Jerash Holdings (US) (JRSH) Risk Analysis

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 revenue will be reduced if our customers are not successful, particularly if our customers reduce the volume of their purchases from us or require us to reduce the prices at which we sell our products.

We used to have stronger seasonality due to higher values of fall and winter orders normally shipped in the first two quarters of our fiscal years. We have been working on smoothing out seasonality through expansions of customer base and product offerings. In fiscal 2026, we managed to reverse the trend to have higher sales in the second half of the year through the introduction of a new customer and expansion in sales of some existing customers for spring and summer season orders.  Due to the nature of our relationships with customers and our use of purchase orders to conduct our business, our revenue may vary from period to period.

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. Furthermore, global markets have recently experienced volatility and disruption following the escalation of geopolitical tensions, including the military conflict between Russia and Ukraine and the conflict in the Middle East. Specifically, Russian military forces initiated a full-scale invasion of Ukraine on February 24, 2022, leading to sustained conflict and disruption. See "-Risk Factors Relating to our Securities-We are currently operating in a period of economic uncertainty and capital market disruption, which has been significantly impacted by geopolitical instability due to the ongoing military conflict between Russia and Ukraine and the confrontations in the Middle East, including conflicts between Israel and Hamas, and between Iran and Israel. Our business, financial condition, and results of operations could be materially adversely affected by any negative impact on the global economy and capital markets resulting from the conflict in Ukraine or any other geopolitical tensions." Additionally, on October 7, 2023, Hamas militants and members of other terrorist organizations infiltrated Israel's southern border from the Gaza Strip and conducted a series of terror attacks on civilian and military targets, leading to a declaration of war by Israel. Subsequently, there have been disruptions in the region. The intensity and duration of the current Israel-Hamas war and the larger regional conflict are difficult to predict, as are the economic implications on our business and operations, the global supply chain, and global geopolitical stability. Since November 2023, Yemen's Iran-backed Houthi Rebels have intensified attacks on commercial vessels in the Red Sea, targeting ships from over 40 nations, including Jordan. The Red Sea turmoil has led to higher logistic costs for us to import raw material. Furthermore, we have incurred extra production costs to adhere to customers' delivery schedules and mitigate the impact of delayed arrivals of raw materials caused by the aforementioned logistic disruption. If these attacks continue or escalate, we may be forced to reroute shipments around the Cape of Good Hope, which will result in higher shipping costs and delays. Additionally, these disruptions could lead to increased shipping insurance premiums and elevated global fuel prices, which will further drive up our transportation expenses. Since June 2025, the conflict between Israel and Iran has escalated. In March 2026, military conflict involving the United States, Israel and Iran increased geopolitical instability internationally and, to date, increased armed conflicts in the Middle East, which has had a significant effect on global energy and capital markets. These direct military engagements, proxy activities, and broader regional tensions could have significant adverse effects on Jordan's political and economic environment, and consequently, on our business operations. Further intensification of the conflict could result in regional economic instability, potentially disrupting trade routes, supply chains, and cross-border commerce. Heightened military activity could also create security risks for our facilities, employees, and customers, potentially leading to business interruptions, increased operating costs, or damage to physical assets. In response to regional threats, the government of Jordan may implement new regulations, restrictions, or emergency measures, which could affect our ability to conduct business as usual. Currently, both of the ports of Aqaba in Jordan and Haifa in Israel, which are the main ports for Jerash's imports of raw materials and export of garment products, are operating as normal. While we do not have any employees, staff, consultants, operations, materials, or equipment located in Israel, Iran, Ukraine, Russia, or Belarus, all of our manufacturing processes are performed in a complex of production facilities located in Jordan. This situation could adversely affect our business or the services being provided to us due to concerns about conflict in the Palestinian territories and broader regional instability. For example, when Hamas launched its attack on October 7, 2023, it had an unfavorable impact on the Jordanian street and the country's national security. Similarly, escalating tensions involving Iran, including disruptions to strategic airspaces and critical maritime routes, such as the Strait of Hormuz and the Red Sea, have contributed to increases in the price of oil and gas, disruptions to global supply chains, and heightened market uncertainty. Despite bilateral cooperation between Jordan and the United States that may contribute to assisting the conflicting parties in ultimately achieving peace and security, we cannot assure that our business operations will not be adversely impacted by such disputes. Any of the aforementioned factors could affect our business, prospects, financial condition, and operating results. The extent and duration of military action, sanctions, and resulting market disruptions are impossible to predict, but could be substantial.

U.S. and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and Ukraine. On February 24, 2022, a full-scale military invasion of Ukraine by Russian troops was reported. Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in Ukraine could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, and supply chain interruptions. In March 2026, military conflict involving the United States, Israel and Iran increased geopolitical instability internationally and, to date, increased armed conflicts in the Middle East, which has had a significant effect on global energy and capital markets. The military conflict in Ukraine has led to sanctions and other penalties being levied by the United States, European Union, and other countries against Russia. Additional potential sanctions and penalties have also been proposed and/or threatened. Russian military actions and the resulting sanctions could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets, potentially making it more difficult for us to obtain additional funds. In addition, in managing an organization operating globally, we are subject to the risks and challenges related to the potential to subject our business to materially adverse consequences should the situation escalate beyond its current scope, including, among other potential impacts, the geographic proximity of the situation relative to the Middle East, where a material portion of our business is conducted. Although our business has not been materially impacted by the ongoing military conflict between Russian and Ukraine and military actions in the Middle East to date, it is impossible to predict the extent to which our operations, or those of our suppliers and manufacturers, will be impacted in the short and long term, or the ways in which the conflict may impact our business. The extent and duration of the military action, sanctions, and resulting market disruptions are impossible to predict, but could be substantial. Any such disruptions may also magnify the impact of other risks described in this annual report. See also "-Risks Related to Operations in Jordan-Our operations in Jordan may be adversely affected by social and political uncertainties or change, military actions, health-related risks, acts of terrorism, or other geopolitical instability."

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.

All of our manufacturing process is performed in a complex of production facilities located in 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 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.

Risk FactorsAs a smaller reporting company, we are not required to provide the information required by this item.

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.