Item 1A. Risk Factors 8
Item 1B. Unresolved Staff Comments 11
Item 1C. Cybersecurity 11
Item 2. Properties 12
Item 3. Legal Proceedings 12
Item 4. Mine Safety Disclosures 12
PART II
Item 6. [Reserved] 14
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 21
Item 8. Financial Statements and Supplemental Data 21
Item 9A. Controls and Procedures 41
Item 9B. Other Information 41
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 41
PART III
Item 10. Directors, Executive Officers and Corporate Governance 42
Item 11. Executive Compensation 47
Item 14. Principal Accounting Fees and Services 50
PART IV
Item 15. Exhibits and Financial Statement Schedules 51
PART I
ITEM 1. BUSINESS
Forward-Looking Statements
This Annual Report on Form 10-K for the fiscal year
ended August 31, 2024 (“Annual Report”) contains forward-looking statements, within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words like “plans”, “expects”,
“aims”, “believes”, “projects”, “anticipates”, “intends”, “estimates”,
“will”, “should”, “could” and similar expressions in connection with any discussion, expectation,
or projection of future operating or financial performance, events or trends. Forward-looking statements are based on management's current
expectations and assumptions, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to
predict. Actual outcomes and results may differ materially from these expectations and assumptions due to changes in global political,
economic, business, competitive, market, regulatory and other factors. Any forward-looking statements speak only as of the date on which
they are made and we undertake no obligation to publicly update or review any forward-looking information, whether as a result of new
information, future developments or otherwise, except as required by law.
These factors include, but are not limited to, the
fact that our business is highly competitive, we are continually seeking ways to expand our business, we may seek additional financing
or other ways to expand operations and improve margins, as well as the other risk factors that are set forth in more detail elsewhere
in this Annual Report, including in the sections, ITEM 1A, “Risk Factors”, and ITEM 7, “Management's Discussion and
Analysis of Financial Condition and Results of Operations.”
Introduction
Jewett-Cameron Trading Company Ltd. is organized under
the laws of British Columbia, Canada. In this Annual Report, the “Company”, “Jewett-Cameron”, “we”,
“our” and “us” refer to Jewett-Cameron Trading Company Ltd. and its subsidiaries.
Our 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 we offer
along with the markets being served. Consistent with our operational structure, our Chief Executive Officer (CEO), as the chief operating
decision maker, manages our business based on segment financial information for purposes of evaluating performance, allocating resources,
setting incentive compensation targets, as well as internal forecasting of future period financial results. Our segments are as follows:
· Pet, Fencing and Other
· Industrial wood products
· Seed processing and sales
· Corporate and administrative services
Total Company sales were $47.1 million and $54.3 million
during fiscal years ended August 31, 2024 and 2023, respectively. Sales, income before taxes, assets, depreciation and amortization, capital
expenditures, and interest expense by segment are shown in the financial statements under Note 11 “Segment Information.”
Our principal office
is located at 32275 NW Hillcrest Street, North Plains, Oregon; and our website address is www.jewettcameron.com. Our primary mailing
address is P.O. Box 1010, North Plains, OR 97133. Our phone number is (503) 647-0110. The contents of our website or any other website
are not incorporated by reference into this Annual Report.
We file reports and
other information with the Securities and Exchange Commission located at 100 F Street NE, Washington, D.C. 20549. Copies of these filings
may be accessed through their website at www.sec.gov. Reports are also filed under Canadian regulatory requirements on SEDAR,
and these reports may be accessed at www.sedar.com.
The contact person for the Company is Chad Summers,
President and CEO.
Our authorized capital includes 21,567,564 common
shares without par value; and 10,000,000 preferred shares without par value. As of August 31, 2024 and November 19, 2024, there were 3,504,802
common shares outstanding. Our common shares are listed on the NASDAQ Capital Market in the United States with the symbol “JCTC”.
The common shares formerly traded under the symbol “JCTCF” until October 9, 2024.
Our fiscal year ends on August 31st.
General Development
of Business
Incorporation
and Subsidiaries
Jewett-Cameron Trading Company Ltd. was incorporated
under the Company Act of British Columbia on July 8, 1987 as a holding company for Jewett-Cameron Lumber Corporation (“JCLC”),
which was incorporated in September 1953 in Oregon, USA. 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 completed a reorganization of certain of its subsidiaries and JCLC’s name was changed to JC USA Inc. (“JC USA”).
JC USA has the following wholly owned subsidiaries incorporated under the laws of the State of Oregon: Jewett-Cameron Seed Company, (“JCSC”),
incorporated in October 2000, Greenwood Products, Inc. (“Greenwood”), incorporated in February 2002, and Jewett-Cameron Company
(“JCC”) incorporated in September 2013. Jewett-Cameron Trading Company, Ltd. and its subsidiaries have no significant assets
in Canada.
Corporate
Development
Incorporated in 1953, JC USA initially operated as
a small lumber wholesaler based in Portland, Oregon. In September 1984, the original stockholders sold their interest in the corporation
to a new group of investors. Two members of that group remained active in the Company. These individuals are Donald Boone, who passed
away in May 2019, and who was the previous Chairman and the former President, Chief Executive Officer, Treasurer, and Principal Financial
Officer, transitioning to strictly the Board Chair in 2017; and Michael Nasser, who retired from day-to-day involvement in the business
in December 2022, but remained engaged as a director until October 2023.
In 1987, we acquired JC USA and began to diversify
into products beyond lumber trading. Lucky Dog® was acquired in 1995, and Adjust-A-Gate® was acquired in 2003.
In 2000, we acquired the operations and property that
became our JCSC seed division.
In 2002, Greenwood acquired the business and certain
assets of Greenwood Forest Products Inc., a company involved in the processing and distribution of specialty wood products.
In April 2023, as a result of lower quantities of
seed for processing, and the demand for its marketing and sales services declining against rising costs, the Board of Directors decided
to close the JCSC seed division. JCSC’s facilities and equipment were near the end of the expected useful life and would have required
significant capital investment to remain operating. Regular operations at JCSC ended effective August 31, 2023, but some seed storage
operations continued through July 2024 in order to provide customers time to obtain alternative storage arrangements. The entire seed
inventory was sold in early October 2023, and the remaining equipment is in the process of being sold. Some of the JCSC personnel were
moved to different positions within the Company as management has prioritized career development and retention whenever possible.
In September 2024, we announced the successful conclusion
of an 18-month search and evaluation process to identify and evaluate potential new suppliers. We have historically sourced the majority
of our metal products from a single factory in China. Under our new strategic sourcing program, we now have suppliers located in Canada,
Bangladesh, Vietnam, Malaysia, and Taiwan in addition to our original sources in China. The products from our new suppliers meet our high-quality
standards with competitive pricing, but also mitigate the current 25% tariff rates from China placed on various Chinese made steel products
imported into the United States. We expect this program will help us to maintain competitive pricing while enhancing our margins.
Narrative
Description of Business
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
four segments: Pet, Fencing and Other; Industrial wood products; Seed processing and sales; and corporate and administrative services.
Pet, Fencing and Other Operating Segment
We have concentrated on building a customer base for
lawn, garden, and pet 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 not
unique and are available from multiple suppliers and retail outlets. However, 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-RightTM 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, CA, and MX pertaining 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 fulfil 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.
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. Sales of seed has seasonality, but it is most affected
by weather patterns in multiple parts of the United States that utilize cyclical planting. The annual weather plays an important part
in year-to-year sales volatility and specific crop demand.
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 Administrative Services – JC
USA
JC USA is the parent company for Greenwood, JCC and
JCSC as described above. 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 Sustainable Product 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, 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.
Fencing Products
Our fencing business crafts durable, functional fencing
solutions that bolster security, privacy, and beauty. Our primary products include:
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:
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:
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.
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 sold all of its seed inventory and is in the process of selling the segment’s remaining equipment.
Company Strategy
Management continues to focus on multiple strategies
to lower costs, increase sales and improve profitability.
These strategies include:
· Sales Growth
· Product Innovation
· Operational Efficiency
· Monetization of Surplus Assets
Driving Sales Growth
In-Store Displayer Expansion
During the third quarter of fiscal 2024, we successfully
trialed new in-store merchandiser displays for Lifetime Steel Post® for wood fences at major home improvement retailers in Southern
California. The initial success of the program was then expanded into more stores throughout the summer of 2024 and totaled over 100 stores
by the end of August 2024. The displayers are continuing to roll out into more stores across multiple regions. These displays are located
in close proximity to the wood fencing materials and demonstrate the usefulness and durability of the product to those consumers shopping
for wood fencing. These Lifetime Steel Post(R) displayers are in addition to our
Adjust-A-Gate(R) merchandisers which are thousands of stores. Each Lifetime Steel Post® display contains 96 posts and each
Adjust-A-Gate® display contains 20 units and 4 drop rods. A typical fence project may contain 1 or 2 gates and upwards of 24 or more
posts. Each display unit will require replenishment throughout the year, which is expected to provide increased reorder demand for each
product.
To manage the in-store displayer program, the company
has partnered with Continental Sales & Marketing, Inc. (“CSM”). CSM is a nationally recognized, multifaceted, strategic
business partner with over 49 years of experience with national and regional home improvement retailers. CSM has built strong relationships
across a wide range of departments at the corporate level of major home centers, co-ops and independent dealers, and are talented at distribution,
supply chain and SKU management issues. CSM will be working to place additional fencing display units with retailers across the country
and facilitate the necessary replenishment of each unit as display product is sold. CSM will also work to increase the online presence
of our other products through our retail partners, including key national and regional home improvement retailers, which will provide
additional visibility and sales opportunities to expand distribution of our various product lines.
Appointment of New Vice-President of Sales and Marketing and Retail
Ambassadors
In August 2024, we appointed a new Vice President
of Sales and Marketing, who has a proven track record of successfully growing sales with productive marketing campaigns, innovative product
enhancements and targeted engagement with customers. We believe this appointment will help grow our market share, including among the
professionals served by our big box home center customers. We intend to increase our efforts to engage with professional contractors and
fence installers. Besides increasing direct demand for our products, we also want to equip them to become ambassadors and influencers
of our products. This will provide us with direct access to the most frequent users of these products to provide ongoing feedback to help
with product innovation and solutions.
Grow Greenwood Products sales through both existing and new customers
The demand for Greenwood’s transit-oriented
products has picked up post-pandemic and riders have returned to the office. Beyond transit, Greenwood’s specialty engineered lumber
has multiple uses in multiple markets, including other types of transportation, construction, and industrial sectors. We believe we can
grow our sales by expanding our sales efforts to both existing customers as well as to new potential customers in multiple industries
outside of transit with the addition of new traders with sales experience across multiple industries.
Expand MyEcoWorld® Distribution
Our MyEcoWorld® sustainable and Post Consumer
Recycled (PCR) bags have been well received by the marketplace with excellent consumer reviews. Our current sustainable products include
compostable bin liners, yard debris bags, and pet waste bags. We also offer lower cost PCR bags. We believe all of these products have
excellent performance and are priced competitively. Our strategy is to increase our market penetration through multiple channels. In addition
to our relationships with home improvement retailers and large mass merchandise retailers, we have already placed our bags in certain
grocery stores and are working to increase our placement in additional grocery chains and more stores within each chain. We are also offering
a direct to consumer subscription service, where customers can purchase MyEcoWorld® products direct from the Company and have additional
products shipped to them directly on a regular schedule. We believe this category has the potential to grow as the demand for high performing
sustainable products grows along with the increasing plastic bans being legislated throughout the country. We relaunched the line in fiscal
2024 with our expanded product offerings. Our recent engagement of CSM for sales and marketing support will also include MyEcoWorld®,
where their relationships with retailers across the country will help us introduce these products to new stores, including big box retailers.
Product Innovation and Development
We are committed to continuing to innovate by improving
and expanding our existing product lines in addition to adding new products that solve problems, meet unmet needs, and enrich outdoor
spaces.
We develop new products and improve our existing products
through a number of methods. Many of our enhancements have originated from suggestions from our customers to improve their experience
and to better meet their needs. Our suppliers also help us to improve our products based on their manufacturing experience. We also seek
to acquire existing products that complement our current product lines.
We have 5 new and enhanced products set to launch
over next 12 months, which include enhancements to our Original Adjust-A-Gate®, Lifetime Steel Post®, and Euro Fence products.
Operational Efficiency
Sourcing Diversification
The Company has historically sourced
the majority of our metal products from a single factory in China. Over 18 months, management completed an extensive and thorough world-wide
search and evaluation process to identify and evaluate potential new suppliers. These suppliers needed to meet the Company’s high-quality
standards with competitive pricing, as well as offering innovative capabilities to collaborate with us to both continuously improve our
products and also develop entirely new products. This process has successfully concluded with the implementation of a new multi-source,
strategic sourcing program for fiscal 2025, which we publicly announced in September 2024. We now have suppliers located in Canada, Bangladesh,
Vietnam, Malaysia, and Taiwan in addition to our original sources in China. These new supply agreements cover the Company’s fence
products, dog containment products, as well as MyEcoWorld® products. The products from our new suppliers meet our high-quality standards
with competitive pricing. They also mitigate the current 25% tariff rates from China placed on various Chinese made steel products imported
into the United States which has led to a higher cost of goods on a number of our most popular products. By sourcing more of our products
from outside of China, we expect that it will help us to maintain competitive pricing, enhance our margins, and reduce our supply chain
risk.
Expansion of Distribution Locations
Currently, we distribute most of
our products from our Oregon warehouse, with some of our bulkier products drop shipped directly to the customer. This single location
distribution model made our products less competitive for certain customers in the Midwest and East Coast due to high shipping costs and
longer times to delivery. Our plan is to add a distribution center in the Eastern US through a third-party logistics partner. This arrangement
would utilize the partner’s existing infrastructure and “pick and pack” services and require us to make no significant
capital expenditures. Although it would increase our warehousing costs, we believe those costs can be offset through lower delivery costs
and shipping times for existing customers and make our products more competitive to potential new customers that are located farther from
our Oregon base. Once this new eastern center is established, we will look to add additional distribution centers in other areas of the
US under similar third-party logistic agreements that can benefit from being closer to customers in those regions.
Monetization of Surplus Assets
In July 2024, we listed the JCSC
property for sale or lease at a listing price of $9,000,000 which is 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. The net proceeds of any sale will be reduced
by brokers’ commissions, expenses related to the sale, and taxes. If we are able to complete a sale, the disposal of this surplus
property will enhance our working capital in a non-dilutive manner.
Tariffs
Our metal and other products have historically been mostly manufactured in China and are imported into the United States. 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 effective September 24, 2018. These new tariffs are 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 10, 2019. A number of our
products manufactured in China remain subject to duties of 25% when imported into the United States.
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
are not subject to the China-specific tariffs, but may be subject to other duties and fees that are typically much lower than the current
25% tariff on Chinese manufactured metal products.
Customer Concentration
The top ten customers were responsible for 88% and
88% of total Company sales for the years ended August 31, 2024 and August 31, 2023, respectively. Also, the Company’s single largest
customer was responsible for 36% and 35% of total Company sales for the years ended August 31, 2024 and August 31, 2023 respectively.
Employees
As of August 31, 2024 we had 62 full-time employees
(August 31, 2023 – 68 full-time employees). By segment these employees were located as follows: JCC – 40 (2023 – 40)
Greenwood – 2 (2023 – 1), JCSC – 0 (2023 – 8), and JC USA – 20 (2023 -19). At the end of fiscal 2023, we
ceased regular operations at JCSC. Four of the JCSC employees were transferred to JCC, and the remainder were terminated and offered transition
assistance. We continue to evaluate our ongoing staffing needs, and during 2024 we reduced our number of employees in conjunction with
our improved business alignment, oversight of responsibilities, professional development opportunities, and more efficient operations.
As of November 19, the number of our full-time employees is 53.
None of our employees are represented by unions. Jewett-Cameron
Trading Company Ltd. has no direct employees, and our CEO and CFO are employed by JC USA.
ITEM
1A. RISK FACTORS
Investors should carefully consider the following
risk factors and all other information contained in this Annual Report. There is a great deal of risk involved in our business, and any
of the following risks could affect our business, its financial condition, its potential profits or could result in you losing your entire
investment. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties, including those
not presently known to us or that we currently deem immaterial, also may result in decreased revenues, increased expenses or other events
which could result in a decline in our financial condition and the price of our common shares.
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 fiscal year ended August 31, 2024 our top
ten customers represented 88% 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:
· Capacity constraints;
· 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.
The continuing tariffs by the United States on certain Chinese goods include some of our products that we purchase from suppliers in China.
The possibility of new tariffs being levied on manufactured goods imported into the United States from other countries in addition to
China also currently exists. 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.
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 3rd
and 4th 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.
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.
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 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. 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.
ITEM
1B. UNRESOLVED STAFF COMMENTS
--- No Disclosure Necessary ---
ITEM
1C. CYBERSECURITY
Risk Management and Strategy
We currently manage our cybersecurity risk through
our IT consultants in a variety of practices that are applicable to all users of our information technology and information assets, including
our officers, directors, employees, vendors and contractors. Our cyber risk management programs are designed to identify, assess, manage,
mitigate, and respond to cybersecurity threats.
We utilize a combination of technology and active
monitoring that are integrated within our enterprise risk management network system to promote security awareness and prevent security
incidents that are consistent with recognized standards and practices for information technology and cyber security. Our process for addressing
risk aligns with industry standards as outlined in the NIST Cybersecurity Framework and NIST Risk Management Framework.
The performance and effectiveness of our cybersecurity program are also tested on a regular schedule by outside consulting third-party
experts.
We have not experienced any material cybersecurity
incidents or identified any material cybersecurity threats that have affected or are reasonably likely to materially affect us, our business
strategy, results of operations or financial condition.
Our Chief Financial Officer is responsible for assessing
and managing our cyber risk management program and informs senior management regarding the prevention, detection, mitigation, and remediation
of cybersecurity incidents.
Governance
The Audit Committee of the Board of Directors is responsible
for overseeing risks related to cybersecurity.
Our Chief Executive Officer and Chief Financial Officer
are responsible for assessing and managing risks and incidents relating to cybersecurity threats. They report any material findings and
recommendations, if any, to the Audit Committee and the Board of Directors.
ITEM 2. PROPERTIES
Our executive offices are located at 32275 NW Hillcrest
Street, North Plains, Oregon. The 5.6 acre facility, which is owned, consists of 55,250 square feet of covered space (10,000 office and
47,250 warehouse), a little over three acres of paved yard space, and was originally completed in October 1995. A 12,000 square foot warehouse
expansion was completed in fiscal 2017 which we are using for several new product lines. In fiscal 2021, we completed the conversion of
2,000 square feet of older warehouse space into 4,000 square feet of office and meeting space on two levels. The facility provides office
space for JC USA, including all of our executive offices, and is used as a distribution center to service the customer base for JCC and
Greenwood. During fiscal 2022, we leased an additional 4,700 square feet of warehouse space located in North Plains, Oregon.
During fiscal 2010, we purchased a 2,000 square foot
building adjacent to our main facilities that previously housed a seed testing lab located at 31895 NW Hillcrest Street, North Plains,
Oregon. We formerly leased the property for $729 per month until the expiration of the lease on January 4, 2010. At that time, the Company
exercised its option to buy the land and building for a total cost of $150,946. In fiscal 2020, we renovated this building into an innovation
center which focuses on new product development.
The property associated with JCSC, which is owned,
consists of 11.6 acres of land, 105,000 square feet of buildings, rolling stock, and equipment. It was used for seed processing and storage.
It is located at 31345 NW Beach Road, Hillsboro, Oregon, which is adjacent to North Plains, Oregon. With the closure of JCSC’s business,
the property is considered surplus to our needs and is currently listed for sale or lease.
ITEM
3. LEGAL PROCEEDINGS
From time to
time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. We are currently
unaware of any material pending legal proceedings to which we are party or of which our property is the subject. However, we may at times
in the future become involved in litigation in the ordinary course of business, which may include actions related to or based on our intellectual
property and its use, customer claims, employment practices and employee complaints and other events arising out of our operations. When
appropriate in management’s estimation, we will record adequate reserves in our financial statements for pending litigation. Litigation
is subject to inherent uncertainties, and an adverse result in any such matters could adversely impact our reputation, operations, and
our financial operating results or overall financial condition. Additionally, any litigation to which we may become subject could also
require significant involvement of our senior management and may divert management’s attention from our business and operations.
In fiscal 2021,
we 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 our favor on the majority of all of our claims. A damages
hearing was held in August 2023. In September 2023, we settled this arbitration for a cash payment of $2,450,000 which was received in
October 2023.
ITEM
4. MINE SAFETY DISCLOSURES
--- No Disclosure Necessary ---
PART II
Market
Information
Our common shares trade on the NASDAQ Capital Market
(formerly the NASDAQ Small Cap Market) in the United States. The trading symbol for our common shares is “JCTC” and the CUSIP
number for the stock is 47733C-20-7. The common shares formerly traded under the symbol “JCTCF” until October 9, 2024. Our
common shares began trading on the NASDAQ Small Cap Market in April 1996.
Table No. 1 lists the volume of trading along with
the high, low, and closing sales prices on the NASDAQ Capital Market for our common shares.
Table No. 1
NASDAQ Capital Market
Common Shares Trading Activity
(US Dollars)
Period Ended Volume High Low Closing
Monthly
Quarterly
Annually
Holders
Computershare Investor Services Inc. which is located
in Vancouver, British Columbia, Canada is the registrar and transfer agent for our common shares.
On November 14, 2024 there
were 29 registered shareholders and 3,504,802 shares of our common shares outstanding.
Dividends
We have not declared any dividends since incorporation
and we do not anticipate that we will do so in the foreseeable future. Our present policy is to retain earnings for use in our operations
and expansion of our business. There are no current restrictions that limit our ability to pay dividends on common equity or that are
likely to do so in the future. Any dividends paid by us to U.S. shareholders would be subject to Canadian withholding tax.
Recent Sales of Securities:
Use of Proceeds from Securities
We have not sold securities in the last three fiscal
years.
Purchases of equity
securities by the issuer and affiliated purchasers
We have not repurchased any common shares during
the years ended August 31, 2024 or August 31, 2023.
ITEM 6. [RESERVED]
Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operation
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 administrative services
Sales, income before taxes, assets, depreciation and amortization, capital
expenditures, and interest expense by segment are shown in the financial statements under Note 12 “Segment Information.”
Quarterly Results
The following table summarizes quarterly financial
results in fiscal 2024 and fiscal 2023. (Figures are thousands of dollars except per share amounts).
For the Year Ended August 31, 2024
First Second Third Fourth Full
Quarter Quarter Quarter Quarter Year
For the Year Ended August 31, 2023
First Second Third Fourth Full
Quarter Quarter Quarter Quarter Year
RESULTS
OF OPERATIONS
Fiscal 2024 was a year of transition for the Company.
Although our business continued to be negatively affected by stubbornly high inflation and negative consumer sentiment, we successfully
completed several important projects to optimize our operations and focus on our core products, broaden our customer base, and improve
our financial position.
The overall business climate remains challenging.
Inflation has pushed our costs higher, particularly in raw materials and shipping, while simultaneously squeezing consumers who have cut
back on discretionary spending. These issues are particularly acute in the home improvement and pet product sectors. Wet and unseasonably
cold weather across much of the US also shortened our traditional Spring and Summer selling season which reduced our expected sales in