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



                               EXECUTIVE OVERVIEW



Overview

Through our wholly owned operating subsidiaries and VIE, we 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 an approved manufacturer of many well-known brands and retailers, such as
Walmart, Costco, Hanes, New Balance, G-III, VF Corporation (which owns brands
such as The North Face, Timberland, and JanSport), and PVH Corp. (which owns
brands such as Calvin Klein, Tommy Hilfiger, IZOD, and Speedo). Our production
facilities are made up of four factory units, one workshop, and three warehouses
and currently employ approximately 4,100 people. The total annual capacity at
our facilities is approximately 8.0 million pieces (average for product
categories including t-shirts, polo shirts, pants, shorts, and jackets).

Impact of COVID-19 on our business





Collectability of receivables. We had accounts receivable of $5.3 million as of
March 31, 2020. Out of this $5.3 million, $5.1 million has been received up to
June 24, 2020. Some customers, including our major customer VF Corporation, have
requested to extend their credit terms for an addition of 20 days to 60 days
from their original payment terms. On the other hand, VF Corporation offered to
accelerate 50% of its settlements for shipments in April and May 2020.

Inventory. We had inventory of $22.6 million as of March 31, 2020. Most of them are for orders scheduled to be shipped within fiscal 2021.





                                       17





Investments. We acquired two pieces of land in fiscal 2020 for the construction
of dormitory and production facility. Due to the ongoing COVID-19 outbreak, the
management has decided to hold off the construction until there is a clearer
picture on customer demand following the reopening of the U.S. and EU economies.



Revenue. For fiscal 2020, there were orders in the amount of approximately $1.6
million which were originally scheduled to be shipped in the year but were
deferred to fiscal 2021 due to the national shutdown in Jordan between March 18
and March 31, 2020. We have shipped these orders as of the date of this annual
report. We have been proactively communicating with our existing customers to
reconfirm their orders for fiscal 2021. We also managed to start business with
some new customers. However, the above is subject to the progress of reopening
of economies in the U.S. and the EU that would have significant impact on both
order fulfilment and delivery schedules.

Liquidity/Going Concern. We had approximately $26.1 million of cash and cash equivalent as of March 31, 2020. We had net current assets of approximately $48.1 million with a current ratio of 5.4 to 1. In addition, we had banking facilities with aggregate limits of $26 million with $235 outstanding as of March 31, 2020. Given the above, we believe that we will have sufficient financial resources to maintain as a going concern in fiscal 2021.





Subsequent events. Our main production facilities in Al Tajamouat Industrial
City resumed production on April 4, 2020, under the condition that only migrant
workers who were living in the dormitory within the same industrial city can go
back to work, in addition to some strict hygienic precautionary measures. Our
Al-Hasa workshop also restarted operation on April 26, 2020. Eventually, local
employees resumed work on June 1, 2020.



Seasonality of Sales



A significant portion of our revenue is received during the first six months of
our fiscal year. The majority of our VF Corporation orders are derived from
winter season fashions, the sales of which occur in Spring and Summer and are
merchandized by VF Corporation during the 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 our
number of customers to mitigate our current concentration risk with VF
Corporation.



                             Results of Operations



The following table presents certain information from our statement of income
for fiscal years 2020 and 2019 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)



                                        Years Ended March 31,
                                  2020                         2019                   Year over Year

Statement of Income                    As % of                      As % of
Data:                    Amount         Sales         Amount         Sales         Amount           %
Revenue                 $  93,024            100 %   $  84,984            100 %   $   8,040             9 %
Cost of goods sold         75,041             81 %      66,207             78 %       8,834            13 %
Gross profit               17,983             19 %      18,777             22 %        (794 )          (4 )%
Selling, general and
administrative
expenses                   10,318             11 %      12,428             15 %      (2,110 )         (17 )%
Other (expense)
income, net                   (21 )            0 %          23              0 %         (44 )        (191 )%
Net income before
taxation                $   7,644              8 %   $   6,372              7 %   $   1,272            20 %
Income tax expense          1,174              1 %       1,260              1 %         (86 )          (7 )%
Net income              $   6,470              7 %   $   5,112              6 %   $   1,358            27 %




Revenue. Revenue increased by approximately $8.0 million, or 9%, to
approximately $93.0 million in fiscal 2020 from approximately $85.0 million in
fiscal 2019. 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 addition of new customers in the
fiscal year. Approximately 96% and 83% of our products were exported to the U.S.
in fiscal 2020 and 2019, respectively.



                                       18

The table below presents our revenue for fiscal years 2020 and 2019 by geographic area.





                           Revenue by Geographic Area

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



                          Years Ended March 31,
                       2020                   2019              Year over Year
Region           Amount        %        Amount        %        Amount         %
United States   $ 89,123        96 %   $ 70,093        83 %   $  19,030        27 %
Jordan             3,738         4 %     13,693        16 %      (9,955 )     (73 )%
Others               163         0 %      1,198         1 %      (1,035 )     (86 )%
Total           $ 93,024       100 %   $ 84,984       100 %   $   8,040         9 %




Since January 2010, all apparel manufactured in Jordan can be exported to the
U.S. without customs duty being imposed, pursuant to the United States-Jordan
Free Trade Agreement entered into in December 2001. This free trade agreement
provides us with substantial competitiveness and benefit that allowed us to
expand our garment export business in the U.S. Our sales to the U.S. increased
by approximately 27% in fiscal 2020 compared to fiscal 2019. According to the
Major Shippers Report issued by the Office of Textiles and Apparel under the
U.S. Department of Commerce dated May 5, 2020, U.S. apparel import from Jordan
increased by approximately 17% from $1.56 billion in the fiscal year ended March
31, 2019 to approximately $1.83 billion in the fiscal year ended March 31, 2020.
Our sales growth ratio has been exceeding the industrial average growth ratio,
and we expect we still have plenty of room to expand our garment export business
in the U.S. in the long run, as Jerash accounted for only approximately 5% of
the total Jordanian garment exports to the U.S. in fiscal 2020, according to
data from the Major Shippers Report issued by the U.S. Department of Commerce.
The short-term trend may be substantially impacted by the COVID-19 outbreak

in
fiscal 2021.



Cost of goods sold. Following the growth in sales revenue, our cost of goods
sold increased by approximately $8.8 million, or 13%, to approximately $75.0
million in fiscal 2020 from approximately $66.2 million in fiscal 2019. As a
percentage of revenue, the cost of goods sold increased by approximately 3%
points to 81% in fiscal 2020 from 78% in fiscal 2019. The increase in cost of
goods sold as a percentage of revenue was primarily attributable to the
absorption of ramp-up expenses of our newly acquired Paramount facility starting
in April 2019 and newly set up Al-Hasa workshop that started operation in
November 2019, and the manufacturing overheads absorbed as expenses in the
period from March 18 to March 31, 2020, due to the shutdown in Jordan amid

the
COVID-19 outbreak.



For the fiscal year ended March 31, 2020, we purchased approximately 22%, 16%,
and 11% of our raw materials from three major suppliers. For the fiscal year
ended March 31, 2019, we purchased approximately 19%, 12%, and 11% of our raw
materials from three major suppliers.



Gross profit margin. Gross profit margin was approximately 19% in fiscal 2020,
which decreased by approximately 3% points from 22% in fiscal 2019. The decrease
in gross profit margin was primarily driven by the expenses related to ramping
up our new production facilities and the fixed cost during the shutdown period
from March 18 to March 31, 2020.



Selling, general and administrative expenses. Selling, general and
administrative expenses decreased by approximately 17% from approximately $12.4
million in fiscal 2019 to approximately $10.3 million in fiscal 2020. The
decrease was mainly attributable to the decrease in stock-based compensation
expenses by $3.3 million partially offset by an increase of $0.9 million in
professional fees related to land purchase, start-up expenses of new
subsidiaries, and miscellaneous staffing expenses resulting from a raise in

headcounts in fiscal 2020.



                                       19






Other (expense) income, net. Other expenses, net was approximately $21,000 in
fiscal 2020 and other income, net was $23,000 in fiscal 2019. The net expenses
in fiscal 2020 mainly resulted from the impact of variable exchange rates.



Net income before taxation. Net income before taxation for fiscal 2020 increased
by approximately 20% from approximately $6.4 million to approximately $7.6
million. The increase was mainly attributable to the decrease in stock-based
compensation expenses partially offset by a decrease in gross profit in fiscal
2020.



U.S. taxation. Income tax expense for fiscal 2020 was approximately $1.2 million
compared to income tax expense of $1.3 million for fiscal 2019. The effective
tax rate was 15.4% and 19.8% for fiscal 2020 and 2019, respectively.



Jordan taxation. Jerash Garments, Jerash Embroidery, Chinese Garments,
Paramount, and Victory Apparel are subject to the regulations of Income Tax
Department in Jordan. The corporate income tax rate is 14% for the industrial
sector. In accordance with the Investment Encouragement Law, Jerash Garments'
export sales to overseas customers are entitled to a 100% income tax exemption
for a period of 10 years commencing at the first day of production. This
exemption was extended for five years to December 31, 2018. Effective January 1,
2019, in accordance to Development Zone law, Jerash Garments and its
subsidiaries and VIE began paying corporate income tax in Jordan at a rate of
10% plus a 1% social contribution. The tax income tax rate increased to 14% plus
a 1% social contribution effective from January 1, 2020. For fiscal 2020, our
income tax in Jordan was $1,229,000.



Jerash Garments and its subsidiaries and VIE are subject to local sales tax of
16%. However, Jerash Garments was granted a sales tax exemption from the
Jordanian Investment Commission for the period June 1, 2015 to June 1, 2018 that
allowed Jerash Garments to make purchases with no sales tax charge. This
exemption was extended to February 5, 2021 and we intend to apply to extend the
exemption before the expiration date.



Hong Kong taxation. Treasure Success is registered in Hong Kong with an income
tax rate of 8.25% on assessable profits up to HK$2,000,000 and 16.5% on any part
of assessable profits over HK$2,000,000. Treasure Success incurred no income tax
expense for fiscal 2020 and 2019 due to its operating loss. In accordance with
tax legislation in Hong Kong, the accumulated loss can be used to offset future
profit for income tax purposes.

PRC taxation. Jiangmen Treasure Success was established in the PRC and is subject to an income tax rate of 25%.

Net income. Net income for fiscal 2020 was approximately $6.5 million, a 27% increase from approximately $5.1 million for fiscal 2019. The increase was mainly attributable to the decrease in stock-based compensation expenses partially offset by a decrease in gross profit in fiscal 2020.





                        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 our Jordanian subsidiaries and VIE 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 and VIE are required to set aside at least 10% of their respective
accumulated profits each year, if any, to fund certain reserve funds. These
reserves are not distributable as cash dividends. We have relied on direct
payments of expenses by our subsidiaries and VIE (which generate revenue) to
meet our obligations to date. To the extent payments are due in U.S. dollars, we
have occasionally paid such amounts in JOD to an entity controlled by our
management capable of paying such amounts in U.S. dollars. Such transactions
have been made at prevailing exchange rates and have resulted in immaterial
losses or gains on currency exchange but no other profit.



As of March 31, 2020, we had cash of approximately $26.1 million and restricted
cash of approximately $0.8 million compared to cash of approximately $27.2
million and restricted cash of approximately $0.7 million as of March 31, 2019,
which was mainly the security deposit supporting our duty free import into
Jordan at the customs.



                                       20



Our current assets as of March 31, 2020 were approximately $59.0 million, and
our current liabilities were approximately $10.9 million, which resulted in a
current ratio of approximately 5.4:1. Our current assets as of March 31, 2019
were approximately $55.4 million, and our current liabilities were approximately
$7.6 million, which resulted in a current ratio of approximately 7.3:1. Total
equity as of March 31, 2020 and 2019 was approximately $54.8 million and $50.3
million, respectively.



We had net working capital of $48.1 million and $47.8 million as of March 31,
2020 and 2019, respectively. Based on our current operating plan, we believe
that cash on hand and cash generated from operation will be sufficient to
support our working capital needs for the next 12 months from the date this
document is filed.



We have funded our working capital needs from 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



HSBC Facility



On May 29, 2017, our wholly owned subsidiary, Treasure Success, entered into a
facility letter ("2017 Facility Letter") with HSBC to provide credit to us,
which was later amended by an offer letter between HSBC, Treasure Success, and
Jerash Garments dated June 19, 2018 ("2018 Facility Letter"), and further
amended on August 12, 2019 (the "2019 Facility Letter," and together with the
2017 Facility Letter and the 2018 Facility Letter, the "HSBC Facility"). The
2019 Facility Letter extended the term of the HSBC Facility indefinitely,
subject to review at any time by HSBC. Pursuant to the HSBC Facility, we have a
total credit limit of $11,000,000.



The HSBC Facility currently provides us with various credit facilities for
importing and settling payment for goods purchased 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. LIBOR was
0.3% and HIBOR was 0.9% on June 24, 2020. 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.
Previously, the HSBC Facility was secured by collateral provided by us, Jerash
Garments, Treasure Success, and the personal guarantees of Mr. Choi and Mr. Ng.
The personal guarantees were released by HSBC in August 2019. 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.



As of March 31, 2020, there was no amount outstanding under the HSBC Facility.
Borrowings under the HSBC Facility are due upon demand by HSBC or within 120
days of each borrowing date.



                                       21





HSBC Factoring Agreement



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 "2017
Factoring Agreement") with HSBC for certain debt purchase services related to
our accounts receivable. On June 14, 2018, Treasure Success and Jerash Garments
entered into another Offer Letter-Invoice Discounting/Factoring Agreement with
HSBC (the "2018 Factoring Agreement, and together with the 2017 Factoring
Agreement, the "HSBC Factoring Agreement"), which amended the 2017 Factoring
Agreement. The HSBC Factoring Agreement was effective through May 1, 2019. We
are negotiating with HSBC to amend the HSBC Factoring Agreement to extend the
term of the facility with substantially similar terms and we will continue to be
able to use the borrowings under the HSBC Factoring Agreement through any
negotiation period. Under the current terms of the HSBC 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 2-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. As of March 31, 2020,
there was $235 outstanding under the HSBC Factoring Agreement.



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 were secured by collateral provided by us, Jerash
Garments, and Treasure Success, and the personal guarantees of Mr. Choi and
Mr. Ng. 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. In addition, to secure the Factoring Agreement, we had
granted HSBC a charge of $3,000,000 over our deposits. Following the
effectiveness of the 2018 Factoring Agreement, the security collateral of
$3,000,000 was released as of January 22, 2019. HSBC released the personal
guarantees of Mr. Choi and Mr. Ng in August 2019.



The HSBC Factoring Agreement is subject to the review by HSBC at any time and
HSBC has discretion on whether to renew the HSBC Factoring Agreement. Either
party may terminate the agreement subject to a 30-day notice period.



SCBHK Facility Letter



Pursuant to the SCBHK facility letter dated June 15, 2018, and issued to
Treasure Success by SCBHK, SCBHK offered to provide an import facility of up to
$3.0 million to Treasure Success. The SCBHK facility covers import invoice
financing and pre-shipment financing under export orders with a combined limit
of $3 million. Borrowings under the SCBHK facility are due within 90 days of
each invoice or financing date. SCBHK charges interest at 1.3% per annum over
SCBHK's cost of funds. In consideration for arranging the SCBHK facility,
Treasure Success paid SCBHK HKD50,000. We were informed by SCBHK on January 31,
2019 that the SCBHK facility had been activated. As of March 31, 2020, there was
no amount outstanding under the SCBHK facility.

Years ended March 31, 2020 and 2019

The following table sets forth a summary of our cash flows for the fiscal years ended March 31, 2020 and 2019.





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



                                                                  For the years ended
                                                                       March 31,
                                                                  2020           2019

Net cash provided by operating activities                      $     6,913     $   9,775
Net cash used in investing activities                               (4,932 )      (1,601 )
Net cash (used in) provided by financing activities                 (2,913 )       7,466
Effect of exchange rate changes on cash                                 15            (2 )
Net (decrease) increase in cash                                       (917 )      15,638
Cash and restricted cash, beginning of year                         27,834

12,196


Cash and restricted cash, end of year                          $    26,917

$ 27,834

Non-cash financing activities Warrants issued to underwriters in connection with the IPO in fiscal 2019

                                                 $         -

$ 161 Prepaid stock issuance cost netted with proceeds from the IPO in fiscal 2019

                                             $         -     $     308
Right of use assets obtained in exchange for operating lease
obligations                                                    $     1,624     $       -




                                       22





Operating Activities

Net cash provided by operating activities was approximately $6.9 million in fiscal 2020, compared to net cash provided by operating activities of approximately $9.8 million in fiscal 2019. The decrease in net cash provided by operating activities was primarily attributable to the following factors:

? accounts receivable increased by approximately $1.3 million in fiscal 2020,

compared to a decrease of accounts receivable of approximately $1.2 million in

fiscal 2019, due to introduction of some new customers whose payment terms are

longer than our major customer in fiscal 2019;

? inventory increased by approximately $1.6 million in fiscal 2020, compared to

an increase of approximately $770,000 in fiscal 2019, due to shipments delayed

due to the national shutdown in Jordan from March 18 to March 31, 2020 amid

the COVID-19 outbreak;

? income tax payable decreased by approximately $250,000, compared to an

increase of approximately $1.2 million in fiscal 2019; and

? an increase in deposits paid to suppliers by $1.7 million, compared to a

decrease of approximately $690,000 in fiscal 2019, due to the preparation for


    production in fiscal 2021.




Investing Activities



Net cash used in investing activities was approximately $4.9 million and $1.6
million for fiscal 2020 and 2019, respectively. The increase in net cash used in
investing activities was mainly attributable to the acquisition of our Paramount
facility and the increase in plant and machineries for Paramount, the Al-Hasa
workshop, and our existing factory units.



Financing Activities



Net cash used in financing activities was approximately $ 2.9 million for fiscal
2020 compared to net cash provided by $7.5 million in fiscal 2019. The cash
outflow resulted from payments of dividend and repayment of bank borrowings. Net
cash provided in fiscal 2019 was primarily from proceeds from our IPO.



Non-cash Financing Activities



We had non-cash financing activities related to the IPO in fiscal 2019. Expense
recognized for warrants issued to the underwriters in connection with the IPO
was $160,732. There was also a prepaid stock issuance cost of $308,179 netted
with proceeds from the IPO. There was approximately $1.6 million of rights of
use assets obtained in exchange for operating lease obligations in fiscal 2020
pursuant to new financial reporting requirements.



Statutory Reserves



In accordance with the Corporate Law in Jordan, Jerash Holdings' subsidiaries
and VIE 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. The statutory
reserve was $212,739 in both fiscal 2020 and 2019.



The following table provides the amount of our statutory reserves, the amount of
restricted net assets, consolidated net assets, and the amount of restricted net
assets as a percentage of consolidated net assets, as of March 31, 2020 and
2019.



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



                                                                     As of March 31,
                                                                   2020          2019
Statutory Reserves                                               $     213     $     213
Total Restricted Net Assets                                      $     213     $     213
Consolidated Net Assets                                          $  54,751

$ 50,262 Restricted Net Assets as Percentage of Consolidated Net Assets 0.39 % 0.42 %






                                       23





Total restricted net assets accounted for approximately 0.39% of our
consolidated net assets as of March 31, 2020. As our subsidiaries and VIE in
Jordan are only required to set aside 10% of net profits to fund the statutory
reserves, 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 $4.7 million and $0.8 million in
fiscal 2020 and 2019, respectively, for purchases of equipment in connection
with our business activities and to increase capacity. Additions in plant and
machinery amounted to approximately $1.9 million and $0.6 million in fiscal 2020
and 2019, respectively, and additions to leasehold improvements amounted to
approximately $1.1 million and $0.1 million in fiscal 2020 and 2019,
respectively. In fiscal 2020, we acquired two pieces of land for an aggregate
purchase price of approximately $1.7 million.



In 2015, we commenced a project to build a 4,800 square foot workshop in the
Tafilah Governorate of Jordan, which was initially intended to be used as a
sewing workshop for Jerash Garments, but which we now intend to use as a
dormitory. This dormitory is expected to be operational before the end of fiscal
2021 and is expected to house workers for the 54,000 square foot workshop in
Al-Hasa County. This project is expected to cost approximately $200,000 upon
completion.



In 2018, we commenced another project to build a 54,000 square foot workshop in
Al-Hasa County in the Tafilah Governorate of Jordan, which started operation in
November 2019 with approximately 240 workers. Provided that we satisfy certain
employment requirements over certain time periods, we do not anticipate
incurring any significant costs for the project, which was 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 approximately
$353,000. See "Item 2. Properties" above for more information regarding this
workshop.




On December 11, 2018, we entered into an agreement through Jerash Garments to
acquire all of the stock of Paramount, an existing garment manufacturing
business, in order to operate our fourth manufacturing facility in Al Tajamouat
Industrial City in Amman, Jordan. We paid approximately $980,000 as of the
closing date of the transaction on June 18, 2019.



On August 7, 2019, we completed a transaction to acquire 12,340 square meters
(approximately three acres) of land in Al Tajamouat Industrial City, Jordan,
from a third party to construct a dormitory for our employees with aggregate
purchase price JOD863,800 (approximately $1,218,303). Management has revised the
plan to construct both dormitory and production facilities on the land in order
to capture the increasing demand for our capacity. On February 6, 2020, we
completed a transaction to acquire 4,516 square meters (approximately 48,608
square feet) of land in Al Tajamouat Industrial City, Jordan, from a third party
to construct a dormitory for our employee with aggregate purchase price
JOD313,501 (approximately $442,162). We expect to spend approximately $5 million
in capital expenditures to build the dormitory and the production facilities.
Due to the ongoing COVID-19 outbreak, management has decided to put on hold the
construction project to retain financial resources to support our operations,
and also to wait and see how the global economy and customer demand recover
after the outbreak.



We projected that there will be an aggregate of approximately $1.2 million of
capital expenditures in both the fiscal years ending March 31, 2021 and 2022 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 operations of
our subsidiaries and VIE to fund our capital commitments in the past and
anticipate using such funds to fund capital expenditure commitments in the
future.

Off-balance Sheet Commitments and Arrangements





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



                                       24

For Management's Discussion and Analysis of the fiscal years ended March 31, 2019 and 2018, please see our Annual Report on Form 10-K for the year ended March 31, 2019, filed with the SEC on June 28, 2019.





                          Critical Accounting Policies



We prepare our financial statements in conformity with U.S. GAAP, which require
us to make judgments, estimates, and assumptions that affect our reported amount
of assets, liabilities, revenue, costs and expenses, and any related
disclosures. Although there were no material changes made to the accounting
estimates and assumptions in the past 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 certain accounting policies involve a higher degree of judgment
and complexity in their application and require us to make significant
accounting estimates. The policies that we believe are the most critical to
understanding and evaluating our consolidated financial condition and results of
operations are summarized in "Note 2-Summary of Significant Accounting Policies"
in the notes to our audited financial statements.

Recent Accounting Pronouncements

See "Note 3-Recent Accounting Pronouncements" in the notes to our audited financial statements for a discussion of recent accounting pronouncements.

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