Jewett Cameron Trading Co Ltd 10-Q for FY2025 Q2
Jewett Cameron Trading Co Ltd (JCTC)
About this 10-Q
Jewett Cameron Trading Co Ltd filed this 10-Q on April 14, 2025, covering the quarter ended February 28, 2025 (FY2025 Q2).
Headline figures
Quarter ended February 28, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $9.05M
- up 10.0% from $8.23M a year earlier
- Net loss
- $573.09K
- compared with a net loss of $534.15K a year earlier
- Diluted EPS
- -$0.16
- compared with -$0.15 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(MARK ONE)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY
PERIOD ENDED |
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________ TO ________ |
COMMISSION FILE NUMBER
| (Exact Name of Registrant as Specified in its Charter) |
| british columbia |
NONE | |
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
| (Address Of Principal Executive Offices) | (Zip Code) |
| ( |
| (Registrant’s Telephone Number, Including Area Code) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered |
Indicate by check mark whether the registrant (1)
has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer
| Large accelerated filer ¨ | Accelerated filer ¨ |
| Smaller Reporting Company | |
| Emerging growth company |
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 pursuant to Section 13(a) of the Exchange Act. x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨ No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, no par value – common shares as of April 14, 2025.
Jewett-Cameron Trading Company Ltd.
Index to Form 10-Q
| PART I – FINANCIAL INFORMATION | ||
| Item 1. | Financial Statements | 1 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 16 |
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 29 |
| Item 4. | Controls and Procedures | 30 |
| PART II – OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 30 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 30 |
| Item 3. | Defaults Upon Senior Securities | 30 |
| Item 4. | Mine Safety Disclosures | 30 |
| Item 5. | Other Information | 30 |
| Item 6. | Exhibits | 31 |
i
PART 1 – FINANCIAL INFORMATION
| Item 1. | Financial Statements |
JEWETT-CAMERON TRADING COMPANY LTD.
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
(Unaudited – Prepared by Management)
FEBRUARY 28, 2025
JEWETT-CAMERON TRADING COMPANY LTD.
CONSOLIDATED BALANCE SHEETS
(Expressed in U.S. Dollars)
(Prepared by Management)
(Unaudited)
February 28, 2025 | August 31, 2024 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net of allowance of $ | ||||||||
| Inventory, net of allowance of $ | ||||||||
| Asset held for sale (note 4) | ||||||||
| Prepaid expenses | ||||||||
| Prepaid income taxes | ||||||||
| Total current assets | ||||||||
| Property, plant and equipment, net (note 4) | ||||||||
| Intangible assets, net (note 5) | ||||||||
| Deferred tax assets (Note 6) | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Total liabilities | ||||||||
| Stockholders’ equity | ||||||||
| Capital stock (notes 8, 9) Authorized common shares, preferred shares, Issued common shares (August 31, 2024 – ) | ||||||||
| Additional paid-in capital | ||||||||
| Retained earnings | ||||||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
Subsequent event (Note 15)
The accompanying notes are an integral part of these consolidated financial statements.
| 2 |
JEWETT-CAMERON TRADING COMPANY LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in U.S. Dollars)
(Prepared by Management)
(Unaudited)
Three Month Periods to the end of February | Six Month Periods to the end of February | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| SALES | $ | $ | $ | $ | ||||||||||||
| COST OF SALES | ||||||||||||||||
| GROSS PROFIT | ||||||||||||||||
| OPERATING EXPENSES | ||||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Wages and employee benefits | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| (Loss) from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| OTHER ITEMS | ||||||||||||||||
| Other income | ||||||||||||||||
| Interest income | ||||||||||||||||
| (Loss) gain on sale of assets | ( | ) | ||||||||||||||
| Total other items | ||||||||||||||||
| (Loss) income before income taxes | ( | ) | ( | ) | ( | ) | ||||||||||
| Income tax recovery (expense) | ( | ) | ||||||||||||||
| Net (loss) income | ( | ) | ( | ) | ( | ) | ||||||||||
| Basic (loss) earnings per common share | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||
| Diluted (loss) earnings per common share | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||
| Weighted average number of common shares outstanding: | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 3 |
JEWETT-CAMERON TRADING COMPANY LTD.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Expressed in U.S. Dollars)
(Prepared by Management)
(Unaudited)
| Capital Stock | ||||||||||||||||||||
Number of Shares |
Amount |
Additional paid-in capital |
Retained earnings |
Total | ||||||||||||||||
| August 31, 2023 | $ | $ | $ | $ | ||||||||||||||||
| Shares issued pursuant to compensation plans (note 9) | ||||||||||||||||||||
| Net income | — | |||||||||||||||||||
| February 29, 2024 | $ | $ | $ | $ | ||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| August 31, 2024 | $ | $ | $ | $ | ||||||||||||||||
| Shares issued pursuant to compensation plans (note 9) | ||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| February 28, 2025 | ||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 4 |
JEWETT-CAMERON TRADING COMPANY LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in U.S. Dollars)
(Prepared by Management)
(Unaudited)
Six Month Period at the end of February, | Six Month Period at the end of February, | |||||||
| 2025 | 2024 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Items not involving an outlay of cash: | ||||||||
| Depreciation and amortization | ||||||||
| Stock-based compensation expense | ||||||||
| Gain on sale of property, plant and equipment | ( | ) | ( | ) | ||||
| Write-down of intangible assets | ||||||||
| Deferred income taxes | ( | ) | ||||||
| Changes in non-cash working capital items: | ||||||||
| (Increase) decrease in accounts receivable | ( | ) | ||||||
| (Increase) decrease in inventory | ( | ) | ||||||
| (Increase) in prepaid expenses | ( | ) | ( | ) | ||||
| Increase (decrease) in accounts payable and accrued liabilities | ( | ) | ||||||
| Decrease in prepaid income taxes | ||||||||
| Increase in income taxes payable | ||||||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Proceeds on sale of property, plant and equipment | ||||||||
| Purchase of property, plant and equipment | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| (Repayment) proceeds from bank indebtedness | ( | ) | ||||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Net (decrease) increase in cash | ( | ) | ||||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
Supplemental disclosure with respect to cash flows (Note 13)
The accompanying notes are an integral part of these consolidated financial statements.
| 5 |
JEWETT-CAMERON TRADING COMPANY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
February 28, 2025
(Unaudited)
1. NATURE OF OPERATIONS
Jewett-Cameron Trading Company Ltd. was incorporated in British Columbia on July 8, 1987 as a holding company for Jewett-Cameron Lumber Corporation (“JCLC”), incorporated September 1953. Jewett-Cameron Trading Company, Ltd. acquired all the shares of JCLC through a stock-for-stock exchange on July 13, 1987, and at that time JCLC became a wholly owned subsidiary. Effective September 1, 2013, the Company reorganized certain of its subsidiaries. JCLC’s name was changed to JC USA Inc. (“JC USA”), and a new subsidiary, Jewett-Cameron Company (“JCC”), was incorporated.
JC USA has the following wholly owned subsidiaries incorporated under the laws of the State of Oregon: Jewett-Cameron Seed Company, (“JCSC”), incorporated October 2000, Greenwood Products, Inc. (“Greenwood”), incorporated February 2002, and JCC, incorporated September 2013. Jewett-Cameron Trading Company Ltd. and its subsidiaries (the “Company”) have no significant assets in Canada.
The Company, through its subsidiaries, operates out of facilities located in North Plains, Oregon. JCC’s business consists of the manufacturing and distribution of pet, fencing and other products, wholesale distribution to home centers, other retailers, on-line as well as direct to end consumers located primarily in the United States. Greenwood is a processor and distributor of industrial wood and other specialty building products principally to customers in the marine and transportation industries in the United States. JCSC was a processor and distributor of agricultural seeds in the United States. JC USA provides professional and administrative services, including accounting and credit services, to its subsidiary companies.
Effective August 31, 2023, the Company ended seed cleaning operations at its JCSC. During the year ended August 31, 2024, JCSC ended its active operations and sold most of its remaining equipment in preparation of being wound-up.
The Company’s operations and general workforce can be negatively affected by a number of external factors. Examples include, but are not limited to, global health conditions and political conflict in other regions that may affect economies and financial markets globally. It is not possible for the Company to predict the duration or magnitude of adverse results of such external factors and their effect on the Company’s business, financial condition, or ability to raise funds.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
These unaudited consolidated interim financial statements have been prepared in conformity with generally accepted accounting principles of the United States of America (“US GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC").
Principles of consolidation
These consolidated financial statements include the accounts of the Company and its current wholly owned subsidiaries, JC USA, JCC, JCSC, and Greenwood, all of which are incorporated under the laws of Oregon, U.S.A.
All inter-company balances and transactions have been eliminated upon consolidation.
| 6 |
JEWETT-CAMERON TRADING COMPANY LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) February 28, 2025 (Unaudited) |
2. SIGNIFICANT ACCOUNTING POLICIES (cont’d…)
Estimates
The preparation of consolidated financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates incorporated into the Company’s consolidated financial statements include the estimated useful lives for depreciable and amortizable assets, the estimated allowances for doubtful accounts receivable and inventory obsolescence, possible product liability and possible product returns, and litigation contingencies and claims. Actual results could differ from those estimates.
Cash and cash equivalents
The
Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.
At February 28, 2025, cash and cash equivalents were $
Accounts receivable
Trade and other accounts receivable are reported at face value less any provisions for uncollectible accounts considered necessary. Accounts receivable primarily includes trade receivables from customers. The Company estimates doubtful accounts on an item-by-item basis and includes over aged accounts as part of allowance for doubtful accounts, which are generally ones that are ninety days or greater overdue.
The Company extends credit to domestic customers and offers discounts for early payment. When extension of credit is not advisable, the Company relies on either prepayment or a letter of credit.
Inventory
Inventory, which consists primarily of finished goods, is recorded at the lower of cost, based on the average cost method, and market. Market is defined as net realizable value. An allowance for potential non-saleable inventory due to excess stock or obsolescence is based upon a review of inventory components.
Property, plant and equipment
Property, plant and equipment are recorded at cost less accumulated depreciation. The Company provides for depreciation over the estimated life of each asset on a straight-line basis over the following periods:
| Schedule of estimated life of assets | |
| Office equipment | |
| Warehouse equipment | |
| Buildings |
Intangibles
The Company’s intangible assets have a finite life and are recorded at cost. Amortization is calculated using the straight-line method over the remaining life of the asset. The intangible assets are reviewed annually for impairment.
| 7 |
JEWETT-CAMERON TRADING COMPANY LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) February 28, 2025 (Unaudited) |
2. SIGNIFICANT ACCOUNTING POLICIES (cont’d…)
Asset retirement obligations
The Company records the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development, and normal use of the long-lived assets. The Company also records a corresponding asset which is amortized over the life of the asset. Subsequent to the initial measurement of the asset retirement obligation, the obligation is adjusted at the end of each period to reflect the passage of time (accretion expense) and changes in the estimated future cash flows underlying the obligation (asset retirement cost). The Company does not have any significant asset retirement obligations.
Impairment of long-lived assets and long-lived assets to be disposed of
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount and the fair value less costs to sell.
Currency and foreign exchange
These financial statements are expressed in U.S. dollars which is also the functional currency of the Company and its subsidiaries as the Company's operations are primarily based in the United States.
The Company does not have non-monetary or monetary assets and liabilities that are in a currency other than the U.S. dollar. Any statement of operations transactions in a foreign currency are translated at rates that approximate those in effect at the time of translation. Gains and losses from translation of foreign currency transactions into U.S. dollars are included in current results of operations.
Basic earnings (loss) per common share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding in the period. Diluted earnings (loss) per common share takes into consideration common shares outstanding (computed under basic earnings per share) and potentially dilutive common shares.
| 8 |
JEWETT-CAMERON TRADING COMPANY LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) February 28, 2025 (Unaudited) |
2. SIGNIFICANT ACCOUNTING POLICIES (cont’d…)
Earnings (loss) per share (cont’d…)
The earnings (loss) for the three and six month periods ended February 28, 2025 and February 29, 2024 are as follows:
| Schedule of earnings (loss) per share | ||||||||||||||||
Three Month Periods at the end of February, | Six Month Periods at the end of February, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Net (loss) income | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||
| Basic weighted average number of common shares outstanding | ||||||||||||||||
| Effect of dilutive securities | ||||||||||||||||
| Stock options | ||||||||||||||||
| Diluted weighted average number of common shares outstanding | ||||||||||||||||
Comprehensive income (loss)
The Company has no items of other comprehensive income or loss in any period presented. Therefore, net income or loss presented in the consolidated statements of operations equals comprehensive income or loss.
The Company accounts for stock-based compensation in accordance with ASC 718, “Compensation - Stock Compensation” (“ASC 718”). Equity awards are accounted for at their “fair value” which is measured on the grant date for stock-settled awards. For “full-value” awards, fair value is equal to the underlying value of the stock that have time vesting conditions.
Stock-based compensation to employees are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award. Stock-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period, or in the period of grant for awards that vest immediately without any future service condition. For awards that vest over time, previously recognized compensation cost is reversed if the service or performance conditions are not satisfied and the award is forfeited. The Company also grants employees and non-employees restricted stock awards (“RSAs”). The fair value of the RSAs is determined using the fair value of the common shares on the date of the grant. Forfeitures are accounted for as they occur.
The Company has not adopted a stock option plan and has not granted any stock options.
| 9 |
JEWETT-CAMERON TRADING COMPANY LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) February 28, 2025 (Unaudited) |
2. SIGNIFICANT ACCOUNTING POLICIES (cont’d…)
Financial instruments
The Company uses the following methods and assumptions to estimate the fair value of each class of financial instruments for which it is practicable to estimate such values:
Cash and cash equivalents - the carrying amount approximates fair value because the amounts consist of cash held at a bank and cash held in short term investment accounts.
Accounts receivable - the carrying amounts approximate fair value due to the short-term nature and historical collectability.
Bank indebtedness - the carrying amount approximates fair value due to the short-term nature of the obligations.
Accounts payable and accrued liabilities - the carrying amount approximates fair value due to the short-term nature of the obligations.
The estimated fair values of the Company's financial instruments as of February 28, 2025 and August 31, 2024 follows:
| Schedule of estimated fair values | ||||||||||||||||
February 28, 2025 | August 31, 2024 | |||||||||||||||
| Carrying | Fair | Carrying | Fair | |||||||||||||
| Amount | Value | Amount | Value | |||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | ||||||||||||
| Accounts receivable, net of allowance | ||||||||||||||||
| Accounts payable and accrued liabilities | ||||||||||||||||
The following table presents information about the assets that are measured at fair value on a recurring basis as of February 28, 2025 and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets. Fair values determined by Level 2 inputs utilize data points that are observable such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and included situations where there is little, if any, market activity for the asset:
| Schedule of assets measured at fair value on a recurring basis | ||||||||||||||||
February 28, 2025 | Quoted
Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
| Assets: | ||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | ||||||||||||
The fair values of cash are determined through market, observable and corroborated sources.
| 10 |
JEWETT-CAMERON TRADING COMPANY LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) February 28, 2025 (Unaudited) |
2. SIGNIFICANT ACCOUNTING POLICIES (cont’d…)
Income taxes
A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carry forwards. Deferred tax expense (benefit) results from the net change during the year of deferred tax assets and liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Shipping and handling costs
The Company incurs certain expenses related to preparing, packaging and shipping its products to its customers, mainly third-party transportation fees. All costs related to these activities are included as a component of cost of sales in the consolidated statements of operations. All costs billed to the customer are included as sales in the consolidated statements of operations.
Revenue recognition
The Company recognizes revenue from the sales of lumber, building supply products, industrial wood products, specialty metal products, and other specialty products and tools, when the products are shipped, title passes, and the ultimate collection is reasonably assured. Revenue from the Company's seed operations was generated from seed processing, handling and storage services provided to seed growers, and by the sales of seed products. Revenue from the provision of these services and products is recognized when the services have been performed, products are sold, and collection of the amounts is reasonably assured.
Recent Accounting Pronouncements
The Company has evaluated all recently issued, but not yet effective, accounting pronouncements and determined that it does not believe that any, if currently adopted, would have a material effect on the Company’s financial statements.
3. INVENTORY
A summary of inventory is as follows:
| Schedule of inventory | ||||||||
February 28, 2025 | August 30, 2024 | |||||||
| Pet, fencing, and other products | $ | $ | ||||||
| Industrial wood products | ||||||||
| Inventory net | $ | $ | ||||||
| 11 |
JEWETT-CAMERON TRADING COMPANY LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) February 28, 2025 (Unaudited) |
4. PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant, and equipment is as follows:
| Schedule of property, plant, and equipment | ||||||||
February 28, 2025 | August 31 2024 | |||||||
| Office equipment | $ | $ | ||||||
| Warehouse equipment | ||||||||
| Buildings | ||||||||
| Land | ||||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Net book value | $ | $ | ||||||
In the event that facts and circumstances indicate that the carrying amount of an asset may not be recoverable and an estimate of future discounted cash flows is less than the carrying amount of the asset, an impairment loss will be recognized. Management's estimates of revenues, operating expenses, and operating capital are subject to certain risks and uncertainties which may affect the recoverability of the Company's investments in its assets. Although management has made its best estimate of these factors based on current conditions, it is possible that changes could occur which could adversely affect management's estimate of the net cash flow expected to be generated from its operations.
In
connection with the wind-up of the Company’s JCSC operations, the Company listed for sale in July 2024 its 11.6 acre property that
formerly housed operations. The carrying value of this property of $
5. INTANGIBLE ASSETS
A summary of intangible assets is as follows:
| Schedule of intangible assets | ||||||||
February 28, 2025 | August 31, 2024 | |||||||
| Intangible assets | ||||||||
| Accumulated amortization | ( | ) | ( | ) | ||||
| Net book value | $ | $ | ||||||
| 6. | DEFERRED INCOME TAXES |
Deferred
income tax asset as of February 28, 2025 of $
| 12 |
JEWETT-CAMERON TRADING COMPANY LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) February 28, 2025 (Unaudited) |
7. BANK INDEBTEDNESS
The
Company has a line of credit agreement in the form of a Contract of Sale & Assignment Agreement with Northrim Funding Services (“Northrim”).
Under the terms of the agreement, Northrim will provide short-term operating capital by either purchasing the Company’s accounts
receivable invoices (“AR invoices”) or as a loan against the Company’s inventory position.
Prior
to June 2024, the Company formerly had a different Bank Line of Credit of $
8. CAPITAL STOCK
Common Stock
Holders of common stock are entitled to one vote for each share held. There are no restrictions that limit the Company's ability to pay dividends on its common stock. The Company has not declared any dividends since incorporation.
The Company has a Restricted Share Plan (the “Plan”) as approved by shareholders on February 8, 2019. The Plan allows the Company to grant, from time to time, restricted shares as compensation to directors, officers, employees and consultants of the Company. The Restricted Shares are subject to restrictions, including the period under which the shares will be restricted (the “Restricted Period”) and subject to forfeiture which is determined by the Board at the time of the grant. The recipient of Restricted Shares is entitled to all of the rights of a shareholder, including the right to vote such shares and the right to receive any dividends, except that the shares granted under the Plan are nontransferable during the Restricted Period.
The Board of Directors has set the compensation for non-executive Directors under the Plan at 25 common shares for each quarter of service. The cumulative amount of shares earned each fiscal year to be granted shortly after the close of that fiscal year. Non-executive Directors also received a one-time initial grant of 225 common shares which were issued in December 2020.
The maximum number of Common Shares reserved for issuance under the Plan will not exceed 1% of the then issued and outstanding number of Common Shares at the time of the grant. As of November 30, 2024 the maximum number of shares available to be issued under the Plan was . In December 2024, the Company issued common shares to officers, directors and employees under the Plan. The value of these shares was $, which reduced the number of shares available under the Plan to as at February 28, 2025.
| 13 |
JEWETT-CAMERON TRADING COMPANY LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) February 28, 2025 (Unaudited) |
9. RESTRICTED SHARE PLAN (cont’d…)
On January 10, 2025, the Board of Directors approved and ratified a new restricted share plan, the 2024 Restricted Share Plan (The “2024 Plan”), which was also approved by the Company’s shareholders on February 21, 2025. The terms of the 2024 are similar to the original Plan and reserves the number of shares under the 2024 Plan to 1% of the issued and outstanding number of Common Shares at the time of the initial grant under the 2024 Plan. Pursuant to the 1% limit, the Company has reserved 35,181 shares under the 2024 Plan.
During the year ended August 31, 2023, common shares were issued under the Plan at an average price of $ per share. shares were granted to Directors without a Restricted Period under the Company’s S-8 Registration Statement. common shares were granted to Officers and Employees and have a three-year Restricted Period.
During the year ended August 31, 2024, common shares were issued under the Plan at an average price of $ per share. were granted to Officers and Directors without a Restricted Period under the Company’s S-8 Registration Statement. common shares were granted to Officers and Employees and have a three-year Restricted Period.
During the six-month period ended February 28, 2025, the Company issued common shares (six months ended February 29, 2024 – common shares) to officers, directors and employees under the RSA. The value of these shares was $ (2024 - $).
10. PENSION AND PROFIT-SHARING PLANS
The Company has a deferred compensation 401(k) plan for all employees with at least 6 months of service pending a monthly enrollment time. The plan allows for a non-elective discretionary contribution plus matching employee contributions up to a specific limit. The percentages of contribution remain the discretion of the Board and are reviewed with management annually For the six-month periods ended February 28, 2025 and February 29, 2024 the 401(k) compensation expense were $ and $, respectively.
11. SEGMENT INFORMATION
The Company has four principal reportable segments. These reportable segments were determined based on the nature of the products offered. Reportable segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance.
The Company evaluates performance based on several factors, of which the primary financial measure is business segment income before taxes. The following tables show the operations of the Company's reportable segments: Pet, Fencing and Other; Industrial wood products; Seed processing and sales; and Corporate and administration.
Following is a summary of segmented information for the six-month periods ended February 28, 2025 and February 29, 2024.
| Schedule of segmented information | ||||||||
| 2025 | 2024 | |||||||
| Sales to unaffiliated customers: | ||||||||
| Industrial wood products | $ | $ | ||||||
| Pet, fencing and other | ||||||||
| Seed processing and sales | ||||||||
| $ | $ | |||||||
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JEWETT-CAMERON TRADING COMPANY LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) February 28, 2025 (Unaudited) |
11. SEGMENT INFORMATION (cont’d…)
| 2025 | 2024 | |||||||
| (Loss) income before income taxes: | ||||||||
| Industrial wood products | $ | ( | ) | $ | ||||
| Pet, fencing and other | ( | ) | ||||||
| Seed processing and sales | ||||||||
| Corporate and administration | ||||||||
| $ | ( | ) | $ | |||||
| Identifiable assets: | ||||||||
| Industrial wood products | $ | $ | ||||||
| Pet, fencing and other | ||||||||
| Seed processing and sales | ||||||||
| Corporate and administration | ||||||||
| $ | $ | |||||||
| Capital expenditures: | ||||||||
| Industrial wood products | $ | $ | ||||||
| Pet, fencing and other | ||||||||
| Seed processing and sales | ||||||||
| Corporate and administration | ||||||||
| $ | $ | |||||||
| Depreciation and amortization: | ||||||||
| Industrial wood products | $ | $ | ||||||
| Pet, fencing and other | ||||||||
| Seed processing and sales | ||||||||
| Corporate and administration | ||||||||
| $ | $ | |||||||
The following table lists sales made by the Company to customers which were in excess of 10% of total sales for the six months ended February 28, 2025 and February 29, 2024:
| Schedule of sales | |||||||||
| 2025 | 2024 | ||||||||
| Sales | $ | $ |
The Company conducts business primarily in the United States, but also has limited amounts of sales in foreign countries. The following table lists sales by country for the six months ended February 28, 2025 and February 29, 2024:
| Schedule of sales by country | ||||||||
| 2025 | 2024 | |||||||
| United States | $ | $ | ||||||
| Canada | ||||||||
| Mexico/Latin America/Caribbean | ||||||||
All of the Company’s significant identifiable assets were located in the United States as of February 28, 2025 and February 29, 2024.
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JEWETT-CAMERON TRADING COMPANY LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) February 28, 2025 (Unaudited) |
12. RISKS
Credit risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and accounts receivable. The Company places its cash with a high quality financial institution. The Company has concentrations of credit risk with respect to accounts receivable as large amounts of its accounts receivable are concentrated geographically in the United States amongst a small number of customers.
At
February 28, 2025, two customers accounted for accounts receivable greater than 10% of total accounts receivable at
Volume of business
The
Company has concentrations in the volume of purchases it conducts with its suppliers. For the six months ended February 28, 2025, there
were three suppliers that each accounted for 10% or greater of total purchases, and the aggregate purchases amounted to $
13. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS
Certain cash payments for the six months ended February 28, 2025 and February 29, 2024 are summarized as follows:
| Schedule of cash payments | ||||||||
| 2025 | 2024 | |||||||
| Cash paid during the periods for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
There were no non-cash investing or financing activities during the periods presented.
14. CONTINGENCIES
In
fiscal 2021, the Company initiated arbitration against a former distributor asserting a breach of the distribution agreement and seeking
damages. In February 2023, the arbitrator issued its decision and ruled in favor of the Company on the majority of its claims. In September
2023, the Company settled the arbitration for a cash payment of $
15. SUBSEQUENT EVENT
Beginning
on March 7, 2025,
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
These unaudited financial statements are those of the Company and its wholly owned subsidiaries. In the opinion of management, the accompanying consolidated financial statements of Jewett-Cameron Trading Company Ltd., contain all adjustments, consisting only of normal recurring adjustments, necessary to fairly state its financial position as of February 28, 2025 and August 31, 2024 and its results of operations and cash flows for the three and six month periods ended February 28, 2025 and February 29, 2024 in accordance with U.S. GAAP. Operating results for the three and six month periods ended February 28, 2025 are not necessarily indicative of the results that may be experienced for the fiscal year ending August 31, 2024. Overall, the operating results of JCC are seasonal with the first two quarters of the fiscal year historically being slower than the final two quarters of the fiscal year.
Business Description
We are committed to improving the lives of professionals and do-it-yourselfers with innovative products that enrich outdoor spaces in their quality, performance, and ease to work with.
The Company’s operations are classified into three reportable operating segments and the parent corporate and administrative segment, which were determined based on the nature of the products offered along with the markets being served. The segments are as follows:
- Pet, Fencing and Other
- Industrial wood products
- Seed processing and sales
- Corporate and administration
Pet, Fencing and Other Operating Segment
We have concentrated on building a customer base for Pet, Fencing and our sustainable related products. Management believes this market is less sensitive to downturns in the U.S. economy than the market for new home construction as its products serve both new and existing home and pet owners. However, the home improvement business is seasonal, with higher levels of sales occurring between February and August. Inventory buildup occurs until the start of the season in February and then gradually declines to seasonal low levels at the end of the summer.
Our wood products, distributed through JCC, are primarily cedar fencing and are not unique. However, Western Red Cedar, which historically has constituted the bulk of our wood fencing, can only be supplied in large volume from a limited number of suppliers and can experience supply shortages on occasion. Other cedar fencing, which serves as a substitute for Western Red Cedar, is more widely available from multiple suppliers. The metal products that JCC manufactures and distributes may be somewhat differentiated from similar products available from other suppliers. We have been successful in garnering key patents and trademarks on multiple products that assist their ability to continue to differentiate based on design and functionality.
We own the patents and manufacturing rights connected with the Adjust-A-Gate® and Fit-Right® products, which are the gate support systems for wood, vinyl, chain link, and composite fences, in addition to our trade secret industry practices and well-known trademarked brands. We believe the ownership of these patents and trademarks is an important competitive advantage for these and certain other products. We completed our purchase of the full global trademark rights for Adjust-A-Gate® and filed its registration with the US Patent and Trademark Office in February 2023. As of the close of fiscal 2024, the Company owns 7 US Patents and 1 patent application pending in the US, Canada, and Mexico relating to its fencing products.
Backlog orders have typically not been a factor in this business as customers may place firm priced orders for products for shipments to take place three to four months in the future which gives us time to order, manufacture and receive the goods at our warehouse in time to fulfill the customer’s order.
Industrial Wood Products - Greenwood
Greenwood is a wholesale distributor of a variety of specialty wood products. Current products are focused on the transportation industry. Greenwood’s total sales for fiscal 2024 and 2023 were 8% and 5%, respectively, of total Company sales.
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The primary market in which Greenwood competes has decreased in economic sensitivity as users are incorporating products into the municipal and mass transit transportation sectors. However, these markets sustained some contractions in recent years due to COVID-19 as work shifted from offices to homes, and many individuals utilized public transit less due to concerns over exposure. In addition, this segment is prone to disruption of supply chain support which can impact other commodities outside of those specific to the disruption.
Greenwood utilizes contract manufacturers to supply its products. Inventory is maintained at non-owned warehouses and wood treating facilities throughout the United States and is primarily shipped to customers on a just-in-time basis. Inventory is generally not purchased on a speculative basis in anticipation of price changes as we order the products from the manufacturers and warehouses once a customer places an order with us.
Greenwood has no significant backlog of orders.
Seed Processing and Sales - JCSC
JCSC operated out of a Company-owned 11.6 acre facility located adjacent to North Plains, Oregon. JCSC processed and distributed agricultural seed. Most of this segment’s sales came from selling seed to distributors with a lesser amount of sales derived from cleaning seed.
We ended regular operations at JCSC effective August 31, 2023 and have sold all of our remaining seed inventory and are working to sell the remaining JCSC equipment. Seed storage operations continued through July, 2024.
In July 2024, we listed the JCSC property for sale or lease. The combined size of the buildings is approximately 109,500 square feet. One of the buildings is specialized for the seed industry, while most are metal warehouse buildings with power, allowing a wide array of possible uses. The property is currently zoned “Rural Industrial” (RIND), which allows for use of the existing property, or development of the site, as approved by Washington County. We are exploring the potential to re-zone the property, or revise the existing code, to expand the list of permitted uses. The listed sale price of the property is $9,000,000. This is the current asking price, and there is no guarantee the property will sell for this amount. If we are able to complete a sale, the net proceeds will be reduced by brokers’ commissions, expenses related to the sale, and taxes.
Corporate and Administration – JC USA
JC USA is the parent company for Greenwood, JCC and JCSC as described in Note 1 to Notes to Consolidated Financial Statements. JC USA operates out of our offices in North Plains, Oregon and provides professional and administrative services, including warehousing, accounting and credit services, to JCTC’s subsidiary companies.
Company Products
The Company’s mission is to improve the lives of professionals and do-it-yourselfers with innovative products that enrich outdoor spaces. We design, source, commercialize and distribute our products. Many are patent protected and all are well crafted for their quality, performance, and ease to work with.
The Fencing, Pet and Other businesses are conducted by JCC, which operates out of a 5.6 acre owned facility located in North Plains, Oregon that includes offices, a warehouse, and a paved yard. JCC uses contract manufacturers to make all products. Some of the products that JCC distributes flow through our distribution center located in North Plains, Oregon, and some are shipped direct to the customer from the manufacturer. Primary customers are home centers, eCommerce providers, other retailers, distributors, and direct sales to consumers.
The Industrial Wood Products segment is conducted by Greenwood, a processor and distributor that operates out of the same facilities in North Plains, Oregon. Greenwood contracts with custom manufacturers for its products. Inventory is maintained at non-owned warehouses and wood treating facilities throughout the United States and is primarily shipped to customers on a just-in-time basis.
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Fencing Products
Our fencing business crafts durable, functional fencing solutions that bolster security, privacy, and beauty. Our primary products include:
| · | The Adjust-A-Gate® family of products are straightforward, lifelong solutions that eliminate measurement issues. Complete steel frame gate kits to perfectly fit openings for wood fences and never sag. Easy enough for homeowners, but with superior quality that meets the demands of the professional contractor. |
| · | Fit-Right® is a fully adjustable gate system for chain link gates. This custom solution is perfect for when a special sized chain link gate opening is needed. Equipped with all the necessary parts, building a gate on-site eliminates measurement issues for the right fit the first time and every time. |
| · | Lifetime Steel Post® offers unmatched strength and versatility in fencing. This post offers versatile support for a range of fence designs and styles, allowing flexibility to showcase the posts or keep them discreetly hidden. |
| · | Euro Fence offers the beauty of wood without the upkeep, featuring durable wood/plastic composite materials. With locking tongue & groove composite and aluminum boards, it provides UV protection, never needs paint or stain, and installs easily in-ground or mounted. |
| · | Perimeter Patrol® Portable Security Panels create an enclosed space or linear fence for outdoor areas. Perfect for crowd control, job site security, outdoor events, enclosed storage areas and more. |
| · | Cedar fencing is a premium softwood known for its unique blend of beauty and durability. Its natural resistance to decay enhances its longevity, while its ease of cutting, sawing, and nailing with standard tools makes it a preferred choice for versatile applications. |
Pet Products
Our Lucky Dog® brand is dedicated to keeping pets safe and happy with exceptional quality, long-lasting products that put your pet first. Our primary pet products are:
| · | Lucky Dog® STAY Series Studio Kennels built with long-lasting steel frames and powder coated finish. The waterproof polyester cover offers UPF 50+ protection and is designed for ultimate comfort. |
| · | Lucky Dog® Outdoor Kennel Covers provide durable, waterproof protection with UPF 50+ sun defense. Designed for year-round comfort, they fit securely over Lucky Dog® Kennels. |
| · | Lucky Dog® Dwell Series® Crates offers peace of mind with secure latches, rust-resistant E-coating along with a patented sliding side door and patented corner stabilizers. With a top handle for easy transport and a divider panel for flexible space, they offer durability and convenience. |
| · | Lucky Dog® Exercise Pens provide a secure space for pets with sturdy, rust-resistant wire construction. Featuring a step-thru door, tool-free setup, and fold-flat design for easy storage, these pens are perfect for both indoor and outdoor use. |
Sustainable Products
Our newest product category is Sustainable and Post-Consumer Recycled (“PCR”) bag products. Sold under the MyEcoWorld® brand, it is making a tangible, positive difference to the planet by working to reduce conventional single-use plastic in our daily lives.
We offer two types of bag products. The Compostable bags are made with 30% corn. The PCR Products are certified to the Global Recycled Standard (GRS) to contain recycled material that has been independently verified at each stage of the supply chain, from the source to the final product, and cost less than compostable bags.
Our primary Sustainable Products are:
| · | Food Waste Bags that are certified compostable and worm-safe. These durable bags offer puncture resistance, odor control, and pest deterrence, ensuring reliable use and a cleaner kitchen environment. |
| · | Yard Waste Bags that are suitable for a variety of composting methods, including home, curbside pickup, and industrial composting facilities. |
| · | Pet Poop Bags that ensure no breaks or leaks while keeping the user’s hands clean. |
Industrial Wood Products
Greenwood Products specializes in engineering advanced noise and vibration reduction panels for transit buses, motor coaches, light rail cars, and boats. Our dB-Ply® proprietary acoustical panel is a cost-effective product designed to reduce vibration and sound transmission to meet mandated interior noise requirements. Greenwood’s other products include durable, high-performance structural panels tailored for a wide range of industrial applications, and Jumbo Concrete Forms designed to reduce installation time and lower job-site labor costs.
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Seed Segment
The Company formerly operated agricultural seed processing, distribution and sales through JCSC. Most of this segment’s sales were derived from selling seed to distributors with a lesser amount of sales derived from cleaning seed. During the fiscal year ended August 31, 2023, the Company decided to close its JCSC seed subsidiary effective August 31, 2023. JCSC has now been wound up and all remaining assets have been transferred to JC USA.
Results of Operations
During the second quarter, we continued our focus on our core products while progressing in our efforts to lower our costs through multi-sourcing of our products and rationalizing our personnel assignments to improve operational efficiencies.
Sales increased by 10% in the current fiscal second quarter compared to the second quarter of fiscal 2024. Strength in fencing, primarily in Lifetime Steel Posts® (“LTP”), offset declines in Industrial Wood due to difficult year over year comparisons, and lingering weakness in consumer spending on pet products. Margins were lower in the current quarter due to specific product mix and the costs involved with the LTP program, including the initial one-time costs of deploying new displayer units in additional stores. We have now taken steps to pare down the costs of these new displayer units which we expect will result in higher margins for LTP going forward.
Fence products are our largest category, and we continue to focus on growing our sales in this segment. The ongoing rollout of our in-store displayers for our LTP product accelerated during the second quarter. By the end of February, our new in-store displayers were in 334 Home Depot and Lowe’s stores. This exceeded our original goal of 300 installations by the end of the second quarter ahead of the traditional fence installation season during the Spring and Summer months. These in-aisle display units are positioned adjacent to the lumber bays, which may result in additional sales of complementary wood products.
The durability, strength, and easier installation of LTP makes it popular with both DIY consumers and professionals Traditional wood fence posts are prone to rot, decay, and fail over time. Lifetime Steel Posts® are engineered to last a lifetime, providing a maintenance-free, corrosion-resistant alternative for wood fence post construction. Installation is faster and less expensive than similar wood posts, which requires smaller diameter post holes and less concrete. In many areas of the country LTP can be driven directly into the ground using hydraulic post drivers in a matter of seconds with no concrete needed which saves both time and cost. We anticipate the need for replenishment orders for these displayers during the second half of fiscal 2025 as the initial supply is sold through.
We have also added to our fencing gate line with the launch of our new Adjust-A-Gate® Unlimited in December. This product is a fully adjustable complete gate kit. It features a low profile, corner bracket solution that allows for fully adjustable gate designs customizable for each unique project yet is easy to install by both professionals and DIYers of all skill levels. The Adjust-A-Gate® Unlimited is sold as an all-in-one complete integrated system at a competitive price point compared to other gate kits that require purchasing additional parts such as latches, hinges and other components to complete a gate project. Our original full frame Adjust-A-Gate® kits have been featured in thousands of stores in their own in-aisle display units. Last summer we expanded into over 1,500 additional stores with these displayers and we continue to add stores for the upcoming fencing season.
The availability of cedar fencing can be constrained by factors such as shortages in log material as well as labor challenges from time to time. This can tighten supply and result in increased costs of sourcing. In recent years we have mitigated some of the Western Red Cedar constraints by offering Japanese Cedar, or Sugi Cedar, as a high-quality alternative. Sugi fencing sells for a lower price than Western Red Cedar which can negatively affect our margins, but we are looking for ways to improve our margins on this product. As Sugi Cedar continues to be more available and consumers become more familiar with its similarities to Western Red Cedar for fence applications, we believe demand for this product at competitive pricing may shift consumer sentiment more towards it as a quality alternative. We are evaluating options to optimize our importing of Sugi Cedar from Asia to offer our customers competitive pricing and improve our margins where possible. We will continue to monitor the potential impact of new tariffs and any possible exemptions of product classes that may be applied to our wood fence imports.
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Sales of our pet products remain limited by continuing weak consumer demand in the sector which have restrained new orders from retailers continuing to be burdened by large product inventories. We continue to pursue new sales relationships in this sector, and our direct sales to consumers through our own online store have picked up. We have made significant progress in reducing our overall pet product inventory, which is down 17% year-over-year from February 2024 and nearly 60% from February 2023. With the significant increases in import tariffs, particularly in steel products, our inventory on hand in our US warehouse may become further price competitive against new imported products going forward.
MyEcoWorld® secured its first grocery store placement with the launch of Pet Waste Bags into 59 Tops Friendly Markets across the Northeast beginning in late February. Our MyEcoWorld® sustainable and Post-Consumer Recycled (PCR) bags continue to gain traction in the marketplace as consumers continue to look quality sustainable as alternatives to disposable traditional single-use plastics.
At Greenwood, sales for the current six-month period were down compared to the year-ago period. However, sales in the prior six months were buoyed by transit operators buying components to catch up on fleet maintenance they deferred during the pandemic. The continued push for workers to return to the office suggests that demand from the transit sector will continue to stabilize. Although the new tariffs on Canadian wood products could raise prices for our raw materials in future periods, Greenwood's materials currently appear to be exempt on the applicable schedule at this time. We have recently hired two new traders who are focusing both on growing our customer base in our primary transit sector and developing new markets for our industrial wood products.
The current prevailing issue for industry and consumers alike is the recently announced higher US import tariffs. The diversification of our suppliers to additional countries beyond China is successfully allowing us to mitigate some of the recent tariff increases. China sourced products were already subject to a 25% tariff implemented in 2019, with additional tariffs added in February and March 2025, and further tariffs announced in April 2025. Our new supply agreements with factories in Bangladesh, Vietnam, Malaysia and Taiwan mitigate the higher China specific tariffs, but are variously affected by other new tariffs. Steel and aluminum products from all countries outside the US are subject to the 25% global tariff rate, while all imports not included on the exemption list from all countries were assigned a baseline 10% tariff in April 2025. Steel and aluminum imports which are assigned the 25% tariff are presently exempt from the 10% baseline and any reciprocal tariffs on top of the 25% rate.
The new tariffs are a fluid and complicated situation that will become more clear over time due to ongoing negotiations as well as interpretations to exemptions being applied to various product categories. Initially, it appears the steel and aluminum products we import from Vietnam and Bangladesh will be subject to a lower tariff rates than those same products manufactured in China. Even with increased cost to produce our products in other countries and different freight costs, the landed costs are expected to be less than the costs associated with China-sourced products. Management began pursuing multiple suppliers in 2023 and as a result we are able to reduce to a certain extent the tariff impact to our customers. In fiscal 2024, more than 80% of our imported inventory purchases were from China-based suppliers. Our purchases for fiscal 2025 are currently expected to be less than 40% from China and likely to be significantly less in fiscal 2026.
The higher tariffs, including the significantly higher tariffs on the products we continue to source from China, is requiring us to raise our prices to our customers to compensate. In March 2025, we sent a letter to all of our customers notifying them of an upcoming price increase to address these new costs. We are currently working with customers on the final pricing and the expected start date for the new prices. Although consumers will eventually adjust their buying to accept higher prices over time, it is likely to dampen demand in the short-term until consumers become more accepting of the higher prices. These increased costs will also likely negatively affect our margins in the short term and we are able to successfully mitigate some of the higher tariff costs through various pricing and other strategies. However, these tariffs do not just affect our products, but will impact all imported goods into the US, including many of those of our competitors as well.
We continue to look for operational efficiencies and cost savings in all aspects of our business. We have realigned our employees as part of our strategic plans to increase sales in our core products while developing both new and improved products. We have added employees to Greenwood to support our growth initiatives in Industrial Wood, and hired new employees in other key areas, including sales, marketing, and product innovation. At the end of the second quarter, our full-time employee count was 11% lower than at the end of the second quarter of fiscal 2024.
The surplus Jewett-Cameron Seed property of 11.6 acres of land and 109,500 square feet of buildings is listed for sale at a price of $9,000,000, which we believe continues to be a competitive price based on comparable properties in the area. This is the current asking price and there is no guarantee the property will sell for this amount. A number of parties have reviewed the listing and the property, but no serious offers have been received to date. The land is currently zoned with a rural industrial classification but is well situated on a corner lot at a major interchange immediately adjacent to US Highway 26, which is one of the region’s busiest roadways. The Company is exploring the potential to expand the list of permitted uses for the property, including a possible re-zoning by the governing authority. A reclassification would provide interested parties with greater flexibility of development options.
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Our current inventory level and product mix has improved over prior periods, as we have continued to reduce the inventory of our pet products and increased the inventory of our core products, including LTP and Adjust-a-Gate. This enhanced product mix will allow us to more quickly and efficiently meet the anticipated restocking of the new in-store display units during the busy fencing season in the second half of our fiscal year.
Consumer sentiment and economic conditions continue to be challenging due to the impact of inflation, high interest rates, and disruptions and uncertainty over higher import tariffs and trade policy. These circumstances are affecting the entire industry and are largely outside of any company’s control, but we are taking actions to limit their effect on our business and minimize disruptions to our operations and customers. The new higher tariff rates are increasing our costs for most of our products, both directly and indirectly. This will require us to increase our prices to our customers. Similar to what we experienced with the historically high inflation rates over the last several years, the higher prices caused by the new tariffs may result in lower short-term demand for our products from consumers until they become more accepting of higher prices across the entire economy. DIYers are particularly price sensitive in the short-term, but less so for Professionals. Further developing our engagement with Professionals, particularly in the fencing segment, will help us diversify and increase our end users. These professionals may also serve as Brand Ambassadors and influencer for our products, as well as providing important product input that helps us develop new product innovations that meet their needs.
Although the current economic climate and tariff uncertainty provides significant short-term issues, our focus remains on designing quality, affordable, functional solutions than enrich outdoor spaces. Jewett-Cameron has withstood many economic challenges in our over 70 years in business by successfully adjusting to unpredictable markets. We will continue to lead with innovation to dependably provide quality products that improve the lives both professionals and DIYers at affordable prices.
Three Months Ended February 28, 2025 and February 29, 2024
Sales for the three months ended February 28, 2025 were $9,054,951 compared to sales of $8,229,192 for the three months ended February 29, 2024, which was an increase of $825,759, or 10%. Sales in the current quarter were increased by the rollout of the LTP in-store displayers and higher sales at Greenwood.
Sales at JCC were $7,943,319 in the three months ended February 28, 2025 compared to sales of $7,383,965 for the three months ended February 29, 2024. This represents an increase of $559,354, or 8%. The higher revenue was due to the stocking of the LTP in-store displayers, while pet sales remained weak. Operating loss for the current quarter was ($834,127) compared to an operating loss of ($934,557) for the quarter ended February 29, 2024. The operating results of JCC are historically seasonal with the first two quarters of the fiscal year being slower than the final two quarters of the fiscal year.
Sales at Greenwood were $1,111,632 compared to sales of $824,073 for the three months ended February 29, 2024, which is an increase of $287,559, or 35%. We have added additional traders which have contributed to the increase in sales. For the three months ended February 28, 2025, Greenwood had an operating loss of ($24,035) compared to an operating loss of ($20,234) for the three months ended February 29, 2024.
Active operations at JCSC ended as of December 31, 2023, and all storage activity ended in July 2024. There was no revenue or expenses from JCSC in the current quarter compared to revenue of $21,153 for the quarter ended February 29, 2024
JC USA is a holding company for the wholly-owned operating subsidiaries, and thus the overall results of JC USA are eliminated on consolidation. For the quarter ended February 28, 2025, JC USA had an operating profit of $97,078 compared to an operating profit of $242,046 for the quarter ended February 29, 2024.
Gross margin for the three months ended February 28, 2025 was 20.1% compared to 25.1% as of February 29, 2024. The decrease was due to a less favorable mix of products sold during the quarter. Our margin for the current quarter was also negatively affected by higher logistics and ocean shipping costs and our investment in the new in-store fencing product display units.
Operating expenses decreased by $205,008 to $2,586,195 compared to expenses of $2,791,203 for the three months ended February 29, 2024. The decline was primarily due to lower Wages and Employee Benefits, which fell to $1,564,799 from $1,732,738 which was related to a lower employee headcount in the current quarter. Selling, General and Administrative expenses declined to $940,168 from $967,426, and Depreciation and Amortization decreased to $81,228 from $91,039 Interest income was $9,096 compared to $19,819 for the quarter ended February 29, 2024. Other income in the current quarter was $306, and there was a Loss on the sale of assets of ($568) in the year-ago quarter.
Income tax recovery for the three-month period ended February 28, 2025 was $187,991 compared to a recovery of $173,291 in the three months ended February 29, 2024. The Company estimates income tax expense for the quarter based on combined federal and state rates that are currently in effect.
Net loss for the quarter ended February 28, 2025 was ($573,094), or ($0.16) per basic and diluted share, compared to a net loss of ($534,145), or ($0.15) per basic and diluted share, for the quarter ended February 29, 2024.
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Six Months Ended February 28, 2025 and February 29, 2024
Sales were $18,321,951 for the six months ended February 28, 2025 compared to sales $18,035,033 for the six months ended February 29, 2024, which is an increase of $286,918, or 2%.
Sales at JCC rose to $16,368,287 for the six months ended February 28, 2025 from sales of $16,006,938 for the six months ended February 29, 2024, which was an increase of $361,349, or 2%. Current sales were positively affected by the roll-out of the new LTP in-store display units, which has grown to over 300 store installations by the close of the quarter. Operating loss at JCC for the six months ended February 28, 2025 was ($1,754,365) compared to operating loss of ($1,998,898) for the six months ended February 29, 2024. Overall, the operating results of JCC are seasonal with the first two quarters of the fiscal year being slower than the final two quarters of the fiscal year.
Sales at Greenwood were relatively flat at $1,953,665 in the current six months compared to sales of $1,958,424 for the six months ended February 29, 2024. We hired additional traders and reassigned some employees to Greenwood in the current six months to support our efforts to increase sales by opening new sales channels and adding new customers, both within the transit sector and in new sectors such as construction. Sales in the prior year’s period were boosted by higher demand by municipalities and transit operators catching up on deferred vehicle maintenance post-pandemic. For the six months ended February 28, 2025, Greenwood had an operating loss of ($47,865) compared to operating income of $41,383 for the six months ended February 29, 2024.
JCSC operations were permanently closed as of December 31, 2023, and storage activity ended in July 2024. Therefore, there was no revenue or income from JCSC in the current six-month period compared to revenue of $69,672 and an operating profit of $38,392 for the six months ended February 29, 2024.
JC USA, the holding company that provides professional and administrative services for the wholly-owned operating subsidiaries had operating income of $205,798 for the six months ended February 28, 2025 compared to operating income of $505,263 for the six months ended February 29, 2024. The results of JC USA are eliminated on consolidation.
Gross margin for the six-month period ended February 28, 2025 was 19.2% compared to 22.3% for the six months ended February 29, 2024. Our costs for the current quarter were negatively affected by higher logistics and ocean shipping costs and our investment in the new in-store fencing product display units.
Operating expenses for the six months ended February 28, 2025 declined by 7% to $5,138,242 from $5,536,508. Selling, General and Administrative Expenses fell to $1,749,380 from $1,915,907. Wages and Employee Benefits fell to $3,226,567 from $3,431,658 due to a lower employee headcount in the current period. Depreciation and Amortization decreased to $162,295from $188,943 for the six months ended February 29, 2024.
Other items in the current six-month period included Other income of $306, Interest income of $31,094 and gain on sale of assets of $800. In the prior six-month period ended February 29, 2024, the Company settled its arbitration case against one of its former distributors for a cash payment of $2,450,000. This one-time gain was included in other income. Other items included a gain on sale of assets of $89,087 which was largely due to the sale of JCSC equipment, and net interest income of $12,964.
Income tax recovery for the six months ended February 28, 2025 was $364,621 compared to income tax expense of ($278,745) for the six months ended February 29, 2024. The Company estimates income tax expense for the period based on combined federal and state rates that are currently in effect.
Net loss for the six months ended February 28, 2025 was ($1,231,811), or ($0.35) per basic and diluted share, compared to net income for the six months ended February 29, 2024 of $757,395, or $0.22 per share which was positively affected by a one-time gain related to the arbitration settlement in October 2023.
LIQUIDITY AND CAPITAL RESOURCES
As of February 28, 2025, the Company had working capital of $19,086,483 compared to working capital of $20,548,093 as of August 31, 2024, a decrease of $1,461,610.
Cash and cash equivalents totaled $435,635, a decrease of $4,417,732 from cash of $4,853,367. The decrease was due to the purchase of inventory for the busier Spring and Summer seasons, which rose to $14,881,766 from $13,157,243, the timing of collection of accounts receivable, which rose to $5,636,877 from $3,668,815, and prepaid expenses, which are largely related to down payments for future inventory purchases, which increased to $1,485,244 from $891,690. Prepaid income taxes fell to $27,075 from $50,326.
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Asset held for sale was unchanged at $566,022. This asset is the 11.6 acres of land and 109,500 square feet of buildings which formerly housed JCSC operations. The property and buildings are listed for sale at a price of $9,000,000, though there is no guarantee the property will sell for this amount.
Current liabilities increased to $3,946,136 from $2,639,370. Accounts payable increased to $2,305,136 from $1,237,988, and accrued liabilities increased to $1,641,000 from $1,401,382.
As of February 28, 2025, accounts receivable and inventory represented 89% of current assets and 74% of total assets compared to 73% of current assets and 61% of total assets as of August 31, 2024.
For the three months ended February 28, 2025, the accounts receivable collection period, or DSO, was 55 compared to 52 for the three months ended February 29, 2024. For the six-month period ended February 28, 2025, the DSO was 55 compared to 47 for the six months ended February 29, 2024. Inventory turnover for the three months ended February 28, 2025 was 175 days compared to 258 days for the three months ended February 29, 2024. For the six months ended February 28, 2025, inventory turnover was 172 days compared to 232 days for the six months ended February 29, 2024.
External sources of liquidity include an asset-based line of credit agreement with Northrim Funding Services (“Northrim”) which we established in fiscal 2024. Under the terms of the agreement, Northrim will provide short-term operating capital by either purchasing the Company’s accounts receivable invoices (“AR invoices”) or as a loan against our inventory position. The maximum amount of AR invoices Northrim will purchase at one time is limited to an amount equal to 80% of the net eligible accounts but is not to exceed $6,000,000. Borrowing against our inventory is computed as an amount equal to 25% of all eligible inventory but is not to exceed $4,000,000. The maximum total draw the Company may borrow under the line is $6,000,000. Interest is computed at the prime rate plus 4.75% with floor of 11%, and is secured by certain or our assets. The line expires on June 30, 2025. There was no borrowing under this line as of February 28, 2025. Subsequent to the end of the six-month period, in March 2025 the Company drew its initial borrowings against this line. We have drawn approximately $3,000,000 to fund inventory purchases to meet expected demand ahead of our historically busy sales season of Spring and Summer. We have also begun discussions with the lender to renew the line, which is currently set to expire on June 30, 2025.
During the six months ended February 28, 2025, the Company issued 13,317 common shares to officers, directors and employees under the Restricted Share Plan. The value of these shares was $59,926.
Current Working Capital Requirements
Based on the Company’s current working capital position, combined with the expected timing of accounts receivable and the capital available under our Line of Credit, the Company is expected to have sufficient liquidity available to meet the Company’s working capital requirements for the next twelve months.
OTHER MATTERS
Tariffs
Our metal and other products have historically been mostly manufactured in China and are imported into the United States. Beginning in 2018, the Office of the United States Trade Representative (“USTR”) instituted new tariffs on the importation of a number of products into the United States from China. These initial tariffs were a response to what the USTR considers to be certain unfair trade practices by China. The tariffs began at 10%, and subsequently were increased to 25% as of May 2019.
Prior to fiscal 2024, our metal products were primarily manufactured in China and subject to the full 25% tariff rate. During fiscal 2024, we engaged suppliers in countries outside of China, including Bangladesh, Vietnam, Malaysia, Taiwan, and Canada. Products manufactured in and imported from these countries were not subject to the China-specific tariffs, but were subject to other duties and fees that are typically much lower than the then 25% tariff on Chinese manufactured metal products.
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Beginning in January 2025, the new administration in the United States began to increase tariff rates on numerous products from a range of nations. Imported steel and aluminum products from all countries globally were assigned a new tariff rate of 25% on top of any country or product specific rates. In early April 2025, the US imposed a universal baseline 10% tariff rate on imports globally along with a list of product exemptions. The current schedules exempt steel and aluminum products which are subject to the 25% global steel and aluminum tariff from the 10% universal baseline tariff and from any reciprocal tariffs. Therefore, our steel products imported from countries other than China are subject to only the 25% rate. China, however, has been assigned special rates. Tariff rates on steel products imported from China were at 70% as of the end of March 2025, consisting of the 2019 tariff of 25%, February 2025 tariff of 10%, March 2025 tariff of 10%, with the additional 25% steel and aluminum tariff. Additional China specific tariffs announced in April 2025 could increase these rates even higher.
We are continuing our shift to suppliers outside of China which have lower tariff rates. We also face uncertainty in the interpretation of new tariffs and their applicability, including with respect to customs valuation, product classification and country-of-origin determinations. Although we and our suppliers seek to comply with applicable customs laws and regulations, the application of rules regarding new tariffs can be subject to varying interpretations or future re-interpretations. It is possible that US or other relevant authorities could, upon review or audit, disagree with the valuation, rules of origin or classification methods applied to certain products. Any such disagreement could result in the retroactive assessment of additional duties with interest, the imposition of penalties, or other enforcement actions without the ability to mitigate such penalties, thereby adversely affecting our operations or financial results. Furthermore, certain of our competitors may be better positioned than us to withstand or react to border taxes, tariffs or other restrictions on global trade and as a result, we may lose market share to such competitors. Due to broad uncertainty regarding the timing, content and extent of any regulatory changes in the U.S. or abroad, we cannot predict with certainty the impact, if any, that these changes could have to our business, financial condition and results of operations.
Inflation
Since fiscal 2021, a number of product costs have increased substantially, including raw materials, energy, and transportation/logistical related costs. These higher costs have negatively affected our gross margins. Historically, we have passed cost increases on to the customer, but the rapid rise of prices over the last several years has resulted in consumers significantly reducing discretionary spending which has made the market much more price sensitive. This has made retailers more reluctant to accept higher prices for our goods which has limited our ability to raise our selling prices quickly enough to match the rate of increase of our costs. Our ability to pass through all of the current increase in our product costs to our customers is somewhat limited and occur after such costs are first incurred. Although management is working to mitigate such cost increases through the new sourcing agreements and modifying logistic agreements, we expect that our gross margins will remain under pressure in fiscal 2025.
The increases in interest rates as a result of the higher level of inflation in the US economy experienced beginning in calendar 2021 and continuing through 2024 has also had a negative effect on our interest expense charged on any borrowing on our lines of credit. The interest rate on our current line of credit is computed using the Prime Interest Rate, which has risen from 3.25% in January 2022 to approximately 7.50% in February 2025. There were no amounts outstanding under this line of credit as of February 28, 2025. However, beginning on March 7, 2025, the Company began drawing against its asset-based line of credit to fund its usual seasonal build of inventory to meet its anticipated needs for the busy Spring and Summer seasons. The Company has drawn approximately $3,000,000 at a current interest rate of 12.25%.
Environmental, Social and Corporate Governance (ESG)
Jewett-Cameron endeavors to be a good steward and provide sustainable products with a positive impact. We strive to operate and grow in a way that honors our environment and relationships for the long term. This also aligns with one of our three value pillars: stewardship.
Environmental
For our products, the goal is that 90% of materials can be recycled. Our suppliers are audited to strict commercial and fair practice standards, including our own supplier qualifications regarding facilities, capacity, labor practices, and environmental awareness. Packaging is designed to maximize recyclability and re-use and minimize non-recycled materials, and all waste materials in our own facilities are segregated to maximize recycling. Our facilities have replaced high energy consumption infrastructure with energy efficient HVAC and lighting during our most recent remodel.
Active products and designs utilize either recycled or non-petroleum-based plastics to enhance recycling and composting. This includes the recently introduced compostable dog waste bag, a plant-based product, that is less reliant on fossil fuels used in traditional plastic bags. We also dedicate a percentage of sales to support environmental cleanup efforts.
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Social
Our social responsibilities include cultural standards of operations and values which we establish in conjunction with our employees. We regularly provide employees with a corporate engagement survey to benchmark their engagement, satisfaction, and ideas for change. We support educational programs that build the future workforce through active participation in regional and statewide organizations, including the CTE/STEM Employer Coalition and assisting teachers to connect traditional school subjects to practical job site applications. We also actively participate in the local community, supported by a Corporate Charitable Giving Charter.
Governance
As a public company, our processes are outlined and governed by multiple regulations, including the Sarbanes-Oxley Act of 2002. Our financial controls are mapped, executed, self-audited as well as regularly audited by outside experts as part of our annual process. We have established risk mitigations that allows for condensed reviews of risks and impacts with our systems in place. An IT Governance Committee aligns execution and security both for ourselves and also for parties with whom we communicate and do business.
Uyghur Forced Labor Prevention Act
The Uyghur Forced Labor Prevention Act (“UFLPA”) is a US Federal Law signed by President Biden in December 2021 which became effective on June 21, 2022. As enforced by U.S. Customs and Border Protection, the UFLPA prohibits any products that are made, mined, or manufactured, in part or in full, in China’s Xinjiang Uyghur Autonomous Region to be imported into the United States, as they are presumed to have been made with forced labor. Any imports of such goods will be detained and seized by U.S. Customs unless the importer is able to prove that these goods have not been made with forced labor. The Company has ensured that each of its suppliers is in full compliance with the law and none of its products fall under the prohibited goods clause.
Business Risks
This quarterly report includes “forward–looking statements” as that term is defined in Section 21E of the Securities Exchange Act of 1934. Forward-looking statements can be identified by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “could,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates,” “anticipates,” or “hopeful,” or the negative of those terms or other comparable terminology, or by discussions of strategy, plans or intentions. For example, this section contains numerous forward-looking statements. All forward-looking statements in this report are made based on management’s current expectations and estimates, which involve risks and uncertainties, including those described in the following paragraphs.
Risks Related to Our Business
We could experience a decrease in the demand for our products resulting in lower sales volumes.
In the past we have at times experienced decreasing products sales with certain customers. The reasons for this can be generally attributed to: increased competition; general economic conditions; demand for products; and consumer interest rates. If economic conditions deteriorate or if consumer preferences change, we could experience a significant decrease in profitability.
If our top customers were lost, we could experience lower sales volumes.
For the six months ended February 28, 2025, our top ten customers represented 96% of our total sales, and our single largest customer was responsible for 36% of our total sales. We would experience a significant decrease in sales and profitability and would have to cut back our operations, if these customers were lost and could not be replaced. Our top ten customers are located in North America and are primarily in the retail home improvement and pet industries.
We are dependent upon third-party manufacturers and suppliers for substantially all our of products
We do not have any manufacturing capabilities and rely on a limited number of contract manufacturers located outside the United States for the majority of our products. Our reliance on contract manufacturers involves certain risks, including:
| · | Production disruptions or delays at the factory as a result of political instability, labor unrest, mechanical issues, natural disasters, or pandemic outbreaks; |
| · | Capacity constraints; |
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| · | Inability to control the quality of the finished products; |
| · | Inability to control manufacturing and delivery schedules; |
If our products are delayed or cannot be supplied in a timely manner, we risk losing revenue and customers. Developing alternate sources of supply for our products that meet our requirements may be time-consuming, difficult, and costly, and we may not be able to source our products on terms that are acceptable to us, or at all, which will have a negative effect on our revenue and financial condition.
We face significant competition, which could reduce the demand for our products.
Our revenue depends in part on maintaining and growing the sales of our current products in both existing and new markets, but also by improving existing products and developing new products. There is substantial competition among companies in each of our market sectors, and a number of companies market products that compete directly with our products. Current and potential customers may consider these products from our competitors to be superior to or less expensive than our products. Some of these competitors may also have greater financial, manufacturing, and sales and market resources than us. If we are unable to effectively compete with these other products and companies, we would likely lose market share which would result in a decrease in revenue and profitability.
We could experience delays in the delivery of our products to our customers causing us to lose business.
We purchase our products from other vendors and a delay in shipment from these vendors to us could cause significant delays in our delivery to our customers. Such disruptions may include adjustments to ocean shipping schedules, labor strikes or other job-related actions by workers within the supply chain, geopolitical unrest, longshoreman or rail strikes, geopolitical unrest, or government actions. This could result in a decrease in sales orders to us and we would experience a loss in profitability.
Governmental actions, such as tariffs, and/or foreign policy actions could adversely and unexpectedly impact our business.
Since the bulk of our products are supplied from other countries, political actions by either our trading country or our own domestic policy could impact both availability and cost of our products. Currently, we see this in regard to tariffs being levied on foreign sourced products entering into the United States, including from China. Beginning in January 2025, the new administration in the United States began to increase tariff rates on numerous products from a range of nations. Imported steel and aluminum products from all countries globally were assigned a new tariff rate of 25% on top of any country or product specific rates. In early April 2025, the U.S. imposed a universal baseline tariff rate of 10% on all imports globally, although steel and aluminum products tariffed at the 25% rate are exempted from the additional baseline 10% tariff. China, however, has been assigned special additional rates. For steel and aluminum products imported from China, the rates were at 70% at the end of March 2025, but additional China specific tariffs announced in April 2025 could result in even higher tariff rates for those products. We also face uncertainty in the interpretation of new tariffs and their applicability, including with respect to customs valuation, product classification and country-of-origin determinations. Although we and our suppliers seek to comply with applicable customs laws and regulations, the application of rules regarding new tariffs can be subject to varying interpretations or future re-interpretations. It is possible that U.S. or other relevant authorities could, upon review or audit, disagree with the valuation, rules of origin or classification methods applied to certain products. Any such disagreement could result in the retroactive assessment of additional duties with interest, the imposition of penalties, or other enforcement actions without the ability to mitigate such penalties, thereby adversely affecting our operations or financial results. Furthermore, certain of our competitors may be better positioned than us to withstand or react to border taxes, tariffs or other restrictions on global trade and as a result, we may lose market share to such competitors. We cannot control the duration or depth of such actions which may increase our product costs which would in turn reduce our margins and potentially decrease the competitiveness of our products. These actions could have a negative effect on our business, results of operations, or financial condition.
Inflation could adversely affect our business
Inflation has many impacts on our business, including increasing our direct costs for raw materials, manufacturing, shipping and logistics, labor, and energy. Our ability to pass on these higher costs to our customers is limited. When we are able to increase our selling prices, it may be delayed several months after we first incur the higher costs and we may not be able to fully recoup the difference. In addition, high rates of inflation can reduce consumer’s discretionary spending and reduce demand for our products. These actions could have a negative effect on our business, results of operations, or financial condition. The increases in interest rates as a result of the higher level of inflation in the US economy experienced beginning in calendar 2021 and continuing through 2024 has also had a negative effect on our interest expense charged on any borrowing on our lines of credit. The interest rate on our current line of credit is computed using the Prime Interest Rate, which has risen from 3.25% in January 2022 to approximately 7.50% in February 2025. Beginning on March 7, 2025, the Company began drawing against its asset-based line of credit to fund its usual seasonal build of inventory to meet its anticipated needs for the busy Spring and Summer seasons. The Company has drawn approximately $3,000,000 at a current interest rate of 12.25%.
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Outdoor product sales are highly seasonal and subject to adverse weather.
Our fencing and outdoor products are primarily bought by consumers during the spring and summer. The majority of our revenues and income from these products occur during our third and fourth quarters of our fiscal year. Demand for these products is highly affected by the weather. Adverse weather, including abnormally wet conditions or unseasonably hot or cold temperatures, can negatively affect demand for our products and cause our customers to delay, or reduce, their orders. This would have a negative effect on our business, results of operations, or financial condition.
Competitors may infringe on our intellectual property which would negatively affect our business and financial condition
We rely on our intellectual property rights, including patents, patent applications, and trademarks, to provide us with competitive advantages and protect us from theft of our intellectual property. We believe that our patents are valid, enforceable, and valuable. If third parties infringe on our intellectual property, we may be forced to pursue litigation which would consume significant amounts of our management and financial resources. There is no guarantee that we will have the financial resources necessary to engage in litigation, or that any litigation we do pursue will result in a favorable outcome. Such infringements or unfavorable outcomes of litigation would have a negative effect on our business, results of operations, or financial condition.
Our products may have issues that could lead to product liability claims
The products we manufacture and distribute exposes us to potential product liability risks. Although we seek to insure against such risks, there can be no assurance that such insurance coverage will be sufficient to cover any claims or adverse legal judgements, and our costs to defend any litigation could be significant. A successful product liability claim in excess of our insurance coverage could have a material negative effect on our business and financial condition. In addition, it could significantly increase our costs of this insurance on commercially reasonable terms or make it unavailable to us altogether.
We could lose our credit agreement and could result in our not being able to pay our creditors.
We have a line of credit with Northrim where short-term operating capital will be provided by purchasing our accounts receivable invoices for up to $6,000,000, or as a loan against our inventory for up to $4,000,000, with the maximum amount we can draw under the line of $6,000,000. The maximum draw amount is currently available, and the line will expire on June 30, 2025. If we lost access to credit, or the borrowing costs exceed the likely benefits of our use of such capital, it could negatively affect our ability to acquire inventory to fulfil our customers’ orders and pay our obligations on a timely basis. Although we are in discussions with our current lender to renew the line of credit, there can be no assurance that we will be able to successfully extend or replace this line of credit.
Our information technology systems are susceptible to certain risks, including cyber security breaches, which could adversely impact our operations and financial condition.
Our operations involve information technology systems that process, transmit and store information about our suppliers, customers, employees, and financial information. These systems face threats including telecommunication failures, natural disasters, and cyber security threats, including computer viruses, unauthorized access to our systems, and other security issues. While we have taken aggressive steps to implement security measures to protect our systems and initiated an ongoing training program to address many of the primary causes of cyber threat with all our employees, such threats change and morph almost daily. There is no guarantee our actions will secure our information systems against all threats and vulnerabilities. The compromise or failure of our information systems could have a negative effect on our business, results of operations, or financial condition.
If we fail to maintain an effective system of internal controls, we may not be able to detect fraud or report our financial results accurately, which could harm our business and we could be subject to regulatory scrutiny.
We have completed a management assessment of internal controls as prescribed by Section 404 of the Sarbanes-Oxley Act, which we were required to do in connection with our audit of our financial statements for the year ended August 31, 2024. Based on this process we did not identify any material weaknesses or significant deficiencies. Although we believe our internal controls are operating effectively, we cannot guarantee that in the future we will not identify any material weaknesses or significant deficiencies in connection with this ongoing process.
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A contagious disease outbreak, such as the recent COVID-19 pandemic emergency, could have an adverse effect on our operations and financial condition
Our business could be negatively affected by an outbreak of an infectious disease due to the consequences of the actions taken by companies and governments to contain and control such an outbreak. These consequences include:
| · | The inability of our third-party manufacturers to manufacture or deliver products to us in a timely manner, if it all. |
| · | Isolation requirements may prevent our employees from being able to report to work or being required to work from home or other off-site location which may prevent us from accomplishing certain functions, including receiving products from our suppliers and fulfilling orders for our customers, which may result in an inability to meet our obligations. |
| · | Our new product launches may be delayed or require unexpected changes to be made to our new or existing products. |
| · | The effect of the outbreak on the economy may be severe, including an economic downturn and decrease in employment levels which could result in a decrease in consumer demand for our products. |
The financial impact of such an outbreak are outside our control and are not reasonable to estimate but may be significant. The costs associated with any outbreak may have an adverse impact on our operations and financial condition and not be fully recoverable or adequately covered by insurance.
Risks Related to Our Common Shares
We may decide to acquire assets or enter into business combinations, which could be paid for, either wholly or partially with our common shares and if we decide to do this our current shareholders would experience dilution in their percentage of ownership.
Our Articles of Incorporation give our Board of Directors the right to enter into any contract without the approval of our shareholders. Therefore, our management could decide to make an investment (buy shares, loan money, etc.) without shareholder approval. If we acquire an asset or enter into a business combination, this could include exchanging a large amount of our common shares, which could dilute the ownership interest of present shareholders.
Future stock distributions could be structured in such a way as to be 1) diluting to our current shareholders or 2) could cause a change in control to new investors.
If we raise additional funds by selling more of our stock, the new shares may have rights, preferences or privileges senior to those of the rights of our existing shares. If common shares are issued in return for additional funds, the price per share could be lower than that paid by our current stockholders. The result of this would be a lessening of each present stockholder’s relative percentage interest in our company.
The Company’s common shares currently trade within the NASDAQ Capital Market in the United States. The average daily trading volume of our common stock was approximately 4,700 shares on NASDAQ for the fiscal year ended August 31, 2024 and 7,900 shares for the six months ended February 28, 2025. With this limited trading volume, investors could find it difficult to purchase or sell our common stock or experience significant volatility in the price of our common stock. In addition, if any of the risk factors set forth above are realized, it can have a negative impact on the trading price of our common stock.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk
The Company does not have any derivative financial instruments as of February 28, 2025. However, the Company is exposed to interest rate risk.
The Company’s interest income and expense are most sensitive to changes in the general level of U.S. interest rates. In this regard, changes in U.S. interest rates affect the interest earned on the Company’s cash.
The Company is subject to interest rate risk as it has an asset-based line of credit whose interest rate may fluctuate over time. The Company could be subject to increased interest payments as interest rates may change based on economic conditions, as the interest is computed at the prime rate plus 4.75%, with floor of 11%. As of February 28, 2025 and August 31, 2024, the Company has no borrowings under this line of credit.
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Foreign Currency Risk
The Company operates primarily in the United States. However, a relatively small amount of business is currently conducted in currencies other than U.S. dollars, and the Company may experience an increase in foreign exchange risk as they expand their international sales. Also, to the extent that the Company uses contract manufacturers in foreign countries, currency exchange rates can influence the Company’s purchasing costs.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
Management of the Company, including the Company’s Principal Executive Officer and Principal Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”). Based on that evaluation, our Principal Executive and Principal Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective in ensuring that information required to be disclosed in our Exchange Act reports is (1) recorded, processed, summarized and reported in a timely manner, and (2) accumulated and communicated to our management, including our Chief Executive Officer and our Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes in the Company’s internal control over financial reporting that occurred during the Company’s most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Part II – OTHER INFORMATION
Item 1. Legal Proceedings
In fiscal 2021, the Company initiated arbitration against a former distributor asserting a breach of the distribution agreement and seeking damages. In February 2023, the arbitrator issued its decision and ruled in favor of the Company on the majority of all of its claims. In September 2023, the Company settled its arbitration for a cash payment of $2,450,000 which was received in October 2023.
The Company does not know of any other material, active or pending legal proceedings against them; nor is the Company involved as a plaintiff in any other material proceeding or pending litigation. The Company knows of no other active or pending proceedings against anyone that might materially adversely affect an interest of the Company.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
---No Disclosure Required---
Item 3. Defaults Upon Senior Securities
---No Disclosure Required---
Item 4. Mine Safety Disclosures
---No Disclosure Required---
Item 5. Other Information
During the quarter ended February 28, 2025, no director
or officer of the Company
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Item 6. Exhibits
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Jewett-Cameron Trading Company Ltd.
(Registrant)
| Date: April 14, 2025 | /s/ “Chad Summers” | |
|
Chad Summers, President and Chief Executive Officer (Principal Executive Officer) |
| Date: April 14, 2025 | /s/ “Mitch Van Domelen” | |
|
Mitch Van Domelen, Chief Financial Officer and Corporate Secretary (Principal Financial Officer and Principal Accounting Officer) |
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EXHIBIT 31.1
CERTIFICATIONS
I, Chad Summers, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Jewett-Cameron Trading Company Ltd;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: April 14, 2025
By: /s/ “Chad Summers”
Chad Summers
Chief Executive Officer
EXHIBIT 31.2
CERTIFICATIONS
I, Mitch Van Domelen, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Jewett-Cameron Trading Company Ltd;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: April 14, 2025
By: /s/ “Mitch Van Domelen”
Mitch Van Domelen,
Chief Financial Officer
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE U.S. SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Jewett-Cameron Trading Company Ltd. (the “Company”) on Form 10-Q for the period ended February 28, 2025 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned officer of the Company does hereby certify, to such officer’s knowledge, that, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Date: April 14, 2025 | Signed: /s/ “Chad Summers” |
|
Chad Summers, Chief Executive Officer |
EXHIBIT 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE U.S. SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Jewett-Cameron Trading Company Ltd. (the “Company”) on Form 10-Q for the period ended February 28, 2025 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned officer of the Company does hereby certify, to such officer’s knowledge, that, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Date: April 14, 2025 | Signed: /s/ “Mitch Van Domelen” |
|
Mitch Van Domelen, Chief Financial Officer |