Jerash Holdings (US), Inc.: Form 10-Q for the period ended Dec 31, 2023

The following discussion and analysis should be read in conjunction with the consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements.” All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to: any projections of earnings, revenue, or other financial items; any statements regarding the adequacy, availability, and sources of capital, any statements of the plans, strategies, and objectives of management for future operations; any statements concerning proposed new products, services, or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Forward-looking statements may include the words “may,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect,” “plan,” “project,” or “anticipate,” and other similar words. In addition to any assumptions and other factors and matters referred to specifically in connection with such forward-looking statements, factors that could cause actual results or outcomes to differ materially from those contained in the forward-looking statements include those factors set forth in the “Risk Factors” section included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2023 and in subsequent reports that we file with the U.S. Securities and Exchange Commission (the “SEC”).

Although we believe that the expectations reflected in our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent risks and uncertainties, such as those disclosed in this Quarterly Report. We do not intend, and undertake no obligation, to update any forward-looking statement, except as required by law.

The information included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our unaudited condensed consolidated financial statements and the notes included in this Quarterly Report, and the audited consolidated financial statements and notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the fiscal year ended March 31, 2023, filed with the SEC on June 28, 2023 and amended on October 5, 2023. References to fiscal 2024 and fiscal 2023 in this Management’s Discussion and Analysis of Financial Condition and Results of Operations refer to our fiscal year ending March 31, 2024, and fiscal year ended March 31, 2023, respectively.

Results of Operations

Three Months Ended December 31, 2023 and 2022

The following table summarizes the results of our operations during the three-month periods ended December 31, 2023 and 2022, and provides information regarding the dollar and percentage increase or (decrease) during such periods.

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

25

Revenue. For the three months ended December 31, 2023, revenue of the Company decreased by approximately $15.5 million, or 36%, to $27.5 million, compared to revenue of approximately $43.0 million for the same period in fiscal 2022. The decrease was primarily due to reduced shipments to some of our major customers in the U.S. and Hong Kong in the face of high inflation and high interest rates. In addition, some orders were delayed and shipped in the fourth quarter due to the logistics issues caused by the tension in the Red Sea. Raw material importation was disrupted, causing some curtailment in production at the end of the third quarter, but this situation has been resolved by establishing an alternate route using the Port of Jebel Ali in the United Arab Emirates.

The following table outlines the dollar amount and percentage of total sales to our customers for the three months ended December 31, 2023 and 2022.

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

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

(2) Excit Holdings Limited is previously named Jiangsu Guotai Huasheng Industrial (HK) Co., Limited.

Revenue by Geographic Area

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

Since January 2010, all apparel manufactured in Jordan can be exported to the U.S. without customs duty being imposed, pursuant to the United States-Jordan Free Trade Agreement entered into in December 2001. This free trade agreement provides us with substantial competitiveness and benefit that allowed us to expand our garment export business in the U.S.

The decrease of approximately 32% in sales to the U.S. during the three months ended December 31, 2023, was mainly attributable to fewer shipments, amid a high inflation environment being delivered to some of our U.S. customers. This decline was compounded by the unexpected tension in the Red Sea, which caused some delays in outbound shipments as well as inbound.

During the three months ended December 31, 2023, aggregate sales to Hong Kong, Germany, Jordan, and other locations decreased by 49% from approximately $9.9 million to $5.1 million compared to the same period last year. This was due to fewer shipments delivered to the customers in those regions with lower economic growths.

Cost of goods sold. Following the decrease in sales revenue, our cost of goods sold for the three months ended December 31, 2023 decreased by approximately $14.2 million, or 38%, to approximately $23.1 million, from approximately $37.2 million for the same period in 2022. As a percentage of revenue, the cost of goods sold decreased by approximately 3% points to 84% for the three months ended December 31, 2023, from 87% for the same period in 2022. The decrease in cost of goods sold as a percentage of revenue was primarily attributable to the higher proportion of shipments to one of our major customers in the U.S. that typically generate higher profit margin.

For the three months ended December 31, 2023, we purchased 17% and 14% of garments and raw materials from two suppliers, respectively. For the three months ended December 31, 2022, we purchased 28% of our garments from one major supplier.

Gross profit margin. Gross profit margin was approximately 16% for the three months ended December 31, 2023, representing an increased by 3% points from 13% for the same period in 2022. The increase in gross profit margin was primarily driven by the higher proportion of shipments to one of our major customers in the U.S. that typically generate higher profit margin.

Operating expenses. Operating expenses for the three months ended December 31, 2023 decreased by 9%, or approximately $0.4 million, to approximately $4.1 million, compared to the same period in 2022. The decrease was primarily due to lower travel expenses of overseas workers and the write-back of approximately $121,000 from provision for doubtful debts, partially offset by a stock-based payment compensation of $0.2 million during this period, while there was none in the same period in fiscal 2023.

Other expenses, net. Other expenses, net were approximately $105,000 for the three months ended December 31, 2023, as compared to other expenses, net of approximately $112,000 for the same period in fiscal 2023. The decrease was primarily due to higher interest incomes from fixed deposits in banks, offset by the interest expenses arising from participating in the supply chain financing programs of a customer.

Income tax expenses. Income tax expenses for the three months ended December 31, 2023 were approximately $39,000 compared to income tax expenses of approximately $324,000 for the same period in fiscal 2023. The decrease in the effective tax rate mainly resulted from a tax refund of approximately $239,000 from our holding company, offsetting the higher proportion of the operating loss of a Hong Kong subsidiary and our holding company in our group profit and the increase of corporate income tax rate in Jordan from a combined rate of 19% to 20% or 21% since January 1, 2023. The effective tax rate was down to 14.2% for the three months ended December 31, 2023, as compared to 26.7% for the three months ended December 31, 2022.

Net income. Net income for the three months ended December 31, 2023 was approximately $232,000 compared to net income of approximately $891,000 for the same period in fiscal 2023. The decrease was mainly attributable to the lower sales to different geographic locations.

Nine Months Ended December 31, 2023 and 2022

The following table summarizes the results of our operations during the nine-month periods ended December 31, 2023 and 2022, and provides information regarding the dollar and percentage increase or (decrease) during such periods.

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

27

Revenue. For the nine months ended December 31, 2023, our revenue decreased by approximately $18.7 million, or 16%, to $95.6 million, from approximately $114.3 million for the same period in fiscal 2023. The main reason for the decline in revenue was that the inflationary environment resulted in fewer shipments to customers in the U.S., one of our main markets. This was partially compensated by the increase in sales to Germany and some other locations.

The following table outlines the dollar amount and percentage of total sales to our customers for the nine months ended December 31, 2023 and 2022, respectively.

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

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

(2) Excit Holdings Limited is previously named Jiangsu Guotai Huasheng Industrial (HK) Co., Limited.

Revenue by Geographic Area

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

Since January 2010, all apparel manufactured in Jordan can be exported to the U.S. without customs duty being imposed, pursuant to the United States-Jordan Free Trade Agreement entered into in December 2001. This free trade agreement provides us with substantial competitiveness and benefit that allowed us to expand our garment export business in the U.S.

Sales to the U.S. decreased by approximately 15% during the nine months ended December 31, 2023, which was mainly attributable to fewer shipments to some of our major customers in the country.

During the nine months ended December 31, 2023, aggregate sales to Hong Kong, Germany, Jordan, and other locations decreased by 23% from approximately $14.7 million to $11.3 million from the same period last year, as fewer shipments were delivered to the customers in those regions with lower economic growths during this period.

Cost of goods sold. Following the decrease in sales revenue, our cost of goods sold decreased by approximately $14.7 million, or 16%, to approximately $80.2 million, for the nine months ended December 31, 2023, from approximately $95.0 million for the same period in fiscal 2023. As a percentage of revenue, the cost of goods sold increased by approximately 1% point to 84% for the nine months ended December 31, 2023 from 83% for the same period in fiscal 2023. The increase in cost of goods sold as a percentage of revenue was primarily attributable to our diversification in customer base with some orders with lower profit margin.

For the nine months ended December 31, 2023, we purchased 13% of our garments from one major supplier. For the nine months ended December 31, 2022, we purchased 13% and 10% of our garments and raw materials from two major suppliers, respectively.

Gross profit margin. Gross profit margin was approximately 16% for the nine months ended December 31, 2023, which decreased by 1% point from 17% for the same period in fiscal 2023. The decrease in gross profit margin was primarily driven by a shift in customer mix with more orders that generate lower profit margin.

Operating expenses. Operating expenses for the nine months ended December 31, 2023 decreased slightly by approximately $46,000, to approximately $13.0 million, compared to the same period in fiscal 2023. The slight decrease was primarily due to a decrease in travel expenses for overseas workers of approximately $660,000 and a write-back of approximately $188,000 from the provision for doubtful debt upon receipt of the amount, which was partially offset by an increase in stock-based compensation expenses.

Other expenses, net. Other expenses, net was approximately $571,000 for the nine months ended December 31, 2023, as compared to other expenses, net of approximately $245,000 for the same period in fiscal 2023. The increase was primarily due to higher interest expenses arisen from participating in supply chain financing programs of certain customers, which was only partially offset by the interest income from fixed deposits in banks.

Income tax expenses. Income tax expenses for the nine months ended December 31, 2023 were approximately $0.7 million compared to income tax expenses of $1.6 million for the same period in fiscal 2023. The increase in the effective tax rate mainly resulted from the higher proportion of the operating loss of a Hong Kong subsidiary and our holding company in our group profit and the increase of corporate income tax rate in Jordan form a combined rate of 19% to 20% or 21% since January 1, 2023. The effective tax rate was up to 38.6% for the nine months ended December 31, 2023, as compared to 26.6% for the nine months ended December 31, 2022.

Net income. Net income for the nine months ended December 31, 2023 was approximately $1.1 million compared to net income of approximately $4.4 million for the same period in fiscal 2023. The decrease was mainly attributable to lower sales and profit margin following our diversification of our customer base.

Liquidity and Capital Resources

Jerash Holdings (US), Inc. is a holding company incorporated in Delaware. As a holding company, we rely on dividends and other distributions from our Jordanian and Hong Kong subsidiaries to satisfy our liquidity requirements. Current Jordanian regulations permit our Jordanian subsidiaries to pay dividends to us only out of their accumulated profits, if any, determined in accordance with Jordanian accounting standards and regulations. In addition, our Jordanian subsidiaries are required to set aside at least 10% of their respective accumulated profits each year, 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. 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.

As of December 31, 2023, we had cash of approximately $19.6 million and restricted cash of approximately $1.6 million. Compared to cash of approximately $17.8 million and restricted cash of approximately $1.6 million as of March 31, 2023, the increase in total cash was mainly a result of a net profit of approximately $1.1 million and the conversion of inventory to collections, offset by dividends paid during the nine months ended December 31, 2023.

Our current assets as of December 31, 2023 were approximately $49.4 million and our current liabilities were approximately $8.9 million, which resulted in a ratio of approximately 5.5 to 1. As of March 31, 2023, our current assets were approximately $ 57.3 million and our current liabilities were $ 14.4 million, resulting in a ratio of 4.0 to 1.

The decrease in current assets was mainly due to a decrease in inventory, prepaid expenses and other current assets.

The primary driver in the decrease in current liabilities was the decrease in accounts payable for raw material purchases, income tax payables and deferred revenue.

Total equity as of December 31, 2023 was approximately $68.2 million compared to $68.2 million as of March 31, 2023.

We had net working capital of $40.5 million and $42.8 million as of December 31, 2023 and March 31, 2023, respectively. Based on our current operating plan, we believe that cash on hand and cash generated from our operating activities will be sufficient to support our working capital needs for the next 12 months from the date this Quarterly Report is released.

Since May and October 2021, we have participated in supply chain financing programs of two of our major customers, respectively. The programs allow us to receive early payments for approved sales invoices submitted by us through the bank the customer cooperates with. For any early payments received, we are subject to an early payment charge imposed by the customer’s bank, for which the rate is Secured Overnight Financing Rate plus a spread. The arrangement allows us to have better liquidity without the need to incur administrative charges and handling fees as in bank financing. Due to the rising interest rate, we have suspended our participation in one of the above supply chain financing programs.

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

Credit Facilities

DBSHK Facility Letter

Pursuant to the DBSHK facility letter dated January 12, 2022, DBSHK provided a bank facility of up to $5.0 million to Treasure Success. Pursuant to the facility, 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. The DBSHK facility bears interest at 1.5% per annum over Hong Kong Interbank Offered Rate 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. We had nil outstanding under this DBSHK facility as of both of December 31, 2023 and March 31, 2023. The DBSHK facility is reviewed annually.

On January 4, 2024, DBSHK offered a revised credit facility to Treasure Success. Pursuant to the revised facility, DBSHK agreed to finance cargo receipt, trust receipt, account payable financing, and certain type of import and export invoice financing up to an aggregate of $5.0 million, with certain financial covenants. The DBSHK facility bears interest at 1.5% per annum over Hong Kong Interbank Offered Rate for HKD bills and 1.1% to 1.3% per annum over DBSHK’s cost of funds for foreign currency bills.

Capital Bank of Jordan Credit Facility

We received documents from Capital Bank of Jordan for a credit facility of $10 million, and entered into the credit facility on June 1, 2023 after reviewing the documents. As of the date of this quarterly report, the execution is still in process and the credit facility is not yet effective. Further details of the credit facility will be provided once the execution is complete and the facility becomes effective.

Nine Months Ended December 31, 2023 and 2022

The following table sets forth a summary of our cash flows for the periods indicated:

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

Operating Activities

Net cash provided by operating activities was approximately $7.9 million for the nine months ended December 31, 2023, compared to cash provided by operating activities of approximately $9.9 million for the same period in fiscal 2023. The decrease in net cash provided by operating activities was primarily attributable to the following factors:

• a decrease in inventory of $16.7 million in the nine months ended December 31, 2023 compared to a decrease of $1.6 million in the same period in fiscal 2023;
• an increase in accounts receivable of $6.0 million in the nine months ended December 31, 2023 compared to a decrease of $5.5 million in the same period in fiscal 2023;
• an increase of advance to suppliers of $1.1 million compared to an increase of $4.7 million in the same period in fiscal 2023;
• a decrease of accounts payable of $3.4 million in the nine months ended December 31, 2023 compared to an increase of $1.1 million in the same period in fiscal 2023; and
• a decrease of net income to $1.1 million in the nine months ended December 31, 2023 from net income of $4.4 million in the same period in fiscal 2023.

Investing Activities

Net cash used in investing activities was approximately $4.3 million for the nine months ended December 31, 2023, compared to approximately $11.4 million in the same period in fiscal 2023. The net cash used in investing activities in the nine months ended December 31, 2023 was mainly used in investment in property, plant, and machinery including the ongoing construction of a dormitory and factory expansion. The net cash used in investing activities in the nine months ended December 31, 2022 also included the acquisitions of Ever Winland and Kawkab Venus for $7.3 million.

Financing Activities

Net cash used in financing activities was approximately $1.8 million for the nine months ended December 31, 2023, which was dividend payments in the period. Net cash provided by financing activities in the nine months ended December 31, 2022 was primarily net proceeds from short-term loans and was partially offset by dividend payments and share repurchases.

Statutory Reserves

In accordance with the corporate law in Jordan, our subsidiaries in Jordan are required to make appropriations to certain reserve funds, based on net income determined in accordance with generally accepted accounting principles of Jordan. Appropriations to the statutory reserve are required to be 10% of net income until the reserve is equal to 100% of the entity’s share capital. Jiangmen Treasure Success is required to set aside 10% of its net income as statutory surplus reserve until such reserve is equal to 50% of its registered capital, in accordance with corporate laws in China. These reserves are not available for dividend distribution. The statutory reserves were approximately $0.4 million and approximately $0.4 million as of December 31, 2023 and 2022, respectively.

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 December 31, 2023 and 2022.

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

Total restricted net assets accounted for approximately 0.60% of our consolidated net assets as of December 31, 2023. 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 $4.3 million and approximately $11.3 million for the nine months ended December 31, 2023 and 2022, for plant and machinery, the construction of a dormitory and factory expansion in both periods, and the acquisitions of Ever Winland and Kawkab in fiscal 2023. For the nine months ended December 31, 2023, payments for additional plant and machinery, and construction of a dormitory and factory expansion, amounted to approximately $0.8 million and $3.2 million, respectively. For the nine months ended December 31, 2022, payments for additional plant and machinery, construction of a dormitory and factory expansion, the acquisition of Kawkab Venus, and the acquisition of Ever Winland amounted to approximately $0.6 million, $3.4 million, $2.2 million, and $5.1 million, respectively.

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. This project was constructed in conjunction with the Jordanian Ministry of Labor and the Jordanian Education and Training Department.

On August 7, 2019, we completed a transaction to acquire 12,340 square meters (approximately three acres) of land in Al Tajamouat Industrial City, Jordan, from a third party to construct a dormitory for our employees with aggregate purchase price JOD863,800 (approximately $1,218,303). Management has revised the plan to construct both dormitory and production facilities on the land in order to capture the increasing demand for our capacity. We are conducting engineering design and study on this project with the business growth potential brought about by the new business collaboration with Busana Apparel Group.

On February 6, 2020, we completed a transaction to acquire 4,516 square meters (approximately 48,608 square feet) of land in Al Tajamouat Industrial City, Jordan, from a third party to construct a dormitory for our employee with an aggregate purchase price JOD313,501 (approximately $442,162). We spent approximately $8.9 million in capital expenditures to build the dormitory and $0.2 million in dormitory’s kitchen, respectively. Due to the ongoing COVID-19 pandemic, management decided to put on hold the construction project in fiscal 2021 to retain financial resources to support our operations, and also to wait and see how the global economy and customer demand recover after the outbreak. The preparation work resumed in early 2021 and construction work commenced in April 2021. The dormitory is expected to be completed and ready for use by the end of fiscal year 2024.

We project that there will be an aggregate of approximately $4.7 million and $12.6 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. We expect that our capital expenditures will increase in the future as our business continues to develop and expand. We have used cash generated from the operations of our subsidiaries to fund our capital commitments in the past and anticipate using such funds to fund capital expenditure commitments in the future.

Off-balance Sheet Commitments and Arrangements

We have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties. In addition, we have not entered into any derivative contracts that are indexed to our own shares and classified as shareholders’ equity, or that are not reflected in our consolidated financial statements.

Critical Accounting Policies

We prepare our financial statements in conformity with accounting principles generally accepted by the United States of America (“U.S. GAAP”), which require us to make judgments, estimates, and assumptions that affect our reported amount of assets, liabilities, revenue, costs and expenses, and any related disclosures. Although there were no material changes made to the accounting estimates and assumptions in the past three years, we continually evaluate these estimates and assumptions based on the most recently available information, our own historical experience and various other assumptions that we believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from our expectations as a result of changes in our estimates.

We believe that our accounting policies involve a higher degree of judgment and complexity in their application and require us to make significant accounting estimates. Accordingly, the policies we believe are the most critical to understanding and evaluating our consolidated financial condition and results of operations are summarized in “Note 2—Summary of Significant Accounting Policies” in the notes to our unaudited condensed consolidated financial statements.

Recent Accounting Pronouncements

See “Note 3—Recent Accounting Pronouncements” in the notes to our unaudited condensed consolidated financial statements for a discussion of recent accounting pronouncements.

Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in the Securities Exchange Act of 1934, as amended (the “Exchange Act”) Rule 15d-15(e)) are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this report, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), based on their evaluation of our disclosure controls and procedures as of December 31, 2023, concluded that our disclosure controls and procedures were ineffective as of that date based on reasons set forth below.

In the annual report for fiscal 2023 filed on June 28, 2023, the management concluded that, as of March 31, 2023, our internal control over financial reporting was not effective due to certain control deficiencies that are deemed as material weaknesses, including:

• We failed to maintain effective controls over period-end financial reporting, specifically related to income taxes and the reconciliation of account level balances that resulted in errors; and
• There were ineffective information technology general controls in the areas of privileged user access and the review of user access over certain information technology systems that support our financial reporting processes.

Based on the above, we have implemented measures to address the weaknesses by:

• improving the checking and documentation of account level balance reconciliation;
• communicating with external professional consultant to strengthen our work and review on US tax issues; and
• rolling out a password control mechanism to exercise control and check on the work of the privileged user access for all information technology systems supporting our financial reporting processes.

While we believe the Company’s remediation efforts to-date have improved and will continue to improve our disclosure controls and procedures, remediation of the material weaknesses will require validation and testing of the operating effectiveness of our disclosure controls over a sustained period of financial reporting cycles. As the Company continues to evaluate and work to improve its internal control over financial reporting, management may determine additional measures are necessary to address control deficiencies or determine that it is necessary to modify the remediation plan described above. Management cannot provide assurance as to when the Company will remediate such weaknesses, nor can management be certain of whether additional actions will be required or the costs of any such actions.

Our remediation efforts are ongoing and are subject to continued management review supported by ongoing design and testing. Notwithstanding the material weaknesses, our management has concluded that the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report present fairly, in all material respects, our financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America.

Changes in Internal Control Over Financial Reporting

Other than our ongoing remediation efforts with respect to our disclosure controls and procedures, which extend to our internal control over financial reporting, there were no changes in our internal control over financial reporting (as the term is defined in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act) during the quarter ended December 31, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

JERASH HOLDINGS (US), INC.