
standard is to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the adoption of
this new accounting standard resulted in increased disclosure, including qualitative and quantitative disclosures about the nature,
amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Adoption of this standard did not
result in significant changes to the Company’s accounting policies, business processes, systems or controls, or have a material
impact on the Company’s financial position, results of operations and cash flows or related disclosures. As such, prior period
financial statements were not recast.
On April 1, 2018, we adopted ASU 2016-18,
Restricted Cash – A Consensus of the
FASB Emerging Issues Task Force
, (“ASU 2016-18”), which amends ASC 230,
Statement of Cash Flows
,
to clarify guidance on the classification and presentation of restricted cash in the statement of cash flows using the full retrospective
method. Adoption of this standard did not have a material impact on our consolidated financial statements. See our unaudited condensed
consolidated statements of cash flows for the reconciliation of cash presented in the statements of cash flows to the cash presented
on the balance sheet.
In May 2017, the FASB issued ASU 2017-09,
Compensation -
Stock Compensation (Topic 718): Scope of Modification Accounting
("ASU 2017-09"), which amends the scope of modification
accounting for share-based payment arrangements such that an entity would not apply modification accounting if the fair value,
vesting conditions and classification of the awards are the same immediately before and after the modification. ASU 2017-09 became
effective for the Company beginning April 1, 2018 for both interim and annual reporting periods. The adoption of ASU 2017-09 did
not have a material impact on the Company's condensed consolidated financial statements.
New Accounting Pronouncements Not Yet Adopted
In
June
2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation, which simplifies the accounting for share-based payments
granted to nonemployees for goods and services. Under this ASU, most of the guidance on such payments to nonemployees would be
aligned with the requirements for share-based payments granted to employees. This ASU is effective for annual reporting periods
beginning after December 15, 2018. Early adoption of this ASU is permitted. The Company does not expect adoption of this ASU to
have a material impact on its Consolidated Financial Statements.
NOTE 4 – ACCOUNTS
RECEIVABLES, NET
The Company’s net accounts receivable is as follows:
|
|
As of
|
|
|
As of
|
|
|
|
September 30, 2018
|
|
|
March 31, 2018
|
|
Trade accounts receivable
|
|
$
|
15,687,636
|
|
|
$
|
5,247,090
|
|
Less: allowances for doubtful accounts
|
|
|
-
|
|
|
|
-
|
|
Accounts receivables, Net
|
|
$
|
15,687,636
|
|
|
$
|
5,247,090
|
|
As of September 30, 2018 and March 31, 2018 the
balance
of accounts receivable includes $3 and $470,659, of factored accounts receivable to be received from Hong Kong and Shanghai Banking
Corporation (“HSBC”) under the Factoring Agreement (see Note 10).
NOTE 5 – INVENTORIES
Inventories consisted of the following:
|
|
As of
|
|
|
As of
|
|
|
|
September 30, 2018
|
|
|
March 31, 2018
|
|
Raw materials
|
|
$
|
5,393,718
|
|
|
$
|
11,497,237
|
|
Work-in-progress
|
|
|
675,539
|
|
|
|
2,073,509
|
|
Finished goods
|
|
|
2,672,739
|
|
|
|
6,722,646
|
|
Total inventory
|
|
$
|
8,741,996
|
|
|
$
|
20,293,392
|
|
An inventory allowance was not considered necessary as of September
30, 2018 and March 31, 2018.
NOTE 6 – PROPERTY,
PLANT AND EQUIPMENT, NET
Property, plant and equipment, net consisted of the following:
|
|
As of
September 30, 2018
|
|
|
As of
March 31, 2018
|
|
Land
|
|
$
|
61,078
|
|
|
$
|
61,048
|
|
Property and buildings
|
|
|
432,562
|
|
|
|
432,347
|
|
Equipment and machinery
|
|
|
5,523,345
|
|
|
|
4,918,270
|
|
Office and electric equipment
|
|
|
514,479
|
|
|
|
505,356
|
|
Automobiles
|
|
|
367,332
|
|
|
|
372,084
|
|
Leasehold improvements
|
|
|
1,633,566
|
|
|
|
1,552,108
|
|
Subtotal
|
|
|
8,532,362
|
|
|
|
7,841,213
|
|
Construction in progress
|
|
|
197,290
|
|
|
|
217,494
|
|
Less: Accumulated Depreciation and Amortization
|
|
|
(5,865,654
|
)
|
|
|
(5,238,992
|
)
|
Property and Equipment, Net
|
|
$
|
2,863,998
|
|
|
$
|
2,819,715
|
|
Depreciation and amortization expense was $334,232
and $300,540 for the three months ended September 30, 2018 and 2017, respectively. Depreciation and amortization expense was $653,542
and $588,324 for the six months ended September 30, 2018 and 2017, respectively.
The construction in progress account represents costs incurred for
constructing
two new sewing workshops. The first one is an approximately 4,800 square foot workshop in the Tafilah Governorate of Jordan, which
is expected to be completed by the end of calendar year 2018. The second one is an approximately 54,000 square foot workshop in
Al-Hasa County in the Tafilah Governorate of Jordan, which is expected to be completed by the middle of calendar year 2019.
NOTE 7
–
EQUITY
Preferred Stock
The Company has 500,000 authorized shares of preferred stock with a par value of $0.001 per share, and
with none issued and outstanding as of September 30, 2018 and March 31, 2018. The preferred stock can be issued by the Board of
Directors in one or more classes or one or more series within any class, and such classes or series shall have such voting powers,
full or limited, or no voting powers, and such designations, preferences, rights, qualifications, limitations or restrictions of
such rights as the Board of Directors may determine from time to time.
NOTE
7 – EQUITY
(Continued)
Common Stock
Prior to September 17, 2018, the Company had 15,000,000 authorized shares of common stock with a par value
of $0.001 per share. On September 17, 2018, following approval from its stockholders, the Company filed a certificate of amendment
to its certificate of incorporation to increase its authorized shares of common stock from 15,000,000 to 30,000,000. The Company
had 11,325,000 and 9,895,000 shares of common stock outstanding as of September 30, 2018 and March 31, 2018 respectively.
Statutory Reserve
In accordance with the Corporate Law in Jordan,
Jerash Garments, Jerash Embroidery, Chinese Garments and Victory Apparel 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.
This reserve is not available for dividend distribution. As of both September 30, 2018 and March 31, 2018, the consolidated balance
of the statutory reserve was $71,699.
Private placement
On May 15, 2017, the Company conducted the initial closing of a private placement for the sale of an aggregate
of 540,000 shares of common stock and warrants exercisable for up to 54,000 shares of common stock to ten accredited investors.
Fifty percent of the shares (270,000 shares) purchased in the initial closing were sold by one of the Company’s shareholders
at $4.99 per share, the remaining fifty percent of the shares (270,000 shares) were issued by Jerash Holdings. Each share
was
sold together with one warrant, with each such warrant being immediately exercisable for one-tenth of one share of common stock.
540,000 five-year warrants were issued at $0.01 per warrant to purchase up to 54,000 shares of Jerash Holdings’ common stock
at an exercise price per full share equal to $6.25. The Company received aggregate gross proceeds of $1,352,700 for the shares
and warrants issued and sold in the initial closing of the private placement, and incurred direct expenses related to the offering
of $379,828.
On August 18, 2017, the Company conducted the
second closing of a private placement, pursuant to which an aggregate of 200,000 shares of common stock and warrants exercisable
for up to 20,000 shares of common stock were sold to one accredited investor. Fifty percent of the shares (100,000 shares) purchased
in the closing were sold by one of the Company’s shareholders at $4.99 per share and the remaining fifty percent of the shares
(100,000 shares) were issued by Jerash Holdings. Each share was sold together with one warrant, with each such warrant being immediately
exercisable for one-tenth of one share of common stock. 200,000 five-year warrants were issued at $0.01 per warrant to purchase
up to 20,000 shares of Jerash Holdings’ common stock at an exercise price per full share equal to $6.25. The Company received
net proceeds of $450,910 for the shares and warrants issued and sold in the closing of this private placement.
On September 27, 2017, the Company conducted
the third and final closing of a private placement, pursuant to which an aggregate of 50,000 shares of common stock and warrants
exercisable for up to 5,000 shares of common stock were sold to two accredited investors. Fifty percent of the shares (25,000 shares)
purchased in the closing were sold by one of the Company’s shareholders at $4.99 per share and the remaining fifty percent
of the shares (25,000 shares) were issued by Jerash Holdings. Each share was sold together with one warrant, with each such warrant
being immediately exercisable for one-tenth of one share of common stock. 50,000 five-year warrants were issued at $0.01 per warrant
to purchase up to 5,000 shares of Jerash Holdings’ common stock at an exercise price per full share equal to $6.25. The Company
received net proceeds of $110,179 for the shares and warrants issued and sold in the closing of this private placement.
Initial Public Offering
The registration statement on Form S-1 (File No. 333-222596) for the Company’s initial public offering
(the “IPO”) was declared effective on March 14, 2018. On May 2, 2018 the Company issued 1,430,000 shares of common
stock at $7.00 per share and received gross proceeds of $10,010,000. The Company incurred underwriting commissions of $477,341,
underwriter offering expenses of $250,200 and additional underwriting expenses of $352,159, yielding net proceeds from the IPO
of $8,930,300.
NOTE
7 – EQUITY
(Continued)
Independent Board of Directors
Simultaneous with the closing of the IPO, the Company increased the size of Board of Directors from two
to five members and elected three new independent directors who were all reelected to the Board of Directors at the Company’s
2018 annual meeting of stockholders and will hold office until the next annual meeting of stockholders. The Company approved an
audit committee charter and formed an audit committee of the Board of Directors, whose chair is an “audit committee financial
expert.” The Company also approved a compensation committee charter and a nominating and corporate governance committee charter
and formed a compensation committee and a nominating and corporate governance committee.
NOTE 8
–
STOCK BASED COMPENSATION
Warrants issued for services
From time to time, the Company issues warrants to purchase its common stock. These warrants are valued
using the Black-Scholes model and using the volatility, market price, exercise price, risk-free interest rate and dividend yield
appropriate at the date the warrants were issued.
On May 15, 2017, Jerash Holdings issued warrants
to the designees of the placement agent in the above private placement to purchase 48,600 units, with each unit consisting of one
share of Jerash Holdings common stock and one warrant (with each such warrant being immediately exercisable for one-tenth of one
share of its common stock at an exercise price of $6.25 per share for a period of five years from the issuance date), at an exercise
price of $5.50 per unit. The fair value of these units was $107,990 and was included in offering costs of the private placement
in May 2017.
On May 15, 2017, Jerash Holdings also issued a five-year warrant to purchase up to 50,000 shares of its
common stock pursuant to a letter agreement with one
of its board advisors. The warrant has an exercise price of $5.00 per share and may be converted by means of “cashless”
exercise during the term of the warrant. This warrant may be exercised any time after issuance through and including the five-year
anniversary of the issuance date. Stock-based compensation expense was recognized during the quarter ended June 30, 2017 was $116,578
for this warrant. No compensation expense was recognized in connection with this warrant during the three and six months ended
September 30, 2018.
On August 1, 2017, warrants to purchase 18,000
units became issuable by Jerash Holdings to the designees of the placement agent in the above private placement, with each unit
consisting of one share of Jerash Holdings common stock and one warrant (with each such warrant being immediately exercisable for
one-tenth of one share of its common stock at an exercise price of $6.25 per share for a period of five years from the issuance
date), at an exercise price of $5.50 per unit. The fair value of these units was $43,122 and was included in offering costs of
the private placement in August 2017.
On September 27, 2017, warrants to purchase
4,500 units became issuable by Jerash Holdings to the designees of the placement agent in the above private placement, with each
unit consisting of one share of Jerash Holdings common stock and one warrant (with each such warrant being immediately exercisable
for one-tenth of one share of its common stock at an exercise price of $6.25 per share for a period of five years from the issuance
date), at an exercise price of $5.50 per unit. The fair value of these units was $10,814 and was included in offering costs of
the private placement in September 2017.
Simultaneous with the closing of the IPO,
the Company issued to the underwriter and its affiliates warrants to purchase 57,200 shares of common stock (“IPO Underwriter
Warrants”) at an exercise price of $8.75 per share with an expiration date of May 2, 2023. The shares underlying the IPO
Underwriter Warrants were subject to a 180-day lock-up.
During the period ended September 30, 2018, all of the outstanding warrants were fully vested and exercisable
other than the 57,200 IPO Underwriter Warrants noted
above subject to a 180-day lock-up.
NOTE 8
–
STOCK BASED COMPENSATION
(Continued)
The fair value of these warrants granted was estimated as of the grant date using the Black-Scholes model
with the following assumptions:
|
|
Common Stock Warrants
September 30, 2018
|
|
Expected term (in years)
|
|
|
5.0
|
|
Risk-free interest rate (%)
|
|
|
1.8% - 2.8
|
%
|
Expected volatility (%)
|
|
|
50.3% - 52.2
|
%
|
Dividend yield (%)
|
|
|
0.0
|
%
|
Warrants issued for services
Warrant activity is summarized as follows:
|
|
Shares
|
|
|
Weighted Average
Exercise Price
|
|
Warrants outstanding at March 31, 2018
|
|
|
207,210
|
|
|
$
|
5.69
|
|
Granted (Underwriter Warrants for the IPO)
|
|
|
57,200
|
|
|
$
|
8.75
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Cancelled
|
|
|
-
|
|
|
|
-
|
|
Warrants outstanding at September 30, 2018
|
|
|
264,410
|
|
|
$
|
6.35
|
|
Stock Options
On March 21, 2018 the Board of Directors
adopted the Jerash Holdings (US), Inc. 2018 Stock Incentive Plan (the “Plan”), pursuant to which the Company may grant
various types of equity awards. 1,484,250 shares of common stock were reserved for issuance under the Plan. On April 9, 2018, the
Board of Directors approved the issuance of 989,500 nonqualified stock options under the Plan in accordance with the Plan at an
exercise price of $7.00 per share, and a term of five years. As of September 30, 2018, all of these outstanding stock options were
fully vested and exercisable.
The fair value of the options granted on April 9, 2018 was estimated as of the grant date using the Black-Scholes
model with the following assumptions
.
|
|
Stock Options September 30,
2018
|
|
Expected term (in years)
|
|
|
5.0
|
|
Risk-free interest rate (%)
|
|
|
2.6
|
%
|
Expected volatility (%)
|
|
|
50.3
|
%
|
Dividend yield (%)
|
|
|
0.0
|
%
|
On August 3, 2018, the Board of Directors granted the Company’s Chief Financial Officer and Head
of U.S. Operations a total of 150,000 nonqualified stock options under the Plan in accordance with the Plan at an exercise price
of $6.12 per share and a term of ten years. The options vest in three equal six-month installments, with the first one-third having
vested on August 3, 2018 and the remaining amounts vesting on February 3 and August 3, 2019.
NOTE 8
–
STOCK BASED COMPENSATION
(Continued)
Stock Options
(Continued)
The fair value of the options granted on August 3, 2018 was estimated as of the grant date using the Black-Scholes
model with the following assumptions.
|
|
Stock Options September 30,
2018
|
|
Expected term (in years)
|
|
|
10.0
|
|
Risk-free interest rate (%)
|
|
|
2.95
|
%
|
Expected volatility (%)
|
|
|
50.3
|
%
|
Dividend yield (%)
|
|
|
0.0
|
%
|
|
|
|
|
|
The fair value of all outstanding stock options is $3.21. Stock option activity is summarized as follows:
|
|
Shares
|
|
|
Weighted
Average Exercise Price
|
|
Stock options outstanding at March 31, 2018
|
|
|
-
|
|
|
|
-
|
|
Granted
|
|
|
1,139,500
|
|
|
$
|
6.88
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Cancelled
|
|
|
-
|
|
|
|
-
|
|
Stock options outstanding at September 30, 2018
|
|
|
1,139,500
|
|
|
$
|
6.88
|
|
Total expense related to the stock options
issued was $193,954 for the three months ended September 30, 2018 and $3,399,934 for the six months ended September 30, 2018. There
were $387,909 of unrecognized compensation costs at September 30, 2018 relating to unvested awards.
NOTE 9 – RELATED PARTY TRANSACTIONS
The relationship and the nature of related
party transactions are summarized as follow:
Name of Related Party
|
|
Relationship
to the Company
|
|
Nature
of Transactions
|
Ford Glory Holdings Limited (“FGH”)
|
|
Affiliate, former indirect parent of the Company
|
|
Working Capital Advances
|
Ford Glory International Limited, (“FGIL”)
|
|
Affiliate, subsidiary of FGH
|
|
Sales / Purchases
|
Value Plus (Macao Commercial Offshore) Limited (“VPMCO”)
|
|
Affiliate, subsidiary of FGH
|
|
Purchases
|
Yukwise Limited (“Yukwise”)
|
|
Common Shareholder
|
|
Consulting Services
|
Multi-Glory Corporation Limited (“Multi-Glory”)
|
|
Common Shareholder
|
|
Consulting Services
|
NOTE 9 – RELATED PARTY TRANSACTIONS
(Continued)
Pursuant to the terms of a sale and purchase
agreement between one of the Company’s current individual shareholders and Victory City Investments Limited, the ultimate
51% shareholder of FGIL, dated July 13, 2016 (the “Sale and Purchase Agreement”), and effective since August 1, 2016,
all rights, interests and benefits of any contracts that FGIL had at that time with any of the Company’s customers for products
manufactured or to be manufactured by the Company, together with the costs and obligations relating to those contracts were transferred
to the Company. Thereafter, the Company has been selling directly to the end-customers and no longer through its affiliate, FGIL.
Related party balances:
|
a.
|
Accounts receivable – related party:
|
Accounts receivable
from related party in connection with the collection of accounts receivable from end-customers on behalf of the Company due to
the support arrangement during the transition period as described below (see a. Sales to related party) consisted of the following:
|
|
As of
September 30, 2018
|
|
|
As of
March 31, 2018
|
|
FGIL
|
|
$
|
-
|
|
|
$
|
50,027
|
|
Related party transactions:
|
a.
|
Sales to related party:
|
Pursuant to the Sale and Purchase Agreement, the Company has all rights, interests and benefits of the
sales agreements signed with end-customers since August 2016, together with the costs and obligations of those
agreements.
During the transition period, the Company’s affiliate supported the Company to complete the transition with no additional
fees charged. For the three months ended September 30, 2018 and 2017, $0 and $23,413,053, respectively, of sales were made with
the support of FGIL. For the six months ended September 30, 2018 and 2017, $0 and $42,185,022, respectively, of sales were made
with the support of FGIL.
On January 16, 2018, Treasure
Success and Multi-Glory entered into a consulting agreement, pursuant to which Multi-Glory will provide high-level advisory, marketing
and sales services to the Company for $300,000 per annum. The agreement renews automatically for one-month terms. The agreement
became effective as of January 1, 2018. Total consulting fees under this agreement were $75,000 for the three months ended September
30, 2018 and $150,000 for the six months ended September 30, 2018.
On January 12, 2018, Treasure Success and Yukwise entered into a consulting agreement, pursuant to which
Mr. Choi will serve as Chief Executive Officer and provide high-level advisory and general management services for $300,000
per
annum, with automatic renewal for one-month terms. This agreement became effective as of January 1, 2018. Total advisory and management
expenses under this agreement were $75,000 for the three months ended September 30, 2018 and $150,000 for the six months ended
September 30, 2018.
Borrowings under the Credit Facility, as defined
below, with HSBC are collateralized by the personal guarantees by Mr. Choi and Mr. Ng Tsze Lun.
NOTE 10 – CREDIT FACILITIES
Pursuant to a letter agreement dated May 29,
2017, Treasure Success entered into an $8,000,000 import credit facility with HSBC (the “Facility Letter”). In addition,
pursuant to an offer letter dated June 5, 2017, HSBC offered to provide Treasure Success with a $12,000,000 factoring facility
for certain debt purchase services related to our accounts receivables (the “Factoring Agreement” and together with
the Facility Letter, the “Credit Facilities”). The Credit Facilities are guaranteed by Jerash Holdings, Jerash Garments,
as well as the Company’s two individual shareholders. In addition, the Credit Facilities require cash and other investment
security collateral of $3,000,000. The Credit Facilities provide that drawings under the Credit Facilities are charged interest
at the Hong Kong Interbank Offered Rate (“HIBOR”) plus 1.5% for drawings in Hong Kong dollars, and the London Interbank
Offered Rate (“LIBOR”) plus 1.5% for drawings in other currencies. In addition, the Credit Facilities also contain
certain service charges and other commissions and fees.
Under the Factoring Agreement, HSBC also provides
credit protection and debt services related to each preapproved customer. For any approved debts or collections assigned
to HSBC, HSBC charges a flat fee of 0.35% on the face value of the invoice for such debt or collection. We may assign debtor payments
that are to be paid to HSBC within 90 days, defined as the maximum terms of payment. We may receive advances on invoices that are
due within 30 days of the delivery of our goods, defined as the maximum invoicing period.
The Credit Facilities are subject to review
at any time, and HSBC has discretion on whether to renew the Facility Letter. Either party may terminate the Factoring Agreement
subject to a 30-day notice period.
As of September 30, 2018 and March 31, 2018, the Company had made $2,154,756 and $980,195 in withdrawals,
respectively, under the Credit Facilities, which are due within 120 days of each borrowing date or upon demand by HSBC. As of September
30, 2018, $1,263,536 was outstanding under the Facility Letter and $891,220 was outstanding under the Factoring Agreement.
NOTE 11 – EARNINGS PER SHARE
The following table sets forth the computation
of basic and diluted earnings per share for the three and six months ended September 30, 2018 and 2017. 57,200 IPO Underwriter
Warrants, 50,000 stock options to the Company’s Chief Financial Officer and 100,000 stock options to the Company’s
Head of U.S. Operations were anti-dilutive for the three and six months ended September 30, 2018 and accordingly excluded from
the EPS calculation.
|
|
Three Months Ended
September 30,
(in $000s except share and
per share information)
|
|
|
Six Months Ended
September 30,
(in $000s except share and
per share information)
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
4,587
|
|
|
$
|
5,753
|
|
|
$
|
3,702
|
|
|
$
|
9,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic earnings per share (weighted-average shares)
|
|
|
11,325,000
|
|
|
|
9,577,172
|
|
|
|
11,074,945
|
|
|
|
9,577,172
|
|
Dilutive securities – unexercised warrants and options
|
|
|
55,314
|
|
|
|
-
|
|
|
|
155,354
|
|
|
|
-
|
|
Denominator for diluted earnings per share (adjusted weighted-average shares)
|
|
|
11,380,314
|
|
|
|
9,577,172
|
|
|
|
11,230,299
|
|
|
|
9,577,172
|
|
Basic earnings per share
|
|
$
|
0.41
|
|
|
$
|
0.60
|
|
|
$
|
0.33
|
|
|
$
|
0.96
|
|
Diluted earnings per share
|
|
$
|
0.40
|
|
|
$
|
0.60
|
|
|
$
|
0.33
|
|
|
$
|
0.96
|
|
NOTE 12 – SEGMENT REPORTING
ASC 280, “Segment Reporting”, establishes standards for reporting information about operating
segments on a basis consistent with the Company's internal organizational structure as well as information about geographical areas,
business segments and major customers in financial statements for details on the Company's business segments. The Company uses
the “management approach” in determining reportable operating segments. The management approach considers the internal
organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing
performance as the source for determining the Company’s reportable segments. Management, including the chief operating decision
maker, reviews operating results by the revenue of the Company’s products. The Company’s major product is outerwear.
For the three-month periods ended September 30, 2018 and 2017, outerwear accounted for approximately 96.3% and 91.8% of total revenue,
respectively. For the six-month periods ended September 30, 2018 and 2017, outerwear accounted for approximately 97.3% and 95.3%
of total revenue, respectively. Based on management's assessment, the Company has determined that it has only one operating segment
as defined by ASC 280.
The following table summarizes sales by geographic
areas for the three months ended September 30, 2018 and 2017, respectively.
|
|
For the three months ended
|
|
|
|
September 30, 2018
|
|
|
September 30, 2017
|
|
United States
|
|
$
|
27,864,070
|
|
|
$
|
25,274,990
|
|
Jordan
|
|
|
4,968,784
|
|
|
|
2,249,807
|
|
Other countries
|
|
|
631,543
|
|
|
|
24,682
|
|
Total
|
|
$
|
33,464,397
|
|
|
$
|
27,549,479
|
|
The following table summarizes sales by geographic
areas for the six months ended September 30, 2018 and 2017, respectively.
|
|
For the six months ended
|
|
|
|
September 30, 2018
|
|
|
September 30, 2017
|
|
United States
|
|
$
|
45,673,431
|
|
|
$
|
46,339,490
|
|
Jordan
|
|
|
5,098,997
|
|
|
|
2,307,165
|
|
Other countries
|
|
|
1,055,054
|
|
|
|
252,982
|
|
Total
|
|
$
|
51,827,482
|
|
|
$
|
48,899,637
|
|
All long-lived assets were located in Jordan
as of September 30, 2018 and March 31, 2018.
NOTE 13 – COMMITMENTS AND CONTINGENCIES
Rent Commitment
The Company leases two manufacturing facilities
under operating leases. Operating lease expense amounted to $347,286 and $313,222 for the three months ended September 30, 2018
and 2017, respectively, and amounted to $689,629 and $629,964 for the six months ended September 30, 2018 and 2017, respectively.
The Company is currently evaluating the renewal of these leases.
Future minimum lease payments under non-cancelable operating leases
are as follows:
Twelve months ended September 30,
|
|
|
|
2019
|
|
$
|
424,304
|
|
2020
|
|
|
17,971
|
|
2021 and thereafter
|
|
|
-
|
|
Total
|
|
$
|
442,275
|
|
NOTE 13 – COMMITMENTS AND
CONTINGENCIES
(Continued)
The Company has twenty-six
operating leases for its facilities that require monthly payments ranging between $247 and $26,947 that are renewable on an
annual basis.
Contingencies
From time to time, the Company is a party to
various legal actions arising in the ordinary course of business. The Company accrues costs associated with these matters when
they become probable and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are
expensed as incurred. The Company’s management does not expect any liability from the disposition of such claims and litigation
individually or in the aggregate would not have a material adverse impact on the Company’s consolidated financial position,
results of operations and cash flows.
NOTE 14 – INCOME
TAX
The Tax Act imposes a one-time transition tax
on deemed repatriation of historical earnings of foreign subsidiaries, and future foreign earnings are subject to U.S. taxation.
The change has caused the Company to record a one-time income tax payable to be paid over 8 years. The one-time transition tax
was calculated using the Company’s total post-1986 overseas earnings and profits based on a rate of 15.5% for the Company’s
cash and cash equivalents and a rate of 8% for its other assets. The Company previously booked a provisional charge of $1.4 million
related to the transition tax for all of its foreign subsidiaries, resulting in an increase in income tax expense of approximately
$1.4 million for the year ended March 31, 2018. The income tax payable attributable to the transition tax is due over an 8-year
period beginning in 2018. The Company revised its estimate of the impact of the transition tax, which resulted in a total of $1,892,000
in transition tax due.
Under GAAP, companies are allowed to make an accounting policy election to either treat taxes resulting
from
GILTI using the period cost method or the deferred
method. The Company has selected the period cost method as its accounting policy with respect to the new GILTI tax rules, and therefore
considered the taxes resulting from GILTI as a current-period expense for the six-month period ended September 2018. See Note 2
for additional discussion on GILTI policy election.
The Company booked $1,463,000 and $0 in
income tax expense for the quarters ended September 30, 2018 and 2017, respectively, and $1,829,000 and $0 in income tax expense
for the six months ended September 30, 2018 and 2017, respectively.
The Tax Act has significant complexity
and our final tax liability may materially differ from provisional estimates due to additional guidance and regulations that may
be issued by the U.S. Treasury Department, the Internal Revenue Service and state and local tax authorities, and for the Company’s
finalization of the relevant calculations required by the new tax legislation.
NOTE 15 –
SUBSEQUENT EVENT
On November 1, 2018, the Board of Directors approved the payment of an annual dividend of $0.20 per share,
paid quarterly. The first quarterly dividend will be paid on November 27, 2018 to stockholders of record as of November 19, 2018.
Item 2.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains
“forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “PSLRA”).
All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and
state securities laws, including, but not limited to: any projections of earnings, revenues or other financial items; any
statements regarding the adequacy, availability and sources of capital, any statements of the plans, strategies and objectives
of management for future operations; any statements concerning proposed new products, services or developments; any statements
regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any
of the foregoing. Forward-looking statements may include the words “may,” “will,” “estimate,”
“intend,” “continue,” “believe,” “expect,” “plan” “project”
or “anticipate” and other similar words. In addition to any assumptions and other factors and matters referred
to specifically in connection with such forward-looking statements, factors that could cause actual results or outcomes to differ
materially from those contained in the forward-looking statements include those factors set forth in this Quarterly Report, particularly
under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” and subsequent reports that we file with the Securities and Exchange Commission (the “SEC”).
Although we believe that the expectations reflected
in our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed. Our
future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent
risks and uncertainties, such as those disclosed in this Quarterly Report. We do not intend, and undertake no obligation,
to update any forward-looking statement, except as required by law.
Notwithstanding the above, Section 21E of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), expressly states that the safe harbor for forward
looking statements does not apply to companies that issue penny stocks. Accordingly, the safe harbor for forward looking statements
under the PSLRA is not currently available to the Company because we may be considered to be an issuer of penny stock.
The information included in this Management’s Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with our consolidated financial statements and the notes included in this Quarterly
Report, and the audited consolidated financial statements and notes and Management’s Discussion and Analysis of Financial
Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended March 31, 2018, filed with the
SEC on June 28, 2018. References to fiscal 2019, fiscal 2018 and fiscal 2017 in this Management’s Discussion and Analysis
of Financial Condition and Results of Operations refer to our fiscal years ending March 31, 2019, March 31, 2018 and March 31,
2017, respectively.
Results of Operations
Three months ended September 30, 2018
and September 30, 2017
The following table summarizes the results
of our operations during the three-month periods ended September 30, 2018 and 2017 and provides information regarding the dollar
and percentage increase or (decrease) during such periods.
(All amounts, other than percentages, in thousands
of U.S. dollars)
|
|
Three Months Ended
September 30, 2018
|
|
|
Three Months Ended
September 30, 2017
|
|
|
Period over Period Increase
(Decrease)
|
|
Statement of Income
Data:
|
|
Amount
|
|
|
As % of
Sales
|
|
|
Amount
|
|
|
As % of
Sales
|
|
|
Amount
|
|
|
%
|
|
Revenue
|
|
$
|
33,464
|
|
|
|
100
|
%
|
|
$
|
27,549
|
|
|
|
100
|
%
|
|
$
|
5,915
|
|
|
|
21
|
%
|
Cost of goods sold
|
|
|
25,115
|
|
|
|
75
|
%
|
|
|
20,334
|
|
|
|
74
|
%
|
|
|
4,781
|
|
|
|
24
|
%
|
Gross profit
|
|
|
8,349
|
|
|
|
25
|
%
|
|
|
7,215
|
|
|
|
26
|
%
|
|
|
1,134
|
|
|
|
16
|
%
|
Selling, general and administrative expenses
|
|
|
2,292
|
|
|
|
7
|
%
|
|
|
1,458
|
|
|
|
5
|
%
|
|
|
834
|
|
|
|
57
|
%
|
Other expense, net
|
|
|
7
|
|
|
|
0
|
%
|
|
|
5
|
|
|
|
0
|
%
|
|
|
2
|
|
|
|
40
|
%
|
Net income before taxation
|
|
$
|
6,050
|
|
|
|
18
|
%
|
|
$
|
5,752
|
|
|
|
21
|
%
|
|
$
|
298
|
|
|
|
5
|
%
|
Taxation
|
|
|
1,463
|
|
|
|
4
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
1,463
|
|
|
|
-
|
|
Net income
|
|
$
|
4,587
|
|
|
|
14
|
%
|
|
$
|
5,752
|
|
|
|
21
|
%
|
|
$
|
(1,165
|
)
|
|
|
(20
|
)%
|
Revenue.
Revenue increased by approximately $5.9
million or 21%, to $33.5 million, for the three months ended September 30, 2018 from approximately $27.5 million for the same period
in fiscal 2018. The increase was mainly the result of deferred shipments attributable to the national holidays in Jordan for EID
al-Fitr from June 15 to June 18, 2018 that affected our shipments and created backlog at the port of Aqaba the following week.
We normally send our products to the port of Aqaba over weekends and freight forwarders designated by customers will effect shipments
per customers’ instructions on Monday and Tuesday. Approximately $2.5 million of shipments scheduled to be shipped in June
were shipped in early July due to the EID al-Fitr holiday. In addition, we had increases in sales to one of our major customers
in the United States, our major export destination, and also our execution of local orders in Jordan.
The following table
outlines the dollar amount and percentage of total sales to our customers for the three months ended September 30, 2018.
(All amounts, other than percentages, in thousands of U.S. dollars)
|
|
Three Months Ended September, 2018
|
|
|
|
Sales
|
|
|
|
|
|
|
Amount
|
|
|
%
|
|
VF Corporation
(1)
|
|
$
|
26,231
|
|
|
|
78.4
|
%
|
Columbia
|
|
|
2,264
|
|
|
|
6.8
|
%
|
Others
|
|
|
4,969
|
|
|
|
14.8
|
%
|
Total
|
|
$
|
33,464
|
|
|
|
100.0
|
%
|
|
(1)
|
Substantially all of our products are sold under The
North Face brand that is owned by VF Corporation.
|
Revenue by Geographic
Area
(All amounts, other than percentages, in thousands
of U.S. dollars)
|
|
Three Months Ended
September 30, 2018
|
|
|
Three Months Ended
September 30, 2017
|
|
|
Period over Period
Increase (decrease)
|
|
Region
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
United States
|
|
$
|
27,864
|
|
|
|
83
|
%
|
|
$
|
25,275
|
|
|
|
92
|
%
|
|
$
|
2,589
|
|
|
|
10
|
%
|
Jordan
|
|
|
4,969
|
|
|
|
15
|
%
|
|
|
2,250
|
|
|
|
8
|
%
|
|
|
2,719
|
|
|
|
121
|
%
|
Others
|
|
|
631
|
|
|
|
2
|
%
|
|
|
24
|
|
|
|
0
|
%
|
|
|
607
|
|
|
|
2,529
|
%
|
Total
|
|
$
|
33,464
|
|
|
|
100
|
%
|
|
$
|
27,549
|
|
|
|
100
|
%
|
|
$
|
5,915
|
|
|
|
21
|
%
|
According to the U.S. Customs and Border Protection
Jordan Free Trade Treaty, which became effective December 2001, all apparel manufactured in Jordan can be exported to the U.S.
with free duty. This treaty provides substantial benefits to us by allowing us to compete and to expand our garment export business
in the U.S.
The increase in sales to the U.S. of approximately
10% in the three months ended September 30, 2018, was mainly attributable to the reason mentioned above regarding the increase
in shipments to one of our major customers in the U.S. Revenue from Jordan and other locations also increased significantly due
to stronger demand of apparel products manufactured in Jordan per the Major Shipper Report.
Cost of goods sold
. Following
the increase in sales revenue, our cost of goods sold increased by approximately $4.8 million or 24%, to approximately $25.1 million,
for the three months ended September 30, 2018 compared to approximately $20.3 million for the same period in fiscal 2018. As a
percentage of revenues, the cost of goods sold increased by approximately 1% to 75% for the three months ended September 30, 2018
compared to 74% for the same period in fiscal 2018. The increase in cost of goods sold as a percentage of revenues was primarily
attributable to the lower proportion of export orders that typically provide higher profit margin. For the three months ended September
30, 2018, we purchased approximately 14% and 11% of our raw materials from two major suppliers, Universal Star Corporation (“Universal
Star”) and Sunny Special Dyeing & Finishing Co.,Ltd. For the three months ended September 30, 2017, the Company purchased
approximately 97% of its raw materials from one supplier, Onset Time Limited (“ONSET”).
Gross profit margin
. Gross profit
margin was approximately 25% for the three months ended September 30, 2018, which was lower by 1% from 26% for the same period
in fiscal 2018.
T
he lower gross profit margin was attributable to lower proportion of export
orders that typically provide higher profit margin.
Selling, general and administrative
expenses
.
Selling, general and administrative
expenses increased by approximately 57% from approximately $1.5 million for the three months ended September 30, 2017 to approximately
$2.3 million for the three months ended September 30, 2018. The increase was primarily due to increases in expenses to expand
marketing and supporting functions in the Hong Kong office, expenses related to banking and finance functions, legal and professional
fees and compliance costs after we became a public reporting company in October 2017, and inclusion of stock-based compensation
of approximately $0.2 million for an aggregate of 150,000 stock options granted to our Chief Financial Officer and Head of U.S.
Operations in the quarter ended September 30, 2018.
In accordance with the Jerash Holdings
(US), Inc. 2018 Stock Incentive Plan (the “Plan”) adopted by the Company on March 21, 2018, a total of 1,484,250 shares
of common stock were reserved for issuance under the Plan for grants to management, key employees and consultants of the Company.
On August 3, 2018, a total of 150,000 stock options were granted to our Chief Financial Officer and Head of U.S. Operations. The
stock options have an exercise price of $6.12 per share of common stock and will be fully vested on August 3, 2019. Based on the
valuation with Black Scholes model, value of each option is $3.88. There were approximately $390,000 unrecognized compensation
costs related to these options at September 30, 2018.
The aggregate stock-based compensation in the three months ended September 30, 2018, was approximately
$0.2 million related to the stock options granted on August 3, 2018. See Note 8 to the notes to our unaudited condensed consolidated
financial statements for more information about these stock options. There was no stock based compensation in the quarter ended
September 30, 2017.
Other expense, net
. Other expense,
net was approximately $6,800 for the three months ended September 30, 2018, as compared to other expense, net of approximately
$4,600 for the same period in fiscal 2018. This increase was primarily due to the foreign currency exchange loss from converting
Jordanian Dinars to U.S. Dollars for financial reporting.
Net income before taxation.
Net
income before taxation for the three months ended September 30, 2018 was $6.0 million compared to net income before taxation of
approximately $5.8 million in the three months ended September 30, 2017. The increase was mainly attributable to the increase in
sales of $5.9 million.
Taxation
. The Tax Cuts and Jobs Act (the “Tax
Act”) imposes a one-time transition tax on deemed repatriation of historical earnings of foreign subsidiaries, and future
foreign earnings are subject to U.S. taxation. The change has caused the Company to record a one-time income tax payable to be
paid over 8 years. The one-time transition tax was calculated using the Company’s total post-1986 overseas earnings and profits
based on a rate of 15.5% for the Company’s cash and cash equivalents and a rate of 8% for its other assets. The Company previously
booked a provisional charge of $1.4 million in fiscal 2018 related to the transition tax for all of its foreign subsidiaries, resulting
in an increase in income tax expense of approximately $1.4 million for the year ended March 31, 2018. The income tax payable attributable
to the transition tax is due over an 8-year period beginning in 2018. The Company revised its estimate of the impact of the transition
tax, which resulted in $1,892,000 of transition tax due. Accordingly, the Company booked a current charge to income tax expense
of $492,000 at June 30, 2018. At September 30, 2018, $1,463,000 of current income tax is reflected as Income tax payable in current
liabilities while a noncurrent income tax payable of approximately $1.6 million attributable to the transition tax is reflected
in "other liabilities" of the Company’s Consolidated Balance Sheet. The Tax Act also imposed a global intangible
low-taxed income tax (“GILTI”), which is a new tax on certain off-shore earnings at an effective rate of 10.5% for
tax years beginning after December 31, 2017 with a partial offset for foreign tax credits. Income tax expense for the three months
ended September 30, 2018 was $1.5 million compared to $0 in the three months ended September 30, 2017. This increase is attributable
to a provision relating to our GILTI liability for the three months ended September 30, 2018.
Net income
.
Net
income for the three months ended September 30, 2018 was $4.6 million compared to a net income of $5.8 million for the same period
in fiscal 2018. The decrease was primarily attributable to provision for GILTI tax of $1.5 million and the inclusion of stock-based
compensation of approximately $0.2 million in the quarter ended September 30, 2018.
Six months ended September 30, 2018 and
September 30, 2017
The following table summarizes the results
of our operations during the six-month periods ended September 30, 2018 and 2017 and provides information regarding the dollar
and percentage increase or (decrease) during such periods.
(All amounts, other than percentages, in thousands
of U.S. dollars)
|
|
Six Months Ended
September 30, 2018
|
|
|
Six Months Ended
September 30, 2017
|
|
|
Period over Period Increase
(Decrease)
|
|
Statement of Income
Data:
|
|
Amount
|
|
|
As % of
Sales
|
|
|
Amount
|
|
|
As % of
Sales
|
|
|
|
Amount
|
|
|
%
|
|
Revenue
|
|
$
|
51,827
|
|
|
|
100
|
%
|
|
$
|
48,899
|
|
|
|
100
|
%
|
|
$
|
2,928
|
|
|
|
6
|
%
|
Cost of goods sold
|
|
|
38,818
|
|
|
|
75
|
%
|
|
|
36,832
|
|
|
|
75
|
%
|
|
|
1,986
|
|
|
|
5
|
%
|
Gross profit
|
|
|
13,009
|
|
|
|
25
|
%
|
|
|
12,067
|
|
|
|
25
|
%
|
|
|
942
|
|
|
|
8
|
%
|
Selling, general and administrative expenses
|
|
|
7,477
|
|
|
|
14
|
%
|
|
|
2,875
|
|
|
|
6
|
%
|
|
|
4,602
|
|
|
|
160
|
%
|
Other expense, net
|
|
|
1
|
|
|
|
0
|
%
|
|
|
11
|
|
|
|
0
|
%
|
|
|
(10
|
)
|
|
|
(91)
|
%
|
Net income before taxation
|
|
$
|
5,531
|
|
|
|
11
|
%
|
|
$
|
9,181
|
|
|
|
19
|
%
|
|
$
|
(3,650
|
)
|
|
|
(40)
|
%
|
Taxation
|
|
|
1,829
|
|
|
|
4
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
1,829
|
|
|
|
-
|
|
Net income
|
|
$
|
3,702
|
|
|
|
7
|
%
|
|
$
|
9,181
|
|
|
|
19
|
%
|
|
$
|
(5,479
|
)
|
|
|
(60)
|
%
|
Revenue.
Revenue increased
by approximately $3.0 million or 6%, to $51.8 million, for the six months ended September 30, 2018 from approximately $48.9 million
for the same period in fiscal 2018. The increase was mainly the result of deferred shipments attributable to the national holidays
in Jordan for EID al-Fitr from June 15 to June 18, 2018 that affected our shipments and created backlog at the port of Aqaba the
following week. We normally send our products to the port of Aqaba over weekends and freight forwarders designated by customers
will effect shipments per customers’ instructions on Monday and Tuesday. Approximately $2.5 million of shipments scheduled
to be shipped in June were shipped in early July due to the EID al-Fitr holiday. In addition, we had increases in sales to one
of our major customers in the United States, our major export destination, and also our execution of local orders in Jordan.
The following table
outlines the dollar amount and percentage of total sales to our customers the six months ended September 30, 2018.
(All amounts, other
than percentages, in thousands of U.S. dollars)
|
|
Six Months Ended
September, 2018
|
|
|
|
Sales
|
|
|
|
|
|
|
Amount
|
|
|
%
|
|
VF Corporation
(1)
|
|
$
|
42,961
|
|
|
|
82.9
|
%
|
Columbia
|
|
|
3,767
|
|
|
|
7.3
|
%
|
Others
|
|
|
5,099
|
|
|
|
9.8
|
%
|
Total
|
|
$
|
51,827
|
|
|
|
100.0
|
%
|
(1) Substantially all of our products are sold under The North
Face brand that is owned by VF Corporation.
Revenue by Geographic
Area
(All amounts, other than percentages, in
thousands of U.S. dollars)
|
|
Six Months Ended
September 30, 2018
|
|
|
Six Months Ended
September 30, 2017
|
|
|
Period over Period
Increase (decrease)
|
|
Region
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
United States
|
|
$
|
45,673
|
|
|
|
88
|
%
|
|
$
|
46,339
|
|
|
|
95
|
%
|
|
$
|
(666
|
)
|
|
|
(1)
|
%
|
Jordan
|
|
|
5,099
|
|
|
|
10
|
%
|
|
|
2,307
|
|
|
|
5
|
%
|
|
|
2,792
|
|
|
|
121
|
%
|
Others
|
|
|
1,055
|
|
|
|
2
|
%
|
|
|
253
|
|
|
|
0
|
%
|
|
|
802
|
|
|
|
317
|
%
|
Total
|
|
$
|
51,827
|
|
|
|
100
|
%
|
|
$
|
48,899
|
|
|
|
100
|
%
|
|
$
|
2,928
|
|
|
|
6
|
%
|
According to the U.S. Customs and Border Protection
Jordan Free Trade Treaty, which became effective December 2001, all apparel manufactured in Jordan can be exported to the U.S.
with free duty. This treaty provides substantial benefits to us by allowing us to compete and to expand our garment export business
in the U.S.
The slight decrease in sales to the U.S.
of approximately 1% in the six months ended September 30, 2018, was mainly attributable to the decrease in orders from one of the
customers in the U.S., which was partly compensated by the increase in orders from another customer.
Sales to customers in Jordan and other locations increased by 121% and 317% respectively for the six-month
ended September 30, 2018 compared with the same period in fiscal 2018. The increase in orders in Jordan reflected the growing demand
of products manufactured in Jordan.
Cost of goods sold
. Following
the increase in sales revenue, our cost of goods sold increased by approximately $2.0 million or 5%, to approximately $38.8 million,
for the six months ended September 30, 2018 compared to approximately $36.8 million for the same period in fiscal 2018. As a percentage
of revenues, the cost of goods sold remained at 75% which was consistent with the same period in fiscal 2018. For the six months
ended September 30, 2018, we purchased approximately 19% and 13% of our raw materials from two major suppliers, Duck San Enterprise
Co., Ltd. and Universal Star. For the six months ended September 30, 2017, the Company purchased approximately 97% of its raw materials
from one supplier, ONSET.
Gross profit margin
. Gross profit
margin was approximately 25% for the six months ended September 30, 2018, which was consistent with the same period in fiscal 2018.
Selling, general and administrative expenses.
Selling, general and administrative expenses increased by approximately 160% from approximately $2.9 million for the six
months ended September 30, 2017 to approximately $7.5 million for the six months ended September 30, 2018. The increase was primarily
due to inclusion of stock-based compensation of approximately $3.4 million for options granted to fifteen employees and consultants
in the six-month period ended September 30, 2018, increases in expenses to expand marketing and supporting functions in the Hong
Kong office, expenses related to banking and finance functions, and legal and professional fees and compliance costs after we became
a public reporting company in October 2017.
In accordance with the Jerash Holdings
(US), Inc. 2018 Stock Incentive Plan (the “Plan”) adopted by the Company on March 21, 2018, a total of 1,484,250 shares
of common stock were reserved for issuance under the Plan for grants to management, key employees and consultants of the Company.
On April 9, 2018, a total of 989,500 stock options were granted to thirteen employees and consultants. The options have an exercise
price of $7.00 per share and vested immediately, resulting in a charge of $3.2 million to compensation costs. Based on the valuation
with Black Scholes model, the value of each option is $3.24.
On August 3, 2018, a total of 150,000 stock
options were granted to our Chief Financial Officer and Head of U.S. Operations. The stock options have an exercise price of $6.12
per share and will be fully vested on August 3, 2019. Based on the valuation with Black Scholes model, value of each option is
$3.88. The aggregate stock-based compensation in the six months ended September 30, 2018, was approximately $0.2 million. There
were approximately $390,000 unrecognized compensation costs in these options at September 30, 2018.
The aggregate stock-based compensation in the six months ended September 30, 2018, was approximately $3.4
million, which consists of a total of 989,500 stock options granted to 13 employees and consultants on April 9, 2018 and a total
of 150,000 stock options granted to two employees on August 3, 2018. See Note 8 to the notes to our unaudited condensed consolidated
financial statements for more information about these stock options.
There was stock based compensation of approximately $117,000 related to the 50,000 warrants granted to
a board observer in the six-month period ended September 30, 2017.
Other expense, net
. Other expense,
net was approximately $1,300 for the six months ended September 30, 2018, as compared to other expense, net of approximately $11,000
for the same period in fiscal 2018. The decrease was primarily due to gain on the foreign currency exchange loss from converting
Jordanian Dinars to U.S. Dollars for financial reporting.
Net income before taxation.
Net
income before taxation for the six months ended September 30, 2018 was $5.5 million compared to net income before taxation of approximately
$9.2 million in the six months ended September 30, 2017. The decrease was mainly attributable to the $3.4 million of stock-based
compensation reported in fiscal 2019 mentioned above, increases in expenses to expand marketing and supporting functions in the
Hong Kong office, expenses relating to banking and finance functions, and legal and professional fees and compliance costs after
we became a public reporting company in October 2017.
Taxation
. The Tax Cuts and
Jobs Act (the “Tax Act”) imposes a one-time transition tax on deemed repatriation of historical earnings of foreign
subsidiaries, and future foreign earnings are subject to U.S. taxation. The change has caused the Company to record a one-time
income tax payable to be paid over 8 years. The one-time transition tax was calculated using the Company’s total post-1986
overseas earnings and profits based on a rate of 15.5% for the Company’s cash and cash equivalents and a rate of 8% for its
other assets. The Company previously booked a provisional charge of $1.4 million in fiscal 2018 related to the transition tax for
all of its foreign subsidiaries, resulting in an increase in income tax expense of approximately $1.4 million for the year ended
March 31, 2018. The income tax payable attributable to the transition tax is due over an 8-year period beginning in 2018. The Company
revised its estimate of the impact of the transition tax, which resulted in $1,892,000 of transition tax due. Accordingly, the
Company booked a current charge to income tax expense of $492,000 at June 30, 2018. At September 30, 2018, $1,463,000 of current
income tax is reflected as Income tax payable in current liabilities while a noncurrent income tax payable of approximately $1.6
million attributable to the transition tax is reflected in "other liabilities" of the Company’s Consolidated Balance
Sheet. The Tax Act also imposed GILTI, which is a new tax on certain off-shore earnings at an effective rate of 10.5% for tax years
beginning after December 31, 2017 with a partial offset for foreign tax credits.
Income tax expense for the six months ended
September 30, 2018 was $1.8 million compared to $0 in the six months ended September 30, 2017. This increase is attributable to
a $0.5 million charge relating to revising the estimated impact of the transition tax provision of the Tax Act, which amount is
a true up to the provisional amount booked at March 31, 2018 and $1.3 million tax provision relating to GILTI for the six months
ended September 30, 2018.
Net income.
Net income for the
six months ended September 30, 2018 was $3.7 million compared to a net income of $9.2 million for the same period in fiscal 2018.
The decrease was primarily attributable to a the $3.4 million of stock-based compensation and a provision for taxation of $1.8
million reported in fiscal 2019 mentioned above, increases in expenses to expand marketing and supporting functions in the Hong
Kong office, expenses relating to banking and finance functions, legal and professional fees and compliance costs after we became
a public reporting company in October 2017, and incremental provision for the Transition Tax mentioned above.
Liquidity and Capital Resources
We are a holding company incorporated in the
U.S. We may need dividends and other distributions on equity from our Jordanian 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
all of our revenues) to meet our obligations to date. To the extent payments are due in U.S. dollars, we have occasionally paid
such amounts in Jordanian Dinar (“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 September 30, 2018, we had cash of approximately
$26.8 million and restricted cash of approximately $3.7 million.
Our current assets as of September 30, 2018
were approximately $52.3 million, and our current liabilities were approximately $7.5 million, which resulted in a ratio of approximately
7.0: 1. Total equity as of September 30, 2018 was approximately $49.8 million.
We had net working capital of $44.8 million and $
29.0
million as of September 30, 2018 and March 31, 2018, 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 this document is filed.
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 contracts, the progress of execution on our customer contracts, and the timing of accounts receivable collections.
On November 1, 2018, our Board of Directors approved the payment
of an annual dividend of $0.20 per share, paid quarterly. The first quarterly dividend will be paid on November 27, 2018 to stockholders
of record as of November 19, 2018.
Credit Facilities
On May 29, 2017, our wholly-owned subsidiary,
Treasure Success, entered into a facility letter (“Facility Letter”) with Hong Kong and Shanghai Banking Corporation
(“HSBC”) to provide credit to us. Under the terms of the Facility Letter, we have a total credit limit of $8,000,000.
The Facility Letter provides us with various credit facilities for importing and settling goods from our suppliers. The available
credit facilities as described in greater detail below includes an import facility, import facilities with loan against import,
trust receipts, clean import loan, and advances to us against purchase orders. HSBC charges an interest rate of 1.5% per annum
over LIBOR or HIBOR, as applicable, for credit related to the release of goods immediately on our documentary credit.
HSBC charges a commission of: i) 0.25% for
the first $50,000, ii) 0.125% for the balance in excess of $50,000 and up to $100,000 and iii) 0.0625% for balance in excess of
$100,000 and an interest rate of 1.5% per annum over LIBOR or HIBOR, as applicable, for credit related to trust receipts whereby
HSBC has title to the goods or merchandise released immediately to us. HSBC has approved certain of our suppliers that are eligible
to use clean import loans. HSBC charges a commission of: i) 0.25% for the first $50,000, ii) 0.125% for the balance in excess of
$50,000 and up to $100,000 and iii) 0.0625% for balance in excess of $100,000 and an interest of 1.5% per annum over LIBOR or HIBOR,
as applicable, for credit services related to clean import loans or release of the goods or merchandise based on evidence of delivery
or invoice. HSBC will advance up to 70% of the purchase order value in our favor. HSBC charges a handling fee of 0.25% and an interest
rate of 1.5% per annum over LIBOR or HIBOR, as applicable, for credit services related to advances.
The Facility Letter is collateralized by
the guarantees of Jerash Holdings and Jerash Garments, and the personal guarantees by Mr. Choi Lin Hung and Mr. Ng Tsze Lun. Jerash
Garments is also required to maintain an account at HSBC for receiving payments from VF Sourcing Asia S.A.R.L. and its related
companies. In addition, to secure the Facility Letter, we granted HSBC a charge of $3,000,000 over the Company’s deposits
which is classified in our balance sheet as restricted cash.
The Facility Letter is subject to review
at any time. HSBC has discretion on whether to renew the Facility Letter. As of September 30, 2018, $1,263,536 was outstanding
under the Facility Letter. Borrowings under the Facility Letter are due within 120 days of each borrowing date or upon demand by
HSBC.
On June 5, 2017, Treasure Success entered
into an Offer Letter - Invoice Discounting / Factoring Agreement and on August 21, 2017, Treasure Success entered into the Invoice
Discounting/Factoring Agreement (together, the “Factoring Agreement”) with HSBC for certain debt purchase services
related to our accounts receivables. Under the terms of the Factoring Agreement, we may borrow up to $12,000,000. In exchange for
advances on eligible invoices from HSBC for our approved customers, HSBC charges a fee to advance such payments at a discounting
charge of 1.5% per annum over 1-month LIBOR or HIBOR, as applicable. Such fee accrues on a daily basis on the amount of funds in
use. HSBC has final determination of the percentage amount available for prepayment from each of our approved customers. We may
not prepay an amount from a customer in excess of 85% of the funds available for borrowing.
HSBC also provides credit protection and
debt services related to each of our preapproved customers. For any approved debts or collections assigned to HSBC, HSBC charges
a flat fee of 0.35% on the face value of the invoice for such debt or collection. We may assign debtor payments that are to be
paid to HSBC within 90 days, defined as the maximum terms of payment. We may receive advances on invoices that are due within 30
days of the delivery of our goods, defined as the maximum invoicing period.
The advances made by HSBC are collateralized
by the guarantees of Jerash Holdings and Jerash Garments, and the personal guarantees by Mr. Choi Lin Hung and Mr. Ng Tsze Lun.
In addition, to secure the Factoring Agreement, we granted HSBC a charge of $3,000,000 over our deposits which is classified in
our balance sheet as restricted cash. If we fail to pay any sum due to HSBC, HSBC may charge a default interest at the rate of
8.5% per annum over the best lending rate quoted by HSBC on such defaulted amount.
Either party may terminate the agreement
subject to a 30 days’ notice period. As of September 30, 2018, there were $0.9 million outstanding under the Factoring Agreement.
Based on our current operating plan, we believe
that our cash on hand and cash generated from operations will be sufficient to meet our working capital requirements for our current
operations over the next twelve months.
Six months ended September 30, 2018 and
2017
The following table sets forth a summary of
our cash flows for the periods indicated:
(All in amounts in thousands of U.S. dollars)
|
|
Six months ended September 30,
|
|
|
|
2018
|
|
|
2017
|
|
Net cash provided by operating activities
|
|
$
|
8,859
|
|
|
$
|
1,711
|
|
Net cash (used in) investing activities
|
|
|
(717
|
)
|
|
|
(335
|
)
|
Net cash provided by financing activities
|
|
|
10,
104
|
|
|
|
2,815
|
|
Effect of exchange rate changes on cash
|
|
|
1
9
|
|
|
|
5
|
|
Net increase in cash
|
|
|
18,
265
|
|
|
|
4,196
|
|
Cash and restricted cash, beginning of six-month period
|
|
|
12,196
|
|
|
|
4,133
|
|
Cash and restricted cash, end of six-month period
|
|
$
|
30,461
|
|
|
$
|
8,329
|
|
Operating Activities
Net cash provided by operating activities was
approximately $8.9 million for the six months ended September 30, 2018, compared to cash provided by operating activities of approximately
$1.7 million for the same period in fiscal 2018. The increase in net cash provided by operating activities was primarily attributable
to the following factors:
|
·
|
A decrease in accounts receivable – related party of $50,000 compared to an increase of $3.8
million in the same period in fiscal 2018.
|
|
·
|
A decrease in accounts payable of $3.1 million compared to a decrease of $7.9 million in the same
period in fiscal 2018.
|
Investing Activities
Net cash used in investing activities was approximately $0.7 million for the six months ended September
30, 2018 and net cash used in investing activities was approximately $0.3 million in the same period in fiscal 2018. The net cash
used in investing activities in the six-month period ended September 30, 2018 were used in purchases of property, plant and equipment.
Financing Activities
Net cash provided by financing activities
was approximately $10.1 million for the six months ended September 30, 2018. The cash inflow mainly resulted from the net proceeds
of $8.9 million of the IPO, which closed on May 2, 2018, and the increase in bank loans of $1.2 million under the bank facilities
given to Treasure Success International Limited.
Statutory Reserves
In accordance with the Corporate Law in Jordan, the subsidiaries in Jordan are required to make appropriations
to certain reserve funds, based on net income determined in accordance with generally accepted accounting principles in 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. This reserve is not available for dividend distribution. As our subsidiaries have already reserved the maximum required
by law, they did not reserve any additional amounts during the three and six months ended September 30, 2018 and 2017.
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 September 30, 2018 and 2017.
|
|
As of September 30,
|
|
|
|
2018
|
|
|
2017
|
|
Statutory Reserves
|
|
$
|
72
|
|
|
$
|
72
|
|
Total Restricted Net Assets
|
|
$
|
72
|
|
|
$
|
72
|
|
Consolidated Net Assets
|
|
$
|
49,790
|
|
|
$
|
32,874
|
|
Restricted Net Assets as Percentage of Consolidated Net Assets
|
|
|
0.14
|
%
|
|
|
0.22
|
%
|
Total restricted net assets accounted for approximately
0.14% of our consolidated net assets as of September 30, 2018. As discussed above, our subsidiaries in Jordan are required to reserve
10% of net profits until the reserve is equal to 100% of the subsidiary’s share capital. Our subsidiaries have already reserved
the maximum amount required. We believe the potential impact of such restricted net assets on our liquidity is limited.
Capital Expenditures
We had capital expenditures of approximately
$0.7 million and $0.7 million for the six months ended September 30, 2018 and 2017, respectively, for purchases of equipment in
connection with our business activities and increase of capacity. Additions in plant and machinery amounted to approximately $602,000
and approximately $452,000 for the six months ended September 30, 2018 and 2017, respectively, and additions to leasehold improvements
amounted to approximately $81,000 and $116,000 for the six months ended September 30, 2018 and 2017, respectively.
In 2015, we commenced a project to build
a 4,844 square foot workshop in the Tafilah Governorate of Jordan, which will primarily be used as a sewing workshop for
Jerash
Garments. This project is expected to cost $230,000 and is expected to be completed in calendar year 2018. There is another project
for the construction of a 53,820 square foot workshop in Al-Hasa County in the Tafilah
Governorate of Jordan, which is expected
to be completed by the middle of calendar year 2019.
We project that we will use an aggregate of approximately $3.1 million to fund our capital expenditures
for fiscal 2019 and fiscal 2020 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
our subsidiaries’ operations to fund our capital commitments in the past and anticipate using such funds and proceeds received
from our expected initial public offering 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 shareholders’ equity, or that are not reflected
in our consolidated financial statements.
Critical Accounting Policies
We prepare our financial statements in conformity
with accounting principles generally accepted by the United States of America (“U.S. GAAP”), which require us to make
judgments, estimates and assumptions that affect our reported amount of assets, liabilities, revenue, costs and expenses, and any
related disclosures. Although there were no material changes made to the accounting estimates and assumptions in the past three
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 the following accounting policies
involve a higher degree of judgment and complexity in their application and require us to make significant accounting estimates.
Accordingly, these are the policies we believe are the most critical to understanding and evaluating our consolidated financial
condition and results of operations.
Revenue recognition
Revenue Recognition for Contracts with Customers
In May 2014, the FASB issued guidance which
provided a single, comprehensive accounting model for revenue arising from contracts with customers. This guidance was revised
and clarified through supplemental adoption guidance subsequent to May 2014. This new revenue recognition guidance superseded most
of the prior revenue recognition guidance, which specified that revenue should be recognized when risks and rewards are transferred
to a customer. Under the new guidance, revenue is recognized at an amount that reflects the consideration expected to be received
for those goods and services pursuant to a five-step approach: (1) identify the contracts with the customer; (2) identify the separate
performance obligations in the contracts; (3) determine the transaction price; (4) allocate the transaction price to separate performance
obligations; and (5) recognize revenue when, or as, each performance obligation is satisfied. The new guidance also requires additional
disclosures about the nature, timing and uncertainty of revenue and cash flow arising from customer contracts, including significant
judgments and changes in judgments.
Pursuant to ASC 606 and ASC 270-10-50-1A,
we have conducted an analysis for each of our customers with the five-step approach that has been reviewed by our audit committee.
We derive all of our revenue through the supply of apparel products to our customers. We normally receive purchase orders from
customers for the supply of apparel products with specifications provided by customers to them at a specific quantity to a specific
location on or before a specific date. Purchase orders are contracts between us and our customers. Performance obligations require
us to deliver a stated quantity of a specific product in acceptable quality (with style number, product description and color)
to a specific location in accordance to the shipping term on or before a specific date detailed on a purchase order.
Revenue is recognized when performance obligations
under the terms of the purchase orders with our customers are satisfied. Our performance obligations generally consist of delivering
our products to a specific location designated by the customers on purchase orders. Control of the products is generally transferred
upon delivering the products to customers based on shipping terms mostly free on-board shipping point. Once control is transferred
to the customers, we have completed our performance obligations related to the contract. After completion of our performance obligation,
we have an unconditional right to consideration as outlined in the purchase orders determined by the shipped quantity and the unit
price.
We offer credit terms to our customers.
Receivables are recognized upon revenue is recognized. Our receivables resulting from contracts with our customers are typically
45 to 90 days from sailing date from shipping point in accordance with established credit terms. Most of our performance obligations
under terms of our contracts with customers have an expected original duration of one year or less. Before the performance obligations
are fulfilled, we maintain costs of the products related to purchase orders in our inventory. Inventory values as of September
30, 2018 and March 31, 2108, were approximately $8.7 million and $20 million, respectively.
Receivables resulted from sales revenue
recognition as of September 30, 2018 was $15.7 million, with an increase of $10.5 million comparing to $5.2 million as of March
31, 2018. The increase was primarily attributable to higher sales revenue recognized in the month of September 2018, after completion
of our performance obligations, with a credit term of 45 to 90 days from sailing dates granted to our customer. We did not have
any business combinations in the quarter ended September 30, 2018 that might cause significant changes in contract assets and contract
balances, nor was there any impairment of contract assets. There was also no change in time frame for a right to consideration
to become unconditional or any change in the time frame for a performance obligation to be satisfied.
The new guidance does not affect the methodology
we have been adopting to recognize revenue in previous fiscal years and thus there was no adjustment for the cumulative effect
of applying the guidance to retained earnings for compliance with the guidance.
Accounts receivable
Accounts receivable are recognized and carried
at original invoiced amount less an estimated allowance for uncollectible accounts. The Company usually grants credit to customers
with good credit standing with a maximum of 90 days and determines the adequacy of reserves for doubtful accounts based on individual
account analysis and historical collection trends. The Company establishes a provision for doubtful receivables when there is objective
evidence that the Company may not be able to collect amounts due. The allowance is based on management's best estimates of specific
losses on individual exposures, as well as a provision on historical trends of collections. The provision is recorded against accounts
receivables balances, with a corresponding charge recorded in the consolidated statements of income and comprehensive income. Actual
amounts received may differ from management's estimate of credit worthiness and the economic environment. Delinquent account balances
are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is
not probable. No allowance was considered necessary as of September 30, 2018 and March 31, 2018.
Recent Accounting Pronouncements
See Note 3 – Recent Accounting Pronouncements in the notes to our unaudited condensed
consolidated financial statements for a discussion of recent accounting pronouncements.
Item 4.
Controls and Procedures
Disclosure Controls and Procedures
Disclosure controls and procedures (as defined in Exchange Act Rule
15d-15(e)) are designed with the objective of ensuring that information required to be disclosed in our reports filed under the
Exchange Act, such as this report, is recorded, processed, summarized and reported within the time periods specified in the SEC’s
rules and forms. Disclosure controls and procedures are also designed with the objective of ensuring that such information is accumulated
and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow
timely decisions regarding required disclosure.
Our Chief Executive Officer (principal executive
officer) and Chief Financial Officer (principal financial officer), based on their evaluation of the Company’s disclosure
controls and procedures as of September 30, 2018, concluded that the Company’s disclosure controls and procedures were effective
as of that date.
Changes in Internal Control Over Financial
Reporting
This Quarterly Report does not include a report
of management’s assessment regarding internal control over financial reporting due to the transition period established by
the SEC for newly public companies.
JERASH HOLDINGS (US), INC.
PART II - OTHER INFORMATION
Item 1.
Legal Proceedings
We are not currently involved in any material
legal proceedings. From time-to-time the Company is, and the Company anticipates that we will be, involved in legal proceedings,
claims and litigation arising in the ordinary course of our business and otherwise. The ultimate costs to resolve any such matters
could have a material adverse effect on the Company’s financial statements. We could be forced to incur material expenses
with respect to these legal proceedings, and in the event there is an outcome in any that is adverse to us, the Company’s
financial position and prospects could be harmed.
Item 5.
Other Information
On November 9, 2018, the Company and
Richard J. Shaw entered into an employment agreement effective August 3, 2018 (the “Employment Agreement”).
Pursuant to the Employment Agreement, Mr. Shaw will serve as Chief Financial Officer of the Company, committing up to 160
hours per month, for a term of 12 months beginning as of August 3, 2018. Following the initial term, the Employment
Agreement will automatically renew for subsequent one-month terms unless terminated by Mr. Shaw or the Company. The
Employment Agreement provides that Mr. Shaw may concurrently serve as a chief financial officer of other companies, provided
that he informs the Company in advance. Mr. Shaw will receive a fee of $10,000 per month during the term of the
Employment Agreement.
Item 6.
Exhibits
The exhibits listed below are filed as part of this Quarterly Report
on Form 10-Q.
Index to Exhibits
3.1
|
Amended and Restated Certificate of Incorporation
|
|
Incorporated herein by reference to Exhibit 3.1 to Post-Effective Amendment No. 1 to the Company’s Form S-1 (File No. 333-222596), filed with the SEC on September 19, 2018.
|
10.1+
|
Employment Agreement between the Company and Karl Brenza
|
|
Incorporated herein by reference to Exhibit 10.21 to Post-Effective Amendment No. 1 to the Company’s Form S-1 (File No. 333-222596), filed with the SEC on September 19, 2018.
|
10.2
+
|
Stock Option Award Agreement between the Company and Karl Brenza
|
|
Incorporated herein by reference to Exhibit 10.22 to Post-Effective Amendment No. 1 to the Company’s Form S-1 (File No. 333-222596), filed with the SEC on September 19, 2018.
|
10.3+
|
Stock Option Award Agreement between the Company and Richard J. Shaw
|
|
Incorporated herein by reference to Exhibit 10.23 to Post-Effective Amendment No. 1 to the Company’s Form S-1 (File No. 333-222596), filed with the SEC on September 19, 2018.
|
10.4+
|
Employment Agreement between the Company and Richard J. Shaw
|
|
Filed herewith.
|
31.1
|
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002
|
|
Filed herewith.
|
31.2
|
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002
|
|
Filed herewith.
|
32.1
|
Certification of Principal Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
Filed herewith.
|
32.2
|
Certification of Principal Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
Filed herewith.
|
101.INS
|
XBRL Instance Document
|
|
Filed herewith.
|
101.SCH
|
XBRL Taxonomy Extension Schema Linkbase
|
|
Filed herewith.
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase
|
|
Filed herewith.
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase
|
|
Filed herewith.
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase
|
|
Filed herewith.
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase
|
|
Filed herewith.
|
|
+
|
Indicates a management contract or compensatory plan,
contract or arrangement.
|
Signature
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: November 13, 2018
|
Jerash Holdings (US), Inc.
|
|
|
|
By:
|
/s/ Richard J. Shaw
|
|
|
Richard J. Shaw
|
|
|
Chief Financial Officer (Principal Financial and Authorized Officer)
|
Exhibit 10.4
EMPLOYMENT AGREEMENT
This
Employment Agreement
(the “
Agreement
”) is made as of August 3, 2018 (the “
Effective
Date
”) between Jerash Holdings (US), Inc., with an address of 19/F, Ford Glory Plaza, 37-39 Wing Hong Street, Cheung
Sha Wan, Kowloon, Hong Kong (“
Company
”), and Richard J. Shaw with an address at 8481 Big Cone Path, Liverpool,
NY 13090 (“
Employee
”) (Company and Employee are each a “
Party
” and collectively
the “
Parties
”).
Whereas
,
Employee is experienced in financial management.
Whereas
,
the Company desires to retain Employee to provide general financial services and Employee agrees to provide such services, in accordance
with the terms and conditions set forth in this Agreement.
Now,
Therefore
, in consideration of the premises, mutual covenants, terms and conditions contained herein, and for other
good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereby agree as follows:
1.
Services
.
Employee shall serve as an executive officer and his title shall be Chief Financial Officer of the Company. Employee will provide
general financial services to the Company, as further described in Exhibit A (the “
Services
”). Employee
shall provide such services as the Company may reasonably request and shall commit up to 160 hours per month on Services for the
Company, provided that: (a) Employee may continue to serve as the President of LogiCore Strategies, LLC (“LogiCore”);
and (b) Employee may continue to serve as a chief financial officer of clients of LogiCore, provided that no conflict of interest
exists between those clients and the Company. Employee shall provide prior notice to the Company if he intends to assume any position
as described in clause (b) above and shall provide prompt notice to the Company if he already holds any such positions.
2.
Appointment;
Term
. The Company hereby appoints Employee and Employee hereby accepts appointment as Chief Financial Officer for the Company,
subject to the terms and conditions of this Agreement. The term of this Agreement shall commence on the Effective Date and shall
continue for twelve (12) months (the “
Term
”). This Agreement shall automatically renew for subsequent
one (1) month terms unless terminated by either Party.
3.
Use of the
Company Facilities, Equipment
. Employee shall not have a dedicated workspace or equipment at the Company offices and shall
not have set hours for the performance of the Services. The Company may authorize use of certain Company facilities and services,
including, but not limited to, use of temporary office space and Company equipment related to authorized projects, as long as such
use does not interfere with the day-to-day operations of the Company.
4.
Ownership
of Work Product
. All work product developed by Employee, in whole or in part, either alone or jointly with others, during
the Term and any subsequent renewal term, which may relate in any manner to the actual or anticipated business, work, research
or development of the Company, or which result, to any extent, from the Services performed by Employee for the Company, or use
of the Company’s Confidential Information (as defined below), will be the sole property of the Company.
5.
Compensation
.
Employee shall be paid $120,000.00 USD per annum for Services the Company may reasonably request, to be paid in the following manner:
Fees payable in advance
on a monthly basis by the Company into an account nominated by the Employee in writing within 10 days of receipt of an invoice
issued at the end of each month by the Employee with an initial retainer in the amount of $10,000.00 due at the time of executing
this agreement.
The Company and Employee
agree to negotiate in good faith to increase Employee’s compensation upon an increase in duties or time committed to providing
services.
In addition, Employee
shall receive an option to purchase 50,000 shares with an exercise price equal to the Nasdaq closing price on the date of execution
of this Agreement. The option shall vest immediately and be exercisable for 10 years. The option shall be subject to a separate
agreement and have a cashless exercise provision.
6.
Expenses
. Company shall
promptly reimbursement Employee for travel related expenses incurred in the ordinary course of providing services outlined in this
agreement. Reimbursable expenses shall not be limited to but shall include costs of airfare, hotels, business meals when traveling,
and mileage reimbursement. Employee shall provide a formal accounting of all expenses including receipts on a monthly basis for
approval and payment. Payment will be deposited into an account nominated by the Employee in writing within 30 days after submission.
7.
Termination
.
This Agreement shall automatically renew unless terminated by either Party. This Agreement may be terminated upon mutual written
consent of the Employee and Company. At any time after the twelve (12) months hereof, Employee may terminate this Agreement (a)
upon ninety (90) days’ prior written notice to the Company or (b) immediately if Employee’s agent is subject to materially
diminished duties or responsibilities provided that should a replacement Chief Financial Officer be retained by the Company such
replacement shall not constitute diminished duties or responsibilities. The Company may terminate this Agreement without prior
notice and without further obligation for reasons of just cause (
e.g.
, fraud, theft, conviction of a felony, improper or
dishonest action or significant acts of misconduct), on the part of Employee or any of Employee’s agents providing services
to the Company. The Company may terminate this Agreement without cause upon ninety (90) days’ written notice.
8.
Notices
.
All notices and other communications required hereunder must be in writing and shall be deemed to have been duly given only when
personally delivered or deposited in the US Postage Service, postage prepaid for first class delivery, as follows:
If to the Company:
Jerash Holdings
(US), Inc.
19/F, Ford
Glory Plaza
37-39 Wing
Hong Street
Cheung Sha
Wan, Kowloon
Hong Kong
Attn: Choi
Lin Hung
If to Employee:
Richard J.
Shaw
8481 Big
Cone Path
Liverpool, NY 13090
or to such other addresses as either party
hereto shall furnish to the other by notice given in accordance with this section. Unless otherwise specified herein, such notices
or other communications shall be deemed received (i) the date delivered, if delivered personally, and (ii) five (5) days after
being sent, if sent via first class mail.
9.
Confidentiality;
Non-Solicitation
.
A. Employee shall keep
secret and retain the confidential nature of all Confidential Information (as defined herein) belonging to the Company and take
such other precautions with respect thereto as the Company, in its sole discretion, may reasonably request. Employee shall not
at any time, whether before or after the termination of this Agreement, use, copy, disclose or make available any Confidential
Information (as defined herein) to any corporation, governmental body, individual, partnership, trust or other entity (a “
Person
”);
except that Employee may use, copy or disclose to any Person any Confidential Information (as defined herein) (i) to the extent
required in the performance of the Services, (ii) to the extent it becomes publicly available through no fault of Employee, and
(iii) to the extent Employee is required to do so pursuant to applicable law or court order.
B. For purposes of
this Agreement, “Confidential Information” shall mean all information pertaining to the affairs and operations of the
Company that is not generally available to the public and that the Company desires to keep confidential, including, but not limited
to, trade secrets, inventions, financial information, information as to customers, clients or patients, and suppliers, sales and
marketing information, and all documents and other tangible items relating to or containing any such information. Employee acknowledges
that the Confidential Information is vital, sensitive, confidential and proprietary to the Company.
C. All Confidential
Information disclosed or made available by the Company to Employee shall at all times remain the personal property of the Company
and all documents, lists, plans, proposals, records, electronic media or devices and other tangible items supplied to Employee
that constitute or contain Confidential Information shall, together with all copies thereof, and all other property of the Company,
be returned to the Company immediately upon termination of this Agreement for whatever reason or sooner upon demand.
D. Employee acknowledges
that a breach of the provisions of this Section 9 shall cause irreparable harm to the Company for which it will have no adequate
remedy at law. Employee agrees that the Company may, in its sole discretion, obtain from a court of competent jurisdiction an injunction,
restraining order or other equitable relief in favor of itself restraining Employee from committing or continuing any such violation.
Any right to obtain an injunction, restraining order or other equitable relief hereunder will not be deemed a waiver of any right
to assert any other remedy which the Company may have in law or in equity.
E. Additionally, during
the Term, Employee shall not induce or solicit Company’s employees, agents, Employees, contractors, clients, and customers
away for the Company on its behalf or on behalf of any other company or person. Employee agrees that this Section 8, the scope
of the territory covered, the actions restricted thereby, and the duration of such covenant are reasonable and necessary to protect
the legitimate business interests of the Company.
F. The confidentiality
and non-solicit obligations set forth herein shall survive for a period of twelve (12) months after the termination or expiration
of this Agreement.
10.
Indemnification
.
Employee and Company shall mutually indemnify, defend (with counsel chosen by the Company), and hold each other harmless from and
against any and all claims, losses, damages, liabilities, actions, costs and expenses, including, but not limited to, reasonable
legal fees and expenses, paid or incurred by the other party and arising directly and indirectly out of: (i) any breach of this
Agreement by the either party, (ii) any breach by either party of written policies or standards for the Company or (iii) any other
act or omission of either party. .
11.
Miscellaneous
.
A.
Governing Law
.
This Agreement shall be governed and controlled as to validity, enforcement, interpretation, construction, effect and in all other
respects by the laws of the State of New York and the federal laws of the United States applicable therein, without giving effect
to any choice of law or conflict of law rules or provisions that would cause the application of the laws of any jurisdiction. In
the event that any legal proceedings are commenced in any court with respect to any matter arising under this Agreement, Employee
and the Company hereto specifically consent and agree that the venue of any such action shall be in the courts of the State of
New York, County of Onondaga and each of Employee and the Company hereby waive any claim that such venue is an inconvenient forum
for the resolution of such proceeding.
B.
Entire Agreement
.
This Agreement constitutes the entire agreement of the Parties hereto and supersedes any prior agreement or understanding, whether
oral or written, between the Parties hereto with respect to the subject matter hereof. This Agreement may not be terminated, modified
or amended orally or by any course of conduct or usage of trade but only by an agreement in writing duly executed by the Parties
hereto.
C.
Assignment
.
This Agreement may not be assigned by either Party without the prior written consent of a duly authorized officer of the other
Party. The merger or consolidation of a Party, or the sale of all or substantially all of the assets or shares of a Party hereto,
shall not be deemed an assignment of this Agreement.
D.
Counterparts
.
This Agreement may be executed in one or more counterparts, including by means of facsimile or email, each of which shall be deemed
an original and all of which together shall constitute one and the same instrument.
E.
Severability
.
The invalidity of any provision of this Agreement or portion of a provision shall not affect the validity of any other provision
of this Agreement or the remaining portion of the applicable provision.
[Signature page follows.]
In
Witness Whereof
, the Parties have entered into this Employment Agreement as of the Effective Date set forth above.
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Jerash Holdings (US), Inc.
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By:
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/s/ Choi Lin Hung
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Name:
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Choi Lin Hung
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Title:
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President
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/s/ Richard J. Shaw
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Name:
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Richard J. Shaw
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Title:
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Chief Financial Officer
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Exhibit A – Services
Assist in completion of S-1
Lead all SEC filing, including filings of 10Q and 10K
Ensure that adequate controls are established and maintained
over financial reporting
Investor relations matters
Work with other management team members, bankers, attorneys,
and accountants in evaluation, development, and execution of company strategy
Support M&A activities
Exhibit 31.1
Certification of
Principal Executive Officer
Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
I, Choi Lin Hung, certify that:
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1.
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I have reviewed this quarterly
report on Form 10-Q of Jerash Holdings (US), Inc.;
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2.
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Based on my knowledge, this
report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by
this report;
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3.
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Based on my knowledge, the
financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other
certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
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(a)
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Designed such disclosure
controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;
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(b)
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Evaluated the effectiveness
of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(c)
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Disclosed in this report
any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other
certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing
the equivalent functions):
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(a)
|
All significant deficiencies
and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not
material, that involves management or other employees who have a significant role in the registrant’s internal control over
financial reporting.
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Date: November 13, 2018
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/s/ Choi Lin Hung
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Choi Lin Hung
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President and Treasurer
(Principal Executive Officer)
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Exhibit 31.2
Certification of
Principal Financial Officer
Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
I, Richard J. Shaw, certify that:
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1.
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I have reviewed this quarterly
report on Form 10-Q of Jerash Holdings (US), Inc.;
|
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2.
|
Based on my knowledge, this
report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by
this report;
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3.
|
Based on my knowledge, the
financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
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4.
|
The registrant’s other
certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
|
|
(a)
|
Designed such disclosure
controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;
|
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(b)
|
Evaluated the effectiveness
of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
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(c)
|
Disclosed in this report
any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
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5.
|
The registrant’s other
certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing
the equivalent functions):
|
|
(a)
|
All significant deficiencies
and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
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(b)
|
Any fraud, whether or not
material, that involves management or other employees who have a significant role in the registrant’s internal control over
financial reporting.
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Date: November 13, 2018
|
/s/ Richard J. Shaw
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Richard J. Shaw
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Chief Financial Officer
(Principal Financial and Accounting Officer)
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Exhibit 32.1
CERTIFICATION PURSUANT
TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report
of Jerash Holdings (US), Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2018, (the “Report”),
I, Choi Lin Hung, President and Treasurer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that:
(1) The
Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The
information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company.
/s/ Choi Lin Hung
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Choi Lin Hung
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President and Treasurer
(Principal Executive Officer)
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November 13, 2018
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Exhibit 32.2
CERTIFICATION PURSUANT
TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report
of Jerash Holdings (UC), Inc. (the "Company") on Form 10-Q for the quarter ended September 30, 2018, (the "Report"),
I, Richard J. Shaw, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The
Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The
information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company.
/s/ Richard J. Shaw
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Richard J. Shaw
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Chief Financial Officer
(Principal Financial and Accounting Officer)
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November 13, 2018
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