| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principles of Consolidation The Company’s unaudited condensed consolidated
financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“U.S.
GAAP”) for interim financial information and the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do
not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all
adjustments considered necessary for a fair presentation have been included in the Company’s unaudited condensed consolidated financial
statements. The consolidated balance sheet as of March 31, 2024 has been derived from the audited consolidated balance sheet at that date
but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. These condensed consolidated
financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto
included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2024, as filed with the U.S. Securities
and Exchange Commission (the “SEC”). Operating results for the six months ended September 30, 2024 are not necessarily indicative
of the results that may be expected for the year ending March 31, 2025. Principles of Consolidation The unaudited condensed consolidated financial
statements include the financial statements of Jerash Holdings, its wholly owned subsidiaries, and two non-wholly owned subsidiaries. Non-wholly owned subsidiaries are entities that
the reporting parent entity does not own equity interests in full. Noncontrolling interest is evaluated with a depiction of the portion
of a non-wholly owned subsidiary’s net assets, net income, and net comprehensive income that is attributable to holders of equity-classified
ownership interests other than the reporting parent entity. As mentioned in Note 1, the Company holds 51% of equity interest in J&B
and Jerash Newtech through its wholly owned subsidiary, Treasure Success. The Company consolidates J&B and Jerash Newtech and reports
noncontrolling interest to reflect the portion of their equity that is not attributable to the Company as controlling shareholder. As
of September 30, 2024, noncontrolling interest was $32,121. All significant intercompany balances and transactions
have been eliminated in consolidation. Use of Estimates The preparation of the unaudited condensed consolidated
financial statements, in conformity with U.S. GAAP, requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and
the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates. Cash The Company’s cash consists of cash on hand
and cash deposited in financial institutions. The Company considers all highly liquid investment instruments with an original maturity
of three months or less from the original date of purchase to be cash equivalents. As of September 30, 2024 and March 31, 2024, the Company
had no cash equivalents. Restricted Cash Restricted cash consists of cash used as security
deposits to obtain credit facilities from a bank and to secure customs clearance, labor import requirements, and other requirements of
local regulations. The Company is required to keep certain amounts on deposit that are subject to withdrawal restrictions. These security
deposits at the bank are refundable only when the bank facilities are terminated. The restricted cash is classified as a current asset
if the Company intends to terminate these bank facilities within one year, and as a non-current asset if otherwise. Accounts Receivable, Net Accounts receivable are recognized and carried
at the original invoiced amount less an estimated allowance for credit loss. The Company usually grants extended payment terms to customers
with good credit standing and determines the adequacy of credit losses based on the historical level of credit loss, current economic
trends, and reasonable and supportable forecasts that affect the collectability of the future cash flows. Inventories Inventories are stated at the lower of cost or
net realizable value. Inventories include cost of raw materials, freight, direct labor, and related production overhead. The cost of inventories
is determined using the First-in, First-out method. The Company periodically reviews its inventories for excess or slow-moving items and
makes provisions as necessary to properly reflect inventory value. Advance to Suppliers, Net Advance to suppliers consists of balances paid
to suppliers for services or materials purchased that have not been provided or received. Advance to suppliers for services and materials
is short-term in nature. Advance to suppliers is reviewed periodically to determine whether its carrying value has become impaired. The
Company considers the assets to be impaired if the performance by the suppliers becomes doubtful. At each reporting date, the Company
generally determines the adequacy of allowance for credit losses by evaluating all available information, and then records specific allowances
for those advances based on the specific facts and circumstances. Credit Loss On April 1, 2023, the Company adopted Accounting Standards Update (“ASU”)
2016-13 “Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments,”
by using a modified retrospective transition method, which replaces the incurred loss impairment methodology with an expected loss methodology
that is referred to as the current expected credit loss methodology. The expected credit loss impairment model requires the entity to
recognize its estimate of expected credit losses for affected financial assets using an allowance for credit losses and requires consideration
of a broader range of reasonable and supportable information to inform credit loss estimates. The adoption of ASU 2016-13 did not have
a material impact on the Company’s consolidated financial statements. The Company’s accounts receivable and other
receivables, which are included in prepaid expenses and other current assets line items in the consolidated balance sheet, are within
the scope of ASC Topic 326. The Company measures expected credit losses of account receivables and other receivables, on a collective
basis when similar risk characteristics exist. The Company makes estimates of expected credit and collectability trends for the allowance
for credit losses based upon assessment of various factors, including historical experience, the age of the receivables, creditworthiness
of the customers and other debtors, current economic conditions, reasonable and supportable forecasts of future economic conditions, and
other factors that may affect its ability to collect from the customers and other debtors. The Company also provides specific provisions
for allowance when facts and circumstances indicate that the receivable is unlikely to be collected. Expected credit losses are included in general and administrative expenses in the unaudited condensed consolidated statements of operations
and comprehensive income (loss). After all attempts to collect a receivable have failed, the receivable is written off against the allowance. Property, Plant, and Equipment, Net Property, plant, and equipment are recorded at
cost, reduced by accumulated depreciation and amortization. Depreciation and amortization expense related to property, plant, and equipment
is computed using the straight-line method based on the estimated useful lives of the assets, or in the case of leasehold improvements,
the shorter of the initial lease term or the estimated useful life of the improvements. The useful life and depreciation method are reviewed
periodically to ensure that the method and period of depreciation are consistent with the expected pattern of economic benefits from items
of property, plant, and equipment. The estimated useful lives of depreciation and amortization of the principal classes of assets are
as follows:
Useful life
Land Infinite
Property and buildings 15-25 years
Equipment and machinery 3-5 years
Office and electronic equipment 3-5 years
Automobiles 5 years
Leasehold improvements Lesser of useful life and lease term Expenditures for maintenance and repairs, which
do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and betterments
which substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation or amortization of
assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in the consolidated statements of
operations and comprehensive income (loss). Construction in Progress Construction in Progress (“CIP”) is
recorded at cost for property, plant, and equipment where the asset is in construction or development. CIP accumulates cost of construction
and transaction costs involved in the progress of acquiring the materials for construction or development. The Company does not commence
depreciating the asset in CIP account because the asset has not yet been placed in service. Once an asset is placed in service, all costs
associated with the asset that are recorded in the CIP account are transferred to property, plant, and equipment for the asset. Impairment of Long-Lived Assets The Company assesses its long-lived assets, including
property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group
may not be recoverable. Factors which may indicate potential impairment include a significant underperformance relative to the historical
or projected future operating results or a significant negative industry or economic trend. Recoverability of assets to be held and used
is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by that
asset. If impairment is indicated, a loss is recognized for any excess of the carrying value over the estimated fair value of the asset.
The fair value is estimated based on the discounted future cash flows or comparable market values, if available. The Company did not record
any impairment loss during the six months ended September 30, 2024 and 2023. Goodwill Goodwill represents the excess purchase price
paid over the fair value of the net assets of acquired companies. Goodwill is not amortized. As of September 30, 2024 and March 31, 2024,
the carrying amount of goodwill was $499,282. Goodwill is tested for impairment on an annual basis, or in interim periods if indicators
of potential impairment exist, based on the one reporting unit. The Company has the option to perform a qualitative assessment to determine
whether it is necessary to perform the quantitative goodwill impairment test. When performing the quantitative impairment test, the Company
compares the fair value of its only reporting unit with the carrying amounts. The Company would recognize an impairment charge for the
amount by which the carrying amount exceeds the reporting unit’s fair value. The Company concluded that no impairment of its goodwill
occurred for the six months ended September 30, 2024 and 2023. Revenue Recognition Substantially all of the Company’s revenue is derived from product sales, which consist of sales of the Company’s customized
ready-made outerwear for large brand-name retailers and PPE. The Company considers purchase orders to be a contract with a customer. Contracts
with customers are considered to be short-term when the time between order confirmation and satisfaction of the performance obligations
is equal to or less than one year. Virtually all of the Company’s contracts are short-term. The Company has minimal incremental
costs of obtaining a contract, which are expensed when incurred. The Company recognizes revenue for the transfer of promised goods to
customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods. The Company
typically satisfies its performance obligations in contracts with customers upon shipment of the goods. Generally, payment is due from
customers within 14 to 150 days of the invoice date. The contracts do not have significant financing components. Shipping and handling
costs associated with outbound freight from Jordan export dock are not an obligation of the Company. Returns and allowances are not a
significant aspect of the revenue recognition process as historically they have been immaterial. The Company also derives revenue from rendering
cutting and making services to other apparel vendors who subcontract orders to the Company. Revenue is recognized when the service is
rendered. All of the Company’s contracts have a single performance obligation satisfied at a point in time and the transaction price
is stated in the contract, usually as a price per unit. All estimates are based on the Company’s historical experience, complete
satisfaction of the performance obligation, and the Company’s best judgment at the time the estimate is made. Historically, sales
returns have not significantly impacted the Company’s revenue. The Company does not have any contract assets since the Company has an unconditional right to consideration when the Company has satisfied
its performance obligation and payment to the accounts receivable from customers is not contingent on a future event. The Company had
contract liabilities of $1,123,163 and $10,200 as of September 30, 2024 and March 31, 2024, respectively. As of September 30, 2024, $1,123,163
deferred revenue was expected to be recognized within fiscal year 2025. As of March 31, 2024, $10,200 was received in advance, and $6,923
of such advance has been recognized as revenue for the six months ended September 30, 2024. The Company has one revenue generating reportable
geographic segment under ASC Topic 280 “Segment Reporting” and derives its sales primarily from its sales of customized ready-made
outerwear. The Company believes disaggregation of revenue by geographic region best depicts the nature, amount, timing, and uncertainty
of its revenue and cash flows (see “Note 15—Segment Reporting”). Shipping and Handling Proceeds collected from customers for shipping
and handling costs are included in revenue. Shipping and handling costs are expensed as incurred and are included in operating expenses,
as a part of selling, general, and administrative expenses. Total shipping and handling expenses were $1,370,698 and $656,536 for the
three months ended September 30, 2024 and 2023, respectively. Total shipping and handling expenses were $1,971,143 and $1,099,019 for
the six months ended September 30, 2024 and 2023, respectively. Income and Sales Taxes The Company is subject to income taxes on an entity
basis on income arising in or derived from the tax jurisdiction in which each entity is domiciled. Jerash Holdings and Jerash Supplies
are incorporated/formed in the State of Delaware and are subject to federal income tax in the United States of America. Treasure Success,
Ever Winland, J&B, and Jerash Newtech are registered in Hong Kong and are subject to profit tax in Hong Kong. Jiangmen Treasure Success
is incorporated in China and is subject to corporate income tax in China. Jerash Garments, Jerash Embroidery, Chinese Garments, Paramount,
Jerash The First, MK Garments, and Kawkab Venus are subject to income tax in Jordan, unless an exemption is granted. In accordance with
Development Zone law, Jerash Garments and its subsidiaries were subject to corporate income tax in Jordan at a rate of 19% or 20% plus
a 1% social contribution starting from January 1, 2023 to December 31, 2023. Effective January 1, 2024, the income tax rate increased
to 20%, plus a 1% social contribution. Jerash Garments and its subsidiaries are subject
to local sales tax of 16% on purchases. Jerash Garments was granted a sales tax exemption from the Jordanian Investment Commission for
the period from June 1, 2015 to June 1, 2018 that allowed Jerash Garments to make purchases with no sales tax charge. The exemption has
been extended to February 5, 2025. The Company accounts for income taxes in accordance
with ASC 740, “Income Taxes,” which requires the Company to use the asset and liability method of accounting for income taxes.
Under the asset and liability method, deferred income taxes are recognized for the tax consequences of temporary differences by applying
enacted statutory tax rates applicable to future years to differences between financial statement carrying amounts and the tax bases of
existing assets and liabilities and operating loss and tax credit carry forwards. Under this accounting standard, any changes in tax rates
and the impact on deferred income taxes are recognized in the income statement in the period when the new rates are enacted. A valuation
allowance is recognized if it is more likely than not that some portion, or all of, a deferred tax asset will not be realized. ASC 740 clarifies the accounting for uncertainty
in tax positions. This interpretation requires that an entity recognize in its financial statements the impact of a tax position, if that
position is more likely than not of being sustained upon examination, based on the technical merits of the position. Recognized income
tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement
are reflected in the period in which the change in judgment occurs. The Company has elected to classify interest and penalties related
to unrecognized tax benefits, if and when required, as part of income tax expense in the consolidated statements of operations and comprehensive
income (loss). No significant uncertainty in tax positions relating to income taxes was incurred during the six months ended September
30 2024, and 2023. Foreign Currency Translation The reporting currency of the Company is the U.S.
dollar (“US$” or “$”). The Company uses JOD in Jordan companies, HKD in Treasure Success, Ever Winland, J&B,
and Jerash Newtech, and Chinese Yuan (“CNY”) in Jiangmen Treasure Success as the functional currency of each above-mentioned
entity. The assets and liabilities of the Company have been translated into US$ using the exchange rates in effect at the balance sheet
date, equity accounts have been translated at historical rates, and revenue and expenses have been translated into US$ using average exchange
rates in effect during the reporting period. Cash flows are also translated at average translation rates for the periods. Therefore, amounts
related to assets and liabilities reported on the consolidated statements of cash flows will not necessarily agree with changes in the
corresponding balances on the consolidated balance sheets. Translation adjustments arising from the use of different exchange rates from
period to period are included as a separate component of accumulated other comprehensive income or loss. Transaction gains and losses
that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in
the consolidated statements of operations and comprehensive income (loss) as incurred, and the total amount of transaction gains and losses
were immaterial for the six months ended September 30, 2024 and 2023. The value of JOD against US$ and other currencies
may fluctuate and is affected by, among other things, changes in Jordan’s political and economic conditions. Any significant revaluation
of JOD, HKD, and CNY may materially affect the Company’s financial condition in terms of US$ reporting. The following table outlines
the currency exchange rates that were used in creating the consolidated financial statements in this report:
September 30, March 31,
Period-end spot rate US$1=JOD0.7090 US$1=JOD0.7090
US$1=HKD7.7700 US$1=HKD7.8243
US$1=CNY7.0138 US$1=CNY7.2190
Average rate US$1=JOD0.7090 US$1=JOD0.7090
US$1=HKD7.8079 US$1=HKD7.8240
US$1=CNY7.1988 US$1=CNY7.1501 Stock-Based Compensation The Company measures compensation expense for stock-based awards based on the awards’ initial grant-date fair value. The estimated
grant-date fair value of the award is recognized as expense over the requisite service period using the straight-line method. The Company estimates the fair value of stock
options using a Black-Scholes model. This model is affected by the Company’s stock price on the date of the grant as well as assumptions
regarding a number of variables. These variables include the expected term of the option, expected risk-free rates of return, the expected
volatility of the Company’s common stock, and expected dividend yield, each of which is more fully described below. The assumptions
for the expected term and expected volatility are the two assumptions that significantly affect the grant date fair value.
● Expected
Term: the expected term of a warrant or a stock option is the period of time that the warrant or a stock option is expected to be outstanding.
● Risk-free
Interest Rate: the Company bases the risk-free interest rate used in the Black-Scholes model on the implied yield at the grant date of
the U.S. Treasury zero-coupon issued with an equivalent term to the stock-based award being valued. Where the expected term of a stock-based
award does not correspond with the term for which a zero-coupon interest rate is quoted, the Company uses the nearest interest rate from
the available maturities.
● Expected
Stock Price Volatility: the Company utilizes the expected volatility of the Company’s common stock over the same period of time
as the life of the warrant or stock option. When the Company’s own stock volatility information is unavailable for such period
of time, the Company utilizes comparable public company volatility.
● Dividend
Yield: Stock-based compensation awards granted prior to November 2018 assumed no dividend yield, while any subsequent stock-based compensation
awards will be valued using the anticipated dividend yield. Earnings or Loss per Share The Company computes earnings per share (“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC 260”).
ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income divided
by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect
on a per share basis of potential common shares (e.g., convertible securities, options, and warrants) as if they had been converted at
the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those
that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS (See “Note 14–Earnings
(Loss) per Share”). Comprehensive Income or Loss Comprehensive income or loss consists of two components,
net income or loss and other comprehensive income or loss. The foreign currency translation gain or loss resulting from translation of
the financial statements expressed in JOD or HKD or CNY to US$ is reported in other comprehensive income or loss in the consolidated statements
of operations and comprehensive income (loss). Fair Value of Financial Instruments ASC 825-10 requires certain disclosures regarding
the fair value of financial instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes
the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of
unobservable inputs. The three levels of inputs used to measure fair value are as follows:
● Level
1 - Quoted prices in active markets for identical assets and liabilities.
● Level
2 - Quoted prices in active markets for similar assets and liabilities, or other inputs that are observable for the asset or liability,
either directly or indirectly, for substantially the full term of the financial instrument.
● Level
3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and
liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable
inputs. The Company considers the recorded value of its financial assets and liabilities, which consist primarily of cash, accounts receivable,
other current assets, credit facilities, accounts payable, accrued expenses, income tax payables, other payables and operating lease liabilities
to approximate the fair value of the respective assets and liabilities at September 30, 2024 and March 31, 2024 based upon the short-term
nature of these assets and liabilities. Concentrations and Credit Risk Credit risk Financial instruments that potentially subject
the Company to significant concentrations of credit risk consist primarily of cash. As of September 30, 2024 and March 31, 2024, respectively,
$5,462,623 and $6,547,090 of the Company’s cash were on deposit at financial institutions in Jordan, where there currently is no
rule or regulation requiring such financial institutions to maintain insurance to cover bank deposits in the event of bank failure. As
of September 30, 2024 and March 31, 2024, $129,269 and $518,485 of the Company’s cash were on deposit at financial institutions
in China, respectively. Cash maintained in banks within China of less than CNY 0.5 million (equivalent to $71,288) per bank are covered
by “deposit insurance regulation” promulgated by the State Council of the People’s Republic of China. As of September
30, 2024 and March 31, 2024, $12,267,634 and $6,682,404 of the Company’s cash were on deposit at financial institutions in Hong
Kong, respectively, which are insured by the Hong Kong Deposit Protection Board subject to certain limitations. While management believes
that these financial institutions are of high credit quality, it also continually monitors their creditworthiness. As of September 30,
2024 and March 31, 2024, $13,527 and $267,954 of the Company’s cash were on deposit in the United States, respectively, and are
insured by the Federal Deposit Insurance Corporation up to $250,000. Accounts receivable are typically unsecured and
derived from revenue earned from customers, and therefore are exposed to credit risk. The risk is mitigated by the Company’s assessment
of its customers’ creditworthiness and its ongoing monitoring of outstanding balances. Customer and vendor concentration risk The Company’s sales are made primarily in
the United States. Its operating results could be adversely affected by U.S. government policies on importing business, foreign exchange
rate fluctuations, and changes in local market conditions. The Company has a concentration of its revenue and purchases with specific
customers and suppliers. For the three months ended September 30, 2024 and 2023, one customer accounted for 68% and 73% the Company’s
total revenue, respectively. For six months ended September 30, 2024, one customer accounted for 70% of the Company’s total revenue.
For six months ended September 30, 2023, two customers accounted for 69% and 13% of the Company’s total revenue, respectively. As
of September 30, 2024, three customers accounted for 16%, 13%, and 11% of the Company’s total accounts receivable balance, respectively.
As of March 31, 2024, four customers accounted for 23%, 23%, 10%, and 10% of the Company’s total accounts receivable balance, respectively. For the three and six months ended September 30,
2024, the Company purchased approximately 10% and 11% of its total purchase in garments and raw materials from one major supplier, respectively.
For the three months ended September 30, 2023, there was no major supplier. For the six months ended September 30, 2023, the Company purchased
approximately 11% of its total purchase in garments and raw materials from one major supplier. As of September 30, 2024, accounts payable
to the Company’s one major supplier accounted for 16% of the total accounts payable balance. As of March 31, 2024, accounts payable
to the Company’s two major suppliers accounted for 22% and 13%, respectively, of the total accounts payable balance. Risks and Uncertainties The principal operations of the Company are located
in Jordan. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by political, economic,
and legal environments in Jordan, as well as by the general state of the Jordanian economy. The Company’s operations in Jordan are
subject to special considerations and significant risks not typically associated with companies in North America. These include risks
associated with, among others, the political, economic, and legal environment, foreign currency exchange, and the recent conflict between
Israel and Hamas. The Company’s results may be adversely affected by changes in the political, regulatory, and social conditions
in Jordan. Although the Company has not experienced losses from these situations and believes that it is in compliance with existing laws
and regulations including its organization and structure disclosed in Note 1, this may not be indicative of future results. Since the inception of the turmoil in the Middle East, the Company
has been closely monitoring the situation and keeping its customers informed. Currently, production is ongoing as usual, with no changes
to customer orders or commitments, and both ports that the Company uses for import and export, in Aqaba and Haifa, are operating normally.
In order to provide flexibility, the Company has also been using the Port of Jebel Ali in the United Arab Emirates as an alternative route
for raw material import since December 2023. However, in the event of any potential impact on the ports, the Company has prepared a contingency
plan, approved by its major customers, to temporarily relocate production to alternate regions. |
