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What changed in Jerash Holdings (US), Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Jerash Holdings (US), Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+167 added−192 removedSource: 10-K (2023-06-28) vs 10-K (2022-06-27)

Top changes in Jerash Holdings (US), Inc.'s 2023 10-K

167 paragraphs added · 192 removed · 126 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeFiscal Year 2022 Fiscal Year 2021 Sales Sales (USD, in thousands) % (USD, in thousands) % VF Corporation (1) $ 96,450 67.3 % $ 55,994 62.1 % New Balance 34,506 24.1 % 11,050 12.3 % Jiangsu Guotai Huasheng Industrial Co (HK)., Ltd 3,245 2.3 % 2,982 3.3 % G-III 2,758 1.9 % 2,875 3.2 % Dynamic 2,235 1.6 % 6,347 7.0 % ARK Garments 829 0.6 % 2,896 3.2 % Onset Time Limited - - % 1,672 1.9 % United Creations LLC - - % 1,665 1.8 % Dick’s Sporting Goods - - % 1,093 1.2 % Others 3,332 2.2 % 3,639 4.0 % Total $ 143,355 100.0 % $ 90,213 100.0 % (1) Most of our products are sold under The North Face brand which is owned by VF Corporation.
Biggest changeFiscal 2023 Fiscal 2022 Sales Sales (USD, in thousands) % (USD, in thousands) % VF Corporation (1) $ 82,661 59.9 % $ 96,450 67.3 % New Balance 24,124 17.5 % 34,506 24.1 % Jiangsu Guotai Huasheng Industrial Co (HK)., Ltd 9,454 6.8 % 3,245 2.3 % Dynamic 8,175 5.9 % 2,235 1.6 % G-III 5,589 4.0 % 2,758 1.9 % Classic 1,596 1.2 % - 0 % Soriana 954 0.7 % 1,487 1.0 % Others 5,510 4.0 % 2,674 1.8 % Total $ 138,063 100.0 % $ 143,355 100.0 % (1) Most of our products are sold under The North Face and Timberland brands owned by VF Corporation. 4 In fiscal 2023 and fiscal 2022, we depended on a few key customers for our sales, and most of our sales in fiscal 2023 and 2022 were to one customer, VF Corporation.
Effective as of January 1, 2019, the government of the Hashemite Kingdom of Jordan converted Al Tajamouat Industrial City into a Development Zone. Following this change, we continued to operate under benefits similar to the Qualifying Industrial Zone designation, but were subject to a 10% corporation income tax plus a 1% social contribution.
Effective as of January 1, 2019, the government of the Hashemite Kingdom of Jordan converted Al Tajamouat Industrial City into a Development Zone. Following this change, we continued to operate under benefits similar to the Qualifying Industrial Zone designation, but were subject to a 10% corporate income tax plus a 1% social contribution.
However, Jerash Garments was granted a sales tax exemption from the Jordanian Investment Commission for the period June 1, 2015 to June 1, 2018 that allowed Jerash Garments to make purchases with no sales tax charge. This exemption was extended to February 5, 2023.
However, Jerash Garments was granted a sales tax exemption from the Jordanian Investment Commission for the period June 1, 2015 to June 1, 2018 that allowed Jerash Garments to make purchases with no sales tax charge. This exemption was extended to February 5, 2024.
Conditions in Jordan Our manufacturing facilities are located in Jordan. Accordingly, we are directly affected by political, security, and economic conditions in Jordan. From time to time Jordan has experienced instances of civil unrest, terrorism, and hostilities among neighboring countries, including Syria and Israel. A peace agreement between Israel and Jordan was signed in 1994.
Accordingly, we are directly affected by political, security, and economic conditions in Jordan. From time to time Jordan has experienced instances of civil unrest, terrorism, and hostilities among neighboring countries, including Syria and Israel. A peace agreement between Israel and Jordan was signed in 1994.
Employees As of March 31, 2022, we had an aggregate of approximately 5,600 employees located in Jordan, Hong Kong, the People’s Republic of China, and the United States of America, all of which are full-time employees.
Employees As of March 31, 2023, we had an aggregate of approximately 5,500 employees located in Jordan, Hong Kong, the People’s Republic of China, and the United States of America, all of which are full-time employees.
According to the Association Agreement between the European Union (the “EU”) and Jordan, which came into force in May 2002, and the joint initiative on rules of origin reviewed and improved in December 2018 by the EU and Jordan, goods manufactured by us in Jordan that are subsequently shipped to EU countries are shipped free from customs duties.
According to the Association Agreement between the European Union (the “EU”) and Jordan, which came into force in May 2002, and the joint initiative on rules of origin reviewed and improved in December 2018 by the EU and Jordan, goods manufactured by us in Jordan that are subsequently shipped to EU countries are shipped free from customs duties. 5 Conditions in Jordan Our manufacturing facilities are located in Jordan.
We anticipate the completion and occupancy of the new building in August 2022. To meet increasing demand, we are also completing plans to construct an additional project on a nearby separate 133,000 square-foot parcel that we purchased in 2019 for $1.2 million, with 2/3 of the land allocated for our seventh factory and 1/3 for housing.
To meet increasing demand, we are also completing plans to construct an additional project on a nearby separate 133,000 square-foot parcel that we purchased in 2019 for $1.2 million, with 2/3 of the land allocated for our seventh factory and 1/3 for housing.
Customers The following table outlines the dollar amount and percentage of total sales to our customers for the fiscal years ended March 31, 2022 (“fiscal 2022”) and March 31, 2021 (“fiscal 2021”).
Customers The following table outlines the dollar amount and percentage of total sales to our customers for the fiscal years ended March 31, 2023 (“fiscal 2023”) and March 31, 2022 (“fiscal 2022”).
Chinese Garments’ principal activities are to house administration, human resources, finance and management offices and to operate additional production lines and sewing, ironing, and packing units, as well as house our trims warehouse. 1 Jerash Embroidery was established in Jordan on March 11, 2013 and operates out of our factory in Al Tajamouat Industrial City.
Chinese Garments was established in Jordan on June 13, 2013 and operates out of our factory in Al Tajamouat Industrial City. Chinese Garments’ principal activities are to house administration, human resources, finance, and management offices and to operate additional production lines and sewing, ironing, and packing units, as well as house our trims warehouse.
Its primary function is to house our administrative and human resources personnel, merchandising and accounting departments, embroidery, printing, additional production lines, trims and finished products warehouses, and sewing, ironing, packing and quality control units. The third factory, which we lease, employs approximately 200 people. Its primary functions are to perform the cutting for our products.
The second factory, which we lease, employs approximately 1,400 people. Its primary function is to house our administrative and human resources personnel, merchandising and accounting departments, embroidery, printing, additional production lines, trims and finished products warehouses, and sewing, ironing, packing and quality control units. The third factory, which we lease, employs approximately 200 people.
Then the product is sent to the embroidery department for embroidery if applicable. From there, the product moves to be processed by the sewing unit, finishing department, quality control, and finally the ironing and packing units. We do not have long-term supply contracts or arrangements with our suppliers.
From there, the product moves to be processed by the sewing unit, finishing department, quality control, and finally the ironing and packing units. We do not have long-term supply contracts or arrangements with our suppliers.
For fiscal 2021, VF Corporation issued approximately 5,400 purchase orders to us in amounts ranging from approximately $8 to $596,000. Our customers are in the retail industry, which is subject to substantial cyclical variations. Consequently, there can be no assurance that sales to current customers will continue at the current rate or at all.
For fiscal 2022, VF Corporate issued approximately 9,500 purchase orders to us in amounts ranging from approximately $5 to $684,000. Our customers are in the retail industry, which is subject to substantial cyclical variations. Consequently, there can be no assurance that sales to current customers will continue at the current rate or at all.
It is through the sample development and approval processes that we and VF Corporation and our other customers agree on the purchase and manufacture of the garments. For fiscal 2022, VF Corporate issued approximately 9,500 purchase orders to us in amounts ranging from approximately $5 to $684,000.
It is through the sample development and approval processes that we and VF Corporation and our other customers agree on the purchase and manufacture of the garments. For fiscal 2023, VF Corporation issued approximately 10,500 purchase orders to us in amounts ranging from approximately $6 to $372,000.
This chart reflects our organizational structure as of the date of this annual report: Jerash Garments was established in Jordan on November 26, 2000 and operates out of our factory in Al Tajamouat Industrial City, a Development Zone in Amman, Jordan.
Eratex (Hong Kong) Limited (“Eratex”), a company formed in Hong Kong, owns the remaining 49%. 1 This chart reflects our organizational structure as of the date of this annual report: Jerash Garments was established in Jordan on November 26, 2000 and operates out of our factory in Al Tajamouat Industrial City, a Development Zone in Amman, Jordan.
PPE had minimal contribution to our total revenue in the fiscal year ended March 31, 2022. 2 Manufacturing and Production Our production facilities are located in Al Tajamouat Industrial City and in Al-Hasa County in the Tafilah Governorate of Jordan. Our production facilities in Al Tajamouat Industrial City comprise five factories and four warehouses.
The sale and export of PPE products did not contribute to our total revenue in the fiscal year ended March 31, 2023. Manufacturing and Production Our production facilities are located in Al Tajamouat Industrial City and in Al-Hasa County in the Tafilah Governorate of Jordan. Our production facilities in Al Tajamouat Industrial City comprise five factories and five warehouses.
Jerash Embroidery’s principal activities are to perform the cutting and embroidery for our products. Paramount was established in Jordan on October 24, 2004 and operates out of our factory in Al Tajamouat Industrial City. Paramount’s principal activities are to manufacture garments per customer orders. MK Garments was established in Jordan on January 23, 2003.
Jerash Embroidery was established in Jordan on March 11, 2013 and operates out of our factory in Al Tajamouat Industrial City. Jerash Embroidery’s principal activities are to perform the cutting and embroidery for our products. Paramount was established in Jordan on October 24, 2004 and operates out of our factory in Al Tajamouat Industrial City.
We are closely monitoring market conditions and customer demands to optimize the construction plan. Total annual capacity at our existing facilities was approximately 14 million pieces (average for product categories including t-shirts, polo shirts, pants, shorts, and jackets, and excluding PPE) as of March 31, 2022. Our production flow begins in the cutting department of our factory.
Total annual capacity at our existing facilities was approximately 14 million pieces (average for product categories including t-shirts, polo shirts, pants, shorts, and jackets, and excluding PPE) as of March 31, 2023. Our production flow begins in the cutting department of our factory. Then the product is sent to the embroidery department for embroidery if applicable.
(“Jiangmen Treasure Success”), an entity incorporated under the laws of the People’s Republic of China (“China” or the “PRC”) and a wholly owned subsidiary of Treasure Success, (viii) Jerash The First Medical Supplies Manufacturing Company Limited (“Jerash The First”), an entity formed under the laws of Jordan and a wholly owned subsidiary of Jerash Garments, and (ix) Jerash Supplies, LLC (“Jerash Supplies”), an entity formed under the laws of the State of Delaware.
(“Jiangmen Treasure Success”), an entity incorporated under the laws of the People’s Republic of China (“China” or the “PRC”) and a wholly owned subsidiary of Treasure Success, (viii) Jerash The First Medical Supplies Manufacturing Company Limited (“Jerash The First”), an entity formed under the laws of Jordan and a wholly owned subsidiary of Jerash Garments, (ix) Jerash Supplies, LLC (“Jerash Supplies”), an entity formed under the laws of the State of Delaware, (x) Kawkab Venus Dowalyah Lisenaet Albesah (“Kawkab Venus”), a limited liability company established in Amman, Jordan, and (xi) Ever Winland Limited (“Ever Winland”), a limited liability company organized in Hong Kong.
On January 1, 2022, this rate further increased to 18% or 20% plus 1% social contribution. For more information, see “Note 2—Summary of Significant Accounting Policies—Income and Sales Taxes.” In addition, Jerash Garments and its subsidiaries are subject to local sales tax of 16%.
For more information, see “Note 2—Summary of Significant Accounting Policies—Income and Sales Taxes.” In addition, Jerash Garments and its subsidiaries are subject to local sales tax of 16%.
Jerash The First was established in Jordan on July 6, 2020 and operate out of our factory in Al-Hasa County. Jerash The First’s principal activities are to manufacture PPE products. Jerash Supplies was formed in Delaware on November 20, 2020. Jerash Supplies is engaged in the trading of PPE products.
Jiangmen Treasure Success’s primary activities are to provide support in sales and marketing, sample development, merchandising, procurement, and other areas. Jerash The First was established in Jordan on July 6, 2020 and operate out of our factory in Al-Hasa County. Jerash The First’s principal activities are to manufacture PPE products. Jerash Supplies was formed in Delaware on November 20, 2020.
Organizational Structure Jerash Holdings is a holding company incorporated in Delaware in January 2016. As of the date of this annual report, Jerash Holdings has the following wholly owned subsidiaries: (i) Jerash Garments and Fashions Manufacturing Co., Ltd.
As of the date of this annual report, Jerash Holdings has the following wholly owned subsidiaries: (i) Jerash Garments and Fashions Manufacturing Co., Ltd.
We are a manufacturer for many well-known brands and retailers, such as VF Corporation (which owns brands such as The North Face, Timberland, and Vans), New Balance, G-III (which owns brands such as Calvin Klein, Tommy Hilfiger, DKNY, and Guess), American Eagle, Walmart, and Costco.
We are a manufacturer for many well-known brands and retailers, such as VF Corporation (which owns brands such as The North Face, Timberland, and Vans), New Balance, G-III (which licenses brands such as Calvin Klein, Tommy Hilfiger, DKNY, and Guess), American Eagle, and Skechers. Our production facilities comprise six factories and five warehouses and we currently employ approximately 5,000 people.
The fourth factory (under Paramount), which we lease, currently employs approximately 1,200 people. Its primary functions are to house additional production lines. The fifth factory (under MK Garments) currently employs approximately 700 people. Its primary function is to manufacture garments for orders from customers.
Its primary functions are to perform the cutting for our products. The fourth factory (under Paramount), which we lease, currently employs approximately 1,100 people. Its primary functions are to house additional production lines. The fifth factory (under MK Garments) currently employs approximately 600 people.
Our production facility in Al-Hasa County in the Tafilah Governorate of Jordan comprises a factory, which currently employs approximately 400 people and its primary functions are to manufacture garment products per customer orders. We commenced the construction of this factory in 2018 and we started operations in November 2019.
Its primary function is to manufacture garments for orders from customers. 3 Our production facility in Al-Hasa County in the Tafilah Governorate of Jordan comprises a factory, which currently employs approximately 300 people and its primary functions are to manufacture garment products per customer orders.
MK Garments’ principal activities are to manufacture garments per customer orders. Treasure Success was established in Hong Kong on July 5, 2016 and operates in Hong Kong. Treasure Success’s primary activities are to employ sales and merchandising staff and supporting personnel in Hong Kong to support the business of Jerash Garments and its subsidiaries.
Treasure Success’s primary activities are sales of garments and to employ sales and merchandising staff and supporting personnel in Hong Kong to support the business of Jerash Garments and its subsidiaries. Jiangmen Treasure Success was established in Jiangmen City of Guangdong Province in the PRC on August 28, 2019 and operates in the PRC.
We are not party to any long-term contracts with VF Corporation or our other customers, and our sales arrangements with our customers do not have minimum purchase requirements.
Approximately 60% and 67% of our sales in fiscal 2023 and 2022 were derived from the sale of manufactured products to VF Corporation, respectively. We are not party to any long-term contracts with VF Corporation or our other customers, and our sales arrangements with our customers do not have minimum purchase requirements.
Starting from January 1, 2020, the corporation income tax increased to 14% plus 1% social contribution. On January 1, 2021, the corporation income tax increased to 16%. Effective January 1, 2022, we have been subject to an 18% or 20% corporate income tax plus a 1% social contribution. Currently, the first factory, which we own, employs approximately 1,500 people.
Starting from January 1, 2020, the corporate income tax rate increased to 14% plus a 1% social contribution. On January 1, 2021, the corporate income tax rate increased to 16% plus a 1% social contribution. On January 1, 2022, the corporate income tax rate increased to 18% or 20% plus a 1% social contribution.
Construction was temporarily suspended in March 2020 due to the COVID-19 pandemic and was subsequently completed and ready for use as of September 30, 2021. In April 2021, we commenced a construction on a 189,000 square-foot housing facility for our multi-national workforce, situated on a 49,000 square-foot site owned by us, in Al Tajamouat Industrial City.
In April 2021, we commenced a construction on a 189,000 square-foot housing facility for our multi-national workforce, situated on a 49,000 square-foot site owned by us, in Al Tajamouat Industrial City. We anticipate the completion and occupancy of the new building for August 2023.
This is a joint project with the Jordanian Ministry of Labor and the Jordanian Education and Training Department. According to our agreement with these government agencies, we will be using this factory without paying rent until December 2022, after which we anticipate entering into a lease agreement for the factory with the Jordanian Ministry of Labor for market rent.
We commenced the construction of this factory in 2018 and we started operations in November 2019. This is a joint project with the Jordanian Ministry of Labor and the Jordanian Education and Training Department. According to our agreement with these government agencies, we used this factory without paying rent through December 2022.
Its primary functions are to house our management offices, as well as production lines, trims warehouse, and printing, sewing, ironing, and packaging units. The second factory, which we lease, employs approximately 1,500 people.
Effective January 1, 2023, we have been subject to a 19% or 20% corporate income tax rate plus a 1% social contribution. Currently, the first factory, which we own, employs approximately 1,400 people. Its primary functions are to house our management offices, as well as production lines, trims warehouse, and printing, sewing, ironing, and packaging units.
Properties” below for more information regarding this factory. 3 In 2015, we commenced a project to build a 4,800 square-foot workshop in the Tafilah Governorate of Jordan, which was previously intended to be used as a sewing workshop for Jerash Garments, but which we now use as a dormitory to house management and supervisory staff who work at the factory in Al-Hasa County.
In 2015, we commenced a project to build a 4,800 square-foot workshop in the Tafilah Governorate of Jordan, which was originally intended to be used as a sewing workshop for Jerash Garments.
Our production facilities comprise six factories and four warehouses and we currently employ approximately 5,700 people. The total annual capacity at our facilities was approximately 14.0 million pieces (average for product categories including t-shirts, polo shirts, pants, shorts, and jackets, and excluding PPE) as of March 31, 2022.
The total annual capacity at our facilities was approximately 14 million pieces (average for product categories including t-shirts, polo shirts, pants, shorts, and jackets, and excluding PPE) as of March 31, 2023. Organizational Structure Jerash Holdings is a holding company incorporated in Delaware in January 2016.
The ruling family has taken initiatives that support the economic growth of the country. However, there is no assurance that such initiatives will be successful or will continue.
The ruling family has taken initiatives that support the economic growth of the country. However, there is no assurance that such initiatives will be successful or will continue. The rate of economic liberalization could change, and specific laws and policies affecting manufacturing companies, foreign investments, currency exchange rates, and other matters affecting investments in Jordan could change as well.
Most of the products we manufacture are sold under The North Face Brand which is owned by VF Corporation. Currently, we manufacture primarily outerwear for The North Face. Approximately 67% and 62% of our sales in fiscal 2022 and 2021 were derived from the sale of manufactured products to VF Corporation, respectively.
We started producing garments for VF Corporation in 2012. Most of the products we manufacture are sold under The North Face and Timberland brands which are owned by VF Corporation. Currently, we manufacture primarily outerwear for The North Face.
Products As a garment manufacturing group, we specialize in manufacturing sportswear and outerwear. Our sportswear and outerwear product offering consists of jackets, polo shirts, t-shirts, pants, and shorts. Our primary product offering is jackets, and in the fiscal years ended March 31, 2022 and 2021, approximately 35% and 25%, respectively, of our total shipped pieces were jackets.
J&B engages in the business of garment trading and manufacturing for orders from customers. Products As a garment manufacturing group, we specialize in manufacturing sportswear and outerwear. Our sportswear and outerwear product offering consists of jackets, polo shirts, t-shirts, pants, and shorts.
On June 24, 2021, Jerash Garments and the sole shareholder of MK Garments entered into an agreement, pursuant to which Jerash Garments acquired all of the outstanding stock of MK Garments. As of October 7, 2021, MK Garments became a subsidiary of Jerash Garments. MK Garments operates out of our factory in Al Tajamouat Industrial City.
On July 14, 2021, Jerash Garments and the sole shareholder of Kawkab Venus entered into an agreement, pursuant to which Jerash Garments acquired all of the outstanding stock of Kawkab Venus.
Removed
Chinese Garments was established in Jordan on June 13, 2013 and operates out of our factory in Al Tajamouat Industrial City.
Added
As of the date of this annual report, Treasure Success owns 51% of the equity interests in J&B International Limited (“J&B”), a company with limited liability incorporated under the laws of Hong Kong. P. T.
Removed
Jiangmen Treasure Success was established in Jiangmen City of Guangdong Province in the PRC on August 28, 2019 and operates in the PRC. Jiangmen Treasure Success’s primary activities are to provide support in sales and marketing, sample development, merchandising, procurement, and other areas.
Added
Paramount’s principal activities are to manufacture garments per customer orders. MK Garments was established in Jordan on January 23, 2003. On June 24, 2021, Jerash Garments and the sole shareholder of MK Garments entered into an agreement, pursuant to which Jerash Garments acquired all of the outstanding stock of MK Garments.
Removed
On July 14, 2021, we executed a sale and purchase contract to acquire the land and building of the fifth factory, the closing of which deal has been postponed due to personal reasons of the seller in relation to health and quarantine requirements. We currently expect to complete this acquisition by the second quarter of fiscal 2023.
Added
As of October 7, 2021, MK Garments became a subsidiary of Jerash Garments. MK Garments operates out of our factory in Al Tajamouat Industrial City. MK Garments’ principal activities are to manufacture garments per customer orders. Treasure Success was established in Hong Kong on July 5, 2016 and operates in Hong Kong.
Removed
In fiscal 2022 and fiscal 2021, we depended on a few key customers for our sales, and most of our sales in fiscal 2022 and 2021 were to one customer, VF Corporation. 4 We started producing garments for VF Corporation in 2012.
Added
Jerash Supplies is engaged in the trading of PPE products. Kawkab Venus was established in Amman, Jordan, on January 15, 2015 with a declared capital of JOD 50,000. It holds land with factory premises, which are leased to MK Garments.
Removed
The rate of economic liberalization could change, and specific laws and policies affecting manufacturing companies, foreign investments, currency exchange rates, and other matters affecting investments in Jordan could change as well. 5 In December 2019, COVID-19 was first identified in Wuhan, China.
Added
Apart from the land and factory premises, Kawkab Venus had no other significant assets or liabilities and no operation activities or employees at the time of acquisition, so the acquisition was accounted for an asset acquisition.
Removed
Less than four months later, on March 11, 2020, the World Health Organization declared COVID-19 a pandemic—the first pandemic caused by a coronavirus.
Added
As of August 21, 2022, Kawkab Venus became a subsidiary of Jerash Garments. 2 Ever Winland was organized in Hong Kong on December 3, 2020. It holds office premises, which are leased to Treasure Success.
Removed
On March 17, 2020, Jordan announced a shutdown of non-essential activities as part of its proactive national efforts to limit the spread of COVID-19 and we suspended the operations of our facilities in Jordan as a result on March 18, 2020.
Added
On June 22, 2022, Treasure Success and the shareholders of Ever Winland entered into an agreement, pursuant to which Treasure Success acquired all of the outstanding stock of Ever Winland.
Removed
On April 4, 2020, we resumed operations of our main production facilities in Al Tajamount Industrial City under the condition that only migrant workers, living in dormitories in Al Tajamouat Industrial City, are allowed to go to work in our factories under strict hygienic precautionary measures pursuant to an approval from the Jordanian Government dated April 1, 2020.
Added
Apart from the office premises used by Treasure Success, Ever Winland had no other significant assets or liabilities and no operating activities or employees at the time of this acquisition, so this transaction was accounted for as an asset acquisition. As of August 29, 2022, Ever Winland became a subsidiary of Treasure Success.
Removed
Our Al-Hasa factory was also allowed to restart operation on April 26, 2020. Eventually, local employees were allowed to resume work on June 1, 2020. In fiscal 2022, our production facilities resumed full operation with additional medical and hygienic measures.
Added
J&B is a joint venture company established in Hong Kong on January 10, 2023. On March 20, 2023, Treasure Success and Eratex entered into a Joint Venture and Shareholders’ Agreement, pursuant to which Treasure Success acquired 51% of the equity interests in J&B on April 11, 2023.
Added
Our primary product offering in the fiscal year ended March 31, 2023 was shorts, pants, and vests, which accounted for approximately 49% of our total shipped pieces. In the fiscal year ended March 31, 2022, our primary product offering was jackets, which accounted for approximately 35% of our total shipped pieces.
Added
We have continued to use the factory without paying rent since January 2023 as new arrangements with the Jordanian Ministry of Labor are still being made. See “Item 2. Properties” below for more information regarding this factory.
Added
Construction was temporarily suspended in March 2020 due to the COVID-19 pandemic and was subsequently completed and ready for use as of September 30, 2021 and the building is now used as a dormitory to house management and supervisory staff who work at the factory in Al-Hasa County.
Added
We have resumed our work with engineering consultants on the architectural design of the building with the consideration of business growth potential bought about by the new business collaboration with Busana Apparel Group.
Added
On January 1, 2022, this rate further increased to 18% or 20% plus 1% social contribution. On January 1, 2023, this rate further increased to 19% or 20% plus a 1% social contribution.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeA significant change in Jordan’s economic policy or any social or political uncertainties that impact economic policy in Jordan could adversely affect business and economic conditions in Jordan generally and our business and prospects. 13 If we violate applicable anti-corruption laws or our internal policies designed to ensure ethical business practices, we could face financial penalties and reputational harm that would negatively impact our financial condition and results of operations.
Biggest changeIf we violate applicable anti-corruption laws or our internal policies designed to ensure ethical business practices, we could face financial penalties and reputational harm that would negatively impact our financial condition and results of operations. We are subject to anti-corruption and anti-bribery laws in the United States and Jordan.
If we cannot obtain additional financing, we may not be able to achieve our desired sales growth, and our results of operations would be negatively affected. 8 We may have conflicts of interest with our affiliates and related parties, and in the past we have engaged in transactions and entered into agreements with affiliates that were not negotiated at arms’ length.
If we cannot obtain additional financing, we may not be able to achieve our desired sales growth, and our results of operations would be negatively affected. We may have conflicts of interest with our affiliates and related parties, and in the past we have engaged in transactions and entered into agreements with affiliates that were not negotiated at arms’ length.
The realization of any of these risks could cause a material adverse effect on our business, financial condition, results of operations, and cash flows. We may face interruption of production and services due to increased security measures in response to terrorism. Our business depends on the free flow of products and services through the channels of commerce.
The realization of any of these risks could cause a material adverse effect on our business, financial condition, results of operations, and cash flows. 13 We may face interruption of production and services due to increased security measures in response to terrorism. Our business depends on the free flow of products and services through the channels of commerce.
In June 2022, we were informed by SCBHK that the facility was cancelled due to persistently low usage and zero loan outstanding. Pursuant to the DBS facility letter dated January 12, 2022, DBS Bank (Hong Kong) Limited (“DBSHK”) provided a bank facility of up to $5.0 million to Treasure Success.
In June 2022, we were informed by SCBHK that the facility was cancelled due to persistently low usage and zero loan outstanding. 8 Pursuant to the DBS facility letter dated January 12, 2022, DBS Bank (Hong Kong) Limited (“DBSHK”) provided a bank facility of up to $5.0 million to Treasure Success.
If acquired businesses do not achieve expected levels of production or profitability, we are unable to integrate the business or assets into our business, or we are unable to adequately manage our growth following the acquisition, our results of operations and financial condition would be adversely affected. 10 Our results of operations are subject to fluctuations in currency exchange rates.
If acquired businesses do not achieve expected levels of production or profitability, we are unable to integrate the business or assets into our business, or we are unable to adequately manage our growth following the acquisition, our results of operations and financial condition would be adversely affected. Our results of operations are subject to fluctuations in currency exchange rates.
Our revenue will be reduced if our customers are not successful, particularly if our customers reduce the volume of their purchases from us or require us to reduce the prices at which we sell our products. If we experience product quality or late delivery problems, or if we experience financial problems, our business will be negatively affected.
Our revenue will be reduced if our customers are not successful, particularly if our customers reduce the volume of their purchases from us or require us to reduce the prices at which we sell our products. 10 If we experience product quality or late delivery problems, or if we experience financial problems, our business will be negatively affected.
In addition, such actions could result in negative publicity and may damage our reputation and discourage retail customers and consumers from buying our products. 11 Our products may not comply with various industry and governmental regulations and our customers may incur losses in their products or operations as a consequence of our non-compliance.
In addition, such actions could result in negative publicity and may damage our reputation and discourage retail customers and consumers from buying our products. Our products may not comply with various industry and governmental regulations and our customers may incur losses in their products or operations as a consequence of our non-compliance.
If we are unable to take effective measures in a timely manner to mitigate the impact of the inflation as well as a potential recession, our business, financial condition, and results of operations could be adversely affected 16 Item 1B. Unresolved Staff Comments. None.
If we are unable to take effective measures in a timely manner to mitigate the impact of the inflation as well as a potential recession, our business, financial condition, and results of operations could be adversely affected. Item 1B. Unresolved Staff Comments. None.
These conditions could also result in pricing pressure and less favorable financial terms to us and our ability to access capital to fund our operations. Risks Related to Operations in Jordan We are affected by conditions to, and possible reduction of, free trade agreements.
These conditions could also result in pricing pressure and less favorable financial terms to us and our ability to access capital to fund our operations. 12 Risks Related to Operations in Jordan We are affected by conditions to, and possible reduction of, free trade agreements.
Our sales to VF Corporation (which owns brands such as The North Face, Timberland, and Vans), directly and indirectly, accounted for approximately 67% and 62% of our total sales in fiscal 2022 and fiscal 2021, respectively. From an accounting perspective, we are considered the principal in our arrangement with VF Corporation.
Our sales to VF Corporation (which owns brands such as The North Face, Timberland, and Vans), directly and indirectly, accounted for approximately 60% and 67% of our total sales in fiscal 2023 and fiscal 2022, respectively. From an accounting perspective, we are considered the principal in our arrangement with VF Corporation.
Any adverse change in our relationship with VF Corporation and its The North Face brand, or with their strategies or reputation, would have a material adverse effect on our results of operations. Most of our products are sold under The North Face brand, which is owned by VF Corporation.
Any adverse change in our relationship with VF Corporation and its The North Face and Timberland brands, or with their strategies or reputation, would have a material adverse effect on our results of operations. Most of our products are sold under The North Face and Timberland brands, which are owned by VF Corporation.
Any adverse change in our relationship with VF Corporation would have a material adverse effect on our results of operations. In addition, our sales of those products could be materially and adversely affected if either VF Corporation’s or The North Face brand’s images, reputations, or popularity were to be negatively impacted.
Any adverse change in our relationship with VF Corporation would have a material adverse effect on our results of operations. In addition, our sales of those products could be materially and adversely affected if the image, reputation, or popularity of either VF Corporation, The North Face, or Timberland were to be negatively impacted.
Through his wholly owned entity Merlotte, Mr. Choi, our chairman, chief executive officer, president, treasurer, and a significant stockholder, has an indirect ownership interest in certain companies, including Ford Glory International Limited (“Ford Glory”) and Jiangmen V-Apparel Manufacturing Limited, with which we have entered into, or in the future may enter into, agreements or arrangements.
Through his wholly owned entity Merlotte Enterprise Limited, Mr. Choi, our chairman, chief executive officer, president, treasurer, and a significant stockholder, has an indirect ownership interest in Jiangmen V-Apparel Manufacturing Limited, with which we have entered into, or in the future may enter into, agreements or arrangements.
Factors in the clothing retail industry that may influence our operating results from quarter to quarter include: ● the volume and timing of customer orders we receive during the quarter; ● the timing and magnitude of our customers’ marketing campaigns; ● the loss or addition of a major customer or of a major retailer nomination; ● the availability and pricing of materials for our products; ● the increased expenses incurred in connection with introducing new products; ● currency fluctuations; ● political factors that may affect the expected flow of commerce; and ● delays caused by third parties. 9 In addition, uncertainty over future economic prospects could have a material adverse effect on our results of operations.
Factors in the clothing retail industry that may influence our operating results from quarter to quarter include: ● the volume and timing of customer orders we receive during the quarter; ● the timing and magnitude of our customers’ marketing campaigns; ● the loss or addition of a major customer or of a major retailer nomination; ● the availability and pricing of materials for our products; ● the increased expenses incurred in connection with introducing new products; ● currency fluctuations; ● political factors that may affect the expected flow of commerce; and ● delays caused by third parties.
Russian military actions and the resulting sanctions could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets, potentially making it more difficult for us to obtain additional funds.
Additional potential sanctions and penalties have also been proposed and/or threatened. Russian military actions and the resulting sanctions could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets, potentially making it more difficult for us to obtain additional funds.
If President Biden takes action or publicly speaks out about the need to terminate or re-negotiate existing free trade agreements on which we rely, or in favor of restricting free trade or increasing tariffs and duties applicable to our products, such actions may adversely affect our sales and have a material adverse impact on our business, results of operations, and cash flows. 12 Our results of operations would be materially and adversely affected in the event we are unable to operate our principal production facilities in Jordan.
If President Biden takes action or publicly speaks out about the need to terminate or re-negotiate existing free trade agreements on which we rely, or in favor of restricting free trade or increasing tariffs and duties applicable to our products, such actions may adversely affect our sales and have a material adverse impact on our business, results of operations, and cash flows.
We are subject to anti-corruption and anti-bribery laws in the United States and Jordan. Jordan’s reputation for potential corruption and the challenges presented by Jordan’s complex business environment, including high levels of bureaucracy, red tape, and vague regulations, may increase our risk of violating applicable anti-corruption laws.
Jordan’s reputation for potential corruption and the challenges presented by Jordan’s complex business environment, including high levels of bureaucracy, red tape, and vague regulations, may increase our risk of violating applicable anti-corruption laws.
The new Biden administration raises the possibility of a policy change. President Joe Biden has expressed no desire to withdraw from existing agreements, presumably indicating that his policy will be less protectionist than former President Donald Trump’s.
President Joe Biden has expressed no desire to withdraw from existing agreements, presumably indicating that his policy will be less protectionist than former President Donald Trump’s.
Also, if in the future we were to determine that we need to seek additional equity capital, being delisted from Nasdaq could have an adverse effect on our ability to raise capital in the public or private equity markets. Our majority stockholders will control us for the foreseeable future, including the outcome of matters requiring stockholder approval.
Also, if in the future we were to determine that we need to seek additional equity capital, being delisted from Nasdaq could have an adverse effect on our ability to raise capital in the public or private equity markets.
There was also loss of productivity in the shutdown period which negatively impacted our first quarter and full year profitability in fiscal 2021. In fiscal 2022, our production facilities resumed full operation with additional medical and hygienic measures in place.
There was also loss of productivity in the shutdown period which negatively impacted our first quarter and full year profitability in fiscal 2021. In fiscal 2022, our production facilities resumed full operation with additional medical and hygienic measures in place. The COVID-19 pandemic did not materially adversely affect our business operations and condition and operating results for fiscal 2023.
Risk Factors Relating to our Securities If we fail to comply with the continuing listing standards of the Nasdaq, our common stock could be delisted from the exchange. If we were unable to meet the continued listing requirements of the Nasdaq Stock Market (“Nasdaq”), our common stock could be delisted from the Nasdaq.
If we were unable to meet the continued listing requirements of the Nasdaq Stock Market (“Nasdaq”), our common stock could be delisted from the Nasdaq.
If demand in sportswear and outerwear were to decline, we may endeavor to expand or transition our product offerings to other segments of the clothing retail industry.
A shift in demand from such products may reduce the growth of new business for our products, and reduce existing business in those products. If demand in sportswear and outerwear were to decline, we may endeavor to expand or transition our product offerings to other segments of the clothing retail industry.
The occurrence of certain of these factors may delay or prevent the delivery of goods ordered by customers, and such delay or inability to meet delivery requirements would have a severe adverse impact on our results of operations and could have an adverse effect on our relationships with our customers.
The occurrence of certain of these factors may delay or prevent the delivery of goods ordered by customers, and such delay or inability to meet delivery requirements would have a severe adverse impact on our results of operations and could have an adverse effect on our relationships with our customers. 11 Our ability to benefit from the lower labor costs in Jordan will depend on the political, social, and economic stability of Jordan and in the Middle East in general.
See also “Note 11—Related Party Transactions.” Our majority stockholders may economically benefit from our arrangements with related parties. If we engage in related party transactions on unfavorable terms, our operating results will be negatively impacted. We are dependent on a product segment comprised of a limited number of products.
See also “Note 11—Related Party Transactions.” If we engage in related party transactions on unfavorable terms, our operating results will be negatively impacted. We are dependent on a product segment comprised of a limited number of products. Presently, we generate revenue primarily from manufacturing and exporting sportswear and outerwear.
Many factors affect the level of consumer spending in the clothing retail industry, including, among others: ● general business conditions; ● interest rates; ● the availability of consumer credit; ● taxation; and ● consumer confidence in future economic conditions.
In addition, uncertainty over future economic prospects could have a material adverse effect on our results of operations. Many factors affect the level of consumer spending in the clothing retail industry, including, among others: ● general business conditions; ● interest rates; ● the availability of consumer credit; ● taxation; and ● consumer confidence in future economic conditions.
The requirements of being a public company, including compliance with the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the requirements of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”), may strain our resources, increase our costs, and distract management, and we may be unable to comply with these requirements in a timely or cost-effective manner.
If one or more analysts who elect to cover us issue negative reports or adversely change their recommendations regarding our common stock, the market price of our common stock could decline. 15 The requirements of being a public company, including compliance with the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the requirements of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”), may strain our resources, increase our costs, and distract management, and we may be unable to comply with these requirements in a timely or cost-effective manner.
Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in Ukraine could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, and supply chain interruptions.
Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in Ukraine could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, and supply chain interruptions. 16 The military conflict in Ukraine has led to sanctions and other penalties being levied by the United States, European Union, and other countries against Russia.
Our direct and indirect customers are in the clothing retail industry, which is subject to substantial cyclical variations and could have a material adverse effect on our results of operations.
If we are unable to sustain consistent product mix and geographic destinations for our products, we could experience negative impacts to our financial condition and results of operations. 9 Our direct and indirect customers are in the clothing retail industry, which is subject to substantial cyclical variations and could have a material adverse effect on our results of operations.
In addition, if we sell a higher proportion of products in geographic regions where we do not benefit from free trade agreements or tax exemptions, our gross margins will fall. If we are unable to sustain consistent product mix and geographic destinations for our products, we could experience negative impacts to our financial condition and results of operations.
In addition, if we sell a higher proportion of products in geographic regions where we do not benefit from free trade agreements or tax exemptions, our gross margins will fall.
If we are unable to effectively implement and maintain our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may decline.
If we are unable to effectively implement and maintain our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, our ability to accurately and timely report our financial results or prevent fraud may be adversely affected, and investor confidence and the market price of our common stock may be adversely impacted.
Because the majority of our assets are located outside the United States, any judgment obtained in the United States against us or certain of our directors and officers may not be collectible within the United States.
Because the majority of our assets are located outside the United States, any judgment obtained in the United States against us or certain of our directors and officers may not be collectible within the United States. 14 Risk Factors Relating to our Securities If we fail to comply with the continuing listing standards of the Nasdaq, our common stock could be delisted from the exchange.
In connection with becoming a reporting company, we will need to continue: ● instituting a more comprehensive compliance function; ● preparing and distributing periodic and current reports under the federal securities laws; ● establishing and enforcing internal compliance policies, such as those related to insider trading; and ● involving and retaining outside counsel and accountants to a greater degree than before we became a reporting company. 15 Our ongoing compliance efforts will increase general and administrative expenses and may divert management’s time and attention from the development of our business, which may adversely affect our financial condition and results of operations.
As a reporting company, we are: ● instituting a more comprehensive compliance function; ● preparing and distributing periodic and current reports under the federal securities laws; ● establishing and enforcing internal compliance policies, such as those related to insider trading; and ● involving and retaining outside counsel and accountants to a greater degree than before we became a reporting company.
There can be no assurance that our available cash, together with resources from our operations, will be sufficient to fund our operations and capital expenditures. In addition, our cash position may decline in the future, and we may not be successful in maintaining an adequate level of cash resources.
In addition, our cash position may decline in the future, and we may not be successful in maintaining an adequate level of cash resources.
From April 1, 2021 to March 31, 2022, VF Corporation issued approximately 9,500 purchase orders to us in amounts ranging from approximately $5 to $684,000. We cannot assure you that our customers will continue to buy our products at all or in the same volumes or on the same terms as they have in the past.
We cannot assure you that our customers will continue to buy our products at all or in the same volumes or on the same terms as they have in the past.
Complying with these statutes, regulations, and requirements will occupy a significant amount of time of our board of directors and management, and will significantly increase our costs and expenses and will make some activities more time-consuming and costly.
We are required to comply with the laws, regulations, requirements, and certain corporate governance provisions under the Exchange Act and the Sarbanes-Oxley Act. Complying with these statutes, regulations, and requirements occupies a significant amount of time of our board of directors and management, significantly increases our costs and expenses, and makes some activities more time-consuming and costly.
All of our manufacturing process is performed in a complex of production facilities located in Jordan.
Our results of operations would be materially and adversely affected in the event we are unable to operate our principal production facilities in Jordan. All of our manufacturing process is performed in a complex of production facilities located in Jordan.
Removed
The COVID-19 pandemic may also materially adversely affect our business operations and condition and operating results for fiscal 2023, including but not limited to material negative impact on our total revenue, slower collection of accounts receivables, and additional allowance for doubtful accounts.
Added
From April 1, 2021 to March 31, 2022, VF Corporation issued approximately 9,500 purchase orders to us in amounts ranging from approximately $5 to $684,000. From April 1, 2022 to March 31, 2023, VF Corporation issued approximately 10,500 purchase orders to us in amounts ranging from approximately $6 to $372,000.
Removed
Because of the significant uncertainties surrounding the COVID-19 pandemic, we cannot reasonably estimate the extent of the business disruption and the related financial at this time. We may require additional financing to fund our operations and capital expenditures. As of March 31, 2022, we had cash and cash equivalents of approximately $25.2 million and restricted cash of approximately $1.4 million.
Added
The Company currently expects that its operation results for the fiscal year ending March 31, 2024 would not be significantly impacted by the COVID-19 pandemic. However, there is still significant uncertainty around the breadth and duration of business disruptions related to the COVID-19 pandemic, as well as its impact on the U.S. and international economies.
Removed
Presently, we generate revenue primarily from manufacturing and exporting sportswear and outerwear. A shift in demand from such products may reduce the growth of new business for our products, and reduce existing business in those products.
Added
Given the dynamic nature of these circumstances, should there be resurgence of COVID-19 cases globally and should the U.S. government or the Jordan government implement new restrictions to contain the spread, the Company’s business would be negatively impacted. We may require additional financing to fund our operations and capital expenditures.
Removed
Our ability to benefit from the lower labor costs in Jordan will depend on the political, social, and economic stability of Jordan and in the Middle East in general.
Added
As of March 31, 2023, we had cash and cash equivalents of approximately $17.8 million and restricted cash of approximately $1.6 million. There can be no assurance that our available cash, together with resources from our operations, will be sufficient to fund our operations and capital expenditures.
Removed
Three of our stockholders beneficially own approximately 52.6% of our outstanding common stock, as of June 24, 2022.
Added
A significant change in Jordan’s economic policy or any social or political uncertainties that impact economic policy in Jordan could adversely affect business and economic conditions in Jordan generally and our business and prospects.
Removed
Accordingly, our other stockholders do not have any ability to exercise control over us and those majority stockholders will have the ability, acting together, to elect all of our directors and to substantially influence the outcome of corporate actions requiring stockholder approval, such as: (i) a merger or a sale of the Group, (ii) a sale of all or substantially all of our assets, and (iii) amendments to our corporate documents.
Added
Our ongoing compliance efforts will increase general and administrative expenses and may divert management’s time and attention from the development of our business, which may adversely affect our financial condition and results of operations. During the course of the audit of our consolidated financial statements, we identified material weaknesses in our internal control over financial reporting.
Removed
This concentration of voting power and control could have a significant effect in delaying, deferring, or preventing an action that might otherwise be beneficial to our other stockholders and be disadvantageous to our stockholders with interests different from those entities and individuals. Our stockholders’ ownership interest in us may be diluted by exercises of currently outstanding or committed warrants.
Added
In connection with the preparation and external audit of our consolidated financial statements for the fiscal year ended March 31, 2023, we identified certain material weaknesses in our internal control over financial reporting and have formulated plans for remedial measures. See “Item 9A.
Removed
We granted warrants to purchase up to 71,100 units to designees of the placement agent in connection with a private placement offering that we initially closed on May 15, 2017 and had subsequent closings on August 18, 2017 and September 27, 2017 (the “Private Placement”).
Added
Controls and Procedures.” Measures that we implement may not fully address the material weaknesses in our internal control over financial reporting and we may not be able to conclude that the material weaknesses have been fully remedied.
Removed
Each unit consists of one share of our common stock and one warrant (with each such warrant being immediately exercisable for one-tenth of one share of common stock at an exercise price of $6.25 per share for a period of five years from the issuance date).
Added
Failure to correct the material weaknesses and other control deficiencies or failure to discover and address any other control deficiencies could result in inaccuracies in our consolidated financial statements and could also impair our ability to comply with applicable financial reporting requirements and make related regulatory filings on a timely basis.
Removed
The private placement agent warrants are exercisable with respect to 48,600 units beginning on July 15, 2017 and expiring on May 15, 2022, 18,000 units beginning on October 18, 2017 and expiring on August 18, 2022, and 4,500 units beginning on November 27, 2017 expiring on September 27, 2022.
Added
As a result, our business, financial condition, results of operations, and prospects, as well as the trading price of our common stock, may be materially and adversely affected.
Removed
The private placement agent’s warrants are exercisable at a price per unit equal to $5.50. 14 In connection with the Private Placement, we also issued five-year warrants to purchase up to 79,000 shares of our common stock to various accredited investors at an exercise price of $6.25 per share.
Added
Due to the material weaknesses in our internal control over financial reporting as described above, our management concluded that our internal control over financial reporting was not effective as of March 31, 2023. This could adversely affect the market price of our common stock due to a loss of investor confidence in the reliability of our reporting processes.
Removed
Such warrants expired on May 15, 2022 with respect to 54,000 warrants, and will expire on August 18, 2022 with respect to 20,000 warrants and September 27, 2022 with respect to 5,000 warrants. We have also issued a five-year warrant to our board observer to purchase up to 50,000 shares of common stock.
Removed
The warrant had an exercise price of $5.00 per share and may be converted by means of a cashless exercise during the term of the warrant, which expired on May 15, 2022.
Removed
Finally, in connection with our initial public offering, we issued to the underwriter and its affiliates warrants to purchase 57,200 shares of common stock at an exercise price of $8.75 per share and an expiration date of May 2, 2023. 70,000 and 87,460 of the foregoing warrants have been exercised and expired, respectively, through the date of this annual report and there are currently 106,950 outstanding warrants to purchase shares of our common stock.
Removed
To the extent any additional warrants are exercised, our stockholders’ ownership interest in us will be diluted, which may reduce the market price of our common stock.
Removed
If one or more analysts who elect to cover us issue negative reports or adversely change their recommendations regarding our common stock, the market price of our common stock could decline.
Removed
We are required to comply with the laws, regulations, requirements, and certain corporate governance provisions under the Exchange Act and the Sarbanes-Oxley Act.
Removed
If we identify material weaknesses in our internal control over financial reporting, are unable to comply with the requirements of Section 404 in a timely manner or assert that our internal control over financial reporting is ineffective, investors may lose confidence in our reported financial information, which could negatively impact the market for our common stock and cause us to be unable to obtain additional financing on acceptable terms or at all, which could cause harm to our business and financial condition.
Removed
In addition, as an emerging growth company, we are not required to obtain an auditor attestation of management’s evaluation of internal controls over financial reporting once such internal controls are in place.
Removed
As a result, we may fail to identify and remediate a material weakness or deficiency in our internal control over financial reporting, which may cause our financial statements and related disclosure to contain material misstatements and could cause delays in filing required financial statements and related reports.
Removed
The recent military conflict in Ukraine has led to sanctions and other penalties being levied by the United States, European Union, and other countries against Russia. Additional potential sanctions and penalties have also been proposed and/or threatened.

Item 2. Properties

Properties — owned and leased real estate

11 edited+4 added−8 removed4 unchanged
Biggest changeOn July 1, 2020, Jiangmen Treasure Success and Jiangmen V-Apparel Manufacturing Limited entered into a factory lease agreement, which was a replacement of a previous lease agreement dated August 31, 2019. The new lease has a one-year term with monthly rent amount of CNY28,300 (approximately $4,500) for additional office space and sample production purposes.
Biggest changeThe new lease has a one-year term with monthly rent amount of CNY28,300 (approximately $4,100) for additional office space and sample production purposes. On April 30, 2021, the factory lease agreement between Jiangmen Treasure Success and Jiangmen V-apparel Manufacturing Limited was terminated. On January 1, 2021, Jiangmen Treasure Success entered a factory lease agreement with an independent third party.
Construction was temporarily suspended in March 2020 due to the COVID-19 pandemic but subsequently completed and ready for use as of September 30, 2021. 17 In 2018, we commenced another project to build a 54,000 square-foot factory in Al-Hasa County in the Tafilah Governorate of Jordan, which started operation in November 2019.
Construction was temporarily suspended in March 2020 due to the COVID-19 pandemic but subsequently completed and ready for use as of September 30, 2021. In 2018, we commenced another project to build a 54,000 square-foot factory in Al-Hasa County in the Tafilah Governorate of Jordan, which started operation in November 2019.
In 2015, we commenced a project to build a 4,800 square-foot workshop in the Tafilah Governorate of Jordan, which was previously intended to be used as a sewing workshop for Jerash Garments, but which we now use as a dormitory to house management and supervisory staff who work at the factory in Al-Hasa County as discussed below.
Business—Organizational Structure.” In 2015, we commenced a project to build a 4,800 square-foot workshop in the Tafilah Governorate of Jordan, which was previously intended to be used as a sewing workshop for Jerash Garments, but which we now use as a dormitory to house management and supervisory staff who work at the factory in Al-Hasa County as discussed below.
The Ministry of Labor financed the building of the factory and the Employment and Training Department supported 50% of the workers’ salaries, as well as transportation and social security costs in the first 12 months following the completion of the project.
The Ministry of Labor financed the building of the factory and the Employment and Training Department supported 50% of the workers’ salaries, as well as transportation and social security costs in the first 12 months following the completion of the project. We used the factory without paying rent through December 2022.
To meet increasing demand, we were also completing plans to construct an additional project on a nearby separate 133,000 square-foot parcel that we purchased in 2019 for $1.2 million, with 2/3 of the land allocated for our seventh factory and 1/3 for housing. We are closely monitoring economic condition and customer demands in formulating the construction plan.
To meet increasing demand, we were also finalizing plans to construct an additional project on a nearby separate 133,000 square-foot parcel that we purchased in 2019 for $1.2 million, with 2/3 of the land allocated for the establishment of our seventh factory and 1/3 for housing purposes.
The new facilities are an existing garment manufacturing operation adjacent to Jerash’s four largest manufacturing centers. Jerash assumed ownership of all of the machinery and equipment owned by MK Garments through the acquisition. We believe the real property that we own and lease is sufficient to conduct our operations as they are currently conducted.
The new facilities are an existing garment manufacturing operation adjacent to Jerash’s four largest manufacturing centers. Jerash assumed ownership of all of the machinery and equipment owned by MK Garments through the acquisition.
The new tenancy agreement has a term from February 26, 2021 to February 25, 2023, with a rent in the amount of HK$119,540 (approximately $15,326) per month.
The tenancy agreement had a term from February 26, 2021 to February 25, 2023, with a rent in the amount of HK$119,540 (approximately $15,326) per month. On August 29, 2022, Ever Winland became a subsidiary of Treasure Success. See “—Item 1.
The lease has a five-year term with monthly rent amount of CNY50,245 (approximately $7,900) for the first year, CNY60,270 (approximately $9,500) for the second year, and 5% further annual increments starting from the third year. On April 30, 2021, the factory lease agreement between Jiangmen Treasure Success and Jiangmen V-apparel Manufacturing Limited was terminated.
The lease has a five-year term with monthly rent amount of CNY50,245 (approximately $7,300) for the first year, CNY60,270 (approximately $8,800) for the second year, and 5% further annual increments starting from the third year.
In April 2021, we commenced construction on a 189,000 square-foot housing facility for our multi-national workforce, situated on a 49,000 square-foot site owned by us, in Al Tajamouat Industrial City. We anticipate the completion and occupancy of the new building in August 2022.
We have continued to use the factory without paying rent since January 2023 as new arrangements with the Jordanian Ministry of Labor are still being made. 17 In April 2021, we commenced construction on a 189,000 square-foot housing facility for our multi-national workforce, situated on a 49,000 square-foot site owned by us, located in Al Tajamouat Industrial City.
In addition, we lease space for our workers in dormitories located inside and outside of Al Tajamouat Industrial City.
In addition, we lease space for our workers in dormitories located inside and outside of Al Tajamouat Industrial City. Treasure Success leased its office space in Hong Kong from Ever Winland pursuant to a tenancy agreement dated February 26, 2021.
On April 30, 2021, the factory lease agreement between Jiangmen Treasure Success and Jiangmen V-apparel Manufacturing Limited was terminated. On January 1, 2021, Jiangmen Treasure Success entered a factory lease agreement with an independent third party.
We have resumed to work with engineering consultants to proceed with the architectural design of these buildings. On July 1, 2020, Jiangmen Treasure Success and Jiangmen V-Apparel Manufacturing Limited entered into a factory lease agreement, which was a replacement of a previous lease agreement dated August 31, 2019.
Removed
Treasure Success leased its office space in Hong Kong from Ford Glory, pursuant to an agreement effective October 3, 2018 providing for a rent in the amount of HK$119,540 (approximately $15,326) per month and having a one-year term with an option to extend the term for an additional year at the same rent.
Added
We anticipate the completion of the construction and the subsequent occupancy of the new building by August 2023.
Removed
On October 3, 2019, Treasure Success exercised the option to extend the lease for an additional year at the same rent. On December 15, 2020, Treasure Success renewed the lease for an additional year starting from October 3, 2020 at the same rent.
Added
On July 14, 2021, Jerash Garments and the sole shareholder of Kawkab Venus entered into an agreement, pursuant to which Jerash Garments acquired all of the outstanding stock of Kawkab Venus.
Removed
In February 2021, Ford Glory disposed of the property that was the subject of the tenancy agreement between Treasure Success and Ford Glory. Ever Winland Limited, the new owner of the property and an independent party to the Group, entered into a new tenancy agreement with Treasure Success on February 26, 2021.
Added
Apart from the land and factory premises, Kawkab Venus had no other significant assets or liabilities and no operation activities or employees at the time of acquisition, so the acquisition was accounted for an asset acquisition. As of August 21, 2022, Kawkab Venus became a subsidiary of Jerash Garments.
Removed
On December 11, 2018, we entered into an agreement through Jerash Garments, one of our subsidiaries in Jordan, to acquire all of the stock of an existing garment manufacturing business in order to operate our fourth manufacturing facility in Al Tajamouat Industrial City located in Amman, Jordan.
Added
We believe the real property that we own and lease is sufficient to conduct our operations as they are currently conducted.
Removed
This acquisition increased Jerash’s annual capacity from 6.5 million pieces to 8 million pieces. The new facilities are an existing garment manufacturing operation adjacent to Jerash’s three largest manufacturing centers. Jerash assumed ownership of all of the machinery and equipment owned by Paramount through the acquisition.
Removed
Jerash leases an approximately 100,900 square-foot primary garment manufacturing factory and housing accommodations for up to 500 workers located in Al Tajamouat Industrial City. Additionally, Jerash has coordinated with the Jordanian Ministry of Industry and Trade, Ministry of Labor and Customs Department to assume the existing compliance certificates and workplace certifications, including the facility’s Better Work Jordan credentials.
Removed
In connection with the closing of this transaction, which occurred as of June 18, 2019, Jerash paid an aggregate of $980,000 to Paramount to acquire all of its stock. Jerash intends to further invest in machinery, dormitory expansion and facility audits to support additional growth at the new facility.
Removed
We will be using the factory without paying rent until December 2022, after which time we anticipate entering into a lease agreement for the factory with the Jordanian Ministry of Labor for market rent.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+1 added−0 removed2 unchanged
Biggest changeDuring the fiscal years ended March 31, 2022 and 2021, we did not have sales of unregistered securities other than those already disclosed in the quarterly reports on Form 10-Q in the fiscal years 2022 and 2021 and current reports on Form 8-K. Item 6. [Reserved].
Biggest changeTotal share repurchases under the share repurchase program for the three months ended March 31, 2023 are as follows: Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of the publicly announced program Approximate dollar value of shares still available to be purchased under the program (in millions) 01/01/2023 - 01/31/2023 - - 156,593 2.2 02/01/2023 - 02/28/2023 29,270 4.74 185,863 2.1 03/01/2023 - 03/31/2023 53,615 4.82 239,478 0 Total 82,885 4.79 239,478 0 During the fiscal years ended March 31, 2023 and 2022, we did not have sales of unregistered securities other than those already disclosed in the quarterly reports on Form 10-Q in the fiscal years 2023 and 2022 and current reports on Form 8-K.
As of June 24, 2022, there were 12,334,318 shares of common stock issued and outstanding held by approximately 37 stockholders of record. Since November 2018, the Board of Directors of Jerash Holdings has declared a quarterly cash dividend payable to holders of its common stock.
As of June 27, 2023, there were 12,294,840 shares of common stock issued and outstanding held by approximately 41 stockholders of record. Since November 2018, the Board of Directors of Jerash Holdings has declared a quarterly cash dividend payable to holders of its common stock.
For information on securities authorized for issuance under our existing equity compensation plan, see Item 12 under the heading “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.” We did not repurchase any of our common stock in the fiscal year ended March 31, 2022.
For information on securities authorized for issuance under our existing equity compensation plan, see Item 12 under the heading “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.” On June 13, 2022, the Board of Directors of Jerash Holdings authorized a share repurchase program, under which the Company may repurchase up to $3.0 million of its outstanding shares of common stock.
Added
The share repurchase program expired on March 31, 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

40 edited+11 added−28 removed14 unchanged
Biggest change(All amounts, other than percentages, in thousands of U.S. dollars) Fiscal Year Ended March 31, 2022 Fiscal Year Ended March 31, 2021 Sales Sales Amount % Amount % VF Corporation (1) $ 96,450 67.3 % $ 55,994 62.1 % New Balance 34,506 24.1 % 11,050 12.3 % Jiangsu Guotai Huasheng Industrial Co (HK)., Ltd 3,245 2.3 % 2,982 3.3 % G-III 2,758 1.9 % 2,875 3.2 % Dynamic Design Enterprise, Inc 2,235 1.6 % 6,347 7.0 % Soriana 1,487 1.0 % - - % ARK Garments 829 0.6 % 2,896 3.2 % Onset Time Limited - - 1,672 1.9 % Others 1,845 1.2 % 6,397 7.0 % Total $ 143,355 100.0 % $ 90,213 100.0 % (1) A large portion of our products are sold under The North Face brand that is owned by VF Corporation. 21 Revenue by Geographic Area (All amounts, other than percentages, in thousands of U.S. dollars) Fiscal Years Ended March 31, 2022 2021 Year over Year Region Amount % Amount % Amount % United States $ 136,068 95 % $ 79,190 88 % $ 56,878 72 % Jordan 1,950 1 % 5,703 6 % (3,753 ) (66 )% Others 5,337 4 % 5,320 6 % 17 0 % Total $ 143,355 100 % $ 90,213 100 % $ 53,142 59 % Since January 2010, all apparel manufactured in Jordan can be exported to the U.S. without customs duty being imposed, pursuant to the United States-Jordan Free Trade Agreement entered into in December 2001.
Biggest change(All amounts, other than percentages, in thousands of U.S. dollars) Fiscal Year Ended March 31, 2023 Fiscal Year Ended March 31, 2022 Sales Sales Amount % Amount % VF Corporation (1) $ 82,661 59.9 % $ 96,450 67.3 % New Balance 24,124 17.5 % 34,506 24.1 % Jiangsu Guotai Huasheng Industrial Co (HK)., Ltd 9,454 6.8 % 3,245 2.3 % Dynamic Design Enterprise, Inc 8,175 5.9 % 2,235 1.6 % G-III 5,589 4.0 % 2,758 1.9 % Classic 1,596 1.2 % - 0 % Soriana 954 0.7 % 1,487 1.0 % Others 5,510 4.0 % 2,674 1.8 % Total $ 138,063 100.0 % $ 143,355 100.0 % (1) A large portion of our products are sold under The North Face and Timberland brands owned by VF Corporation. 20 Revenue by Geographic Area (All amounts, other than percentages, in thousands of U.S. dollars) Fiscal Years Ended March 31, 2023 2022 Year over Year Region Amount % Amount % Amount % United States $ 122,318 89 % $ 136,068 95 % $ (13,750 ) (10 )% Hong Kong 9,474 7 % 3,280 2 % 6,194 189 % Jordan 4,892 3 % 1,950 1 % 2,942 151 % Others 1,379 1 % 2,057 2 % (678 ) (33 )% Total $ 138,063 100 % $ 143,355 100 % $ (5,292 ) (4 )% Since January 2010, all apparel manufactured in Jordan can be exported to the U.S. without customs duty being imposed, pursuant to the United States-Jordan Free Trade Agreement entered into in December 2001.
Critical Accounting Policies We prepare our financial statements in conformity with accounting principles generally accepted by the United States of America, which require us to make judgments, estimates, and assumptions that affect our reported amount of assets, liabilities, revenue, costs and expenses, and any related disclosures.
Critical Accounting Policies and Estimates We prepare our financial statements in conformity with accounting principles generally accepted by the United States of America, which require us to make judgments, estimates, and assumptions that affect our reported amount of assets, liabilities, revenue, costs and expenses, and any related disclosures.
Seasonality of Sales A significant portion of our revenue is received during the first six months of our fiscal year. The majority of our VF Corporation orders are derived from winter season fashions, the sales of which occur in Spring and Summer and are merchandized by VF Corporation during the months of September through November.
EXECUTIVE OVERVIEW Seasonality of Sales A significant portion of our revenue is received during the first six months of our fiscal year. The majority of our VF Corporation orders are derived from winter season fashions, the sales of which occur in Spring and Summer and are merchandized by VF Corporation during the months of September through November.
The following table provides the amount of our statutory reserves, the amount of restricted net assets, consolidated net assets, and the amount of restricted net assets as a percentage of consolidated net assets, as of March 31, 2022 and 2021.
The following table provides the amount of our statutory reserves, the amount of restricted net assets, consolidated net assets, and the amount of restricted net assets as a percentage of consolidated net assets, as of March 31, 2023 and 2022.
This strategy also reflects our current plan to increase our number of customers to mitigate our current concentration risk with VF Corporation. 20 Results of Operations The following table presents certain information from our statement of income for fiscal years 2022 and 2021 and should be read, along with all of the information in this management’s discussion and analysis, in conjunction with the consolidated financial statements and related notes included elsewhere in this filing.
This strategy also reflects our current plan to increase our number of customers to mitigate our current concentration risk with VF Corporation. 19 Results of Operations The following table presents certain information from our statements of income and comprehensive income for fiscal 2023 and 2022 and should be read, along with all of the information in this management’s discussion and analysis, in conjunction with the consolidated financial statements and related notes included elsewhere in this filing.
For Management’s Discussion and Analysis of the fiscal years ended March 31, 2021 and 2020, please see our Annual Report on Form 10-K for the fiscal year ended March 31, 2021, filed with the SEC on June 23, 2021.
For Management’s Discussion and Analysis of the fiscal years ended March 31, 2022 and 2021, please see our Annual Report on Form 10-K for the fiscal year ended March 31, 2022, filed with the SEC on June 27, 2022.
The dormitory is expected to be completed and ready for use in fiscal 2023. We project that there will be an aggregate of approximately $16 million and $0.5 million of capital expenditures in the fiscal years ending March 31, 2023 and 2024, respectively, for further enhancement of production capacity to meet future sales growth.
The dormitory is expected to be completed and ready for use in August 2023. We project that there will be an aggregate of approximately $2.6 million and $8.5 million of capital expenditures in the fiscal years ending March 31, 2024 and 2025, respectively, for further enhancement of production capacity to meet future sales growth.
The increase in net cash provided by operating activities was primarily attributable to the following factors: ● an increase in inventory of $3.2 million during fiscal 2022, compared to an increase of $2.4 million during fiscal 2021; ● a decrease in accounts receivable of $0.8 million during fiscal 2022, compared to an increase of $6.7 million in fiscal 2021; ● an increase in prepaid expenses and other current assets of $0.9 million, compared to a decrease of $0.4 million in fiscal 2021; ● a decrease in advance to suppliers of $1.7 million, compared to an increase of $0.9 million in fiscal 2021; ● a decrease in accounts payable of $3.1 million during fiscal 2022, compared to an increase of $1.5 million in fiscal 2021; and ● an increase of net income to $7.9 million during fiscal 2022 from a net income of $4.1 million in fiscal 2021.
The increase in net cash provided by operating activities was primarily attributable to the following factors: ● an increase in inventory of $4.4 million during fiscal 2023, compared to an increase of $3.2 million during fiscal 2022; ● a decrease in accounts receivable of $8.8 million during fiscal 2023, compared to a decrease of $0.8 million in fiscal 2022; ● a decrease in prepaid expenses and other current assets of $0.3 million, compared to an increase of $0.9 million in fiscal 2022; ● an increase in advance to suppliers of $0.2 million, compared to a decrease of $1.7 million in fiscal 2022; ● an increase in accounts payable of $0.9 million during fiscal 2023, compared to a decrease of $3.1 million in fiscal 2022; and ● a decrease of net income to $2.4 million during fiscal 2023 from a net income of $7.9 million in fiscal 2022. 23 Investing Activities Net cash used in investing activities was approximately $13.8 million and $8.7 million for fiscal 2023 and 2022, respectively.
These reserves are not available for dividend distribution. The statutory reserve was $379,323 and $346,315 as of March 31, 2022 and 2021, respectively.
These reserves are not available for dividend distribution. The statutory reserve was $410,847 and $379,323 as of March 31, 2023 and 2022, respectively.
(All amounts, other than percentages, in thousands of U.S. dollars) As of March 31, 2022 2021 Statutory Reserves $ 379 $ 346 Total Restricted Net Assets $ 379 $ 346 Consolidated Net Assets $ 69,304 $ 56,391 Restricted Net Assets as Percentage of Consolidated Net Assets 0.55 % 0.61 % Total restricted net assets accounted for approximately 0.55% of our consolidated net assets as of March 31, 2022.
(All amounts, other than percentages, in thousands of U.S. dollars) As of March 31, 2023 2022 Statutory Reserves $ 411 $ 379 Total Restricted Net Assets $ 411 $ 379 Consolidated Net Assets $ 68,234 $ 69,304 Restricted Net Assets as Percentage of Consolidated Net Assets 0.60 % 0.55 % Total restricted net assets accounted for approximately 0.60% of our consolidated net assets as of March 31, 2023.
This project was constructed in conjunction with the Jordanian Ministry of Labor and the Jordanian Education and Training Department. 25 On August 7, 2019, we completed a transaction to acquire 12,340 square meters (approximately three acres) of land in Al Tajamouat Industrial City, Jordan, from a third party to construct a dormitory for our employees with aggregate purchase price JOD863,800 (approximately $1,218,303).
On August 7, 2019, we completed a transaction to acquire 12,340 square meters (approximately three acres) of land in Al Tajamouat Industrial City, Jordan, from a third party to construct a dormitory for our employees with aggregate purchase price JOD863,800 (approximately $1,218,303).
Our current assets as of March 31, 2022 were approximately $69.9 million, and our current liabilities were approximately $14.1 million, which resulted in a current ratio of approximately 4.9:1. Our current assets as of March 31, 2021 were approximately $64.7 million, and our current liabilities were approximately $14.8 million, which resulted in a current ratio of approximately 4.4:1.
Our current assets as of March 31, 2023 were approximately $57.3 million, and our current liabilities were approximately $14.4 million, which resulted in a current ratio of approximately 4.0:1. Our current assets as of March 31, 2022 were approximately $69.9 million, and our current liabilities were approximately $14.1 million, which resulted in a current ratio of approximately 4.9:1.
As our subsidiaries in Jordan are only required to set aside 10% of net profits to fund the statutory reserves, we believe the potential impact of such restricted net assets on our liquidity is limited.
As our subsidiaries in Jordan are only required to set aside 10% of net profits to fund the statutory reserves, we believe the potential impact of such restricted net assets on our liquidity is limited. Capital Expenditures We had capital expenditures of approximately $13.8 million and $8.7 million in fiscal 2023 and 2022, respectively.
The DBSHK facility bears interest at 1.5% per annum over Hong Kong Interbank Offered Rate (“HIBOR”) for HKD bills and 1.3% per annum over DBSHK’s cost of funds for foreign currency bills.
The DBSHK facility bears interest at 1.5% per annum over Hong Kong Interbank Offered Rate (“HIBOR”) for HKD bills and 1.3% per annum over DBSHK’s cost of funds for foreign currency bills. The facility is guaranteed by Jerash Holdings and became available to the Company on June 17, 2022.
Management has revised the plan to construct both dormitory and production facilities on the land in order to capture the increasing demand for our capacity. We are conducting engineering design and study on this project and we plan to begin construction in early 2022.
Management has revised the plan to construct both dormitory and production facilities on the land in order to capture the increasing demand for our capacity. We are conducting engineering design and study on this project with the business growth potential bought about by the new business collaboration with Busana Apparel Group.
(All amounts in thousands of U.S. dollars) For the fiscal years ended March 31, 2022 2021 Net cash provided by (used in) operating activities $ 8,963 $ (1,499 ) Net cash used in investing activities (8,673 ) (894 ) Net cash provided by (used in) financing activities 3,289 (1,654 ) Effect of exchange rate changes on cash 144 (8 ) Net increase (decrease) in cash 3,723 (4,055 ) Cash and restricted cash, beginning of year 22,860 26,915 Cash and restricted cash, end of year $ 26,583 $ 22,860 Cash paid for interest 211 - Income tax paid 1,762 773 Non-cash financing activities Right of use assets obtained in exchange for operating lease obligations $ 1,022 $ 1,352 Operating Activities Net cash provided by operating activities was approximately $9.0 million in fiscal 2022, compared to net cash used in operating activities of approximately $1.5 million in fiscal 2021.
(All amounts in thousands of U.S. dollars) For the fiscal years ended March 31, 2023 2022 Net cash provided by operating activities $ 10,807 $ 8,963 Net cash used in investing activities (13,775 ) (8,673 ) Net cash (used in) provided by financing activities (3,953 ) 3,289 Effect of exchange rate changes on cash (250 ) 144 Net (decrease) increase in cash and restricted cash (7,171 ) 3,723 Cash and restricted cash, beginning of year 26,583 22,860 Cash and restricted cash, end of year $ 19,412 $ 26,583 Supplemental disclosure information Cash paid for interest $ 768 $ 211 Income tax paid $ 1,748 $ 1,762 Non-cash investing and financing activities Equipment obtained by utilizing long-term deposit $ 237 $ 322 Acquisition of Kawkab Venus by utilizing long-term deposit $ 500 $ - Right of use assets obtained in exchange for operating lease obligations $ 191 $ 1,022 Operating Activities Net cash provided by operating activities was approximately $10.8 million in fiscal 2023, compared to net cash provided by operating activities of approximately $9.0 million in fiscal 2022.
DBS Facility Letter Pursuant to the DBS facility letter dated January 12, 2022, DBSHK provided a bank facility of up to $5.0 million to Treasure Success. Pursuant to the agreement, DBSHK agreed to finance cargo receipt, trust receipt, account payable financing, and certain type of import invoice financing up to an aggregate of $5.0 million.
Pursuant to the agreement, DBSHK agreed to finance cargo receipt, trust receipt, account payable financing, and certain type of import invoice financing up to an aggregate of $5.0 million, subject to certain financial covenants.
There was a net cash outflow of $1.7 million in fiscal 2021 resulting from dividend payments and proceeds from short-term loans. Statutory Reserves In accordance with the corporate Law in Jordan, Jerash Holdings’ subsidiaries in Jordan are required to make appropriations to certain reserve funds, based on net income determined in accordance with generally accepted accounting principles of Jordan.
Statutory Reserves In accordance with the corporate Law in Jordan, Jerash Holdings’ subsidiaries in Jordan are required to make appropriations to certain reserve funds, based on net income determined in accordance with generally accepted accounting principles of Jordan.
As of March 31, 2022, we had cash of approximately $25.2 million and restricted cash of approximately $1.4 million compared to cash of approximately $21.1 million and restricted cash of approximately $1.7 million as of March 31, 2021.
As of March 31, 2023, our cash balance was approximately $17.8 million and restricted cash was approximately $1.6 million, compared to cash of approximately $25.2 million and restricted cash of approximately $1.4 million as of March 31, 2022.
The decrease in cost of goods sold as a percentage of revenue was primarily attributable to a full resumption of production and a higher proportion of export orders in fiscal 2022. For the fiscal year ended March 31, 2022, we purchased approximately 20% and 11% of our garments and raw materials from two major suppliers, respectively.
The increase in the cost of goods sold as a percentage of revenue was primarily attributable to a lower proportion of export orders to our two major customers in the U.S., which typically generated higher profit margin for the company. For the fiscal year ended March 31, 2023, we purchased approximately 11% of our garments from one major supplier.
This free trade agreement provides us with substantial competitiveness and benefit that allowed us to expand our garment export business in the U.S. The increase of approximately 72% in sales to the U.S. during fiscal year ended March 31, 2022 was mainly attributable to the increase in the export sales to two of our major customers in the U.S.
This free trade agreement provides us with substantial competitiveness and benefit that allowed us to expand our garment export business in the U.S.
Following the increase in sales revenue, our cost of goods sold increased by approximately $41.8 million, or 56%, to approximately $116.0 million in fiscal 2022 from approximately $74.2 million in fiscal 2021. As a percentage of revenue, the cost of goods sold decreased by approximately 1% points to 81% in fiscal 2022 from 82% in fiscal 2021.
Our cost of goods sold experienced a slight increase of approximately $0.3 million to approximately $116.3 million in fiscal 2023 from approximately $116.0 million in fiscal 2022, despite th e decrease in sales. As a percentage of revenue, the cost of goods sold increased by approximately 3 percentage points to 84% in fiscal 2023 from 81% in fiscal 2022.
The facility is guaranteed by Jerash Holdings and became available to the Company on June 17, 2022. 23 Fiscal Years ended March 31, 2022 and 2021 The following table sets forth a summary of our cash flows for the fiscal years ended March 31, 2022 and 2021.
Fiscal Years ended March 31, 2023 and 2022 The following table sets forth a summary of our cash flows for the fiscal years ended March 31, 2023 and 2022.
The increase in gross profit margin was primarily driven by higher proportion of export orders that typically have higher margin. Selling, general, and administrative expenses. Selling, general, and administrative expenses increased by approximately 59% from approximately $10.6 million in fiscal 2021 to approximately $16.8 million in fiscal 2022.
The decrease in gross profit margin was primarily influenced by a lower proportion of export orders from our two major customers in the U.S., which typically generated higher profit margin. Selling, general, and administrative expenses . Selling, general, and administrative expenses increased by approximately 3% from approximately $16.8 million in fiscal 2022 to approximately $17.4 million in fiscal 2023.
(All amounts, other than percentages, in thousands of U.S. dollars) Fiscal Years Ended March 31, 2022 2021 Year over Year Statement of Income Data: Amount As % of Sales Amount As % of Sales Amount % Revenue $ 143,355 100 % $ 90,213 100 % $ 53,142 59 % Cost of goods sold 116,023 81 % 74,214 82 % 41,809 56 % Gross profit 27,332 19 % 15,999 18 % 11,333 71 % Selling, general, and administrative expenses 16,843 12 % 10,614 12 % 6,229 59 % Other (expense) income, net (45 ) 0 % 109 0 % (154 ) (141 )% Net income before taxation $ 10,444 7 % $ 5,494 6 % $ 4,950 90 % Income tax expense 2,524 2 % 1,346 1 % 1,178 88 % Net income $ 7,920 5 % $ 4,148 5 % $ 3,772 91 % Revenue.
(All amounts, other than percentages, in thousands of U.S. dollars) Fiscal Years Ended March 31, 2023 2022 As % of As % of Year over Year Statement of Income Data: Amount Sales Amount Sales Amount % Revenue $ 138,063 100 % $ 143,355 100 % $ (5,292 ) (4 )% Cost of goods sold 116,273 84 % 116,023 81 % 250 - % Gross profit 21,790 16 % 27,332 19 % (5,542 ) (20 )% Selling, general, and administrative expenses 17,375 13 % 16,843 12 % 532 3 % Other expenses, net (331 ) 0 % (45 ) 0 % (286 ) 636 % Net income before taxation $ 4,084 3 % $ 10,444 7 % $ (6,360 ) (61 )% Income tax expense 1,664 1 % 2,524 2 % (860 ) (34 )% Net income $ 2,420 2 % $ 7,920 5 % $ (5,500 ) (69 )% Revenue.
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.
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. 22 Credit Facilities DBS Facility Letter Pursuant to the DBS facility letter dated January 12, 2022, DBSHK provided a bank facility of up to $5.0 million to Treasure Success.
Revenue increased by approximately $53.1 million, or 59%, to approximately $143.4 million in fiscal 2022 from approximately $90.2 million in fiscal 2021. The increase was mainly due to an increase in export sales to two of our major U.S. customers.
Revenue decreased by approximately $5.3 million, or 4%, to approximately $138.1 million in fiscal 2023 from approximately $143.4 million in fiscal 2022. This slight decrease was mainly due to a decline in export sales to two major U.S. customers.
The increase in net cash used in investing activities was mainly attributable to $3.0 million used in the acquisition of property, plant and machinery, $2.1 million for payments for the construction of a dormitory, and $2.7 million for the acquisition of all the share capital of MK Garments. 24 Financing Activities Net cash provided by financing activities was approximately $3.3 million for fiscal 2022, from the net proceeds of $6.3 million in a placement completed in October 2021 and outflows of dividend payments of approximately $2.4 million and repayments of short-term loans of approximately $0.6 million.
There was a net cash inflow of $3.3 million in fiscal 2022 resulting from the net proceeds of $6.3 million in a placement completed in October 2021 and outflows of dividend payments of approximately $2.4 million and repayments of short-term loans of approximately $0.6 million.
The following table outlines the dollar amount and percentage of total sales to our customers for the fiscal years ended March 31, 2022 and 2021, respectively.
Despite receiving orders from new customers and observing an increase in shipments to other existing customers, these efforts were not enough to offset the shortfall in sales. The following table outlines the dollar amount and percentage of total sales to our customers for the fiscal years ended March 31, 2023 and 2022, respectively.
For the fiscal year ended March 31, 2021, we purchased approximately 13% of our garments from one major supplier. Gross profit margin . Gross profit margin was approximately 19% in fiscal 2022, which increased by approximately 1% points from 18% in fiscal 2021.
For the fiscal year ended March 31, 2022, we purchased approximately 20% and 11% of our garments and raw materials from two major suppliers, respectively. Gross profit margin . Our gross profit margin was approximately 16% in fiscal 2023, representing a decrease by approximately 3 percentage points from 19% in fiscal 2022.
Construction was temporarily suspended in March 2020 due to the COVID-19 pandemic but subsequently completed, and the building was ready for use as of September 30, 2021. In 2018, we commenced another project to build a 54,000 square-foot factory in Al-Hasa County in the Tafilah Governorate of Jordan, which started operation in November 2019 with approximately 240 workers.
For the year ended March 31, 2022, payments for the construction of a dormitory and factory expansion amounted to $2.1 million, and payments for the acquisition of all the share capital of MK Garment was 2.7 million. 24 In 2018, we commenced another project to build a 54,000 square-foot factory in Al-Hasa County in the Tafilah Governorate of Jordan, which started operation in November 2019 with approximately 240 workers.
To the extent payments are due in U.S. dollars, we have occasionally paid such amounts in JOD to an entity controlled by our management capable of paying such amounts in U.S. dollars. Such transactions have been made at prevailing exchange rates and have resulted in immaterial losses or gains on currency exchange but no other profit.
Such transactions have been made at prevailing exchange rates and have resulted in immaterial losses or gains on currency exchange but no other profit.
During the fiscal year ended March 31, 2022, aggregate sales to Jordan and other locations, such as Hong Kong and China, decreased by 34% from approximately $11.0 million to $7.3 million during the fiscal year ended March 31, 2022 as more production capacity was allocated to export orders, which typically have a higher profit margin. Cost of goods sold.
During the fiscal year ended March 31, 2023, aggregate sales to Jordan, Hong Kong, and other locations, such as mainland China, increased significantly by 116% from approximately $7.3 million to $15.7 million.
Income tax expenses for the fiscal 2022 were approximately $2.5 million compared to income tax expenses of approximately $1.3 million for fiscal 2021.
The increase in other expenses was primarily due to the increase in net interest expenses. 21 Taxation. Income tax expenses for the fiscal 2023 were approximately $1.7 million, compared to income tax expenses of approximately $2.5 million for fiscal 2022. The effective tax rate for fiscal 2023 increased to 40.7%, compared to 24.2% for fiscal 2022.
The increase was mainly attributable to (i) increased costs for employing additional migrant workers, (ii) the inclusion of approximately $0.9 million of stock-based compensation expenses, (iii) an increase in headcounts from the completion of acquisition of MK Garment in October 2021, and (iv) an increase in export expenses in proportion to growth in sales in fiscal 2022.
The increase was mainly attributable to (i) the acquisition of MK Garments, resulting in higher headcounts, and (ii) increased travelling costs for migrant workers. Other expenses, net . Other expenses, net were approximately $0.3 million in fiscal 2023 and other expenses, net was approximately $45,000 in fiscal 2022.
As a holding company, we rely on dividends and other distributions from our Jordanian and Hong Kong subsidiaries to satisfy our liquidity requirements. Current Jordanian regulations permit our Jordanian subsidiaries to pay dividends to us only out of their accumulated profits, if any, determined in accordance with Jordanian accounting standards and regulations.
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.
In addition, our Jordanian subsidiaries are required to set aside at least 10% of their respective accumulated profits each year, if any, to fund certain reserve funds. These reserves are not distributable as cash dividends. We have relied on direct payments of expenses by our subsidiaries (which generate revenue) to meet our obligations to date.
These reserves are not distributable as cash dividends. We have relied on direct payments of expenses by our subsidiaries (which generate revenue) to meet our obligations to date. To the extent payments are due in U.S. dollars, we have occasionally paid such amounts in JOD to an entity controlled by our management capable of paying such amounts in U.S. dollars.
Total equity as of March 31, 2022 was approximately $69.3 million, compared to $56.4 million as of March 31, 2021. We had net working capital of $55.7 million and $49.8 million as of March 31, 2022 and 2021, respectively.
The primary driver in the increase in current liabilities was the increased accounts payable due to the increase in inventory levels with credit terms from suppliers. We had net working capital of $42.8 million and $55.7 million as of March 31, 2023 and 2022, respectively.
Capital Expenditures We had capital expenditures of approximately $8.7 million and $1.0 million in fiscal 2022 and 2021, respectively, for property, plant, and machinery, the construction of a dormitory, and the acquisition of MK Garment. Additions in property, plant, and machinery amounted to approximately $3.0 million and $0.8 million in fiscal 2022 and 2021, respectively.
For the year ended March 31, 2023, our capital expenditures included investments in additional plant and machinery, the construction of a dormitory and factory expansion, the acquisition of Kawkab Venus, and the acquisition of Ever Winland, which totaled approximately $0.7 million, $5.1 million, $2.2 million, and $5.1 million, respectively.
Net income for fiscal 2022 was approximately $7.9 million, a 91% increase from approximately $4.1 million for fiscal 2021. The increase was mainly attributable to the increase in sales and the improvement in the gross profit margin discussed above. 22 Liquidity and Capital Resources Jerash Holdings is a holding company incorporated in Delaware.
The decrease in net income was mainly attributable to lower sales to two of our major export customers. Liquidity and Capital Resources Jerash Holdings is a holding company incorporated in Delaware. As a holding company, we rely on dividends and other distributions from our Jordanian and Hong Kong subsidiaries to satisfy our liquidity requirements.
Removed
EXECUTIVE OVERVIEW Overview Through our wholly owned operating subsidiaries, we are principally engaged in the manufacturing and exporting of customized, ready-made sportswear and outerwear from knitted fabric and PPE produced in our facilities in Jordan.
Added
The decrease of approximately 10% in sales to the U.S. during fiscal year ended March 31, 2023 was mainly attributable to the decrease in the export sales to two major customers in the U.S. due to challenges related to inflation, which impacted customer demand for new orders.
Removed
We are an approved manufacturer of many well-known brands and retailers, such as Walmart, Costco, New Balance, G-III (which owns brands such as Calvin Klein, Tommy Hilfiger, DKNY, and Guess), American Eagle, VF Corporation (which operates brands such as The North Face, Timberland, and Vans).
Added
This surge in sales can be attributed to receiving more orders from these regions to fill up the production capacity released from the decrease in shipments to the aforementioned two major customers in the U.S. Cost of goods sold .
Removed
Our production facilities are made up of six factories and four warehouses and currently employ approximately 5,700 people. The total annual capacity at our facilities is approximately 14.0 million pieces (average for product categories including t-shirts, polo shirts, pants, shorts, and jackets, and excluding PPE). Impact of COVID-19 on Our Business Collectability of receivables.
Added
The increase in the effective tax rate mainly resulted from lower operating profit in Jordanian companies, operating loss in Jerash Holdings during the fiscal year, increases in the foreign statutory tax rates, and prior year adjustments.
Removed
We had accounts receivable of $11.0 million as of March 31, 2022, out of which $10.4 million had been received through June 23, 2022. Two major customers have offered early payment alternatives since May and July 2021, which have shortened payment terms to below 10 days from submission of documents. See “—Liquidity and Capital Resources” for more details. Inventory.
Added
In addition, the higher corporate income tax rate in Jordan, which increased from a combined rate of 17% to 20% or 21% since January 1, 2023. Net income. Net income for fiscal 2023 decreased by 69.4% to approximately $2.4 million, compared to approximately $7.9 million for fiscal 2022.
Removed
We had inventory of $28.3 million as of March 31, 2022, substantially for orders scheduled to be shipped within fiscal 2023. 19 Investments. We acquired two pieces of land in fiscal 2020 for the construction of dormitory and production facilities.
Added
The decrease in total cash was primarily due to (i) the acquisition of Ever Winland and Kawkab Venus for approximately $5.1 million and $2.2 million, respectively (ii) investment in the construction of a new dormitory building and extension of one of our major factory buildings, and purchases of property, plant, and machinery, which amounted to a total of approximately $5.8 million, (iii) dividends distribution of $2.5 million, and (iv) a share repurchase program totaling $1.2 million.
Removed
Due to the COVID-19 pandemic, management previously decided to hold off the construction to wait for a clearer picture on customer demand. As customer orders recovered to a satisfactory level, in April 2021, management decided to begin work for the dormitory construction, which is expected to be completed and ready for use in fiscal 2023.
Added
The decrease in current assets were primarily due to (i) reduced accounts receivable resulting from the adoption of supply chain financing programs for two of our major customers, which shortened the payment lead time from 90 days to around 10 days, and (ii) decreased cash due to the investment in the construction of a new dormitory building, the extension in one of our major factory buildings, and the acquisition in Ever Winland and Kawkab Venus.
Removed
In June and July 2021, we entered into two Sale and Purchase Contracts to acquire a garment factory and the physical land and building that the factory was leasing. The acquisition of the garment factory was completed on October 7, 2021. We accounted for the acquisition under the acquisition method of accounting.
Added
As of March 31, 2023 and 2022, we had $nil outstanding under this DBSHK facility. Capital Bank of Jordan Credit Facility Jerash Garments recently received documents from Capital Bank of Jordan for a credit facility of $10 million. Our board of directors has reviewed the documents and approved to enter into the credit facility on June 1, 2023.
Removed
The operating results of this garment factory since the completion of the acquisition and the assets of this garment factory are included in the consolidated financial statements as of and for the fiscal year ended March 31, 2022 included in elsewhere in this annual report.
Added
Execution is still in process and the credit facility is not effective as of the date of this annual report. Details of the credit facility will be provided after execution is complete and the facility is effective.
Removed
The acquisition of the land and building of the factory is expected to close in the second quarter of fiscal 2023 due to personal reasons of the seller in relation to health and quarantine requirements. See “Note 15—Commitments and Contingencies—Commitments.” Revenue .
Added
The increase in net cash used in investing activities was mainly attributable to (i) the acquisition of Ever Winland and Kawkab Venus, amounting to $5.1 million and $2.2 million, respectively, (ii) $5.1 million of payments for construction in progress, including the building of a dormitory building and an extension in one of our major factory buildings, and (iii) $0.7 million used for the acquisition of plant and machinery.
Removed
For fiscal 2022, our sales were $143.4 million, which represented an approximate 58.9% increase from $90.2 million for fiscal 2021. We have been proactively communicating with our existing customers to reconfirm their orders and shipment schedules for fiscal 2023.
Added
Financing Activities Net cash used in financing activities was approximately $4.0 million for fiscal 2023, mainly due to dividend payments of approximately $2.5 million and payments for a share repurchase program of approximately $1.2 million this fiscal year.
Removed
However, our operating results are still subject to the economies in the U.S. and the EU that would have significant impact on both order fulfilment and delivery schedules and our operating results may be adversely affected by the negative impact on the global economy and capital markets resulting from the conflict in Ukraine or any other geopolitical tensions, inflation, and a potential recession.
Added
This project was constructed in conjunction with the Jordanian Ministry of Labor and the Jordanian Education and Training Department.
Removed
Liquidity/Going Concern. As of March 31, 2022, we had approximately $25.2 million of cash and net current assets of approximately $69.9 million with a current ratio of 4.9 to 1. In addition, we had banking facilities with aggregate limits of $3 million with $nil outstanding as of March 31, 2022.
Removed
Given the above, we believe that we will have sufficient financial resources to maintain as a going concern in fiscal 2023. On October 4, 2021, we completed the placement of one million new shares to independent investors with a net proceed of approximately $6.3 million to further bolster our financial position for further growth. Capital Expenditures .
Removed
In fiscal 2021, management decided to put on hold the construction projects on the land acquired in fiscal 2020 to retain financial resources to support our operations, and also to wait and see how the global economy and customer demand recover after the COVID-19 pandemic.
Removed
As customer orders recovered to a satisfactory level, management decided to restart the preparation work for the construction of the dormitory in April 2021. The dormitory is expected to be completed and ready for use in fiscal 2023. In fiscal 2022, the Company acquired five car parking spaces.
Removed
Strong recovery in the U.S. markets along with our continued expansion of the cooperation with these two major customers generated substantial order increases. All factories, including MK Garments and Paramount (acquired in mid-2019), are fully booked until December 2022 and were operating at or near capacity during fiscal 2022.
Removed
Other (expenses)/ income, net. Other expenses, net were approximately $45,000 in fiscal 2022 and other income, net was approximately $109,000 in fiscal 2021.
Removed
The increase in other expenses was primarily due to the absence of a realized gain from short-term investments in the current period, compare with a $124,889 realized gain from short-term investments in the corresponding period of fiscal 2021. Taxation.
Removed
The effective tax rate was slightly down to 24.2% for fiscal 2022, compared to 24.5% for the fiscal 2021 as Treasure Success started to report profit and the tax rate in Hong Kong is 16.5%, which is lower than 18% to 20% of Jordan. Net income.
Removed
The increase in total cash was mainly a result of (i) the completion of a placement in October 2021 that resulted in net proceeds of approximately $6.3 million, and (ii) the introduction of supply chain finance programs by two of our major customers that reduce payment terms from 60 to 90 days to within 10 days from shipments, offsetting approximately $8.7 million used for the MK Garments acquisition, purchases of property, plant, and machinery, and payments for dormitory construction.
Removed
The primary drivers in the increase in current assets were the increase in cash as a result of a share placement completed in October 2021 and the increase in operating profit in the year.
Removed
The primary driver in the decrease in current liabilities was the decrease in accounts payable due to the earlier payments to newly appointed suppliers, particularly for new customers introduced in recent years, and the repayment of short-term bank loans in light of the strong cash position.
Removed
Credit Facilities SCBHK Facility Letter Pursuant to the SCBHK facility letter dated June 15, 2018, and issued to Treasure Success by SCBHK, SCBHK offered to provide an import facility of up to $3.0 million to Treasure Success. The SCBHK facility covers import invoice financing and pre-shipment financing under export orders with a combined limit of $3 million.
Removed
Borrowings under the SCBHK facility are due within 90 days of each invoice or financing date. SCBHK charges interest at 1.3% per annum over SCBHK’s cost of funds. In consideration for arranging the SCBHK facility, Treasure Success paid SCBHK HKD50,000. We were informed by SCBHK on January 31, 2019 that the SCBHK facility had been activated.
Removed
As of March 31, 2022, there was no amount outstanding under the SCBHK facility. In June 2022, we were informed by SCBHK that the facility was cancelled due to persistently low usage and zero loan outstanding.
Removed
Investing Activities Net cash used in investing activities was approximately $8.7 million and $0.9 million for fiscal 2022 and 2021, respectively.
Removed
Payments for construction of a dormitory and factory expansion amounted to $2.1 million in fiscal 2022, and payment made for the acquisition of all the share capital of MK Garment was $2.7 million in fiscal 2022.
Removed
In 2015, we commenced a project to build a 4,800 square-foot workshop in the Tafilah Governorate of Jordan, which was initially intended to be used as a sewing workshop for Jerash Garments, but which we now use as a dormitory to house management and supervisory staff for the 54,000 square-foot workshop in Al-Hasa County.

Other JRSH 10-K year-over-year comparisons