As filed with the Securities and Exchange Commission on September 19, 2018

Registration No. 333-222596

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Post-Effective Amendment No. 1

To

Form S-1

REGISTRATION STATEMENT UNDER

THE SECURITIES ACT OF 1933

Jerash Holdings (US), Inc.

(Exact name of registrant as specified in its charter)

Jerash Holdings (US), Inc.

147 W. 35^th Street, Room #1603

New York, New York 10001

(212) 575-9085

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Choi Lin Hung

Chief Executive Officer, President and Treasurer

147 W. 35^th Street, Room #1603

New York, New York 10001

(212) 575-9085

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

James M. Jenkins, Esq.

Alexander R. McClean, Esq.

Harter Secrest & Emery LLP

1600 Bausch & Lomb Place

Rochester, New York 14604

(585) 232-6500

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box. þ

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. x

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

EXPLANATORY NOTE

This Post-Effective Amendment No. 1 (“Post-Effective Amendment”) to the Registration Statement on Form S-1 (File No. 333-222596) (the “Registration Statement”) is being filed pursuant to the undertakings in Item 17 of the Registration Statement to include the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2018, the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2018 and to update certain other information in the Registration Statement. The Company initially filed a post-effective amendment to the Registration Statement on September 7, 2018 and subsequently requested its withdrawal using Form AW. This Post-Effective Amendment limits the offering hereunder to the exercise of certain warrants which were originally registered with the Registration Statement on Form S-1. No additional securities are being registered under this Post-Effective Amendment. All applicable registration fees were paid at the time of the original filing of the Registration Statement.

The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED SEPTEMBER 19, 2018

PROSPECTUS

Jerash Holdings (US), Inc.

57,200 Shares of Common Stock Issuable Upon Exercise of Warrants

This prospectus relates to 57,200 shares of common stock that are issuable upon the exercise of warrants issued as compensation to an underwriter in connection with a public offering that we closed on May 2, 2018. These warrants are exercisable beginning on November 2, 2018 for an aggregate of 57,200 shares of our common stock, par value $0.001 per share, at an exercise price of $8.75 per share. We will receive the exercise price of the warrants if and when the warrants are exercised for cash by the securityholders. We intend to use these proceeds, if any, for general corporate purposes.

Our common stock is listed on the Nasdaq Capital Market under the symbol “JRSH.” On September 14, 2018, the closing price as reported on the Nasdaq Capital Market was $5.60 per share. This price will fluctuate based on the demand for our common stock.

We are an “emerging growth company,” as that term is used in the Jumpstart Our Business Startups Act of 2012 and, as such, have elected to comply with reduced public company reporting requirements.

Investing in our common stock involves a high degree of risk. See “Risk Factors” beginning on page 6 of this prospectus.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. 

Prospectus dated              , 2018

TABLE OF CONTENTS

You should rely only on the information contained in this prospectus and any prospectus supplement prepared by or on behalf of us or to which we have referred you. We have not authorized anyone to provide you with information that is different. If anyone provides you with different or inconsistent information, you should not rely upon it. This prospectus is not an offer to sell or seeking an offer to buy securities in any state were such offer or solicitation is not permitted. The information in this prospectus is complete and accurate only as of the date on the front cover of this prospectus, regardless of the time of delivery of this prospectus or any sale of shares of our common stock. Our business, financial condition, results of operations and prospects may have changed since these dates.

For investors outside the United States: we have not done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of shares of our common stock and the distribution of this prospectus outside the United States.

Except as otherwise indicated herein or as the context otherwise requires, references in this prospectus to “Jerash,” the “Company,” the “Group,” “we,” “us,” “our” and similar references refer to Jerash Holdings (US), Inc. The Company is the parent holding company of our wholly owned operating subsidiaries, Jerash Garments and Fashions Manufacturing Company Limited (“Jerash Garments”), which is an entity formed under the laws of the Hashemite Kingdom of Jordan (“Jordan”), Treasure Success International Limited (“Treasure Success”), which is an entity formed under the laws of Hong Kong, and Chinese Garments and Fashions Manufacturing Company Limited (“Chinese Garments”) and Jerash for Industrial Embroidery Company Limited (“Jerash Embroidery”), both entities formed under the laws of Jordan.

Risk Factors

There are numerous risks affecting our business, some of which are beyond our control. An investment in our common stock involves a high degree of risk and may not be appropriate for investors who cannot afford to lose their entire investment. If any of the following risks actually occur, our business, financial condition or operating results could be materially harmed. This could cause the trading price of our common stock to decline, and you may lose all or part of your investment. In addition to the risks outlined below, risks and uncertainties not presently known to us or that we currently consider immaterial may also impair our business operations. Potential risks and uncertainties that could affect our operating results and financial condition include, without limitation, the following:

Risks Related to Our Business and Our Industry

We rely on one key customer for substantially all of our revenue. We cannot assure you that this or any other customer will continue to buy our products in the same volumes or on the same terms.

Our sales to VF Corporation (which owns brands such as The North Face, Timberland, Wrangler, Lee and Jansport), directly and indirectly, accounted for approximately 79% of our total sales in both fiscal 2017 and fiscal 2018 and 91% of our sales in the quarter ended June 30, 2018. From an accounting perspective, we are considered the primary obligor in our relationship with VF Corporation. We bear the credit and inventory risk, and we have the right to determine the price and to change our product. Therefore, we present the sales and related manufacturing activities on a gross basis.

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. As is common in our industry, VF Corporation and our other customers place purchase orders with us after we complete detailed sample development and approval processes. It is through these sample development and approval processes that we and VF Corporation agree to the purchase and manufacture of the garments in question. From April 1, 2017 to June 30, 2018, VF Corporation issued approximately 9,232 purchase orders to us in amounts ranging from approximately $10 to $570,000. We are not substantially dependent on any particular order from VF Corporation.

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. The failure of VF Corporation to continue to buy our products in the same volumes and on the same terms as in the past may significantly reduce our sales and our earnings. We cannot assure you that VF Corporation will continue to purchase our merchandise at the same historical rate, or at all, in the future, or that we will be able to attract new customers. In addition, because of our reliance on VF Corporation as our key customer and their bargaining power with us, VF Corporation has the ability to exert significant control over our business decisions, including prices.

To the extent The North Face brand of VF Corporation, the brand under which the majority of our products are sold, experiences any adverse change in brand image, reputation or popularity, our sales and earnings would be materially adversely impacted.

A material decrease in the quantity of sales made to our principal customers, a material adverse change in the terms of such sales or a material adverse change in the financial condition of our principal customers, including due to damage to their reputation or brand, could significantly reduce our sales and our earnings.

We may require additional financing to fund our operations and capital expenditures.

As of June 30, 2018, we had cash and cash equivalents of approximately $12.9 million and restricted cash of approximately $3.7 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. In addition, our cash position may decline in the future, and we may not be successful in maintaining an adequate level of cash resources. Treasure Success entered into an secured credit facility with Hong Kong and Shanghai Banking Corporation (“HSBC”) for up to a minimum of $20,000,000 (the “Credit Facilities”) to finance the working capital needs of the Company. The Credit Facilities consists of (i) an $8,000,000 import credit facility with HSBC entered into on May 29, 2017 (the “Facility Letter”) and (ii) a $12,000,000 invoice discounting/factoring facility entered into on August 21, 2017 (the “Factoring Agreement”). As of June 30, 2018, $6,345,846 was outstanding under the Facility Letter and $713,687 was outstanding under the Factoring Agreement. In addition, we may be required to seek additional debt or equity financing in order to support our growing operations. We may not be able to obtain additional financing on satisfactory terms, or at all, and any new equity financing could have a substantial dilutive effect on our existing stockholders. 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.

Defaults under the Credit Facilities could result in a foreclosure on our assets by our lender which would negatively impact our financial condition and results of operations.

The Credit Facilities are guaranteed by us and Jerash Garments, as well as by our significant stockholders Mr. Choi Lin Hung, our chairman, chief executive officer, president, treasurer and a significant stockholder, and Mr. Ng Tsze Lun, a significant stockholder, whose interests may differ from the other stockholders of the Company as a result of their personal guarantees. The Credit Facilities are collateralized by a blanket security interest and includes various financial and other covenants. If in the future we default under the Credit Facilities, our lender could, among other things, declare our debt to be immediately due and payable. If this were to occur, we would be unable to repay our bank debt in full unless we could sell sufficient assets or obtain new financing through a replacement credit facility or equity transaction. If a new credit facility could be obtained, it is likely that it would have higher interest rates and impose significant additional restrictions and requirements on us. There is no assurance that we would be able to obtain a waiver or amendment from our lender or obtain replacement debt financing or issue sufficient equity securities to refinance these facilities. If we are unable to pay off the facility, our lender could foreclose on our assets, which may negatively impact our financial condition and results of operations.

If the market share of our customers declines, our sales and earnings may decline.

Our sales can be adversely affected in the event that our direct and indirect customers do not successfully compete in the markets in which they operate. In the event that the sales of one of our major customers decline for any reason, regardless of whether it is related to us or to our products, our sales to that customer may also decline, which could reduce our overall sales and our earnings.

We rely on our management team and other key employees, who may face competing demands relating to their time and resources. The loss of one or more executives or key employees could harm our business.

Our success depends upon the continued service provided by our management team, including Choi Lin Hung, Richard J. Shaw, Wei Yang, and Karl Brenza. Members of our management team have competing demands for their time and resources. Our Chief Financial Officer serves pursuant to a consulting agreement requiring him to provide approximately 40 hours of service to the company per month. Our Head of US Operations, and the Chairman and Chief Executive Officer have business interests in addition to ours, which may cause conflicts of interest with respect to our operations. To the extent the members of our management team have competing demands on their time and resources, they may have conflicts of interest in allocating their time between our business and their other activities.

While we have entered into consulting agreements with each of these individuals, the consulting agreements are not long-term and may be terminated upon 30 days’ or less prior written notice or no notice. The loss of one or more of our personnel could disrupt our operations and harm our business.

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.

We have engaged, and may in the future engage, in transactions with affiliates and other related parties. These transactions may not have been, and may not be, on terms as favorable to us as they could have been if obtained from non-affiliated persons. While an effort has been made and will continue to be made to obtain services from affiliated persons and other related parties at rates and on terms as favorable as would be charged by others, there will always be an inherent conflict of interest between our interests and those of our affiliates and related parties. Through his wholly-owned entity Merlotte, Mr. Choi Lin Hung, our chairman, chief executive officer, president, treasurer and a significant stockholder, has an indirect ownership interest in certain of the companies, including Ford Glory and Value Plus (Macao Commercial Offshore) (“Value Plus”), with which we have, or in the future may have, such agreements or arrangements. In addition, we have entered into agreements with Victory Apparel, which is wholly-owned by Mr. Choi Lin Hung and Mr. Lee Kian Tjiauw, significant stockholders. We anticipate renewing the terms of our Credit Facilities to extend its term and expect that the personal guarantees of Mr. Choi and Mr. Ng Tsze Lun, a significant stockholder, will be released in exchange for Treasure Success and Jerash Holdings agreeing to guarantee the amounts under the Credit Facilities. The release of these guarantees will personally benefit Mr. Choi and Mr. Ng but will require Jerash Holdings and Treasurer Success to incur potential liability in connection with their guarantee. Our majority stockholders may economically benefit from our arrangements with related parties. If we engage in related party transactions on unfavorable terms, the Company’s operating results will be negatively impacted.

Our revenues and cash requirements are affected by the seasonal nature of our business.

A significant portion of our revenues are received during the first six months of our fiscal year, or from April through September. A majority of our VF Corporation orders are derived from winter season fashions, the sales of which occur in the spring and summer and are merchandized by VF Corporation during the autumn months (September through November). As such, the second half of our fiscal year reflect lower sales in anticipation of the spring and summer seasons.

We rely on a single product segment comprised of a limited number of products.

While we are diversifying our product offerings, for the fiscal year ended March 31, 2018, our product offerings were 48% jackets, 34% crewnecks, 10% polo shirts and 8% pants and shorts. A shift in demand from these products, particularly knitted fabric jackets, may reduce the growth of new business for our products, as well as reduce existing business in those products. If demand in jackets made from knitted fabric were to decline, we may endeavor to expand or transition our product offerings to other segments of the clothing retail industry. There can be no assurance that we would be able to successfully make such an expansion or transition, or that our sales and margins would not decline in the event we made such an expansion or transition.

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.

Our direct and indirect customers are in the clothing retail industry, which is subject to substantial cyclical variations and is strongly affected by any downturn or slowdown in the general economy.  Factors in the clothing retail industry that may influence our operating results from quarter to quarter include:

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:

Consumer purchases of discretionary items, including our products, may decline during recessionary periods and also may decline at other times when disposable income is lower. Consequently, our customers may have larger inventories of our products than expected, and to compensate for any downturn they may reduce the size of their orders, change the payment terms, limit their purchases to a lower price range and try to change their purchase terms, all of which may have a material adverse effect on our financial condition and results of operations.

The clothing retail industry is subject to changes in fashion preferences. If our customers misjudge a fashion trend or the price which consumers are willing to pay for our products decreases, our revenues could be adversely affected.

The clothing retail industry is subject to changes in fashion preferences. We design and manufacture products based on our customers’ judgment as to what products will appeal to consumers and what price consumers would be willing to pay for our products. Our customers may not be successful in accurately anticipating consumer preferences and the prices that consumers would be willing to pay for our products. Our revenues 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.

We may from time to time experience difficulties in making timely delivery of products of acceptable quality. Such difficulties may result in cancellation of orders, customer refusal to accept deliveries or reductions in purchase prices, any of which could have a material adverse effect on our financial condition and results of operations. There can be no assurance that we will not experience difficulties with manufacturing our products.

We face intense competition in the worldwide apparel manufacturing industry.

We compete directly with a number of manufacturers of sport and outerwear from knitted fabric. Some of these manufacturers have a lower cost base than us, longer operating histories, larger customer bases, greater geographical proximity to customers and greater financial and marketing resources than we do. Increased competition, direct or indirect, could reduce our revenues and profitability through pricing pressure, loss of market share and other factors. We cannot assure you that we will be able to compete successfully with existing or new competitors, as the market for our products evolves and the level of competition increases. We believe that our business will depend upon our ability to provide apparel products of good quality and meeting our customers’ pricing and delivery requirements, as well as our ability to maintain relationships with our major customers. There can be no assurance that we will be successful in this regard.

In addition, our customers operate in an intensely competitive retail environment. In the event that any of our customers’ sales decline for any reason, whether or not related to us or to our products, our sales to such customers could be materially reduced, which will have a negative impact on our financial condition and results of operations.

We have previously experienced material weaknesses in our internal control over financial reporting. If we fail to establish and maintain an effective system of internal control over financial reporting, we may not be able to accurately and timely disclose information about our financial results or prevent fraud. Any inability to accurately and timely disclose financial results could harm our business and reputation and cause the market price of our common stock to decline.

A system of financial controls and procedures is necessary to ensure that information about our financial results is recorded, processed, summarized and reported in an accurate and timely fashion. Effective internal control over financial reporting is necessary for us to provide reliable financial reports and prevent fraud. If we cannot disclose required information or provide reliable financial reports, we may not be able to manage our business as effectively as we would if an effective control environment existed, and our business and reputation may be harmed. Our independent registered public accounting firm previously identified that we had a material weakness because we lacked sufficient personnel with an appropriate level of knowledge of accounting principles generally accepted by the United States of America (“U.S. GAAP”) and financial reporting. Although we have taken certain steps to address this deficiency, it is possible that we may have a material weakness identified in the future if the controls and procedures we have implemented are inadequate. We are undertaking a review of our internal controls over financial reporting pursuant to Rule 404 of the Sarbanes-Oxley Act and will implement any changes recommended by the review.

Our results of operations are subject to fluctuations in currency exchange rates.

Exchange rate fluctuations between the U.S. dollar and the Jordanian dinar or Hong Kong dollar, as well as inflation in Jordan or Hong Kong, may negatively affect our earnings. A substantial majority of our revenues and a substantial portion of our expenses are denominated in U.S. dollars. However, a significant portion of the expenses associated with our Jordanian or Hong Kong operations, including personnel and facilities-related expenses, are incurred in Jordanian dinar or Hong Kong dollars, respectively. Consequently, inflation in Jordan or Hong Kong will have the effect of increasing the dollar cost of our operations in Jordan and Hong Kong, respectively, unless it is offset on a timely basis by a devaluation of the Jordanian dinar or Hong Kong dollar, as applicable, relative to the U.S. dollar. We cannot predict any future trends in the rate of inflation in Jordan or Hong Kong or the rate of devaluation of the Jordanian dinar or Hong Kong dollar, as applicable, against the U.S. dollar. In addition, we are exposed to the risk of fluctuation in the value of the Jordanian dinar and Hong Kong dollar vis-a-vis the U.S. dollar. There can be no assurance that the Jordanian dinar and Hong Kong dollar will remain effectively pegged to the U.S. dollar. Any significant appreciation of the Jordanian dinar or Hong Kong dollar against the U.S. dollar would cause an increase in our Jordanian dinar or Hong Kong dollar expenses, as applicable, as recorded in our U.S. dollar denominated financial reports, even though the expenses denominated in Jordanian dinar or Hong Kong dollars, as applicable, will remain unchanged. In addition, exchange rate fluctuations in currency exchange rates in countries other than Jordan where we operate and do business may also negatively affect our earnings.

We are subject to the risks of doing business abroad.

All of our products are manufactured outside the United States, at our subsidiaries’ production facilities in Jordan. Foreign manufacturing is subject to a number of risks, including work stoppages, transportation delays and interruptions, political instability, foreign currency fluctuations, economic disruptions, expropriation, nationalization, the imposition of tariffs and import and export controls, changes in governmental policies (including U.S. policy towards Jordan) and other factors, which could have an adverse effect on our business. In addition, we may be subject to risks associated with the availability of and time required for the transportation of products from foreign countries. 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.

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. We cannot assure you that the political, economic or social situation in Jordan or in the Middle East in general will not have a material adverse effect on our operations, especially in light of the potential for hostilities in the Middle East. The success of the production facilities also will depend on the quality of the workmanship of laborers and our ability to maintain good relations with such laborers in these countries. We cannot guarantee that our operations in Jordan or any new locations outside of Jordan will be cost-efficient or successful.

U.S. Federal Income Tax Reforms could adversely affect us.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation referred to as the Tax Cuts and Jobs Act (the “TCJ Act”). The TCJ Act makes broad and complex changes to the U.S. corporate income tax system and includes a Toll Charge, which is a one-time mandatory deemed repatriation tax on accumulated foreign subsidiaries’ previously untaxed foreign earnings. The Toll Charge will be paid over an eight-year period, starting in 2018, and will not accrue interest. The TCJ Act also imposed a GILTI, which is a new tax on certain off-shore earnings at an effective rate of 10.5% for tax years beginning after December 31, 2017 (increasing to 13.125% for tax years beginning after December 31, 2025) with a partial offset for foreign tax credits. Our preliminary estimate of the Toll Charge is subject to the finalization of management’s analysis related to certain matters, such as developing interpretations of the provisions of the TCJ Act, changes to certain estimates and amounts related to the earnings and profits of certain subsidiaries, and the filing of our tax returns. U.S. Treasury regulations, administrative interpretations or court decisions interpreting the TCJ Act may require further adjustments and changes in our estimates, which could have a material adverse effect on our business, results of operations or financial conditions. While we do not anticipate that the GILTI will have a material impact on our financial results, the change caused us to record a one-time income tax payable during the first quarter of fiscal 2019 that will be paid over eight years.

Our business could suffer if we violate labor laws or fail to conform to generally accepted labor standards or the ethical standards of our customers.

We are subject to labor laws issued by the Jordanian Ministry of Labor for our facilities in Jordan. In addition, many of our customers require their manufacturing suppliers to meet their standards for working conditions and other matters. If we violate applicable labor laws or generally accepted labor standards or the ethical standards of our customers by, for example, using forced or indentured labor or child labor, failing to pay compensation in accordance with local law, failing to operate our factories in compliance with local safety regulations, or diverging from other labor practices generally accepted as ethical, we could suffer a loss of sales or customers. 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.

Our products are produced under strict supervision and controls to ensure that all materials and manufacturing processes comply with the industry and governmental regulations governing the markets in which these products are sold. However, if our controls fail to detect or prevent non-compliant materials from entering the manufacturing process, our products could cause damages to our customers’ products or processes and could also result in fines being incurred. The possible damages, replacement costs and fines could significantly exceed the value of our products and these risks may not be covered by our insurance policies.

We depend on our suppliers for machinery and maintenance of machinery. We may experience delays or additional costs satisfying our production requirements due to our reliance on these suppliers.

We purchase machinery and equipment used in our manufacturing process from third party suppliers. If our suppliers are not able to provide us with maintenance, additional machinery or equipment as needed, we might not be able to maintain or increase our production to meet any demand for our products, which would negatively impact our financial condition and results of operations.

We are a holding company and rely on dividends, distributions and other payments, advances and transfers of funds from our subsidiaries to meet our obligations.

We are a holding company that does not conduct any business operations of our own. As a result, we rely on cash dividends and distributions and other transfers from our operating subsidiaries to meet our obligations. The deterioration of income from, or other available assets of, our operating subsidiaries for any reason could limit or impair their ability to pay dividends or other distributions to us, which in turn could adversely affect our financial condition and results of operations.

Periods of sustained economic adversity and uncertainty could negatively affect our business, results of operations and financial condition.

Disruptions in the financial markets, such as what occurred in the global markets in 2008, may adversely impact the availability and cost of credit for our customers and prospective customers, which could result in the delay or cancellation of customer purchases. In addition, disruptions in the financial markets may have an adverse impact on regional and world economies and credit markets, which could negatively impact the availability and cost of capital for us and our customers. These conditions may reduce the willingness or ability of our customers and prospective customers to commit funds to purchase our services or products, or their ability to pay for our services after purchase. These conditions could result in bankruptcy or insolvency for some customers, which would impact our revenue and cash collections. 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.

We benefit from exemptions from customs duties and import quotas due to our location in Al Tajamouat Industrial City, a Qualifying Industrial Zone in Amman, Jordan, and the free trade agreements with the United States. QIZs are industrial parks that house manufacturing operations in Jordan and Egypt. They are special free trade zones established in collaboration with Israel to take advantage of the free trade agreements between the United States and Israel. Under the trade agreement between Jordan and the United States, goods produced in QIZ areas can directly access U.S. markets without tariff or quota restrictions if they satisfy certain criteria. If there is a change in such benefits or if any such agreements were terminated, our profitability may be reduced.

President Donald Trump expresses antipathy towards existing and proposed trade agreements, has called for greater restrictions on free trade generally, has announced significant increases on tariffs on goods imported into the United States, and has withdrawn the United States from certain trade agreements including the Trans-Pacific Partnership. It remains unclear what specifically President Trump would or would not do with respect to trade agreements, tariffs and duties relating to products manufactured in Jordan. If President Trump 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.

Our results of operations would be materially and adversely affected in the event we are unable to operate our principal production facilities in Amman, Jordan.

All of our manufacturing process is performed in a complex of production facilities located in Amman, the capital of Jordan. We have no effective back-up for these operations and, in the event that we are unable to use the production facilities located in Amman, Jordan as a result of damage or for any other reason, our ability to manufacture a major portion of our products and our relationships with customers could be significantly impaired, which would materially and adversely affect our results of operation.

Our operations in Jordan may be adversely affected by social and political uncertainties or change, military activity, health-related risks or acts of terrorism.

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. Terrorist attacks, military activity, rioting, or civil or political unrest in the future could influence the Jordanian economy and our operations by disrupting operations and communications and making travel within Jordan more difficult and less desirable. In late May 2018, protests about a proposed tax bill began throughout Jordan. On June 5, 2018, King Abdullah II of Jordan responded to the protests by removing and replacing Jordan’s prime minister. If political uncertainty rises in Jordan, our business, financial condition, results of operations and cash flows may be negatively impacted.

Political or social tensions also could create a greater perception that investments in companies with Jordanian operations involve a high degree of risk, which could adversely affect the market price of our common stock. We do not have insurance for losses and interruptions caused by terrorist attacks, military conflicts and wars, which could subject us to significant financial losses. 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. In response to terrorists’ activities and threats aimed at the United States, transportation, mail, financial and other services may be slowed or stopped altogether. Extensive delays or stoppages in transportation, mail, financial or other services could have a material adverse effect on our business, results of operations and financial condition. Furthermore, we may experience an increase in operating costs, such as costs for transportation, insurance and security as a result of the activities and potential delays. We may also experience delays in receiving payments from payors that have been affected by the terrorist activities. The United States economy in general may be adversely affected by terrorist activities and any economic downturn could adversely impact our results of operations, impair our ability to raise capital or otherwise adversely affect our ability to grow our business.

We are subject to regulatory and political uncertainties in Jordan.

We conduct substantially all of our business and operations in Jordan. Consequently, government policies and regulations, including tax policies, in Jordan will impact our financial performance and the market price of our common stock.

Jordan is a constitutional monarchy, but the King holds wide executive and legislative powers. 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. 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.

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.

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. We face the risk that we, our employees or any third parties such as our sales agents and distributors that we engage to do work on our behalf may take action determined to be in violation of anti-corruption laws in any jurisdiction in which we conduct business, including the Foreign Corrupt Practices Act of 1977 (“FCPA”). Any violation of the FCPA or any similar anti-corruption law or regulation could result in substantial fines, sanctions, civil or criminal penalties and curtailment of operations that might harm our business, financial condition or results of operations.

Our stockholders may face difficulties in protecting their interests and exercising their rights as a stockholder of ours because we conduct substantially all of our operations in Jordan and certain of our officers and directors reside outside of the United States.

Certain of our officers and directors reside outside the United States. Therefore, our stockholders may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in any of these jurisdictions based upon U.S. laws, including the federal securities laws or other foreign laws against us, our officers and directors. Furthermore, we conduct substantially all of our operations in Jordan through our operating subsidiaries. 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.

Risk Factors Relating to our Securities

If we fail to comply with the continuing listing standards of the Nasdaq Capital Market, our common stock could be delisted from the exchange.

If we were unable to meet the Nasdaq continued listing requirements, our common stock could be delisted from the Nasdaq. Any such delisting of our common stock could have an adverse effect on the market price of, and the efficiency of the trading market for, our common stock, not only in terms of the number of shares that can be bought and sold at a given price, but also through delays in the timing of transactions and less coverage of us by securities analysts, if any. 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 the Company for the foreseeable future, including the outcome of matters requiring stockholder approval.

Three of our stockholders beneficially own approximately 71.5% of our outstanding common stock as of September 14, 2018. Our other stockholders do not have any ability to exercise control over us, and such entities and individuals 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 Company, (ii) a sale of all or substantially all of our assets; and (iii) amendments to our corporate documents. 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.

We have granted warrants to purchase up to 71,100 units to designees of the placement agent in connection with our Private Placement that initially closed on May 15, 2017 and had subsequent closings on August 18, 2017 and September 27, 2017. 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). 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. The private placement agent’s warrants are exercisable at a price per unit equal to $5.50.

Also in connection with the Private Placement, we 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. Such warrants expire on May 15, 2022 with respect to 54,000 warrants, 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. The warrant has an exercise price of $5.00 per share and may be converted by means of a cashless exercise during the term of the warrant. This warrant may be exercised any time until May 15, 2022.

Finally, in connection with our IPO, 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.

To the extent any of the foregoing warrants are exercised, our stockholders’ ownership interest in us will be diluted, which may reduce the market price of our common stock.

Future sales and issuances of our common stock or rights to purchase common stock could result in additional dilution of the percentage ownership of our stockholders and could cause the market price of our common stock to decline.

We may issue additional securities in the future. Pursuant to our Stock Incentive Plan, we may issue up to 1,484,250 shares of common stock to certain members of management and key employees of the Company.

Future sales and issuances of our common stock or rights to purchase our common stock could result in substantial dilution to our existing stockholders. We may sell common stock, convertible securities and other equity securities in one or more transactions at prices and in a manner as we may determine from time to time. If we sell any such securities, our stockholders may be materially diluted. New investors in any future transactions could gain rights, preferences and privileges senior to those of holders of our common stock.

If securities or industry analysts do not publish research or reports about us, or if they adversely change their recommendations regarding our common stock, our stock price and trading volume of our common stock could decline.

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us, our industry and our market. If no analyst elects to cover us and publish research or reports about us, the market for our common stock could be severely limited and our stock price could be adversely affected. In addition, if one or more analysts ceases coverage of us or fails to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. 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.

The requirements of being a public company, including compliance with the reporting requirements of the Exchange Act and the requirements of the 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.

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 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. In connection with becoming a reporting company, we will need to continue or begin:

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. We estimate that we may incur approximately $600,000 in costs during the fiscal year ending March 31, 2019 in connection with becoming a public company.

Our lack of experienced accounting staff may impact our ability to report our future financial results on a timely and accurate basis, and we need to retain the services of additional accountants and consultants with the required accounting experience and expertise.

With the exception of our chief financial officer, our accounting and finance staff lacks depth and skill in the application of U.S. GAAP with respect to external financial reporting for Exchange Act reporting companies. We intend to engage the services of additional accounting personnel and expert consultants to assist with our financial accounting and reporting requirements to develop our internal control over financial reporting and to produce timely financial reports. Until we do so, we may experience difficulty producing reliable and timely financial statements, which could cause investors to lose confidence in our reported financial information, the market price of our stock to decline significantly, reduce the likelihood that we would be able to obtain additional financing on acceptable terms, and harm our business and financial condition.

We will not be required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act until the end of the second fiscal year reported on our second annual report on Form 10-K.

We will not be required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act until our annual report on Form 10-K for the fiscal year ending March 31, 2019. In addition, as a smaller reporting 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. 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. Furthermore, the process of designing and implementing internal controls over financial reporting may divert our internal resources and take a significant amount of time and expense to complete. The actual or perceived risk associated with our lack of internal controls could cause investors to 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.

The reduced disclosure requirements applicable to emerging growth companies may make our common stock less attractive to investors, which may lead to volatility and a decrease in the market price of our common stock.

For as long as we continue to be an emerging growth company, we may take advantage of exemptions from reporting requirements that apply to other public companies that are not emerging growth companies. Investors may find our common stock less attractive because we may rely on these exemptions, which include not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. If investors find our common stock less attractive as a result of exemptions and reduced disclosure requirements, there may be a less active trading market for our common stock and our stock price may be more volatile or may decrease.

Special Note Regarding Forward-Looking Statements

This prospectus contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (“PSLRA”). All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including: any projections of earnings, revenues or other financial items; 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” or “anticipate” and other similar words. Such forward-looking statements may be contained in the sections “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” among other places in this prospectus.

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 prospectus. We do not intend, and undertake no obligation, to update any forward-looking statement except as required by law.

Determination of Offering Price

The Underwriter Warrants are exercisable at $8.75 per share of common stock until May 2, 2023. The exercise price of the Underwriter Warrants was determined based on negotiations between us and the Underwriter.

PLAN OF DISTRIBUTION

All of the securities being offered by this prospectus are being offered and sold directly by us, without an underwriter. Pursuant to the terms of the Underwriter Warrants, upon receipt of the exercise price for the Underwriter Warrants, we will issue shares of common stock to the warrant holder. 

Use of Proceeds

We will receive proceeds from the exercise of the Underwriter Warrants if the Underwriter Warrants are exercised for cash. If the Underwriter and its affiliates exercise all of the Underwriter Warrants on a cash basis (assuming, in each case, no adjustments are made to the exercise price or number of shares issuable upon exercise of the warrants), we will receive approximately $500,500. We intend to use those proceeds, if any, for general corporate purposes and working capital.

Market for our Common Stock

Our common stock has been traded and quoted on the Nasdaq under the symbol “JRSH” since May 4, 2018. Before that, our stock was not traded on any stock exchange. As of September 14, 2018, there were 11,325,000 shares of common stock issued and outstanding held by approximately 67 stockholders of record. Upon the IPO’s closing on May 2, 2018, we issued 1,430,000 shares of common stock and issued the Underwriter Warrants to the Underwriter.

We declared and paid a dividend of $5,307,500 in the fiscal year ended March 31, 2017. We did not declare any dividends for the fiscal year ended March 31, 2018. We do not intend to declare dividends in the near future as we anticipate that we will retain any future earnings for the development, operation and expansion of our business. We did not repurchase any of our common stock in the fiscal years ended March 31, 2017 and 2018.

The following table presents, for the periods indicated, the high and low sales prices of our common stock as reported on Nasdaq. Our common stock was first quoted on Nasdaq on May 4, 2018.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of the Group’s financial condition and results of operations should be read in conjunction with the Group’s consolidated financial statements and the related notes included elsewhere in this filing.

EXECUTIVE OVERVIEW

Overview

Jerash Holdings is a holding company organized as a corporation in Delaware in January 2016 with nominal or no assets or operations. Through our wholly owned operating subsidiaries, the Group is principally engaged in the manufacturing and exporting of customized, ready-made sport and outerwear from knitted fabric produced in the Group’s facilities in Jordan.

The Group is an approved manufacturer by many well-known brands and retailers, such as Walmart, Costco, Sears, Hanes, Columbia, Land’s End, VF Corporation (which owns brands such as The North Face, Timberland, Wrangler, Lee, Jansport, etc.), and Philip-Van Heusen (which owns brands such as Calvin Klein, Tommy Hilfiger, IZOD, Speedo, etc.). Our production facilities are made up of three factory units and two warehouses and currently employ approximately 2,900 people. Our employees include local Jordanian workers as well as migrant workers from Bangladesh, Sri Lanka, India, Myanmar and Nepal. The total annual capacity at the Group’s facilities is approximately 6.5 million pieces (average for product categories including crewnecks, polos and jackets).

Merger

On May 11, 2017, we implemented the Merger via two transactions, the first being an equity contribution whereby the shareholders of Global Trend, contributed 100% of the outstanding capital stock of Global Trend to Jerash Holdings in exchange for an aggregate of 8,787,500 shares of common stock of Jerash Holdings with Global Trend becoming the wholly-owned subsidiary of Jerash Holdings. In the second transaction, Global Trend merged with and into Jerash Holdings with Jerash Holdings being the surviving entity, as a result of which Jerash Holdings became the direct parent of Global Trend’s wholly owned operating subsidiaries, Jerash Garments and Treasure Success.

Accounting Treatment of Merger

For accounting purposes, Global Trend is recognized as the accounting acquirer, and Jerash Holdings is the legal acquirer or accounting acquiree. As such, following the Merger, the historical financial statements of Global Trend are treated as the historical financial statements of the combined company. Accordingly, the financial information in this Annual Report on Form 10-K, including management’s discussion and analysis of financial condition and results of operations and the consolidated financial statements and the related notes thereto appearing elsewhere in this filing, reflect the consolidated financial statements of Global Trend, its subsidiaries and its affiliate, which includes as a variable interest entity Victory Apparel Jordan Company Limited (“Victory Apparel”). Victory Apparel was incorporated in Jordan in 2005 and it is a wholly owned subsidiary of WCL. Wealth Choice Limited (“WCL”) acquired Global Trend and Jerash Garments from two third-party individuals on March 21, 2012. On March 31, 2006, Victory Apparel purchased all of the property and equipment of Jerash Garments at an industrial building in Al Tajamouat Industrial City purchased by Jerash Garments on July 31, 2000. The land and building were not registered in Victory Apparel’s name, and Jerash Garments continued to hold the land and building in its name in trust for Victory Apparel. The declaration of trust was never registered with the Land Registry of Jordan, and on June 30, 2016, Victory Apparel and Jerash Garments dissolved the sale agreement, resulting in the property and equipment being owned free and clear by Jerash Garments. Victory Apparel does not currently have any material assets or operations of its own, and Mr. Choi and Mr. Lee, the Group’s significant stockholders who together indirectly own 100% of Victory Apparel through WCL, intend to dissolve the entity

Seasonality of Sales

A significant portion of our revenues are 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 Autumn months (September through November). As such, the second half of our fiscal years reflect lower sales in anticipation of the spring and summer seasons. One of our strategies is to increase sales with other customers where clothing lines are stronger during the spring months. This strategy also reflects our current plan to increase the Group’s number of customers to mitigate our current concentration risk with VF Corporation.

RESULTS OF OPERATIONS

Three months ended June 30, 2018 and June 30, 2017

The following table summarizes the results of our operations during the three-month periods ended June 30, 2018 and 2017 and provides information regarding the dollar and percentage increase or (decrease) during such periods..

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

Revenue. Revenue decreased by approximately $3.0 million or 14%, to $18.3 million, for the three months ended June 30, 2018 from approximately $21.4 million for the same period in fiscal 2018. The decrease was mainly the result of deferred shipments attributable to the national holidays in Jordan for EID al-Fitr from June 15 to June 18, 2018 that affected our shipments and created backlog at the port of Aqaba the following week. We normally send our products to the port of Aqaba over weekends and freight forwarders designated by customers will effect shipments per customers’ instructions on Monday and Tuesday. Approximately $2.5 million of shipments scheduled to be shipped in June were shipped in early July due to the EID al-Fitr holiday.

The following table outlines the dollar amount and percentage of total sales to the Group’s customers for the fiscal years ended March 31, 2018 (“fiscal 2018”), March 31, 2017 (“fiscal 2017”), and for the three months ended June 30, 2018.

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

(1) Substantially all of our products are sold under The North Face brand that is owned by VF Corporation.

(2) Until August 2016, substantially all of our sales were to Ford Glory International Limited (“Ford Glory”) which then sold the products to the end customers. Ford Glory is 49% owned by Mr. Choi Lin Hung, our chairman, chief executive officer, president and a significant stockholder, through his wholly owned entity Merlotte Enterprise Limited (“Merlotte”) and therefore is considered an affiliate of the Company. Following August 1, 2016, there was a transition period for orders placed directly with Ford Glory during the remainder of fiscal 2017. For the fiscal years ended March 31, 2018 and for the three months ended June 30, 2018, none of our sales were made to Ford Glory and approximately 63.5% and 0% of our net sales for the fiscal years ended March 31, 2018 and for the three months ended June 30, 2018, respectively, were made directly to our customers with support of Ford Glory. During fiscal 2017, for sales orders received before customers successfully changed their vendor registrations to issue orders directly to us, we fulfilled the order for customers on behalf of Ford Glory, including inventory purchases and manufacturing. As customers now issue sales orders to us directly, support from Ford Glory was phased out during fiscal 2018 as we no longer rely on Ford Glory to receive sales orders. Our merchandising personnel now receive orders directly from our customers through our wholly owned subsidiaries, Treasure Success and Jerash Garments.

In fiscal year 2017, we depended on VF Corporation for sales through Ford Glory. In fiscal 2018, we also depended on a few key customers. Substantially all of our sales through Ford Glory in fiscal 2017, and independent of Ford Glory in 2018, were to VF Corporation. The following table outlines the dollar amount and percentage of our sales through Ford Glory for fiscal year 2017.

(1) Substantially all of our products are sold under The North Face brand that is owned by VF Corporation.

Revenue by Geographic Area

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

According to the U.S. Customs and Border Protection Jordan Free Trade Treaty, which became effective December 2001, all apparel manufactured in Jordan can be exported to the U.S. with free duty. This treaty provides substantial benefits to us by allowing us to compete and to expand our garment export business in the U.S.

The decrease in sales to the U.S. of approximately 15% in the three months ended June 30, 2018 was mainly attributable to the delay in shipments described above, which were destined for the U.S. in July 2018. Revenue from Jordan and other locations increased by approximately 128% and 86%, respectively, as they were less affected by the above-mentioned shipping delays.

Cost of goods sold. Following the decrease in sales revenue, our cost of goods sold decreased by approximately $2.8 million or 17%, to approximately $13.7 million, for the three months ended June 30, 2018 compared to approximately $16.5 million for the same period in fiscal 2018. As a percentage of revenues, the cost of goods sold decreased by approximately 2% to 75% for the three months ended June 30, 2018 compared to 77% for the same period in fiscal 2018. The decrease in cost of goods sold as a percentage of revenues was primarily attributable to improved production efficiency in the period. For the three months ended June 30, 2018, we purchased approximately 30% and 13% of our raw materials from two major suppliers, Duck San Enterprise Co., Ltd and Universal Star Corporation. For the three months ended June 30, 2017, the Company purchased approximately 92% of its raw materials from one supplier, Onset Time Limited.

Gross profit margin. Gross profit margin was approximately 25% for the three months ended June 30, 2018, an improvement of approximately 2% from 23% for the same period in fiscal 2018. The improvement in gross profit margin was attributable to enhanced production efficiency in the period. Gross profit decreased by approximately $192,000 or 4%, to $4.7 million, for the three months ended June 30, 2018 from approximately $4.9 million for the same period in fiscal 2018. The decrease was primarily a result of the decrease in revenue of approximately $3.0 million for the three months ended June 30, 2018.

Selling, general and administrative expenses. Selling, general and administrative expenses increased by approximately 266% from approximately $1.4 million for the three months ended June 30, 2017 to approximately $5.2 million for the three months ended June 30, 2018. The increase was primarily due to the inclusion of stock based compensation of approximately $3.2 million for options granted to thirteen employees and consultants in the quarter ended June 30, 2018, increases in expenses to expand marketing and supporting functions in the Hong Kong office, expenses related to banking and finance functions, and legal and professional fees and compliance costs associated with our IPO, which closed in May 2018.

In accordance with the Stock Incentive Plan adopted by the Company on March 21, 2018, a total of 1,484,250 share of common stock are reserved for issuance under the Plan for grants to management, key employees and consultants of the Company. On April 9, 2018, a total of 989,500 shares were granted to thirteen employees and consultants. These options have an exercise price of $7.00 per share of common stock and vested immediately. Based on the valuation with Black Scholes model as described in Note 8 of our financial statements, the value of each option is $3.24. The aggregate stock-based compensation in the three months ended June 30, 2018, was approximately $3.2 million. There was stock based compensation of approximately $117,000 related to the 50,000 warrants granted to a board observer in the quarter ended June 30, 2017.

Other income (expense), net. Other income, net was approximately $5,600 for the three months ended June 30, 2018, as compared to other expense, net of approximately $6,300 for the same period in fiscal 2018. This increase in income was primarily due to the foreign currency exchange gain from converting Jordanian dinars to U.S. dollars for financial reporting.

Net (loss) income before taxation. Net loss before taxation for the three months ended June 30, 2018 was $0.5 million compared to net income before taxation of approximately $3.4 million in the three months ended June 30, 2017. The decrease was mainly attributable to the $3.2 million of stock-based compensation reported in fiscal 2019 mentioned above, increases in expenses to expand marketing and supporting functions in the Hong Kong office, expenses relating to banking and finance functions, and legal and professional fees and compliance costs associated with our IPO, which closed in May 2018.

Taxation. The TCJ Act imposes a one-time transition tax on deemed repatriation of historical earnings of foreign subsidiaries, and future foreign earnings are subject to U.S. taxation. The change has caused the Company to record a one-time income tax payable to be paid over 8 years. The one-time transition tax was calculated using the Company’s total post-1986 overseas earnings and profits based on a rate of 15.5% for the Company’s cash and cash equivalents and a rate of 8% for its other assets. The Company previously booked a provisional charge of $1.4 million in fiscal 2018 related to the transition tax for all of its foreign subsidiaries, resulting in an increase in income tax expense of approximately $1.4 million for the year ended March 31, 2018. The income tax payable attributable to the transition tax is due over an 8-year period beginning in 2018. The Company revised its estimate of the impact of the transition tax, which resulted in $1,892,000 of transition tax due. Accordingly, the Company booked a current charge to income tax expense of $492,000. At June 30, 2018, $175,000 of current income tax is reflected as Income tax payable in current liabilities while a noncurrent income tax payable of approximately $1.6 million attributable to the transition tax is reflected in "other liabilities" of the Company’s Consolidated Balance Sheet.

Income tax expense for the three months ended June 30, 2018 was $0.4 million compared to $0 in the three months ended June 30, 2017. This increase is attributable to a $0.5 million charge relating to revising the estimated impact of the transition tax provision of the TCJ Act, which amount is a true up to the provisional amount booked at March 31, 2018. The transition tax charge is offset by a $0.1 million tax benefit relating to the Company’s application of the estimated annual effective tax rate to the Company’s pre-tax income for the three months ended June 30, 2018.

Net (loss) income. Net loss for the three months ended June 30, 2018 was $0.9 million compared to a net income of $3.4 million for the same period in fiscal 2018. The loss was primarily attributable to the $3.2 million of stock-based compensation reported in fiscal 2019 mentioned above, increases in expenses to expand marketing and supporting functions in the Hong Kong office, expenses relating to banking and finance functions, legal and professional fees and compliance costs associated with our IPO, which closed in May 2018, and incremental provision for the Transition Tax mentioned above.

Fiscal years ended March 31, 2018 and March 31, 2017

The following table presents certain information from our statement of income for fiscal years 2017 and 2018 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.

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

Revenue. Revenue increased by approximately $7.3 million or 12%, to approximately $69.3 million in fiscal 2018 from approximately $62.0 million in fiscal 2017. The growth was mainly the result of the expansion of our business with one of our major customers, particularly, in export product types with higher sales value, such as jackets, and the economic recovery of the U.S., which remains the Group’s major export destination. Approximately 88% and 90% of our products were exported to the U.S. in fiscal 2018 and 2017 respectively.

As a garment manufacturing group, we excel in manufacturing sport and outerwear and derive most of our revenue from the manufacturing and sales of sport and outerwear, which is the only segment in which we operate.

The table below presents our revenues for fiscal years 2017 and 2018 by geographic area.

Revenue by Geographic Area

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

Since December 2001, all apparel manufactured in Jordan could be exported to the U.S. without duty imposed, pursuant to the U.S. Customs and Border Protection Jordan Free Trade Treaty. This treaty provides substantial competitiveness and benefit for us to expand the Group’s garment export business in the U.S. Our sales to the U.S. increased by approximately 9.8% in fiscal 2018 compared to fiscal 2017. According to the Major Shippers Report issued by the Office of Textiles and Apparel under the U.S. Department of Commerce, U.S. apparel import from Jordan increased by approximately 6.7% from $1.30 billion in the fiscal year ended March 31, 2017 to approximately $1.38 billion in the fiscal year ended March 31, 2018. The Group’s sales growth ratio has been exceeding the industrial average growth ratio, and the Group still has plenty of room to expand our garment export business in the U.S., as Jerash accounts for only 4.8% of the total Jordanian garment exports to the U.S., according to The World Bank.

Cost of goods sold. Following the growth in sales revenue, our cost of goods sold increased by approximately $4.7 million or 10%, to approximately $51.3 million in fiscal 2018 from approximately $46.6 million in fiscal 2017. As a percentage of revenues, the cost of goods sold decreased by approximately 1% to 74% in fiscal 2018 from 75% in fiscal 2017. The slight decrease in cost of goods sold as a percentage of revenues was primarily attributable to higher selling price and lower fixed cost per unit due to the increase of production volume.

Gross profit margin. Gross profit margin was approximately 26% in fiscal 2018, which increased by approximately 1% from 25% in fiscal 2017. The increase in gross profit margin was primarily driven by higher selling price, economies of scale in general, and improved production efficiency.

Selling, general and administrative expenses. Selling, general and administrative expenses increased by approximately 30% from approximately $4.7 million in fiscal 2017 to approximately $6.1 million in fiscal 2018. The increase was mainly attributable to the full year operational expenses of approximately $1.0 million of a company established in Hong Kong for sales and marketing functions in fiscal 2018 (the company had operated for approximately six months in fiscal 2017 after it began operations in October 2016), legal and professional fees for the Merger, private placement completed in fiscal 2018 and initial public offering that closed during the first quarter of fiscal 2019, stock-based compensation expense of $116,578 recognized for warrants issued in fiscal 2018, and additional bank charges resulting from the utilization of bank facilities granted by HSBC in August 2017, as further discussed below in “— Credit Facilities.”

Other expense, net. Other expense, net was approximately $32,000 and $50,000 in fiscal 2018 and 2017, respectively which were relatively consistent in both years.

Net income before taxation. Net income for the year ended March 31, 2018 increased by approximately 11% from approximately $10.6 million to approximately $11.8 million. The increase was mainly attributable to the increase in inventory turnover by approximately 12% and the improvement in gross profit margin from approximately 25% in fiscal 2017 to approximately 26% in fiscal 2018, for the reasons mentioned above.

Income tax expenses. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act, or the TCJ Act. The TCJ Act included a broad range of complex provisions impacting the taxation of multi-national companies. The TCJ Act makes broad and complex changes to the U.S. corporate income tax system and includes a Toll Charge, which is a one-time mandatory deemed repatriation tax on accumulated foreign subsidiaries’ previously untaxed foreign earnings. The Toll Charge will be paid over an eight-year period, starting in 2018, and will not accrue interest. The TCJ Act also imposed a GILTI, which is a new tax on certain off-shore earnings at an effective rate of 10.5% for tax years beginning after December 31, 2017 (increasing to 13.125% for tax years beginning after December 31, 2025) with a partial offset for foreign tax credits. Generally, accounting for the impacts of newly enacted tax legislation. Including the Toll Charge, is required to be completed in the period of enactment, however in response to the complexities and ambiguity surrounding the TCJ Act, the SEC released Staff Accounting Bulletin No. 118 (“SAB 118”) to provide companies with relief around the initial accounting for the TCJ Act. Pursuant to SAB 118, the SEC has provided a one-year measurement period for companies to analyze and finalize accounting for the TCJ Act. During the one-year measurement period, SAB 118 allows companies to recognize provisional amounts when reasonable estimates can be made for the impacts resulting from the TCJ Act. We will finalize accounting for the TCJ Act during the one-year measurement period, and any adjustments to the provisional amounts will be included in income tax expense or benefit in the appropriate period, and disclosed if material, in accordance with guidance provided by SAB 118.

While our accounting for the TCJ Act is not complete, we have recognized a provisional charge (based on information available as of June 4, 2018) of approximately $1.4 million related to the Toll Charge. To determine the amount of the Toll Charge, we must determine, in addition to other factors, the amount of post-1986 foreign earnings and profits of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings, if any.

The income tax payable attributable to the Toll Charge is due over an eight-year period beginning in 2018. At March 31, 2018, an income tax payable of $1.4 million attributable to the transition tax is reflected in the Consolidated Balance Sheet.

The TCJ Act has significant complexity and our final tax liability may materially differ from provisional estimates due to additional guidance and regulations that may be issued by the U.S. Treasury Department, the Internal Revenue Service (“IRS”) and state and local tax authorities, and for Jerash’s finalization of the relevant calculations required by the new tax legislation.

We continue to analyze the provisions of the TCJ Act which are effective after December 30, 2017, including but not limited to the imposition of GILTI.

Under U.S. GAAP, companies are allowed to make an accounting policy election to either treat taxes resulting from GILTI as a current-period expense when they are incurred or factor such amounts into the measurement of deferred taxes. We have not completed our analysis of the effects of the GILTI provisions and will further consider the accounting policy election within the measurement period as provided under SAB 118.

Net income. Net income was $10.4 million and $10.6 million in fiscal 2018 and 2017, respectively. The slight decrease was attributable to the $1.4 million one-time repatriation tax provided for in fiscal 2018 which is to be paid over eight years.

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 subsidiaries to satisfy our liquidity requirements. Current Jordanian regulations permit the Group’s 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. The Group has relied on direct payments of expenses by the Group’s subsidiaries (which generate all of our revenues), to meet the Group’s obligations to date. To the extent payments are due in U.S. dollars, the Group has occasionally paid such amounts in Jordanian dinar to an entity controlled by the Group’s 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.

Three months ended June 30, 2018 and June 30, 2017

As of June 30, 2018, we had cash of approximately $12.9 million and restricted cash of approximately $3.7 million.

Our current assets as of June 30, 2018 were approximately $50.3 million, and our current liabilities were approximately $10.4 million, which resulted in a ratio of approximately 4.8:1. Total equity as of June 30, 2018 was approximately $45.0 million.

We had net working capital of $40.0 million and $29.0 million as of June 30, 2018 and March 31, 2018, respectively.

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

On May 29, 2017, our wholly-owned subsidiary, Treasure Success, entered into a facility letter (“Facility Letter”) with Hong Kong and Shanghai Banking Corporation (“HSBC”) to provide credit to us. Under the terms of the Facility Letter, we have a total credit limit of $8,000,000. The Facility Letter provides us with various credit facilities for importing and settling goods from our suppliers. The available credit facilities as described in greater detail below includes an import facility, import facilities with loan against import, trust receipts, clean import loan, and advances to us against purchase orders. HSBC charges an interest rate of 1.5% per annum over LIBOR or HIBOR, as applicable, for credit related to the release of goods immediately on our documentary credit.

HSBC charges a commission of: i) 0.25% for the first $50,000, ii) 0.125% for the balance in excess of $50,000 and up to $100,000 and iii) 0.0625% for balance in excess of $100,000 and an interest rate of 1.5% per annum over LIBOR or HIBOR, as applicable, for credit related to trust receipts whereby HSBC has title to the goods or merchandise released immediately to us. HSBC has approved certain of our suppliers that are eligible to use clean import loans. HSBC charges a commission of: i) 0.25% for the first $50,000, ii) 0.125% for the balance in excess of $50,000 and up to $100,000 and iii) 0.0625% for balance in excess of $100,000 and an interest of 1.5% per annum over LIBOR or HIBOR, as applicable, for credit services related to clean import loans or release of the goods or merchandise based on evidence of delivery or invoice. HSBC will advance up to 70% of the purchase order value in our favor. HSBC charges a handling fee of 0.25% and an interest rate of 1.5% per annum over LIBOR or HIBOR, as applicable, for credit services related to advances.

The Facility Letter is collateralized by the guarantees of us and Jerash Garments, and the personal guarantees by Mr. Choi Lin Hung and Mr. Ng Tsze Lun. Jerash Garments is also required to maintain an account at HSBC for receiving payments from VF Sourcing Asia S.A.R.L. and its related companies. In addition, to secure the Facility Letter, we granted HSBC a charge of $3,000,000 over the Company’s deposits.

The Facilities are subject to review at any time and, in any event by May 1, 2018. HSBC has discretion on whether to renew the Facility Letter prior to expiration and the Company is currently negotiating an extension of the Facility Letter on similar terms. HSBC has discretion on whether to renew the Facility Letter prior to expiration. As of June 30, 2018, $6,345,846 was outstanding under the Facility Letter. Borrowings under the Facility Letter are due within 120 days of each borrowing date or upon demand by HSBC.

On June 5, 2017, Treasure Success entered into an Offer Letter - Invoice Discounting / Factoring Agreement and on August 21, 2017, Treasure Success entered into the Invoice Discounting/Factoring Agreement (together, the “Factoring Agreement”) with HSBC for certain debt purchase services related to our accounts receivables. Under the terms of the Factoring Agreement, we may borrow up to $12,000,000. In exchange for advances on eligible invoices from HSBC for our approved customers, HSBC charges a fee to advance such payments at a discounting charge of 1.5% per annum over 1-month LIBOR or HIBOR, as applicable. Such fee accrues on a daily basis on the amount of funds in use. HSBC has final determination of the percentage amount available for prepayment from each of our approved customers. We may not prepay an amount from a customer in excess of 85% of the funds available for borrowing.

HSBC also provides credit protection and debt services related to each of our preapproved customers. For any approved debts or collections assigned to HSBC, HSBC charges a flat fee of 0.35% on the face value of the invoice for such debt or collection. We may assign debtor payments that are to be paid to HSBC within 90 days, defined as the maximum terms of payment. We may receive advances on invoices that are due within 30 days of the delivery of our goods, defined as the maximum invoicing period.

The advances made by HSBC are collateralized by the guarantees of us and Jerash Garments, and the personal guarantees by Mr. Choi Lin Hung and Mr. Ng Tsze Lun. In addition, to secure the Factoring Agreement, we granted HSBC a charge of $3,000,000 over our deposits. If we fail to pay any sum due to HSBC, HSBC may charge a default interest at the rate of 8.5% per annum over the best lending rate quoted by HSBC on such defaulted amount.

The Company is in the process of negotiating an extension to the Factoring Agreement on similar terms. The factoring services are subject to review at any time and, in any event by May 1, 2018. Either party may terminate the agreement subject to a 30 days’ notice period. As of June 30, 2018, there were $713,687 outstanding under the Factoring Agreement.

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

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

Operating Activities

Net cash used by operating activities was approximately $10.1 million for the three months ended June 30, 2018, compared to cash used by operating activities of approximately $4.2 million for the three months ended June 30, 2017. The increase in net cash used by operating activities was primarily attributable to the following factors:.

Investing Activities

Net cash used in investing activities was approximately $0.5 million for the three months ended June 30, 2018 and there was cash provided by investing activities of $0.2 million in the same period in fiscal 2018. The net cash used in investing activities in the quarter ended June 30, 2018 were used in purchases of property, plant and equipment.

Financing Activities

Net cash provided in financing activities was approximately $14.9 million for the three months ended June 30, 2018. The cash inflow mainly resulted from the net proceeds of $8.9 million of the IPO, which closed on May 2, 2018, and the bank loans of $6.1 million under the bank facilities given to Treasure Success International Limited.

Statutory Reserves

In accordance with the Corporate Law in Jordan, the subsidiaries in Jordan are required to make appropriations to certain reserve funds, based on net income determined in accordance with generally accepted accounting principles in Jordan. Appropriations to the statutory reserve are required to be 10% of net income until the reserve is equal to 100% of the entity’s share capital. This reserve is not available for dividend distribution. As our subsidiaries have already reserved the maximum required by law, they did not reserve any additional amounts during the three months ended June 30, 2018 and 2017.

The following table provides the amount of our statutory reserves, the amount of restricted net assets, consolidated net assets, and the amount of restricted net assets as a percentage of consolidated net assets, as of June 30, 2018 and 2017.

Total restricted net assets accounted for approximately 0.16% of our consolidated net assets as of June 30, 2018. As discussed above, our subsidiaries in Jordan are required to reserve 10% of net profits until the reserve is equal to 100% of the subsidiary’s share capital. Our subsidiaries have already reserved the maximum amount required. We believe the potential impact of such restricted net assets on our liquidity is limited.

Capital Expenditures

We had capital expenditures of approximately $0.5 million and $0.2 million for the three months ended June 30, 2018 and 2017, respectively, for purchases of equipment in connection with our business activities and increase of capacity. Additions in plant and machinery amounted to approximately $0.4 million and approximately $92,000 for the three months ended June 30, 2018 and 2017, respectively, and additions to leasehold improvements amounted to approximately $46,000 and $72,000 for the three months ended June 30, 2018 and 2017 respectively.

In 2015, we commenced a project to build a 4.844 square foot workshop in the Tafilah Governorate of Jordan, which will primarily be used as a sewing workshop for Jerash Garments. This project is expected to cost $230,000 and is expected to be completed in calendar year 2018. There is another project for the construction of a 53.820 square foot workshop in Al-Hasa County in the Tafilah governorate of Jordan, which is expected to be completed by the middle of calendar year 2019.

We project that we will use an aggregate of approximately $3.1 million to fund our capital expenditures for fiscal 2019 and fiscal 2020 for further enhancement of production capacity to meet future sales growth. We expect that our capital expenditures will increase in the future as our business continues to develop and expand. We have used cash generated from our subsidiaries’ operations to fund our capital commitments in the past and anticipate using such funds and proceeds received from our expected initial public offering to fund capital expenditure commitments in the future.

Fiscal years ended March 31, 2018 and March 31, 2017

As of March 31, 2018, we had cash of approximately $8.6 million and restricted cash of approximately $3.6 million compared to cash of approximately $3.7 million and restricted cash of approximately $0.5 million as of March 31, 2017, which was mainly the security deposit for obtaining the Credit Facilities from HSBC.

Our current assets as of March 31, 2018 were approximately $36.9 million, and our current liabilities were approximately $7.9 million, which resulted in a current ratio of approximately 4.7:1. Our current assets as of March 31, 2017 were approximately $30.3 million, and our current liabilities were approximately $11.9 million, which resulted in a current ratio of approximately 2.5:1. Total equity as of March 31, 2018 and 2017 was approximately $34.1 million and 22.0 million, respectively.

We had net working capital of $29.0 million and $18.4 million as of March 31, 2018 and 2017, respectively. Based on the Group’s current operating plan, we believe that cash on hand and cash generated from operation will be sufficient to support our working capital needs for the next 12 months from the date this document is filed.

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

Credit Facilities

On May 29, 2017, the Group’s wholly owned subsidiary, Treasure Success, entered into a facility letter (“Facility Letter”) with Hong Kong and Shanghai Banking Corporation (“HSBC”) to provide credit to the Group. Under the terms of the Facility Letter, the Group has a total credit limit of $8,000,000. The Group anticipates amending the Facility Letter to extend the term of the facility with substantially similar terms. The Facility Letter currently provides us with various credit facilities for importing and settling payment for goods purchased from the Group’s suppliers. The available credit facilities as described in greater detail below includes an import facility, import facilities with loan against import, trust receipts, clean import loan, and advances to us against purchase orders. HSBC charges an interest rate of 1.5% per annum over LIBOR or HIBOR, as applicable, for credit related to the release of goods immediately on the Group’s documentary credit. LIBOR was 1.88% and HIBOR was 0.99% at March 31, 2018.

HSBC charges a commission of: i) 0.25% for the first $50,000, ii) 0.125% for the balance in excess of $50,000 and up to $100,000 and iii) 0.0625% for balance in excess of $100,000 and an interest rate of 1.5% per annum over LIBOR or HIBOR, as applicable, for credit related to trust receipts whereby HSBC has title to the goods or merchandise released immediately to us. HSBC has approved certain of the Group’s suppliers that are eligible to use clean import loans. HSBC charges a commission of: i) 0.25% for the first $50,000, ii) 0.125% for the balance in excess of $50,000 and up to $100,000 and iii) 0.0625% for balance in excess of $100,000 and an interest of 1.5% per annum over LIBOR or HIBOR, as applicable, for credit services related to clean import loans or release of the goods or merchandise based on evidence of delivery or invoice. HSBC will advance up to 70% of the purchase order value in the Group’s favor. HSBC charges a handling fee of 0.25% and an interest rate of 1.5% per annum over LIBOR or HIBOR, as applicable, for credit services related to advances.

The Facility Letter is collateralized by the guarantees of Jerash Holdings (US), Inc, Jerash Garments, and the personal guarantees of Mr. Choi and Mr. Ng Tsze Lun. Jerash Garments is also required to maintain an account at HSBC for receiving payments from VF Sourcing Asia S.A.R.L. and its related companies. In addition, to secure the Facility Letter, the Group granted HSBC a charge of $3,000,000 over the Company’s deposits. This charge is accounted for as restricted cash in our balance sheet at March 31, 2018. Following the anticipated amendment of the Facility Letter, the Group anticipates that the personal guarantees of Mr. Choi and Mr. Ng, along with the charge over the Group’s deposits will be released in exchange for the addition of Jerash Garments to the Facility Letter, along with Treasure Success and Jerash Holdings providing guarantees of Jerash Garments’ payments under the Facility Letter.

The Facility Letter is subject to review at any time and valid until May 1, 2018. HSBC has discretion on whether to renew the Facility Letter prior to expiration and the Group is currently negotiating an extension of the Facility Letter on similar terms. As of March 31, 2018, $624,772 was outstanding under the Facility Letter. Borrowings under the Facility Letter are due within 120 days of each borrowing date or upon demand by HSBC.

On June 5, 2017, Treasure Success entered into an Offer Letter - Invoice Discounting / Factoring Agreement and on August 21, 2017, Treasure Success entered into the Invoice Discounting/Factoring Agreement (together, the “Factoring Agreement”) with HSBC for certain debt purchase services related to the Group’s accounts receivables. The Group anticipates amending the Factoring Agreement to extend the term of the facility with substantially similar terms. Under the current terms of the Factoring Agreement, the Group may borrow up to $12,000,000. In exchange for advances on eligible invoices from HSBC for the Group’s approved customers, HSBC charges a fee to advance such payments at a discounting charge of 1.5% per annum over 1-month LIBOR or HIBOR, as applicable. Such fee accrues on a daily basis on the amount of funds in use. HSBC has final determination of the percentage amount available for prepayment from each of the Group’s approved customers. The Group may not prepay an amount from a customer in excess of 85% of the funds available for borrowing. As of March 31, 2018, $355,423 was outstanding under the Invoice Discounting / Factoring Agreement.

HSBC also provides credit protection and debt services related to each of the Group’s preapproved customers. For any approved debts or collections assigned to HSBC, HSBC charges a flat fee of 0.35% on the face value of the invoice for such debt or collection. The Group may assign debtor payments that are to be paid to HSBC within 90 days, defined as the maximum terms of payment. The Group may receive advances on invoices that are due within 30 days of the delivery of the Group’s goods, defined as the maximum invoicing period.

The advances made by HSBC are collateralized by the guarantees of us and Jerash Garments, and the personal guarantees by Mr. Choi and Mr. Ng Tsze Lun. In addition, to secure the Factoring Agreement, the Group granted HSBC a charge of $3,000,000 over the Group’s deposits. If the Group fails to pay any sum due to HSBC, HSBC may charge a default interest at the rate of 8.5% per annum over the best lending rate quoted by HSBC on such defaulted amount. Following the anticipated amendment of the Factoring Agreement, the Group anticipates that the personal guarantees of Mr. Choi and Mr. Ng, along with the charge over the Group’s deposits will be released in exchange for the addition of Jerash Garments to the Factoring Agreement, along with Treasure Success and Jerash Holdings providing guarantees of Jerash Garments’ payments under the Factoring Agreement.

The Factoring Agreement is subject to the review by HSBC at any time, and valid until May 1, 2018 and we are in the process of negotiating an extension on similar terms. Either party may terminate the agreement subject to a 30-day notice period. As of March 31, 2018, there was $355,423 outstanding under the Factoring Agreement. Amounts borrowed under the Factoring Agreement are due within 120 days of each borrowing date or upon demand by HSBC.

The following table sets forth a summary of the Group’s cash flows for the fiscal years ended March 31, 2017 and 2018.

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

Operating Activities

Net cash provided by operating activities was approximately $5.2 million in fiscal 2018, compared to net cash provided by operating activities of approximately $7.7 million in fiscal 2017. The decrease in net cash provided by operating activities was primarily attributable to the following factors:

Investing Activities

Net cash used in investing activities was approximately $0.5 million and $0.8 million for the years ended March 31, 2018 and 2017, respectively. The lower net cash used in investing activities was a combined result of a $0.4 million increase in property, plant, and equipment, and a $0.7 million decrease in other receivables – related party.

Financing Activities

Net cash provided by financing activities was approximately $0.3 million for the year ended March 31, 2018. The cash inflow was resulted from the net proceeds from a private placement of approximately $1.8 million, proceeds from short-term loans of approximately $1 million and repayment of amounts due from stockholders of approximately $0.7 million, and an increase of restricted cash of approximately $3.1 million.

Non-cash Financing Activities

The Group has non-cash financing activities related to the placement of common stocks in fiscal 2018. Expense recognized for warrants issued to the placement agent in connection with the private placement was $161,926. There was also a prepaid stock issuance cost of $239,105 netted with proceeds from the private placement.

Statutory Reserves

In accordance with the Corporate Law in Jordan, Jerash Holdings’ subsidiaries in Jordan are required to make appropriations to certain reserve funds, based on net income determined in accordance with generally accepted accounting principles of Jordan. Appropriations to the statutory reserve are required to be 10% of net income until the reserve is equal to 100% of the entity’s share capital. This reserve is not available for dividend distribution. As the statutory reserve balance was reached prior to fiscal 2015, there was no additional appropriation into the statutory reserve in fiscal 2017 and 2018.

The following table provides the amount of the Group’s 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, 2017 and 2018.

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

Total restricted net assets accounted for approximately 0.21% of the Group’s consolidated net assets as of March 31, 2018. As the Group’s subsidiaries in Jordan are only required to set aside 10% of net profits to fund the statutory reserves and it has reached the maximum amount. We believe the potential impact of such restricted net assets on our liquidity is limited.

Capital Expenditures

We had capital expenditures of approximately $0.9 million and $0.5 million in fiscal 2018 and 2017, respectively, for purchases of equipment in connection with our business activities and to increase capacity. Additions in plant and machinery amounted to approximately $0.6 million and $0.2 million in fiscal 2018 and 2017, respectively, and additions to leasehold improvements amounted to approximately $0.2 million and $0.3 million in fiscal 2018 and 2017, respectively.

In 2015, the Group commenced a project to build a 4,844 square foot workshop in the Tafilah Governorate of Jordan, which will primarily be used as a sewing workshop for Jerash Garments. This project is expected to cost $230,000 and is expected to be completed during calendar year 2018. In 2018, the Group commenced another project to build a 53,820 square foot workshop in Al-Hasa County in the Tafilah Governorate of Jordan, which is expected to be completed in the middle of calendar year 2019. Provided that we satisfy certain employment requirements over certain time periods, we do not anticipate incurring any significant costs for the project, which is being constructed in conjunction with the Jordanian Ministry of Labor and the Jordanian Education and Training Department. In the event we breach our agreement with these government agencies, we will have to pay such agencies JOD250,000 or $353,000. See the section entitled “Properties” below for more information regarding this workshop.

The Group projected that there will be an aggregate of approximately $1.7 million of capital expenditures in both fiscal 2019 and 2020 for further enhancement of production capacity to meet future sales growth. We expect that our capital expenditures will increase in the future as our business continues to develop and expand. The Group has used cash generated from our subsidiaries’ operations to fund our capital commitments in the past and anticipate using such funds and proceeds received from our initial public offering to fund capital expenditure commitments in the future.

Off-Balance Sheet Commitments and Arrangements

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

CRITICAL ACCOUNTING POLICIES

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

We believe that the following accounting policies involve a higher degree of judgment and complexity in their application and require us to make significant accounting estimates. Accordingly, these are the policies that we believe are the most critical to understanding and evaluating our consolidated financial condition and results of operations.

Revenue recognition

Revenue Recognition for Contracts with Customers

In May 2014, the FASB issued guidance which provided a single, comprehensive accounting model for revenue arising from contracts with customers. This guidance was revised and clarified through supplemental adoption guidance subsequent to May 2014. This new revenue recognition guidance superseded most of the prior revenue recognition guidance, which specified that revenue should be recognized when risks and rewards are transferred to a customer. Under the new guidance, revenue is recognized at an amount that reflects the consideration expected to be received for those goods and services pursuant to a five-step approach: (1) identify the contracts with the customer; (2) identify the separate performance obligations in the contracts; (3) determine the transaction price; (4) allocate the transaction price to separate performance obligations; and (5) recognize revenue when, or as, each performance obligation is satisfied. The new guidance also requires additional disclosures about the nature, timing and uncertainty of revenue and cash flow arising from customer contracts, including significant judgments and changes in judgments.

Pursuant to ASC 606 and ASC 270-10-50-1A, we have conducted an analysis for each of our customers with the five-step approach that has been reviewed by our audit committee. We derive all of our revenue through the supply of apparel products to our customers. We normally receive purchase orders from customers for the supply of apparel products with specifications provided by customers to them at a specific quantity to a specific location on or before a specific date. Purchase orders are contracts between our Company and the customers. Performance obligations include to deliver a stated quantity of a specific product in acceptable quality (with style number, product description and color) to a specific location in accordance to the shipping term on or before a specific date detailed on a purchase order.

Revenue is recognized when performance obligations under the terms of the purchase orders with our customers are satisfied. Our performance obligations generally consist of delivering our products to a specific location designated by the customers on purchase orders. Control of the products is generally transferred upon delivering the products to customers based on shipping terms mostly free on board shipping point. Once control is transferred to the customers, we have completed our performance obligations related to the contract. After completion of our performance obligation, we have an unconditional right to consideration as outlined in the purchase orders determined by the shipped quantity and the unit price.

We offer credit terms to our customers. Receivables are recognized when revenue is recognized. Our receivables resulting from contracts with our customers are typically 45 to 60 days from sailing date from shipping point in accordance with established credit terms. Most of our performance obligations under terms of our contracts with customers have an expected original duration of one year or less. Before the performance obligations are fulfilled, we maintain costs of the products related to purchase orders in our inventory. Both inventory values as of June 30, 2018 and March 31, 2018, were approximately $20 million.

Receivables resulted from sales revenue recognition as of June 30, 2018 was $13.2 million, with an increase of $8.0 million comparing to $5.2 million as of March 31, 2018. The increase was primarily attributable to higher sales revenue recognized in the month of June 2018, after completion of our performance obligations, with a credit term of 45 to 60 days from sailing dates granted to our customer. We did not have any business combinations in the quarter ended June 30, 2018 that might cause significant changes in contract assets and contract balances, nor was there any impairment of contract assets. There was also no change in time frame for a right to consideration to become unconditional or any change in the time frame for a performance obligation to be satisfied.

The new guidance does not affect the methodology we have been adopting to recognize revenue in previous fiscal years and thus there was no adjustment for the cumulative effect of applying the guidance to retained earnings for compliance with the guidance.

Accounts receivable

Accounts receivable are recognized and carried at original invoiced amount less an estimated allowance for uncollectible accounts. The Company usually grants credit to customers with good credit standing with a maximum of 90 days and determines the adequacy of reserves for doubtful accounts based on individual account analysis and historical collection trends. The Company establishes a provision for doubtful receivables when there is objective evidence that the Company may not be able to collect amounts due. The allowance is based on management's best estimates of specific losses on individual exposures, as well as a provision on historical trends of collections. The provision is recorded against accounts receivables balances, with a corresponding charge recorded in the consolidated statements of income and comprehensive income. Actual amounts received may differ from management's estimate of credit worthiness and the economic environment. Delinquent account balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. No allowance was considered necessary as of June 30, 2018 and March 31, 2018 and 2017.

Recent Accounting Pronouncements

See Note 3 – Recent Accounting Pronouncements in the notes to our unaudited financial statements for the quarter ended June 30, 2018 and Note 3 – Recent Accounting Pronouncements to our audited financial statements for the year ended March 31, 2018 for a discussion of recent accounting pronouncements.

Business

Overview

We, through our wholly owned operating subsidiaries, are principally engaged in the manufacturing and exporting of customized, ready-made sport and outerwear from knitted fabric produced in our facilities in Jordan.

We are a manufacturer utilized by many well-known brands and retailers, such as Walmart, Costco, Sears, Hanes, Columbia, Land’s End, VF Corporation (which owns brands such as The North Face, Timberland, Wrangler, Lee, Jansport, etc.), and Philip-Van Heusen (which owns brands such as Calvin Klein, Tommy Hilfiger, IZOD, Speedo, etc.). Our production facilities are made up of three factory units and two warehouses and employ currently approximately 2,900 people. Our employees include local Jordanian workers as well as migrant workers from Bangladesh, Sri Lanka, India, Myanmar and Nepal. The total annual capacity at these facilities is approximately 6.5 million pieces (average for product categories including crewnecks, polos and jackets).

Merger

Jerash Holdings is a holding company organized as a corporation in Delaware in January 2016 with nominal or no assets or operations. On May 11, 2017, a merger (“the Merger”) was implemented via two transactions. First, the shareholders of Global Trend contributed 100% of the outstanding capital stock of Global Trend to Jerash Holdings in exchange for an aggregate of 8,787,500 shares of the common stock of Jerash Holdings, with Global Trend becoming a wholly owned subsidiary of Jerash Holdings. Second, Global Trend merged with and into Jerash Holdings, with Jerash Holdings being the surviving entity, as a result of which Jerash Holdings became the direct parent of Global Trend’s wholly-owned operating subsidiaries, Jerash Garments and Treasure Success.

Organizational Structure

Jerash Holdings has the following wholly owned subsidiaries: (i) Jerash Garments, an entity formed under the laws of Jordan, (ii) Treasure Success, an entity formed under the laws of Hong Kong, (iii) Chinese Garments and Fashions Manufacturing Co. Ltd. (“Chinese Garments”), an entity formed under the laws of Jordan and a wholly owned subsidiary of Jerash Garments, and (iv) Jerash for Industrial Embroidery Company Limited (“Jerash Embroidery”), an entity formed under the laws of Jordan and a wholly owned subsidiary of Jerash Garments.

This table reflects the Group’s organizational structure:

Jerash Garments was established in Jordan in November 2000 and operates out of our factory unit in Al Tajamouat Industrial City, a QIZ in Amman, Jordan. Jerash Garments’ principal activities are to house management offices and to operate production lines and sewing, ironing, packing and quality control units, as well as house our trims and finished products warehouses.

Chinese Garments was established in Jordan in June 2013 and operates out of our factory unit in Al Tajamouat Industrial City, a QIZ in Amman, Jordan. 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.

Jerash Embroidery was established in Jordan in March 2013 and operates out of our factory unit in Al Tajamouat Industrial City, a QIZ in Amman, Jordan. Jerash Embroidery’s principal activities are to perform the cutting and embroidery for our products.

Treasure Success was established in Hong Kong in July 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.

Products

Our products are in the customized, ready-made sport and outerwear segment, and we derive all of our revenue from the manufacturing and sales of sport and outerwear. Our product offerings consist of jackets, polo shirts, crew neck shirts, pants and shorts made from knitted fabric. Our primary product offering is jackets, and in the three months ended June 30, 2018 and 2017 and the fiscal years ended March 31, 2018 and 2017, approximately 78%, 81%, 48% and 58%, respectively, of our total shipped pieces were jackets.

Manufacturing and Production

Our production facilities are located in Al Tajamouat Industrial City, a QIZ in Amman, Jordan, and are comprised of three factory units and two warehouses. Currently, the first factory unit, which the Group owns, employs approximately 1,300 people. Its primary functions are to house the Group’s management offices, as well as production lines, the Group’s trims warehouse, and sewing, ironing, and packaging units. The second factory unit, which the Group leases, employs approximately 1,300 people. Its primary functions are to house the Group’s administrative and human resources personnel, as well as merchandising and accounting departments, as well as additional production lines, the Group’s trims and finished products warehouses, and sewing, ironing, packing and quality control units. The third factory unit, which the Group leases, employs approximately 300 people. Its primary functions are to perform the cutting and embroidery for the Group’s products.

In 2015, we commenced a project to build a 4,844 square foot workshop in the Tafilah Governorate of Jordan, which will primarily be used as a sewing workshop for Jerash Garments. This project is expected to cost approximately $230,000 to construct and is estimated to be completed during calendar year 2018. In 2018, the Group commenced another project to build a 53,820 square foot workshop in Al-Hasa County in the Tafilah Governorate of Jordan, which is expected to be completed by the middle of calendar year 2019. Provided that we satisfy certain employment requirements over certain time periods, we do not anticipate incurring any significant costs for the project, which is being constructed in conjunction with the Jordanian Ministry of Labor and the Jordanian Education and Training Department. In the event we breach our agreement with these government agencies, we will have to pay such agencies JOD250,000 or $353,000. See the section entitled “Properties” below for more information regarding these workshops.

Total annual capacity at our existing facilities is approximately 6.5 million pieces (average for product categories including crewnecks, polos and jackets). Our production flow begins in our third factory unit in the cutting department. From there, the product moves to either our first or second factory unit for processing by the sewing unit, finishing department, quality control, and finally the ironing and packing units. If applicable during this process, the product is sent back to the embroidery department at our third factory unit for embroidery.

We do not have long term supply contracts or arrangements with our suppliers. Most of our ultimate suppliers for raw materials, such as fabric, zippers and labels, are designated by customers and we purchases such materials on a purchase order basis. For the three months ended June 30, 2018, we purchased approximately 30% and 13% of our raw materials from two major suppliers, Duck San Enterprise Co., Ltd and Universal Star Corporation. For the three months ended June 30, 2017, we purchased approximately 92% of our raw materials from one supplier, Onset Time Limited. For the fiscal year ended March 31, 2018, we purchased approximately 61% of our raw materials from two suppliers, Onset Time Limited (“ONSET”) (43%) and Duck San Enterprise Co., Ltd. (18%). For the fiscal year ended March 31, 2017, we purchased approximately 88% of our raw materials from two suppliers, ONSET (64%) and Value Plus (24%).

Employees

As of June 30, 2018, the Group had an aggregate of approximately 2,900 employees located in Jordan and in Hong Kong, all of which are full-time employees.

Customers

The following table outlines the dollar amount and percentage of total sales to our customers for the quarter ended June 30, 2018, fiscal 2018, fiscal 2017, and the year ended March 31, 2016 (“fiscal 2016”).

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

(1) Substantially all of the Group’s products are sold under The North Face brand that is owned by VF Corporation.

(2) Until August 2016, substantially all of our sales were to Ford Glory which then sold the products to the end customers. Ford Glory is 49% owned by Mr. Choi Lin Hung, our chairman, chief executive officer, president and a significant stockholder, through his wholly owned entity Merlotte and therefore is considered an affiliate of the Group. Following August 1, 2016, there was a transition period for orders placed directly with Ford Glory during the remainder of fiscal 2017. For the fiscal years ended March 31, 2017 and March 31, 2018 and for the three months ended June 30, 2018, approximately 37.6%, 0% and 0%, respectively, of our net sales were made to Ford Glory and approximately 52.6%, 63.5%, 0% of our net sales for the fiscal years ended March 31, 2017 and March 31, 2018 and the three months ended June 30, 2018, respectively, were made directly to our customers with support of Ford Glory. During fiscal 2017, for sales orders received before customers successfully changed their vendor registrations to issue orders directly to us, we fulfilled the order for customers on behalf of Ford Glory, including inventory purchases and manufacturing. As customers now issue sales orders to us directly, support from Ford Glory was phased out during fiscal 2018 as we no longer rely on Ford Glory to receive sales orders. Our merchandising personnel now receive orders directly from our customers through our wholly owned subsidiaries, Treasure Success and Jerash Garments.

In fiscal years 2017 and 2016, the Group depended on one key customer for sales through Ford Glory. In fiscal 2018, the Group also depended on a few key customers. Substantially all of the Group’s sales through Ford Glory in fiscal 2016 and 2017, and independent of Ford Glory in 2018, were to VF Corporation. The following table outlines the dollar amount and percentage of the Group’s sales through Ford Glory for fiscal years 2016 to 2017.

(1) Substantially all of the Group’s products are sold under The North Face brand that is owned by VF Corporation.

The Group established our relationship with VF Corporation in 2012. Substantially all of the Group’s products are sold under The North Face Brand that is owned by VF Corporation. Currently, we manufacture primarily outwear for The North Face. Approximately 79% of the Group’s sales in both fiscal 2018 and 2017, respectively, were derived from the sale of the Group’s products to VF Corporation. We are not party to any long-term contracts with VF Corporation or the Group’s other customers, and our sales arrangements with our customers do not have minimum purchase requirements. As is common in our industry, VF Corporation and our other customers place purchase orders with us after the Group completes detailed sample development and approval processes that we and our customers have agreed upon for their purchase and manufacture of the garments in question. It is through the sample development and approval processes that the Group and VF Corporation and our other customers agree to the purchase and manufacture of the garments in question. For fiscal 2018, VF Corporation issued approximately 6,500 purchase orders to us in amounts ranging from approximately $10 to $570,000. The Group is not substantially dependent on any particular order from VF Corporation.

VF Corporation is 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. In addition, our annual and quarterly results may vary, which may cause our profits and the market price of our common stock to decline.

The Group continues to seek to expand and strengthen our relationship with our current customers and other brand names. However, the Group cannot assure you that these brands will continue to buy our products in the same volumes or on the same terms as they did in the past.

Competition

The markets for the manufacturing of sport and outerwear are highly competitive. The competition in the fields in which we operate is focused primarily on the price of the product, its quality, and the level of customer service. Our products compete with products of other apparel manufacturers in Israel, Europe, the United States, South and Central America and Asia.

Most competition with other manufacturers in the clothing industry focuses on reducing production costs, reducing supply lead times, design, product quality, and efficiency of supply to the customer. Since production costs depend to a large extent on labor costs, in recent years most production in the industry has been moved to countries where the labor costs are low. Some of our competitors have a lower cost base, longer operating experience, broader customer base and other advantages over us which allow them to compete with us. As described in more detail under “- Conditions in Jordan” below, we are able to sell our products manufactured at our facilities in Jordan to the United States free from customs duties and import quotas under certain conditions. These favorable terms enable us to remain competitive on the basis of price. In December 2017, the European Union (“EU”) extended a free trade agreement to us such that goods manufactured by us in Jordan that are subsequently shipped to EU countries are shipped free of duty.

Conditions in Jordan

The Group’s manufacturing facilities are located in Jordan. Accordingly, the Group is 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. Terrorist attacks, military activity, rioting, or civil or political unrest in the future could influence the Jordanian economy and the Group’s operations by disrupting operations and communications and making travel within Jordan more difficult and less desirable. Political or social tensions also could create a greater perception that investments in companies with Jordanian operations involve a high degree of risk, which could adversely affect the market and price for the Group’s common stock.

Jordan is a constitutional monarchy, but the King holds wide executive and legislative powers. 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.

A proposed tax bill that was part of an economic reform plan backed by the International Monetary Fund and aimed at narrowing Jordan’s growing debt contained new taxes on products, such as internet subscriptions, and the elimination of subsidies on bread led to protests throughout Jordan beginning on May 30, 2018. On June 5, 2018, King Abdullah II of Jordan responded to the protests by removing Jordan’s prime minister and replacing him with Omar al-Razzaz. Prime Minister Razzaz then withdrew the proposed tax bill from consideration and formed a new cabinet. On June 11, 2018 Saudi Arabia, Kuwait and the United Arab Emirates pledged $2.5 billion of aid to Jordan (including a deposit into Jordan’s central bank), annual budget support for the next five years and development projects.

Trade Agreements

The Group benefits from exemptions from customs duties and import quotas due to the Group’s location in Al Tajamouat Industrial City, a QIZ in Amman, Jordan, and the free trade agreements with the United States and the EU.

QIZs are industrial parks that house manufacturing operations in Jordan and Egypt. They are special free trade zones established in collaboration with Israel to take advantage of the free trade agreements between the United States and Israel. Under the trade agreement between Jordan and the U.S., goods produced in QIZ areas can directly access U.S. markets without tariff or quota restrictions if they satisfy certain criteria.

Income Tax Incentives

The Encouragement of Investment Committee of Jordan resolved that Jerash Garments’ project is an economically approved project in accordance with the Encouragement of Investment Law number 16 of 1995 and accordingly was granted exemptions from customs duties on the plant’s equipment and machinery. Further, in accordance with the Jordanian Income Tax law, all of Jerash Garments’ exports are 100% exempted, provided a specific Declaration in that respect is filed with the Jordanian Customs and Income Tax Departments. We expect these exemptions to continue through calendar 2019.

In addition, projects in QIZ areas are exempted from paying income and social services tax, total exemptions from buildings and land tax, and exemptions or reduction on most municipality fees.

Government Regulation

The Group’s manufacturing and other facilities in Jordan are subject to various local regulations relating to the maintenance of safe working conditions and manufacturing practices. Management believes that it is currently in compliance in all material respects with all such regulations. The Group is not subject to governmental approval of the Group’s products or manufacturing process.

Properties

Jerash Garments owns an industrial building of approximately 89,340 square feet in Al Tajamouat Industrial City. The Group leases additional space totaling approximately 258,334 square feet in industrial buildings in Al Tajamouat Industrial City. In addition, the Group leases space for our workers in dormitories located inside and outside of Al Tajamouat Industrial City. Treasure Success leases its office space in Hong Kong from Ford Glory, pursuant to an agreement dated October 3, 2016 providing for rent in the amount of HK$21,600 (approximately $2,760) per month and having a one-year term with an option to extend the term for an additional year at the same rent. We expect this agreement to be renewed on similar terms. We also lease our headquarters in New York, New York, pursuant to an agreement dated January 1, 2018 providing for rent in the amount of $720 per month and having a six-month term with an option to extend the term for an additional six months at the same rent. The Group believes the real property that we own and lease is sufficient to conduct the Group’s operations as they are currently conducted.

In 2015, the Group commenced a project to build a 4,844 square foot workshop in the Tafilah Governorate of Jordan, which will primarily be used as a sewing workshop for Jerash Garments. This project is expected to cost approximately $230,000 to construct and is estimated to be completed during calendar year 2018.

In 2018, the Group commenced another project to build a 53,820 square foot workshop in Al-Hasa County in the Tafilah Governorate of Jordan, which is expected to be completed by the middle of calendar year 2019. This project is a joint project with the Jordanian Ministry of Labor and the Employment and Training Department in Jordan. Pursuant to the agreement between these parties, we guaranteed up to JOD125,000 or $176,000 for this project and agreed to employ at least 500 workers for the first 12 months following the completion of the project. The Ministry of Labor is financing the building of the workshop and the Employment and Training Department will support 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 will use the workshop without rent for the first three years after we commence manufacturing in the workshop, after which time we anticipate entering into a lease agreement for the workshop. In the event that we do not comply with the terms of the agreement, we must pay the Ministry of Labor and the Employment and Training Department JOD250,000 or $353,000.

Legal Proceedings

We are not currently involved in any material legal proceedings. From time-to-time we are, and we anticipate that we will be, involved in legal proceedings, claims and litigation arising in the ordinary course of our business and otherwise. The ultimate costs to resolve any such matters could have a material adverse effect on our financial statements. We could be forced to incur material expenses with respect to these legal proceedings, and in the event there is an outcome in any that is adverse to us, our financial position and prospects could be harmed.

Management

Our Directors

The follow table sets forth the name, age and position of each of our directors as of September 14, 2018.

Set forth below for each director is a brief statement about the directors’ age, principal occupation and business experience, including any directorships with any other public companies, describing the specific individual qualities and skills of each director that contribute to the overall effectiveness of the Board and its committees.

Our Executive Officers

The table and biographies below identify our executive officers, the term they have served with us and their business experience:

Choi Lin Hung, the Chairman of the Board, is the Chief Executive Officer, President and Treasurer of the Company. His biographical information is set forth above under the heading “— Directors and Executive Officers.”

Richard J. Shaw has served as our Chief Financial Officer since May 2017. Mr. Shaw has served as the President of LogiCore Strategies, LLC, a financial and business advisory services firm, since June 2014. Since May 2016, Mr. Shaw has served as the Chief Financial Officer and Treasurer of Tripborn, Inc., an online travel agency that offers travel reservations and related travel services to travel agents in India. In addition, since March 2016, Mr. Shaw has served as the Chief Financial Officer of BirchBioMed, Inc., a clinical-stage biomedical company focused on the commercialization, clinical evaluation and development of anti-scarring drugs, autoimmune therapeutics/therapies and novel strategies for transplantation. Prior to these roles as Chief Financial Officer, Mr. Shaw served as Chief Operating Officer for Roberts Office Furniture Concepts, a designer, manufacturer and remanufacturer of sustainable office furniture and workplace systems, from September 2013 to June 2016. From June 2012 to August 2013, he served as Chief Financial Officer of High Peaks Hospitality, LLC, an independent hotel ownership, development construction and management company. Prior to that experience, from May 2008 to June 2012, Mr. Shaw was the Chief Financial Officer of Harden Furniture, Inc., a manufacturer of solid wood furniture and upholstery. Mr. Shaw earned a BS in Accounting from LeMoyne College and is a Certified Public Accountant, licensed by the State of New York.

Wei (“Kitty”) Yang, our Vice President and Secretary, is also a member of the Board. Her biographical information is set forth above under the heading “— Directors and Executive Officers.”

Karl Brenza has served as our Head of US Operations since August 2018. Mr. Brenza has over 25 years of investment banking and financial advisory experience as well as significant operational and technology experience as a corporate executive. Mr. Brenza has served as Senior Managing Director of Paulson Investment Company, LLC, a New York City based investment bank, since August 2018. From February 2008 to August 2018, Mr. Brenza previously served as Senior Managing Director and Head of the Capital Growth Advisory Group at Maxim Group, LLC. He previously served as Managing Director and Head of Investment Banking at Broadband Capital Management, and as Managing Director and Head of Industry Consolidations at BlueStone Capital Partners. Mr. Brenza’s operational experience includes positions as Chief Finance Officer of a public IT solutions company, Director of Business Development and Head of the ISP/telecom group for a venture-backed Internet services company and as a systems engineer for Raytheon Co.

Corporate Governance

Board and Committee Independence

The Board determines whether each of our directors is considered independent. For a director to be considered independent, the director must meet the bright-line independence standards under the Nasdaq listing standards. The Board must also affirmatively determine that, in its opinion, each director has no relationship that would interfere with the directors’ exercise of independent judgment in carrying out the director’s responsibilities. In addition to the Nasdaq listing standards, the Board will consider all relevant facts and circumstances in determining whether a director is independent. There are no family relationships among any of our directors and executive officers. The Board has determined that Gary Haseley, Sean Socha, and Mak Chi Yan each satisfy the independence requirements of Nasdaq.

Leadership Structure of the Board

The Board does not have a policy on whether the roles of Chief Executive Officer and Chairman of the Board should be separate and, if they are to be separate, whether the Chairman of the Board should be a non-employee director or an employee. The Board believes that it should have the flexibility to choose this role in any manner that is in the best interests of our Company and our stockholders. Under the Company’s bylaws, the Board of Directors may elect a Chairperson of the Board from among the directors or from among other officers as it may determine to preside at meetings of the stockholders and directors and to perform other duties as the Board may determine.

Currently, our Chairman of the Board is also our Chief Executive Officer, President and Secretary, Choi Lin Hung. We believe that Mr. Choi’s leadership of the Company in this dual role is appropriate for the Company at this time because his involvement with the Company’s operations and business strategy provide the main focus for the Board. The Board does not currently have a lead independent director. The Board believes its current leadership structure is appropriate because Mr. Choi’s leadership ensures the Company maintains continuity as it grows as a public company listed on Nasdaq and affords the Board access to Mr. Choi’s institutional knowledge of the Company.

Board Committees

The Board of Directors has created three standing committees: an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee. The Board has adopted a formal, written charter for each of the committees under which each committee operates. The charters can be found in the Corporate Governance section of the Investor Relations tab on the Company’s website at www.jerashholdings.com. As a matter of routine corporate governance, each committee intends to review its charter and practices on an annual basis to determine whether its charter and practices are consistent with listing standards of Nasdaq.

Committee Composition

C = Committee chairperson; X = Committee member

Audit Committee

The Audit Committee of the Board (the “Audit Committee”) is composed of three independent directors: Sean Socha, who is the chairperson, Gary Haseley and Mak Chi Yan. Each member of the Audit Committee is an independent director as defined by rules of the SEC and Nasdaq. In addition, the Board of Directors has determined that Sean Socha is an audit committee financial expert as defined by SEC rules.

The Audit Committee has the sole power and authority to select and engage independent auditors for the Company. The Audit Committee reviews with the auditors and with the Company’s management all matters relating to the annual audit of the Company. Because the Audit Committee was formed in May 2018, it did not hold any meetings in fiscal 2018. Prior to the time the Audit Committee was formed, the Board fulfilled the duties within the Audit Committee’s scope of authority.

Compensation Committee

The Compensation Committee of the Board (the “Compensation Committee”) is composed of three independent directors: Gary Haseley, who is the chairperson, Sean Socha and Mak Chi Yan. Each member of the Compensation Committee is an independent director as defined by the rules of the SEC and Nasdaq.

The Compensation Committee has the power and authority to review and approve the remuneration arrangements for the Company’s executive officers, directors and certain employees. The Compensation Committee also interprets and administers our employee benefit plans, including by selecting participants and approving awards under those plans. The Compensation Committee has the power and authority to form, and delegate authority to, subcommittees. Because the Compensation Committee was formed in May 2018, it did not hold any meetings in fiscal 2018. Prior to the time the Compensation Committee was formed, the Board fulfilled the duties within the Compensation Committee’s scope of authority.

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee of the Board (the “Nominating and Corporate Governance Committee”) is composed of three independent directors: Mak Chi Yan, who is the chairperson, Gary Haseley and Sean Socha. Each member of the Nominating and Corporate Governance Committee is an independent director as defined by the rules of the SEC and Nasdaq.

The Nominating and Corporate Governance Committee is responsible for identifying, screening and recommending candidates for membership on the Board. Each year, prior to the annual meeting of stockholders, the Nominating and Corporate Governance Committee intends to recommend nominees to serve as our directors for the following year. Because the Nominating and Corporate Governance Committee was formed in May 2018, it did not hold any meetings in fiscal 2018. Prior to the time the Nominating and Corporate Governance Committee was formed, the Board fulfilled the duties within the Nominating and Corporate Governance Committee’s scope of authority.

Board Role in Risk Oversight

Our Audit Committee is primarily responsible for overseeing our risk management processes on behalf of the Board, including with respect to cybersecurity risks. We intend that the Audit Committee will receive reports from management on at least a quarterly basis regarding management’s assessment of risks to the Company. In addition, we intend for the Audit Committee to report regularly to our Board, which also monitors our risk profile. The Audit Committee and the Board will focus on the most significant risks we face and our general risk management strategies, while our management team coordinates responses to day-to-day risks.

Code of Ethics

We have a Code of Ethics that applies to all of our directors and executive officers, including our principal executive officer, principal financial officer and principal accounting officer or controller. The Code of Ethics is publicly available in the Corporate Governance section of the Investor Relations tab on the Company’s website at www.jerashholdings.com. We intend to post any amendments to or waivers from the Code of Ethics that apply to our principal executive officer, principal financial officer and principal accounting officer, or persons performing similar functions, on our website.

Anti-Corruption Policy

We have adopted an Anti-Corruption Policy that applies to all of our directors, officers, employees, subsidiaries, agents, consultants, joint venture partners and any other third-party representative that conducts business on behalf of the Company outside of the U.S. or interacts with non-U.S. government officials. This Anti-Corruption Policy sets forth our guiding principles to comply with the U.S. Foreign Corrupt Practices Act of 1977 and other anti-corruption and anti-bribery laws to which we may be subject, including the anti-corruption provisions of the Penal Code of Jordan. Our Anti-Corruption Policy is publicly available in the Corporate Governance section of the Investor Relations tab on the Company’s website at www.jerashholdings.com.

Director Compensation

The Company does not pay any director who is also an employee of the Company or its subsidiaries for his or her service as director. In fiscal 2018, our Board consisted entirely of non-independent directors. We did not pay any director compensation in fiscal 2018.

In addition to reimbursement for reasonable expenses incurred in connection with serving on the Board, in fiscal 2019 we intend to pay each independent director an annual fee of  $75,000 in cash or common stock at each director’s election.

Board Observer

On July 1, 2017, we granted Theodore Kachris certain observation rights with respect to the Board. For his services as a board observer, Mr. Kachris received a warrant to purchase 50,000 shares of our common stock and $12,500 annually. Mr. Kachris’ term as a board observer expired on March 31, 2018.

Executive Compensation

Executive Compensation

The following table sets forth the compensation paid by us during the fiscal years ended March 31, 2018 and 2017 for services performed on our behalf with respect to the persons who served as our named executive officers as of March 31, 2018 and for fiscal 2018. Our named executive officers are Mr. Choi, Mr. Shaw, Ms. Yang and Mr. Murphy. Mr. Choi serves as our Chairman, Chief Executive Officer, President and Treasurer, Mr. Shaw serves as our Chief Financial Officer and Ms. Yang serves as our Vice President, Secretary and director. Prior to May 2017, Timothy G. Murphy served as our President, Treasurer, Secretary and sole director.

Summary Compensation Table

Both Mr. Choi and Mr. Murphy previously served without any compensation. Effective January 12, 2018, Treasure Success, our wholly-owned subsidiary, entered into a consulting agreement with Yukwise Limited, pursuant to which Mr. Choi is compensated for his services as the principal executive officer of the Company. Treasure Success compensates Yukwise Limited for Mr. Choi’s time at a rate of  $25,000 per month.

In January 2017, Ms. Yang entered into an employment agreement with our subsidiary, Jerash Garments, with respect to her services as deputy general manager. We have not entered into an employment agreement with Ms. Yang to serve as our Vice President or our Secretary.

We entered into a consulting agreement effective May 26, 2017 with LogiCore pursuant to which Richard J. Shaw serves as the Company’s Chief Financial Officer. The Company compensates LogiCore for Mr. Shaw’s time at a rate of $5,000 per month. This consulting agreement was terminated in August 2018 after Mr. Shaw was appointed as our full-time Chief Financial Officer. Beginning in August 2018, Mr. Shaw is an at-will employee of the Company and is compensated at a rate of $10,000 per month. In connection with increased time commitment to us, Mr. Shaw was also awarded a one-time grant of stock options, as described below in “—Equity Compensation Plan Information.”

We entered into an employment agreement with Karl Brenza pursuant to which Mr. Brenza will serve as Head of US Operations or a term of 12 months, beginning as of August 3, 2018. During this term, he will be compensated at a rate of $10,000 per month. In connection with his appointment, Mr. Brenza was also awarded a one-time grant of stock options, as described below in “—Equity Compensation Plan Information.”

Except as disclosed herein, we did not otherwise award or pay, and our named executive officers and directors did not otherwise earn, any compensation with respect to our last two fiscal years ended March 31, 2018 and 2017.

Equity Compensation Plan Information

On March 21, 2018, the board of directors adopted the Stock Incentive Plan, pursuant to which the board of directors may grant equity awards to certain members of management, key employees, and consultants of the Company. The Stock Incentive Plan authorizes up to 1,484,250 shares of Common Stock to be issued to employees, directors or consultants of the Company. The Board may grant awards of stock options, restricted stock, restricted stock units and other awards pursuant to the Stock Incentive Plan. Awards may be granted under the Stock Incentive Plan at any time and from time to time on or prior to the tenth anniversary of its effective date, or March 21, 2028. The Stock Incentive Plan will be administered by the Board or a committee thereof, if so directed by the Board.

The following table reflects the shares available for issuance under our Stock Incentive Plan as of the end of the most recently completed fiscal year:

On April 9, 2018, the Board approved the issuance of 989,500 nonqualified stock options under the Plan to thirteen of our executive officers, employees and consultants in accordance with the Plan at an exercise price of $7.00 per share, and a term of five years. As of the date of this prospectus, all of the outstanding options were fully vested and exercisable. Mr. Choi, our Chief Executive Officer, President and Treasurer, and Yang Wei, our Vice President and Secretary, received stock option grants entitling them to purchase 336,038 and 100,000 shares of our common stock, respectively.

As of August 3, 2018, the Board approved the issuance of 50,000 and 100,000 nonqualified stock options under the Plan to Richard Shaw, our Chief Financial Officer, and Karl Brenza, our Head of US Operations, respectively, in accordance with the Plan at an exercise price of $6.12 per share, the closing price of our common stock on Nasdaq on the date prior to the grant date, and a term of ten years. As of the date of this prospectus, one-third of these outstanding options are fully vested and exercisable, with the remaining one-third portions vesting on February 3, 2019 and August 3, 2019, assuming Messrs. Shaw and Brenza are still employed or continuing to serve us on those dates. The terms of these options may not be amended if the amendment will have an adverse effect on either Mr. Shaw or Mr. Brenza without his prior written consent.

Security Ownership of Certain Beneficial Owners and Management

The following table provides information as of September 14, 2018, concerning beneficial ownership of our common stock known to us to be held by (1) our named executive officers, (2) our directors, (3) our named executive officers and directors as a group and (4) each person or entity we know to beneficially own more than five percent of our common stock. The percentages of shares owned shown in the table below are based on 11,325,000 shares of our common stock outstanding as of the date of this prospectus. The address for our executive officers is 147 W. 35th Street, Room #1603, New York, New York 10001.

Certain Relationships and Related Person Transactions

Review and Approval of Related Party Transactions

We review all relationships and transactions in which we and any of our directors, executive officers or their immediate family members are participants to determine whether those persons have a direct or indirect material interest in the relevant transaction. Our Audit Committee is responsible for reviewing, approving and overseeing transactions between us and any related person and other potential conflict of interest situations. Our bylaws provide that a transaction will not be void or voidable because it is a related party transaction if:

Related Party Transactions

Historically, we have engaged in transactions with entities that are considered our affiliates. These entities include:

Transactions with Affiliates

On November 29, 2016, the Board of Directors of Jerash Garments declared and approved a cash dividend of   $6,000,000 to its parent company, Global Trend. On November 30, 2016, the Board of Directors of Global Trend declared and approved a cash dividend of  $5,307,500 to its stockholders. Jerash Garments paid the dividend of $6,000,000 directly to Global Trend’s stockholders on December 14, 2016. The overpaid amount was treated as due from stockholders and was fully collected from stockholders on May 8, 2017. The amount due from stockholders was interest-free. As of June 30, 2018, there is no outstanding balance with respect to this overpaid dividend.

Until August 2016, substantially all of our sales were to Ford Glory, which Ford Glory then sold to the end customers. Ford Glory is 49% owned by Mr. Choi Lin Hung, our Chairman, Chief Executive Officer, President, Treasurer and a significant stockholder, through his wholly-owned entity, Merlotte. Thereafter, we began conducting business directly with our customers and no longer through our affiliate, Ford Glory. Following August 1, 2016, there was a transition period for orders placed directly with Ford Glory. For fiscal 2017, fiscal 2018 and the three months ended June 30, 2018, $23,350,919, $0 and $0, respectively, of our net sales were made to Ford Glory. For fiscal 2018 and the three months ended June 30, 2018, $43,997,617 and $0, or approximately 63.5% and 0% of our net sales, respectively, were made directly to our customers with the support of Ford Glory.

We also periodically purchase merchandise or raw materials from certain related party suppliers. For fiscal 2017, we purchased $6,068,593 of our raw materials from two related party suppliers, Value Plus and Ford Glory. For fiscal 2018 and the three months ended June 30, 2018, we did not purchase any of our raw materials from related party suppliers. We had accounts receivable from Ford Glory of  $0, $50,027 and $2,343,892 as of June 30, 2018, March 31, 2018 and March 31, 2017, respectively.

Treasure Success, our wholly-owned subsidiary, leases its office space in Hong Kong from Ford Glory International Limited, pursuant to an agreement dated October 3, 2016 providing for rent in the amount of HK$21,600 (approximately $2,760) per month and having a one-year term with an option to extend the term for an additional year at the same rent.

Our wholly-owned subsidiary, Treasure Success, entered into an invoice discounting/factoring facility for $12,000,000 with HSBC that is guaranteed by Mr. Choi and Mr. Ng. Their interests may differ from other stockholders of the Company as a result of their personal guarantees.

Private Placement

Timothy Murphy, our president, treasurer, secretary and director until May 2017, is the chief financial officer of Maxim Group LLC (“Maxim”). We engaged Maxim as the placement agent for the Private Placement in 2017. Pursuant to the terms of an engagement letter between Maxim and us, Maxim received commissions on the proceeds raised in the Private Placement in the aggregate amount of  $355,500 and warrants (the “Maxim Warrants”). Pursuant to the terms of the engagement letter, Maxim was entitled to, and did elect to, have the Maxim Warrants issued into the names of its affiliates. In connection with the Private Placement, we issued Maxim Warrants to purchase 71,100 units, with each unit consisting of one share of our common stock and one warrant (with each such warrant being immediately exercisable for 1∕10th 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), at an exercise price of  $5.50 per unit. In addition to its service as our placement agent, Maxim also provided merger advisory services to us in connection with the merger in which Jerash Garments became our wholly-owned subsidiary, for which we paid Maxim aggregate fees of $100,000.

Agreements Relating to Contributions of Consultants

Eric Tang, who is the husband of our Vice President, Secretary and director, Ms. Yang, has provided us with consulting services since 2013 primarily in sales and marketing, including playing a critical role providing consulting services in connection with our transition from receiving purchase orders from Ford Glory to receiving purchase orders directly from VF Corporation, one of our major customers. On December 1, 2016, Mr. Tang entered into an employment agreement with our wholly-owned subsidiary, Treasure Success, to serve as our Administration Manager providing marketing advice. Mr. Tang is entitled to receive monthly compensation of HK$39,000 (approximately US$5,000). We do not consider Mr. Tang to be an executive officer of our company. Mr. Tang received aggregate compensation in the amount of HK$507,000 (approximately US$65,000) and HK$155,059 (approximately US$19,880) during fiscal 2018 and the two-year period ended March 31, 2017 in exchange for his consulting services and his employment, respectively.

We entered into a consulting agreement effective May 26, 2017 with LogiCore Strategies, LLC (“LogiCore”), pursuant to which Richard J. Shaw serves as the Company’s Chief Financial Officer. Mr. Shaw wholly owns LogiCore. The Company compensates LogiCore for Mr. Shaw’s time at a rate of $5,000 per month. During fiscal 2018, we paid LogiCore $50,000 for Mr. Shaw’s services. This consulting agreement was terminated in August 2018 after Mr. Shaw was appointed as our full-time Chief Financial Officer. See “Executive Compensation” for more information.

Effective January 12, 2018, Treasure Success, our wholly-owned subsidiary, entered into a consulting agreement with Yukwise Limited, pursuant to which Mr. Choi is compensated for his services as the Chief Executive Officer, President and Treasurer of the Company. Treasure Success compensates Yukwise Limited for Mr. Choi’s time at a rate of $25,000 per month. During fiscal 2018, we paid Yukwise Limited $75,000 for Mr. Choi’s services.

Effective January 16, 2018, Treasure Success, our wholly-owned subsidiary, entered into a consulting agreement with Multi-Glory Corporation Ltd., pursuant to which Ng Tsze Lun, a significant stockholder of the Company, will provide consulting services to the Company as Head of Marketing. In exchange for such services, Treasure Success will compensate Multi-Glory Corporation Ltd. at a rate of $300,000 annually. During fiscal 2018, we paid Multi-Glory Corporation Ltd. $75,000 for Mr. Ng’s services.

Description of Capital Stock

The following description includes the material attributes of our capital stock. This description is not complete, and we qualify it by referring to our amended and restated certificate of incorporation (“certificate of incorporation”) and our bylaws.

Our certificate of incorporation authorizes us to issue 30,500,000 shares of capital stock, divided into two classes:

Common Stock

Our common stock has one vote per share. The holders of our common stock are entitled to vote on all matters to be voted on by stockholders. The holders of our common stock do not have cumulative voting rights.

Directors are elected by a plurality vote of the shares represented in person or by proxy. All other actions by stockholders will be approved by a majority of votes cast except as otherwise required by law.

The holders of common stock are entitled to receive dividends ratably when, as and if declared by the board of directors out of funds legally available therefor. In the event of our liquidation, dissolution or winding up, the holders of common stock are entitled to share equally and ratably in all assets remaining available for distribution after payment of liabilities and after provision is made for each class of stock, if any, having preference over the common stock. Holders of common stock have no preemptive, subscription, redemption, sinking fund, or conversion rights. The outstanding shares of common stock are validly issued, fully paid and non-assessable.

Effects on our Common Stock if We Issue Preferred Stock

Our board of directors has authority, without further action by the stockholders, to issue up to 500,000 shares of preferred stock in one or more series. Our board of directors has the authority to determine the terms of each series of preferred stock, within the limits of the certificate of incorporation and the laws of the state of Delaware. These terms include the number of shares in a series, dividend rights, liquidation preferences, terms of redemption, conversion rights and voting rights.

The issuance of any preferred stock may negatively affect the holders of our common stock. These possible negative effects include diluting the voting power of shares of our common stock and affecting the market price of our common stock.

Anti-Takeover Effects of Provisions of our Certificate of Incorporation and Bylaws

Preferred Stock

We believe that the availability of the preferred stock under our certificate of incorporation provides us with flexibility in addressing corporate issues that may arise. Having these authorized shares available for issuance allows us to issue shares of preferred stock without the expense and delay of a special stockholders’ meeting. The authorized shares of preferred stock, as well as shares of common stock, will be available for issuance without further action by our stockholders, unless action is required by applicable law or the Nasdaq rules or the rules of any stock exchange on which our securities may be listed. The board of directors has the power, subject to applicable law, to issue series of preferred stock that could, depending on the terms of the series, impede the completion of a merger, tender offer or other takeover attempt that some, or a majority, of the stockholders might believe to be in their best interests or in which stockholders might receive a premium for their stock over the then-prevailing market price of the stock.

Exclusive Forum of Certain Actions

Our certificate of incorporation provides that derivative actions brought in the name of the Company, actions against directors, officers and employees for breach of fiduciary duty and other similar actions may be brought only in the Court of Chancery of the State of Delaware. Although we believe this provision benefits the Company and its stockholders by providing increased consistency in the law to be applied in lawsuits brought against or on behalf of the Company, this provision may have the effect of discouraging lawsuits against us or our directors, officers and employees.

Amendment of Bylaws

Our certificate of incorporation grants our board of directors the power to adopt, amend or repeal our bylaws, except as otherwise set forth in the bylaws.

Warrants

In connection with the Private Placement, we issued to the investors participating in the Private Placement five-year warrants to purchase up to an aggregate of 79,000 shares of common stock at an exercise price of $6.25 per share. If at any time after six months following the issuance date of the warrants and prior to the expiration date there is not an effective registration statement on file with the SEC covering the resale of the shares underlying the warrants, the warrants may be exercised by means of a “cashless exercise.”

Registration Rights

On May 15, 2017, in connection with the Private Placement, we entered into a registration rights agreement with the investors participating in the Private Placement. Pursuant to the registration rights agreement, we filed the Resale Registration Statement to register the securities sold in the Private Placement, which Resale Registration Statement was initially declared effective by the SEC on October 27, 2017. 1,591,750 shares of common stock and up to 74,000 shares of common stock underlying warrants are eligible to be sold under this Resale Registration Statement. Additionally, the investors will be entitled to certain piggyback registration rights for the securities in the event they are not otherwise registered for resale, which registration rights require us to notify the investors if we propose to register any shares of common stock under the Securities Act, and to include the securities for which we receive timely requests from such investors for inclusion in connection with such offering.

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is V Stock Transfer, LLC. The transfer agent and registrar’s address is 18 Lafayette Place, Woodmere, New York 11598.

U.S. Tax Matters

THE SUMMARY OF U.S. FEDERAL INCOME TAX CONSEQUENCES SET OUT BELOW IS FOR GENERAL INFORMATION ONLY. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE PARTICULAR UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO THEM OF ACQUIRING, OWNING AND DISPOSING OF THE SECURITIES, THE SHARES AND WARRANTS THAT COMPRISE SUCH SECURITIES AND ANY SHARES OF OUR COMMON STOCK UNDERLYING THE SECURITIES, AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER ANY STATE, LOCAL OR FOREIGN TAX LAWS AND ANY OTHER UNITED STATES FEDERAL TAX LAWS.

The following is a summary of certain material United States federal income tax consequences to you of the acquisition, ownership and disposition of our common stock and warrants, and the shares of common stock underlying the warrants. This discussion is not a complete analysis of all of the potential United States federal income tax consequences relating thereto, and, except as otherwise specifically provided herein, it does not address any estate and gift tax consequences or any tax consequences arising under any state, local or foreign tax laws, or any other United States federal tax laws. This discussion is based on the Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations promulgated thereunder, judicial decisions, and published rulings and administrative pronouncements of the Internal Revenue Service (the “IRS”) all as in effect as of the date of this prospectus. These authorities may change, possibly retroactively, resulting in United States federal income tax consequences different from those discussed below.

The discussion does not cover all aspects of U.S. federal income taxation that may be relevant to, or the actual tax effect that any of the matters described herein will have on, the acquisition, ownership or disposition of our common stock and warrants, and the shares of common stock underlying the warrants, by particular investors, and does not address state, local or non-U.S. tax laws, or any aspect of U.S. federal tax law other than income taxation (such as the estate and gift tax). In particular, this summary does not discuss all of the tax considerations that may be relevant to certain types of investors subject to special treatment under the U.S. federal income tax laws (such as financial institutions, insurance companies, investors liable for the alternative minimum tax, regulated investment companies, real estate investment trusts, individual retirement accounts and other tax-deferred accounts, tax-exempt organizations, partnerships and other pass-through entities, dealers or traders in securities or currencies, investors that will hold securities as part of straddles, hedging transactions, conversion transactions or other integrated transactions for U.S. federal income tax purposes or investors whose functional currency is not the U.S. dollar). This discussion is limited to holders who purchase securities pursuant to this prospectus and who hold our common stock and warrants, and the shares of common stock underlying the warrants, as a “capital asset” within the meaning of Section 1221 of the Code (generally, property held for investment).

If a partnership (or other entity taxed as a partnership for United States federal income tax purposes) holds the securities, the tax treatment of a partner in the partnership will depend on the status of the partner, upon the activities of the partnership, and upon certain determinations made at the partner level. Accordingly, partnerships holding the securities and the partners in such partnerships should consult their tax advisors regarding the specific United States federal income tax consequences to them.

For purposes of this discussion, a “U.S. Holder” is any beneficial owner of securities who, for United States federal income tax purposes, is (i) an individual who is a citizen or resident of the United States; (ii) a corporation (or other entity treated as a corporation for United States federal income tax purposes) created or organized in or under the laws of the United States or of any state or in the District of Columbia; (iii) an estate the income of which is subject to United States federal income taxation regardless of its source; or (iv) a trust, if a United States court can exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust, or if the trust has a valid election in place to be treated as a United States person.

General Principles Related to Taxation of U.S. Holders

Distributions on Shares of our Common Stock. A distribution of cash or other property (other than certain pro rata distributions of our capital stock) in respect of our common stock owned by a U.S. Holder generally will be treated as a dividend to the extent it is paid from our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). If the amount of such distribution exceeds our current and accumulated earnings and profits, such excess generally will be treated first as a tax-free return of capital to the extent of such U.S. Holder’s adjusted tax basis in such shares of our common stock, and then as capital gain (which will be treated in the manner described below under “- Sale or Other Taxable Dispositions of Securities”). In the case of certain non-corporate U.S. Holders, any distribution on shares of our common stock treated as a dividend generally will be eligible for a reduced tax rate so long as certain holding period and other requirements are met. In general, dividends paid on our common stock will not be eligible for the dividends received deduction provided to corporations receiving dividends from certain United States corporations.

Sale or Other Taxable Dispositions of Securities. Upon a sale, exchange or other disposition of the securities or the common stock underlying the securities, a U.S. Holder generally will recognize gain or loss in an amount equal to the difference between the amount realized on such sale, exchange or other disposition and such U.S. Holder’s adjusted tax basis in such security. Any gain or loss so recognized on such security generally will be capital gain or loss and will be long-term capital gain or loss if such U.S. Holder has held such security for more than one year at the time of such sale, exchange or other disposition. Net long-term capital gain of certain non-corporate U.S. Holders generally is subject to preferential rates of tax. The deductibility of capital losses is subject to limitations.

Backup Withholding and Information Reporting. Information reporting will generally apply to non-corporate U.S. Holders with respect to payments of dividends on our common stock or the shares of common stock underlying the securities and to certain payments of proceeds on the sale or other disposition of the common stock or the shares of common stock underlying the securities. Certain non-corporate U.S. Holders may be subject to U.S. backup withholding on payments of dividends on the common stock or the shares of common stock underlying the securities and certain payments of proceeds on the sale or other disposition of the common stock or the shares of common stock underlying the securities unless the beneficial owner furnishes the payor or its agent with a taxpayer identification number, certified under penalties of perjury, and certain other information, or otherwise establishes, in the manner prescribed by law, an exemption from backup withholding.

U.S. backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a credit against a U.S. Holder’s United States federal income tax liability, which may entitle the U.S. Holder to a refund, provided the U.S. Holder timely furnishes the required information to the IRS.

Medicare Tax. A U.S. person that is an individual or estate, or a trust that does not fall into the special classes of trusts that are exempt from such tax, will be subject to a 3.8% tax on the lesser of (1) the U.S. person’s “net investment income” for the relevant taxable year and (2) the excess of the U.S. person’s modified adjusted gross income for the taxable year over a certain threshold (which in the case of individuals will be between $125,000 and $250,000 depending on the individual’s circumstances). Net investment income generally includes interest, “S Corporation” flow through income, dividends, and net gains from the disposition of the Securities or the securities underlying the Securities, unless such income or gains are derived in the ordinary course of the conduct of a trade or business (other than a trade or business that consists of certain passive or trading activities). A U.S. Holder that is an individual, estate or trust should consult its tax advisor regarding the applicability of the Medicare tax to its income and gains in respect of its investment in our securities.

Legal Matters

The validity of the shares of our common stock to be issued in this offering will be passed upon for us by our counsel, Harter Secrest & Emery LLP, Rochester, New York. Harter Secrest & Emery LLP and its partners or former partners owned an aggregate of 55,607 shares of our common stock as of September 14, 2018.

Experts

Friedman LLP, our independent registered public accounting firm, has audited our financial statements for the years ended March 31, 2018 and 2017, as set forth in their report. We have included our financial statements in this prospectus and elsewhere in this registration statement in reliance on Friedman LLP’s report, given on their authority as experts in accounting and auditing.

Where You Can Find More Information

We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to our securities offered by this prospectus. This prospectus, which constitutes part of that registration statement, does not contain all of the information set forth in the registration statement or the accompanying exhibits and schedules. Some items included in the registration statement are omitted from this prospectus in accordance with the rules and regulations of the SEC. For further information with respect to us and the securities offered in this prospectus, we refer you to the registration statement and the accompanying exhibits and schedules. Statements contained in this prospectus regarding the contents of any contract, agreement or any other document are summaries of the material terms of these contracts, agreements or other documents. With respect to each of these contracts, agreements or other documents filed as an exhibit to the registration statement, reference is made to such exhibit for a more complete description of the matter involved.

A copy of the registration statement and the accompanying exhibits and schedules and any other document we file may be inspected without charge and copied at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330. The SEC maintains a website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of the SEC’s website is www.sec.gov.

We file required periodic reports, proxy statements and other information with the SEC. These periodic reports, proxy statements and other information are available for inspection and copying at the public reference room and website of the SEC referred to above. We maintain a website at www.jerashholdings.com. You will be able to access our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports, proxy statements and other information to be filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act with the SEC free of charge at our website as soon as reasonably practicable after such material will be electronically filed with, or furnished to, the SEC. The information contained in, or that can be accessed through, our website is not part of this prospectus.

Index to Financial Statements

JERASH HOLDINGS (US), INC.,

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

JERASH HOLDINGS (US), INC.,

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

JERASH HOLDINGS (US), INC.,

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE THREE MONTHS ENDED JUNE 30, 2018 AND 2017

(UNAUDITED)