UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(MARK ONE)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED FEBRUARY 28, 2022

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________ TO ________

~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MAY 31, 2021~~

~~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 000-19954

JEWETT-CAMERON TRADING COMPANY LTD.

(Exact Name of Registrant as Specified in its Charter)

british columbia A1		NONE 00-0000000
~~BRITISH COLUMBIA~~		~~NONE~~
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)


32275 N.W. Hillcrest, North Plains, Oregon		97133
(Address Of Principal Executive Offices)		(Zip Code)

(503)647-0110

~~(503) 647-0110~~

(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
Common Stock, no par value	JCTCF	NASDAQ Capital Market

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 ☒Yes¨ ☐ No

Yes

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 ¨ ☐
Non-accelerated filer¨ ☒	Smaller Reporting Company x ☒
	Emerging growth company x ☒

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 x☒

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 – ~~3,489,161~~3,492,842 common shares as of ~~July~~April 14, ~~2021.~~2022.

Jewett-Cameron Trading Company Ltd.

Index to Form 10-Q


PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	3 1

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21 17

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	28 25

Item 4.	Controls and Procedures	29 26

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	29 27

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29 27

Item 3.	Defaults Upon Senior Securities	29 27

Item 4.	Mine Safety Disclosures	29 27

Item 5.	Other Information	30 27

Item 6.	Exhibits	30 27


	~~- 2 -~~

PART 1 – FINANCIAL INFORMATION

Item 1. Financial Statements

~~Financial Statements~~

JEWETT-CAMERON TRADING COMPANY LTD.

CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

(Unaudited – Prepared by Management)

~~MAY 31, 2021~~FEBRUARY 28, 2022


	~~- 3 -~~

		1

JEWETT-CAMERON TRADING COMPANY LTD.

CONSOLIDATED BALANCE SHEETS

(Expressed in U.S. Dollars)

(Prepared by Management)

(Unaudited)


	May 31, 2021		August 31, 2020			February 28, 2022			August 31, 2021

ASSETS

Current assets
Cash and cash equivalents	$	2,170,046	$	3,801,037		$	899,055		$	1,184,313
Accounts receivable, net of allowance of $Nil (August 31, 2020 - $Nil)		11,051,061		6,274,426
Inventory, net of allowance of $250,000 (August 31, 2020 - $65,000) (note 3)		7,767,640		9,198,146
Accounts receivable, net of allowance of $Nil 0 (August 31, 2021 - $0)						9,137,254			7,086,503
Inventory, net of allowance of $250,000 (August 31, 2021 - $250,000) (note 3)						18,630,148			14,391,365
Prepaid expenses		2,580,856		1,036,128			2,559,893			2,305,820
Prepaid income taxes						258,205			252,958

Total current assets		23,569,603		20,309,737			31,484,555			25,220,959

Property, plant and equipment, net (note 4)		3,799,402		2,967,565			4,638,238			3,886,543

Intangible assets, net (note 5)		12,910		659			33,894			30,897

Total assets	$	27,381,915	$	23,277,961		$	36,156,687		$	29,138,399

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities

Accounts payable					$	1,660,664		$	1,349,677
Bank indebtedness (note 7)						9,500,000			3,000,000
Accrued liabilities						2,078,436			1,798,088

Total current liabilities						13,239,100			6,147,765

Deferred tax liability (note 6)						125,834			116,945

Total liabilities						13,364,934			6,264,710

Stockholders’ equity
Capital stock (note 9, 10)
Authorized
21,567,564 common shares, 0 par value
10,000,000 preferred shares, 0 par value
Issued
3,492,842 common shares (August 31, 2021 –3,489,161)						824,039			823,171
Additional paid-in capital						725,729			687,211
Retained earnings						21,241,985			21,363,307

Total stockholders’ equity						22,791,753			22,873,689

Total liabilities and stockholders’ equity					$	36,156,687		$	29,138,399

~~- Continued -~~

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


	~~- 4 -~~

		2

JEWETT-CAMERON TRADING COMPANY LTD.

~~CONSOLIDATED BALANCE SHEETS~~

~~(Expressed in U.S. Dollars)~~

~~(Prepared by Management)~~

~~(Unaudited)~~

May 31,
2021

August 31,
2020

Continued

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

  Accounts payable
$
1,557,721

$
1,095,061
  Bank indebtedness (note 7)

996,010

-
  Current portion of notes payable (note 8)

-

342,326
  Income taxes payable

230,190

40,596
  Accrued liabilities

2,290,235

2,016,300

  Total current liabilities

5,074,156

3,494,283

Long-term liabilities

Notes payable (note 8)

-

338,381

Deferred tax liability (note 6)

39,184

96,952

Total liabilities

5,113,340

3,929,616

Stockholders’ equity

  Capital stock (note 9, 10)

    Authorized

      21,567,564 common shares, without par value

      10,000,000 preferred shares, without par value

    Issued

      3,489,161 common shares (August 31, 2020 – 3,481,162)

823,171

821,284
  Additional paid-in capital

687,211

618,707
  Retained earnings

20,758,193

17,908,354


  Total stockholders’ equity

22,268,575

19,348,345


  Total liabilities and stockholders’ equity
$
27,381,915

$
23,277,961


~~Contingency~~ ~~(Note 17)~~
~~Subsequent Events~~ ~~(Note 18)~~

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

~~- 5 -~~

~~JEWETT-CAMERON TRADING COMPANY LTD.~~
CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in U.S. Dollars)
(Prepared by Management)
(Unaudited)

Three Month
Period Ended
May 31,

Nine Month
Period Ended
May 31,

Three Month
Periods at the
end of February

Six Month
Periods at the
end of February

2021
2020

2021
2020
2022 2021 2022 2021

SALES
$
21,619,952
$
16,241,239

$
42,396,591
$
30,918,345
$ 14,060,751 $ 10,460,355 $ 26,978,475 $ 20,776,639

COST OF SALES

16,037,702

11,931,746

31,239,866

22,555,253
10,636,524 7,848,779 21,089,386 15,202,164

GROSS PROFIT

5,582,250

4,309,493

11,156,725

8,363,092
3,424,227 2,611,576 5,889,089 5,574,475

OPERATING EXPENSES

Selling, general and administrative expenses

966,299

706,079

2,556,902

2,118,999
684,116 895,974 1,672,403 1,590,603
Depreciation and amortization

69,353

54,781

175,171

160,992
84,071 55,290 153,709 105,818
Wages and employee benefits

1,908,588

1,635,051

5,226,021

4,343,412
1,959,300 1,723,474 3,833,418 3,317,433
Total Operating Expenses 2,727,487 2,674,738 5,659,530 5,013,854

2,944,240

2,395,911

7,958,094

6,623,403

Income from operations

2,638,010

1,913,582

3,198,631

1,739,689
Income (loss) from operations 696,740 (63,162 ) 229,559 560,621

OTHER ITEMS

Gain on sale of property, plant and
equipment

-

2,200

-

2,600
Gain on extinguishment of debt

687,387

687,387

Interest and other income

(6,282)

3,217

(283)

21,414
Other income 2,000 3,000 5,000 6,000
Interest expense (30,620 ) — (50,896 ) —
Accrual for legal claim (300,000 ) — (300,000 )
Total other items (328,620 ) 3,000 (345,896 ) 6,000

681,105

5,417

687,104

24,014

Income (loss) before income taxes 368,120 (60,162 ) (116,337 ) 566,621

Income before income taxes

3,319,115

1,918,999

3,885,735

1,763,703
Income tax (expense) recovery (98,300 ) 6,998 (4,985 ) (131,258 )

Income tax expense

(904,638)

(522,026)

(1,035,896)

(547,614)
Net income (loss) $ 269,820 $ (53,164 ) $ (121,322 ) $ 435,363

Net income
$
2,414,477
$
1,396,973

$
2,849,839
$
1,216,089
Basic earnings (loss) per common share $ 0.08 $ (0.02 ) $ (0.03 ) $ 0.12

Basic earnings per common share
$
0.69
$
0.40

$
0.82
$
0.33

Diluted earnings per common share
$
0.69
$
0.40

$
0.82
$
0.33
Diluted earnings (loss) per common share $ 0.08 $ (0.02 ) $ (0.03 ) $ 0.12

Weighted average number of common shares outstanding:

Basic

3,489,161

3,481,162

3,485,525

3,672,858
3,492,842 3,486,495 3,491,969 3,483,814
Diluted

3,489,161

3,481,162

3,485,525

3,672,858
3,492,842 3,486,495 3,491,969 3,483,814

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

~~- 6 -~~
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, 2019
3,971,282
$   936,903
$ 618,707
$ 18,875,256
$ 20,430,866

    Shares repurchased and cancelled (note 10)
(490,120)
(115,619)
-
(3,751,427)
(3,867,046)
    Net income
-
-
-
1,216,089
1,216,089

May 31, 2020
3,481,162
$   821,284
$ 618,707
$ 16,339,918
$ 17,779,909

    Net income
-
-
-
1,568,436
1,568,436

August 31, 2020
3,481,162
$ 821,284
$ 618,707
$ 17,908,354
$ 19,348,345

    Shares issued pursuant to compensation plans
    (note 11)

7,999

1,887

68,504

-

70,391
    Net income
-
-
-
2,849,839
2,849,839

May 31, 2021
3,489,161
$ 823,171
$ 687,211
$ 20,758,193
$ 22,268,575

Capital Stock
Number of Shares Amount Additional paid-in capital Retained earnings Total
August 31, 2020 3,481,162 $ 821,284 $ 618,707 $ 17,908,354 $ 19,348,345

Shares issued pursuant to compensation plans (note 11) 7,999 1,887 68,504 — 70,391
Net income — — — 435,363 435,363

February 28, 2021 3,489,161 $ 823,171 $ 687,211 $ 18,343,717 $ 19,854,099

Net income — — — 3,019,590 3,019,590

August 31, 2021 3,489,161 $ 823,171 $ 687,211 $ 21,363,307 $ 22,873,689

Shares issued pursuant to compensation plans (note 11) 3,681 868 38,518 — 39,386
Net loss — — — (121,322 ) (121,322 )

February 28, 2022 3,492,842 $ 824,039 $ 725,729 $ 21,241,985 $ 22,791,753

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

~~- 7 -~~
4

JEWETT-CAMERON TRADING COMPANY LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in U.S. Dollars)
(Prepared by Management)
(Unaudited)

Nine Month
Period Ended
May 31,

2021

2020

CASH FLOWS FROM OPERATING ACTIVITIES

Net income
$
2,849,839

$
1,216,089
Items not involving an outlay of cash:

  Depreciation and amortization

175,171

160,992
  Stock-based compensation expense

70,391

-
  (Gain) on sale of property, plant and equipment

-

(2,600)
  Gain on extinguishment of debt

(680,707)

-
  Deferred income tax expense

(57,768)

39,571

Changes in non-cash working capital items:

  (Increase) in accounts receivable

(4,776,635)

(4,044,507)
  Decrease (increase) in inventory

1,430,506

(408,282)
  (Increase) in notes receivable

-

(561,813)
  (Increase) in prepaid expenses

(1,544,728)

(942,541)
  Decrease in prepaid income taxes

-

101,686
  Increase in accounts payable and accrued liabilities

736,595

1,448,292
  Increase in income taxes payable

189,594

-

Net cash (used in) provided by operating activities

(1,607,742)

(2,993,113)

CASH FLOWS FROM INVESTING ACTIVITIES

  Purchase of property, plant and equipment

(1,019,259)

(207,469)
  Proceeds from sale of property, plant and
  equipment

-

3,900

Net cash provided by (used in) investing activities

(1,019,259)

(203,569)

CASH FLOWS FROM FINANCING ACTIVITIES

  Proceeds from bank indebtedness

996,010

-
  Increase in notes payable

-

680,707
  Redemption of common stock

-

(3,867,046)

Net cash provided by (used in) financing activities

996,010

(3,186,339)

Net (decrease) in cash

(1,630,991)

(6,383,021)

Cash, beginning of period

3,801,037

9,652,310

Cash, end of period
$
2,170,046

$
3,269,289

Six Month Period
at the end of February,

2022 2021

CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $ (121,322 ) $ 435,363
Items not involving an outlay of cash:
Depreciation and amortization 153,709 105,818
Stock-based compensation expense 39,386 —
Deferred income taxes 8,889 (84,080 )

Changes in non-cash working capital items:
(Increase) decrease in accounts receivable (2,050,751 ) 1,184,865
(Increase) in inventory (4,238,783 ) (837,400 )
(Increase) in prepaid expenses (254,073 ) (462,085 )
Increase (decrease) in accounts payable and   accrued liabilities 591,335 (424,881 )
(Increase) in prepaid income taxes (5,247 ) (307,433 )

Net cash used in operating activities (5,876,857 ) (389,833 )

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (908,401 ) (519,470 )

Net cash used in investing activities (908,401 ) (519,470 )

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank indebtedness 6,500,000 —

Net cash provided by financing activities 6,500,000 —

Net decrease in cash (285,258 ) (909,303 )

Cash, beginning of period 1,184,313 3,801,037

Cash, end of period $ 899,055 $ 2,891,734

Supplemental disclosure with respect to cash flows (Note ~~16)~~14)

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

~~- 8 -~~
5

JEWETT-CAMERON TRADING COMPANY LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
~~May 31, 2021~~February 28, 2022
(Unaudited)

1.
1. NATURE OF OPERATIONS
~~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 Jewett-Cameron Company, incorporated September 2013. Former wholly owned subsidiary MSI-PRO was wound-up and dissolved in fiscal 2020. 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 ~~specialty metal~~pet, fencing and other products, ~~and~~ wholesale distribution ~~of wood products~~ to home centers, ~~and~~ 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 is a processor and distributor of agricultural seeds in the United States. MSI was an importer and distributor of pneumatic air tools and industrial clamps ~~in the United States. JCSC is 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.

In March 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic. Government measures to limit the spread of COVID-19, including the closure of non-essential businesses, affected the Company’s operations including delays in inventory production and shipping, a change of product mix based on customer demand to fencing, pet and DIY products, an increase in demand from online sales channels, and costs associated with compliance with COVID-19 control protocols. The Company’s operations, including inventory production and sales, have been excluded from business restrictions within the jurisdictions that the Company operates. However, due to the rapid developments and uncertainty surrounding COVID-19, it is not possible to predict the impact that COVID-19 will have on the Company’s business, financial position, and operating results in the future. In addition, it is possible that estimates in the Company’s consolidated financial statements will change in the near term as a result of COVID-19 and the effect of any such changes could be material, which could result in, among other things valuation of inventory and collectability of accounts receivable. The Company continues to closely monitor the impact of the pandemic on all aspects of its business.

2. SIGNIFICANT ACCOUNTING POLICIES
2.
~~SIGNIFICANT ACCOUNTING POLICIES~~

Generally accepted accounting principles

These consolidated financial statements have been prepared in conformity with generally accepted accounting principles of the United States of America.

Principles of consolidation

These consolidated financial statements include the accounts of the Company and its current wholly owned subsidiaries, JC USA, JCC, ~~MSI,~~ JCSC, and Greenwood, and its former wholly owned subsidiary MSI, 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, 2022
(Unaudited)

2.
~~- 9 -~~
��
SIGNIFICANT ACCOUNTING POLICIES (cont’d…)

~~JEWETT-CAMERON TRADING COMPANY LTD.~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~(Expressed in U.S. Dollars)~~
~~May 31, 2021~~
~~(Unaudited)~~

2.
~~SIGNIFICANT ACCOUNTING POLICIES~~ Estimates~~(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 ~~May 31, 2021,~~February 28, 2022, cash and cash equivalents were ~~$2,170,046~~$899,055 compared to ~~$3,801,037~~$1,184,313 at August 31, ~~2020.~~2021.

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:

Office equipment 3-7 years
Warehouse equipment
~~Office equipment~~
~~3-7~~2-10 years
Buildings
~~Warehouse equipment~~
~~2-10~~5-30 years
~~Buildings~~
~~5-30 years~~

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, 2022
(Unaudited)
2.
~~- 10 -~~
SIGNIFICANT ACCOUNTING POLICIES (cont’d…)

~~JEWETT-CAMERON TRADING COMPANY LTD.~~
~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~
~~(Expressed in U.S. Dollars)~~
~~May 31, 2021~~
~~(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 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.

Earnings per share

Basic earnings per common share is computed by dividing net income ~~or loss~~ available to common shareholders by the weighted average number of common shares outstanding in the period. Diluted earnings per common share takes into consideration common shares outstanding (computed under basic earnings per share) and potentially dilutive common shares.

JEWETT-CAMERON TRADING COMPANY LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

February 28, 2022

(Unaudited)


2.	~~- 11 -~~

		SIGNIFICANT ACCOUNTING POLICIES (cont’d…)

~~JEWETT-CAMERON TRADING COMPANY LTD.~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Expressed in U.S. Dollars)~~

~~May 31, 2021~~

~~(Unaudited)~~

~~SIGNIFICANT ACCOUNTING POLICIES~~ ~~(cont’d…)~~

Earnings per share (cont’d…)

The (loss) earnings per share data for the three and ~~nine~~six month periods ended ~~May 31,~~February 28, 2022 and February 28, 2021 ~~and 2020~~ are as follows:

Three Month Periods
ended May 31,

Nine Month Periods
ended May 31,

2021

2020

2021

2020

Net income
$
2,414,477

$
1,396,973

$
2,849,839

$
1,216,089

Basic weighted average number of
common shares outstanding

3,489,161

3,481,162

3,485,525

3,672,858

Effect of dilutive securities

Stock options

-

-

-

-

Diluted weighted average number
of common shares outstanding

3,489,161

3,481,162

3,485,525

3,672,858

Schedule of Earnings Per Share, Basic and Diluted
	Three Month Periods ended February 28,					Six Month Periods ended February 28,
	2022		2021			2022			2021

Net income (loss)	$	269,820	$	(53,164	)	$	(121,322	)	$	435,363

Basic weighted average number of common shares outstanding		3,492,842		3,486,495			3,491,969			3,483,814

Effect of dilutive securities
Stock options		—		—			—			—

Diluted weighted average number of common shares outstanding		3,492,842		3,486,495			3,491,969			3,483,814

The Company has no items of other comprehensive income in any ~~period~~year presented. Therefore, net income presented in the consolidated statements of operations equals comprehensive income.

Stock-based compensation

All stock-based compensation is recognized as an expense in the financial statements and such costs are measured at the fair value of the award.

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 - 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.

Accounts payable and accrued liabilities - the carrying amount approximates fair value due to the short-term nature of the obligations.

JEWETT-CAMERON TRADING COMPANY LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

February 28, 2022

(Unaudited)


2.	~~- 12 -~~

		SIGNIFICANT ACCOUNTING POLICIES (cont’d…)

~~JEWETT-CAMERON TRADING COMPANY LTD.~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Expressed in U.S. Dollars)~~

~~May 31, 2021~~

~~(Unaudited)~~

~~SIGNIFICANT ACCOUNTING POLICIES~~ ~~(cont’d…)~~

Financial instruments (cont’d…)

The estimated fair values of the Company's financial instruments as of ~~May 31, 2021~~February 28, 2022 and August 31, ~~2020~~2021 follows:

May 31,
2021

August 31,
2020

Carrying
Fair

Carrying
Fair

Amount
Value

Amount
Value

Cash and cash equivalents
$ 2,170,046
$ 2,170,046

$ 3,801,037
$ 3,801,037

Accounts receivable, net of allowance
11,051,061
11,051,061

6,274,426
6,274,426

Notes Payable
-
-

680,707
680,707

Accounts payable and accrued liabilities
3,847,956
3,847,956

3,111,361
3,111,361

Fair Value, Option, Quantitative Disclosures
	February 28, 2022				August 31, 2021
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Cash and cash equivalents	$	899,055	$	899,055	$	1,184,313	$	1,184,313
Accounts receivable, net of allowance		9,137,254		9,137,254		7,086,503		7,086,503
Accounts payable and accrued liabilities		3,739,100		3,739,100		3,147,765		3,147,765
Bank Indebtedness		9,500,000		9,500,000		3,000,000		3,000,000

The following table presents information about the assets that are measured at fair value on a recurring basis as of ~~May 31, 2021~~February 28, 2022 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:

May 31,
2021

Quoted Prices
in Active
Markets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Assets:

Cash and cash equivalents

$
2,170,046

$
2,170,046

$
—

$
—

Fair Value, Assets Measured on Recurring Basis
	February 28, 2022		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents	$	899,055	$	899,055	$	—	$	—

The fair values of cash are determined through market, observable and corroborated sources.

Income taxes

A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carryforwards. 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.

JEWETT-CAMERON TRADING COMPANY LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

February 28, 2022

(Unaudited)


2.	~~- 13 -~~

		SIGNIFICANT ACCOUNTING POLICIES (cont’d…)

~~JEWETT-CAMERON TRADING COMPANY LTD.~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Expressed in U.S. Dollars)~~

~~May 31, 2021~~

~~(Unaudited)~~

~~SIGNIFICANT ACCOUNTING POLICIES~~ ~~(cont’d…)~~

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 is 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 sold and collection of the amounts is reasonably assured.

Recent Accounting Pronouncements

~~In February 2016, Topic 842,~~ ~~Leases~~ ~~was issued to replace the leases requirements in Topic 840,~~ ~~Leases~~. The main difference between previous GAAP and Topic 842 is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. A lessee should recognize in the balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term. The accounting applied by a lessor is largely unchanged from that applied under previous GAAP. Topic 842 will be effective for annual reporting periods beginning after December 15, 2018, including interim periods within those annual periods and is to be retrospectively applied. Earlier application is permitted. The Company adopted this ASU on September 1, 2019. There was no material impact on the Company’s financial statements on adoption.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The accounting standard changes the methodology for measuring credit losses on financial instruments and the timing when such losses are recorded. ASU No. 2016-14 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. The Company ~~is currently evaluating~~adopted this ASU on September 1, 2020. There was no material impact on the ~~impact of ASU No. 2016-13~~Company’s financial statements on ~~its financial position, results of operations and liquidity.~~adoption.

INVENTORY

~~INVENTORY~~

A summary of inventory is as follows:

May 31,
2021

August 31,
2020

Wood products and metal products
$
7,446,038

$
9,017,349

Agricultural seed products

321,602

180,797

$
7,767,640

$
9,198,146

Schedule of Inventory, Current
	February 28, 2022		August 31, 2021

Wood products and metal products	$	18,303,403	$	14,257,609
Agricultural seed products		321,745		133,756

Inventory Net	$	18,630,148	$	14,391,365

JEWETT-CAMERON TRADING COMPANY LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

February 28, 2022

(Unaudited)


4.	~~- 14 -~~

		PROPERTY, PLANT AND EQUIPMENT

~~JEWETT-CAMERON TRADING COMPANY LTD.~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Expressed in U.S. Dollars)~~

~~May 31, 2021~~

~~(Unaudited)~~

~~PROPERTY, PLANT AND EQUIPMENT~~

A summary of property, plant, and equipment is as follows:

May 31,
2021

August 31,
2020

Office equipment
$
535,614

$
654,739

Warehouse equipment

1,345,149

1,293,331

Buildings

5,012,285

4,182,332

Land

559,065

559,065

7,452,113

6,689,467

Accumulated depreciation

(3,652,711)

(3,721,902)

Net book value
$
3,799,402

$
2,967,565

Schedule of property, plant, and equipment
	February 28, 2022			August 31, 2021

Office equipment	$	635,818		$	551,569
Warehouse equipment		1,388,735			1,385,330
Buildings		5,929,343			5,112,129
Land		559,065			559,065
		8,512,961			7,608,093

Accumulated depreciation		(3,874,723	)		(3,721,550	)

Net book value	$	4,638,238		$	3,886,543

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.

INTANGIBLE ASSETS

~~INTANGIBLE ASSETS~~

A summary of intangible assets is as follows:

May 31,
2021

August 31,
2020

Intangible assets

28,905

16,405

Accumulated amortization

(15,995)

(15,746)

Net book value
$
12,910

$
659

Schedule of Finite-Lived Intangible Assets
	February 28, 2022			August 31 2021

Intangible assets		50,694			47,160

Accumulated amortization		(16,800	)		(16,263	)

Net book value	$	33,894		$	30,897

DEFERRED INCOME TAXES

~~DEFERRED INCOME TAXES~~

Deferred income tax liability as of ~~May~~February 28, 2022 of $125,834 (August 31, 2021 ~~of $39,184 (August 31, 2020~~ - ~~$96,952)~~$116,945) reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

BANK INDEBTEDNESS

~~BANK INDEBTEDNESS~~

Bank indebtedness under the Company’s ~~$3,000,000~~$10,000,000 line of credit as of ~~May~~February 28, 2022 was $9,500,000 (August 31, 2021 - $3,000,000). The Line of Credit was ~~$996,010 (August 31, 2020 - $Nil)~~increased during the current six month period from $5,000,000 to $10,000,000.

Bank indebtedness, when it exists, is secured by an assignment of accounts receivable and inventory. Interest iswas calculated solely on the ~~one month~~one-month LIBOR rate plus 175 basis points. As of ~~May 31, 2021,~~February 28, 2022, the interest rate was ~~1.875%.~~1.83%

JEWETT-CAMERON TRADING COMPANY LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

February 28, 2022

(Unaudited)


8.	~~- 15 -~~

		NOTES PAYABLE

~~JEWETT-CAMERON TRADING COMPANY LTD.~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Expressed in U.S. Dollars)~~

~~May 31, 2021~~

~~(Unaudited)~~

~~NOTES PAYABLE~~

On May 4, 2020, the Company entered into loan agreements with U.S. Bank (the “Lender”) for two unsecured loans represented by promissory notes (the “Notes”). The loans were made pursuant to the Paycheck Protection Program (the “PPP”) as part of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) administered by the U.S. Small Business Administration (“SBA”).

The first loan was made to JCC for ~~$487,127~~$487,127 and the second loan was made to JC USA for ~~$193,580.~~$193,580. The total principal amount of the two notes is ~~$680,707.~~$680,707. They have a term of 2 years with a 1%1% annual interest rate. Payments were originally deferred for 6 months, after which the repayment of principal and interest is required to be made in equal monthly payments over 18 months beginning December 4, 2020. However, the SBA subsequently revised the due date to either the date that SBA remits the borrower’s loan forgiveness amount to the lender or, if the borrower does not apply for loan forgiveness, 10 months after the end of the borrower’s loan forgiveness covered period. There is no prepayment penalty. If proceeds are used for ~~qualifying~~qualifying expenses as defined by the CARES Act, including payroll costs, health care benefits, rent and utilities, the Company can apply for forgiveness after 60 days of all or any portion of the promissory note used for such qualifying expenses.

The Company has chosen to account for the loans under FASB ASC 470. Repayment amounts due within 1 year have been recorded as current liabilities, and the remaining amounts due in more than 1 year as long-term liabilities. If the Company is successful in receiving forgiveness for those portions of the loan used for qualifying expenses, those amounts will be recorded as a gain upon extinguishment.

During ~~the 3~~^rd ~~quarter of~~ fiscal 2021 ended ~~May~~August 31, 2021, the Company’s applications for loan forgiveness of both loans was approved by the SBA. The Company has recorded a gain of extinguishment of debt of ~~$687,387~~$687,387 consisting of ~~$680,707~~$680,707 of principal and ~~$6,680~~$6,680 of interest.

CAPITAL STOCK

~~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.

~~10.~~

~~CANCELLATION OF CAPITAL STOCK~~

Treasury stock may be kept based on an acceptable inventory method such as the average cost basis. Upon disposition or cancellation, the treasury stock account is credited for an amount equal to the number of shares cancelled, multiplied by the cost per share and the difference is treated as additional paid-in-capital in excess of stated value.

~~During the 2~~^nd quarter of fiscal 2020 ended February 29, 2020, the Company repurchased for cancelation a total of 490,120 common shares from two large shareholders, including an officer and director of the Company. The shares were repurchased privately at a price of $~~7.89 per share, calculated as the Volume Weighted Average Price (VWAP) of all the shares traded on NASDAQ during the first quarter of fiscal 2020.~~ The total cost of the share repurchases was $3,867,046. The premium paid to acquire those shares over their per share book value in the amount of $3,751,427 was recorded as a decrease to retained earnings


10.	~~- 16 -~~

		RESTRICTED SHARE PLAN

~~JEWETT-CAMERON TRADING COMPANY LTD.~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Expressed in U.S. Dollars)~~

~~May 31, 2021~~

~~(Unaudited)~~

~~11.~~

~~SHARE-BASED INCENTIVE PLANS~~

~~Stock Options~~

The Company formerly had a stock option program under which stock options to purchase securities from the Company could be granted to directors and employees of the Company on terms and conditions acceptable to the regulatory authorities of Canada, notably the Ontario Securities Commission and the British Columbia Securities Commission.

Under the stock option program, stock options for up to 10% of the number of issued and outstanding common shares could be granted from time to time, provided that stock options in favor of any one individual may not exceed 5% of the issued and outstanding common shares. No stock option granted under the stock option program is transferable by the optionee other than by will or the laws of descent and distribution, and each stock option is exercisable during the lifetime of the optionee only by such optionee. Generally, no option can be for a term of more than 10 years from the date of the grant.

The exercise price of all stock options, granted under the stock option program, must be at least equal to the fair market value (subject to regulated discounts) of such common shares on the date of grant. Options vested at the discretion of the Board of Directors.

During the year ended August 31, 2020, the Company’s Board of Directors approved the termination of the stock option program. The Company had no stock options outstanding as of May 31, 2021 and August 31, 2020.

~~Restricted Share Plan~~

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 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 February 28, ~~2021,~~2022, the maximum number of shares available to be issued under the Plan was ~~31,713.~~34,928.

During the second quarter of fiscal 2021 ended February 28, 2021, the Board of Directors set the compensation for members of the Board under the Plan. Non-executive directors will be granted 25 common shares for each quarter of service, with 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.

JEWETT-CAMERON TRADING COMPANY LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

February 28, 2022

(Unaudited)

During the nine months ended May 31, 2021, the Company issued 7,999 common shares to Officers, Directors and Employees under the RSA Plan. 6,564 of these shares were issued to Officers and Directors without a Restricted Period under the Company’s S-8 Registration Statement filed on December 7, 2020. The remaining 1,435 shares were issued to Employees and have a three-year Restricted Period.


11.	~~- 17 -~~

		PENSION AND PROFIT-SHARING PLANS

~~JEWETT-CAMERON TRADING COMPANY LTD.~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Expressed in U.S. Dollars)~~

~~May 31, 2021~~

~~(Unaudited)~~

~~12.~~

~~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 ~~nine months~~six month periods ended ~~May 31,~~February 28, 2022 and 2021, ~~and 2020,~~ the 401(k) compensation expense was ~~$393,218~~$288,216 and ~~$330,208,~~$263,022, respectively.

12.

SEGMENT INFORMATION

~~13.~~

~~DISCONTINUED OPERATIONS~~

Effective September 1, 2019, the Board of Directors decided to permanently close the MSI division and exit the industrial tools business. As of August 31, 2020, the remaining inventory has been liquidated, the division has been wound-up, and the subsidiary has been voluntarily dissolved. The operations and assets of MSI were significantly immaterial to the Company’s overall performance. As such, separate disclosure of MSI’s operations as discontinued operations within the Company’s statement of operations was not considered necessary.

~~14.~~

~~SEGMENT INFORMATION~~

The Company has ~~four~~three principal reportable segments. ~~Three segments are continuing operations and one, Industrial Tools and Clamps, is considered as a discontinued operation.~~ 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.

~~The following~~Following is a summary of segmented information for the ~~nine~~six month periods ended ~~May 31, 2021~~February 28, 2022 and ~~2020.~~2021.

2021

2020

Sales to unaffiliated customers:

Industrial wood products
$
1,883,064

$
1,955,669

Lawn, garden, pet and other

37,843,378

27,493,875

Seed processing and sales

2,670,149

1,230,765

Industrial tools and clamps

-

238,036

$
42,396,591

$
30,918,345

Income (loss) before income taxes:

Industrial wood products
$
(46,258)

$
(69,619)

Lawn, garden, pet and other

3,592,546

1,626,378

Seed processing and sales

94,339

(60,458)

Industrial tools and clamps

-

(238,195)

Corporate and administrative

245,108

505,597

$
3,885,735

$
1,763,703

Schedule of Segment Reporting Information
	2022			2021

Sales to unaffiliated customers:
Industrial wood products	$	1,119,670		$	1,245,346
Lawn, garden, pet and other		24,203,362			17,822,958
Seed processing and sales		1,655,443			1,708,335
	$	26,978,475		$	20,776,639

(Loss) income before income taxes:
Industrial wood products	$	43,946		$	(36,464	)
Lawn, garden, pet and other		(569,856	)		487,741
Seed processing and sales		(121,748	)		51,405
Corporate and administrative		531,321			63,939
	$	(116,337	)	$	566,621

Identifiable assets:
Industrial wood products	$	592,882		$	719,493
Lawn, garden, pet and other		27,893,913			13,907,759
Seed processing and sales		1,010,607			907,460
Corporate and administrative		6,659,285			7,699,446
	$	36,156,687		$	23,234,158
Capital expenditures:
Industrial wood products	$	—		$	—
Lawn, garden, pet and other		—			—
Seed processing and sales		—			—
Corporate and administrative		908,401			519,470
	$	908,401		$	519,470

Interest expense:	$	50,896		$	—

JEWETT-CAMERON TRADING COMPANY LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

February 28, 2022

(Unaudited)


12.	~~- 18 -~~

		SEGMENT INFORMATION (cont’d…)

~~JEWETT-CAMERON TRADING COMPANY LTD.~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Expressed in U.S. Dollars)~~

~~May 31, 2021~~

~~(Unaudited)~~

~~14.~~

~~SEGMENT INFORMATION~~ ~~(cont’d…)~~

2021

2020

Identifiable assets:

Industrial wood products
$
701,021

$
780,726

Lawn, garden, pet and other

19,205,736

13,346,110

Seed processing and sales

793,392

547,496

Industrial tools and clamps

-

741

Corporate and administrative

6,681,766

7,057,217

$
27,381,915

$
21,732,290

Depreciation and amortization:

Industrial wood products
$
-

$
-

Lawn, garden, pet and other

29,335

20,777

Seed processing and sales

4,761

4,761

Industrial tools and clamps

-

2,241

Corporate and administrative

141,075

133,213

$
175,171

$
160,992

Capital expenditures:

Industrial wood products
$
-

$
-

Lawn, garden, pet and other

-

-

Seed processing and sales

-

-

Industrial tools and clamps

-

-

Corporate and administrative

942,188

207,469

$
942,188

$
207,469

Interest expense:
$
-

$
-

The following table lists sales made by the Company to customers which were in excess of 10% of total sales for the ~~nine~~six months ended ~~May 31, 2021~~February 28, 2022 and ~~2020:~~2021:

2021

2020

Sales
$
22,279,565

$
12,605,112

Sales in excess of ten percent of total sales
	2022		2021

Sales	$	13,029,830	$	7,591,948

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 ~~nine~~six months ended ~~May 31, 2020~~February 28, 2022 and ~~2019:~~2021:

2021

2020

United States
$
40,698,374

$
30,184,205

Canada

1,197,681

535,049

Mexico / Latin America / Caribbean

181,168

159,926

Europe

171,254

6,867

Asia/Pacific

148,114

32,298

Schedule of sales by country
	2022		2021

United States	$	25,657,040	$	20,394,544
Canada		426,425		250,863
Europe		24,913		11,058
Mexico/Latin America/Caribbean		632,334		108,659
Asia/Pacific		237,763		11,515

All of the Company’s significant identifiable assets were located in the United States as of ~~May 31, 2021~~February 28, 2022 and ~~2020.~~2021.


13.	~~- 19 -~~

		RISKS

~~JEWETT-CAMERON TRADING COMPANY LTD.~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Expressed in U.S. Dollars)~~

~~May 31, 2021~~

~~(Unaudited)~~

~~15.~~

~~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 ~~May 31, 2021, two~~February 28, 2022, three customers accounted for accounts receivable greater than 10% of total accounts receivable at ~~59%~~69%. At ~~May 31, 2020, two customers~~February 28, 2021, one customer accounted for accounts receivable greater than 10% of total accounts receivable at ~~56%~~45%. The Company controls credit risk through credit approvals, credit limits, credit insurance and monitoring procedures. The Company performs credit evaluations of its commercial customers but generally does not require collateral to support accounts receivable.

Volume of business

The Company has concentrations in the volume of purchases it conducts with its suppliers. For the ~~nine~~six months ended ~~May 31, 2021, there were three suppliers that each accounted for 10% or greater of total purchases, and the aggregate purchases amounted to $14,782,935. For the nine months ended May 31, 2020,~~February 28, 2022, there were two suppliers that each accounted for 10% or greater of total purchases, and the aggregate purchases amounted to ~~$13,119,225.~~$14,000,039. For the six months ended February 28, 2021, there were two suppliers that each accounted for 10% or greater of total purchases, and the aggregate purchases amounted to $7,613,493.

~~16.~~

~~SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS~~

JEWETT-CAMERON TRADING COMPANY LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

February 28, 2022

(Unaudited)

14.

SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS

Certain cash payments for the ~~nine~~six months ended ~~May 31,~~February 28, 2022 and 2021 ~~and 2020~~ are summarized as follows:

2021

2020

Cash paid during the periods for:

Interest
$
-

$
-

Income taxes
$
338,746

$
342,897

Schedule of Cash Flow, Supplemental Disclosures
	2022		2021

Cash paid during the periods for:
Interest	$	50,896	$	—
Income taxes	$	—	$	563,367

There were no non-cash investing or financing activities during the periods presented.

17.

CONTINGENCY

~~17.~~

An association of District Attorneys in the State of California have contacted the Company in regards to their ongoing investigation into the environmental labeling and marketing of dog waste bags. The District Attorneys claim that labelling certain dog waste bags, including the Company’s, as biodegradable or compostable is misleading due to the lack of industrial composting facilities that accept dog waste. The Company has accrued a charge in the current period of $300,000 towards a possible settlement.

~~CONTINGENCY~~

b) The Company is a named party in a Civil Action in Pennsylvania. The matter is an action seeking compensation for personal injuries and is based on theories of product liability as to the Company. The matter arises out of a dog allegedly escaping from a Jewett-Cameron kennel product and causing personal injuries to three individuals. The Company is a named party in a Civil Action in Pennsylvania. The matter is an action seeking compensation for personal injuries and is based on theories of product liability as to Jewett-Cameron. The matter arises out of a dog allegedly escaping from a Jewett-Cameron kennel product and causing personal injuries to three individuals. Jewett-Cameron is currently one of three named Defendants. A trial date has not been set at this time. At the present time it is speculative to predict as to its outcome. It is the Company’s intention to vigorously defend the lawsuit. The Company’s applicable liability insurer is providing a defense covering the Company’s legal fees and costs.

The Company has initiated arbitration against a former distributor asserting a breach of the distribution agreement and seeking damages. Arbitration is scheduled to commence in the first week of August 2022. While the company is robustly pursuing its rights and defending itself against claims, the arbitration and lawsuit are in their initial stages and therefore it is speculative to predict as to its outcome.

18.

SUBSEQUENT EVENTS

Due to the worldwide banking industry phasing out the use of LIBOR, the Company’s ~~intention to vigorously defend the lawsuit. Jewett Cameron’s applicable liability insurer is providing a defense covering Jewett-Cameron’s legal fees and costs.~~

The Company has initiated arbitration against a former distributor asserting a breach of the distribution agreement and seeking damages. This distributor has raised a counter claim in Illinois federal court against the Company asserting a breach of the same contract and seeking damages. While company is robustly pursuing its rights and defending itself against claims, the arbitration and lawsuit are in their initial stages and therefore it is speculative to predict as to its outcome

~~18.~~

~~SUBSEQUENT EVENTS~~

~~Effective June 15, 2021, the Company’s~~Bank Line of Credit agreement has been revised to change the calculation of the interest rate from the one-month LIBOR rate to the one-month Secured Overnight Financing Rate (SOFR). Beginning with the monthly interest payment due March 1, 2022, interest is calculated based on the one-month SOFR plus 157 basis points, which as of March 1, 2022 was ~~increased from $3,000,000 to $5,000,000.~~1.62% (0.05% + 1.57%).


	~~- 20 -~~

		16

Item 2.

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

~~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 ~~May 31, 2021~~February 28, 2022 and August 31, ~~2020~~2021 and its results of operations and cash flows for the three and ~~nine~~six month periods ended ~~May 31,~~February 28, 2022 and 2021 ~~and 2020~~ in accordance with U.S. GAAP. Operating results for the ~~nine~~three and six month ~~period~~periods ended ~~May 31, 2021~~February 28, 2022 is not necessarily indicative of the results that may be experienced for the fiscal year ending August 31, ~~2021.~~2022. 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.

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:

Industrial wood products
·
Lawn, garden, pet and other
·
Seed processing and sales
·
Corporate and administration

The industrial wood products segment reflects the business conducted by Greenwood Products, Inc. (Greenwood). Greenwood is a processor and distributor of industrial wood products. A major product category is treated plywood that is sold primarily to the transportation industry, including the municipal and mass transit transportation sectors.

The lawn, garden, pet and other segment reflects the business of Jewett-Cameron Company (JCC), which is a wholesaler of wood products and a manufacturer and distributor of specialty metal products. ~~Wood~~JCC operates out of a 5.6 acre owned facility located in North Plains, Oregon that includes offices, a warehouse, and a paved yard. This business is a wholesaler, and a manufacturer and distributor of products ~~are primarily fencing, while metal products~~that include an array of pet enclosures, kennels, and ~~kennels,~~pet welfare and comfort products, proprietary gate support systems, perimeter fencing, greenhouses, ~~canopies~~ and ~~umbrellas.~~ fencing in-fill products made of wood, metal and composites. Examples of the Company’s brands include Lucky Dog®, ~~Animal House® and AKC (used under license from the American Kennel Club)~~ for pet ~~enclosures~~products; Adjust-A-Gate™, Fit-Right®, Perimeter Patrol®, and ~~kennels; Adjust-A-Gate, Fit-Right™, LIFETIME POST™~~Infinity Euro Fence and ~~Perimeter Patrol®~~Lifetime Post™ for gates and fencing; Early Start, Spring ~~Gardener™~~Gardner™, Greenline®, and Weatherguard for ~~greenhouses; and TrueShade® for patio umbrellas, furniture covers and canopies.~~greenhouses. JCC uses contract manufacturers to ~~make the specialty metal~~manufacture these products. Some of the products that JCC distributes flow through the Company’s facility in North Plains, Oregon, and some are shipped direct to the customer from the manufacturer. Primary customers are home centers, eCommerce ~~and~~partners, on-line direct consumers as well as other retailers.

The seed processing and sales segment reflects the business of Jewett-Cameron Seed Company (JCSC). JCSC processes and distributes agricultural seed. Most of this segment’s sales come from selling seed to distributors with a lesser amount of sales derived from cleaning seed.

MSI is a former division of the Company that imported and distributed products including pneumatic air tools, industrial clamps, and saw blades. These products were primarily sold to wholesalers that in turn sold to contractors and end users. This business operated from the same owned facilities as JCC. The MSI division was permanently closed and all remaining inventory was liquidated during fiscal 2020.

JC USA Inc. (“JC USA”) is the parent company for the wholly-owned subsidiaries as described above. JC USA provides professional and administrative services, including warehousing, accounting and credit services, to its subsidiary companies.

Tariffs

The Company’s metal products are 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 the Company’s products manufactured in China have been subject to duties of 25% when imported into the United States.

These new tariffs were temporarily reduced on many of the Company’s imported products in September 2019 under a deemed one-year exemption. The 25% tariff rate was restored on the Company’s products in September 2020 when the exemption expired.


	~~- 21 -~~

		17

RESULTS OF OPERATIONS

The strong growth in sales recorded in Q1 of fiscal 2022 continued in the second quarter, with sales increasing by 34% over the second quarter of fiscal 2021, and by 30% over the first six months of fiscal 2022. However, continuing supply chain issues and other inflationary pressures, including higher raw material prices, contributed to significant increases in the cost of goods sold, which rose by 36% in the second quarter and by 39% for the six month period. These costs remain high entering into the 3^rd quarter. Shipping costs, both from China and 4within the US, have continued to increase. Historically, the Company has contracted the majority of its anticipated ocean container volume in advance at fixed prices. Due to the uncertainty of shipping and container availability, ocean carriers are now entering into fewer advanced contracts which will require us to purchase a growing number of container space on the spot market, which could result in higher costs and longer delivery times. COVID related supply chain interruptions continue to occur within China, which are also contributing to higher costs and some inconsistent shipments. These supply chain issues have led management to investigate broader sourcing of certain products to mitigate risk going forward.

We have been working to reduce the impact from these higher costs and logistical issues as much as possible. We have intentionally continued to build inventory ahead of our traditionally busy Spring and Summer season. This will allow us to meet the anticipated inventory build from our retail customers during the 3^thrd ~~quarters~~quarter. It also allows us to receive certain high demand products ahead of already announced price increases from suppliers and shippers while mitigating the risks of shipping and supply chain disruptions and potential new COVID outbreaks. This has again resulted in higher than usual inventory levels at the end of the ~~fiscal year are historically~~second quarter which required higher cash outlays primarily funded through our bank line of credit. As of February 28^th, we have borrowed $9.5 million on our $10 million credit line. Our cash flow models anticipate the ~~Company’s busiest season,~~level of orders and timing of receipts will allow us to begin to repay the ~~strong sales momentum from~~borrowing under the ~~first two quarters continued~~line in the third quarter. ~~This year’s third quarter sales were up 33% over~~

Gross margins improved in the ~~third~~second quarter of ~~fiscal 2020.~~2022 compared to Q1. Management is monitoring our costs and optimizing our selling prices in line with rising costs. However, ~~sales during~~selling price increases for our products may continue to lag any future increases in our product and operating costs, which may further compress our margins. Our current financial results were negatively impacted by a $300,000 accrual for expected costs related to an offer to settle a case brought by an association of California District Attorneys. This case related to their ongoing investigation into the ~~current quarter were restrained~~environmental labeling and marketing of dog waste bags. The District Attorneys claim that labeling certain dog waste bags, including the Company’s, as biodegradable or compostable is misleading due to ~~logistical issues, including extended shipping delays from China, a shortage~~the lack of ~~shipping containers, clogged port~~industrial composting facilities ~~and a scarcity of trucking to ship and receive product.~~

~~Current demand for a~~that accept dog waste. A number of major retailers have already settled their portion of the case. We have accrued $300,000 for possible settlement costs. The Company has proactively solicited feedback from the District Attorneys regarding new packaging and marketing materials for our ~~core~~dog waste bags to help ensure legal compliance for future sales of our products ~~is the highest~~within California.

The higher level of sales recorded in the ~~Company’s history. The increase in sales during the quarter occurred within all~~first six months of ~~the Company’s sales channels, including eCommerce, with many customers requesting both higher volumes and adding additional products to their orders. These results demonstrate~~2022 reflects the success of our current sales and marketing strategy. ~~The rebranding of our products has highlighted our brand names and increased consumer awareness of our consistent look and statement of value.~~ We ~~remain committed to our overall strategy to expand new and existing sales channels, widen our product distribution, and grow our connections with the end consumer.~~

The expansion of our product lines through the introduction of complementary products is performing well, particularly with the compostable dog waste bag which has received extremely favorable consumer response. We are adding sales and customers as our production levels continue to ramp up. We see this initial compostable product as the foundation of a sustainable and innovative brand. We also intend to continue to develop new products, particularly those that complement and expand our existing product ~~lines. Besides our internal new product development process,~~lines, and we may also seek to acquire products that conform to this strategy. The launch of several important new products that were planned for calendar 2021, but were delayed due to the supply chain issues, are now planned to roll out in the second half of fiscal 2022.

We continue to strategically invest in ~~the expansion~~our facilities, personnel, and equipment. The 4^th phase of our ~~facilities, equipment,~~capital improvement and personnel. The Company’s new Enterprise Resource Planning (ERP) software system successfully went live in February 2021 and has been performing well. We have also launched the third of four planned phases to modernize our facilities and add capacity for future expansion. ~~Renovation of an existing portion of the warehouse into a two-story office and gathering was completed and occupied in May 2021.~~ ~~Other current capital~~expansion projects ~~include the renovation of the former seed laboratory into a new Creative Center for new product development which~~ was completed in ~~February 2021.~~ the second quarter of fiscal 2022. These projects have significantly increased and improved functionality of our office space. Our next expansion will be to renovate an existing warehouse building for both custom order fulfilment and to support our growing fence business. We are hiring new employees to fill important skilled specialty roles to improve our efficiency and expand customer engagement and service. New investments have ~~also revamped our corporate~~been made in technology improvements, including Electronic Data Interchange (EDI) and customer order automation. The website continues to improve in line with our omnichannel ~~rebranding. These updates include a larger and unified product presentation, new eCommerce interface,~~commitment offering enhanced accessibility, functionality and modernized investor relations and contact sections. Additionally, we have implemented easier navigation of our increased product selection displayed with a more unified brand presentation within a new eCommerce interface.

The ~~Company has added additional personnel to lead the efforts for enhancing consumer awareness and marketing for both the website and on multiple social media platforms.~~

Intransition of our senior management roles as announced in May 2021 occurred on January 1, 2022. Charlie Hopewell has moved from the day-to-day operational role as CEO to his overall strategy positions as a Director and Board Chair. Chad Summers has been appointed as Chief Executive Officer of Jewett-Cameron in addition to his prior position as President, and Mitch Van Domelen, CPA, has been appointed as Chief Financial Officer.

Chad Summers originally joined the Company in October 2019 and was appointed President of the Company. Mr. Summers assumed the role from Charlie Hopewell who voluntarily decided to transition from President and his current CEO position to continue as Board Chair and Director effective January 1, 2022. Mr. Summers has been with Jewett-Cameron since October 2019.in May 2021. His prior experience includes participation in start-up ventures in both product and service industries and has a strong background in leadership, consulting, and support. He co-owned and led an international ~~family~~ lumber brokering business similar to Jewett-Cameron’s Greenwood division. This experience provided him the opportunity to oversee and actively manage suppliers in China and throughout SE Asia. He also built a successful consulting practice dedicated to growing manufacturers in association with a west coast regional accounting firm which allowed him the opportunity to establish a deep network of manufacturers, professional services and support connections regionally. ~~He also participated~~

Mitch Van Domelen is a Certified Public Accountant who joined Jewett-Cameron in July 2017 as Controller. Mr. Van Domelen has extensive experience in finance and ~~led start-up ventures~~financial reporting for both public and private companies. Prior to joining Jewett-Cameron, he served as Controller for a national beverage brand where he managed the financial processes and full-cycle accounting for the company and its nine brewpub locations. From 2007 to 2012 he worked in public accounting at a large regional public accounting firm in Lake Oswego, Oregon, auditing both public and private companies. From 2005 to 2007, he served as a Sarbanes-Oxley (SOX) compliance consultant for SEC registrants in the Portland metro area, testing their compliance in both ~~product~~US and ~~service industries. Since joining~~International regions. He holds a bachelor's degree in Business Administration from Southern Oregon University. He is a licensed CPA in the ~~Company he has focused on driving growth through pursuing acquisition opportunities as well as key strategic partnerships.~~

~~Subsequent to the end~~State of Oregon and is a member of the ~~third fiscal quarter, the Company added Michelle Walker to the Board~~Oregon Society of Directors. Ms. Walker is a business strategist with experience in brand development, organizational alignment, and building consumer brands, including both B2B and B2C businesses. Previously, she was CEO of Sock It to Me, Inc., a sock and underwear brand she grew by 400% during her tenure. She has also held several senior positions with PepsiCo, including Senior Director and GM of the Lays and Ruffles brands where her responsibility included business strategy, brand positioning, product development, and sales strategy. Ms. Walker’s experience and guidance will be extremely important as the Company continues its growth strategy.CPA's.


	~~- 22 -~~

In response to the COVID-19 pandemic, the State of Oregon ~~fully reopened and~~originally lifted all of its mask and social distancing requirements in June 2021. However, as a response to the surge in COVID-19 infections, indoor masking requirements for businesses were reinstituted in August 2021 and remained in effect until the State of Oregon lifted the indoor masking mandate on March 11, 2022. The Company ~~will remain~~remains vigilant in regard to the COVID virus and its variants. It is critical to our continuing operations that we do all we can to protect and retain our workforce if and when they might experience exposure to the virus. If any employees working at headquarters or in the warehouse facilities contract the virus, the Company ~~would~~could be forced to curtail those operations, including product shipments, for the required period to thoroughly clean and sanitize the facility without human exposure, which ~~would~~could result in delayed or lost revenue, and increased costs. To date, we have not had any incidents of transmissions within the confines of our facilities due to our clear and consistent protocols during the restrictive period, as well as our employees’ remarkable support of our procedures which has been critical to our success in keeping our workplace safe and running. This has directly led to our ability to retain our workforce through these challenging times as well as create an environment in which people feel safe. The assistance of the PPP program provided us the ability to assist sound employee decisions when they either felt they had an external exposure or perhaps even tested positive due to such external exposure. The loans the Company received under the Paycheck Protection Program were essential in supporting the Company’s ability to operate without interruption during the crisis and retain 100% of its workforce. All of the borrowed funds were spent on qualifying employee payroll expenses, and the Company’s loans were fully forgiven by the SBA in April 2021.

The ~~Company’s business is typically seasonal, with sales volumes highest in the 3~~^rd ~~and 4~~^th quarters of the fiscal year. The sales gains seen in the first half of the fiscal year are certainly encouraging. However, the ongoing COVID-19 situation both in the US and internationally continues to cloud the outlook for the remainder of fiscal ~~2021~~2022 remains uncertain. Although our sales trends entering the third quarter are encouraging, the ongoing supply chain, international shipping and ~~into fiscal 2022. Both international~~logistic issues may continue to compromise our ability to receive inventory from China and ~~domestic supply chains and logistics remain chaotic. It has become more difficult~~fully fulfill our customers’ orders in a timely manner. We have deliberately increased our inventory levels to secure shipping containers and ship space for our Chinese manufactured goods. This has resulted in significant cost increases for container rentals in addition to shipping delays, as seaborne container slots are scarce and there are long delays for container ships to unload at certain American West Coast ports. We were abletry to mitigate these ~~effects somewhat due to our building~~risks and any additional risks from the worldwide emerging variants of higher than normal inventory levels of a number of our most popular products in the second quarter before the shipping crisis worsened. But, higher than expected customer orders resulted in some products being unavailable at times during the third quarter. There is also a shortage of trucks and trucking capacity in the United States, which is causing some delays in both receiving goods from suppliers and shipping product to customers. Although we prioritized the shipping of our most important products duringCOVID. Entering the 3^rd quarter, we intentionally have more months of inventory on hand of our highest value products than in a typical year. Inflation, particularly in the ~~combination~~form of product delays and the continued high level of customer orders significantly inflated the Company’s backlog and accounts receivable as payment from customers extended later than usual. At the same time, we needed to order additional product to fulfil both current and future orders. This required the Company to access its line of credit during the third quarter. The situationhigher raw material costs combined with higher shipping costs, is expected to ~~be temporary and is beginning~~remain an issue going forward. These costs may increase faster than we are able raise our selling prices to ~~alleviate during~~our customers, which would continue to pressure our margins for the 4^th ~~quarter as significant amounts~~remainder of ~~product are in transit and are now beginning to be delivered.~~the fiscal year.

Three Months Ended ~~May 31,~~February 28, 2022 and 2021 ~~and May 31, 2020~~

For the three months ended ~~May 31, 2021,~~February 28, 2022, sales ~~totaled $21,619,952 compared to~~were $14,060,751, which is an increase of $3,600,396, or 34%, from sales of ~~$16,241,239~~$10,460,355 for the three months ended ~~May 31, 2020, which was an increase of $5,378,713, or 33%.~~February 28, 2021.

Sales at JCC were ~~$20,020,420~~$12,357,478 for the three months ended ~~May 31, 2021~~February 28, 2022 compared to sales of ~~$15,491,042~~$8,893,322 for the three months ended ~~May 31, 2020.~~February 28, 2021. This represents an increase of ~~$4,529,378,~~$3,464,156, or ~~29%~~39%. ~~The higher consumer~~Consumer demand for fencing and pet products experienced during the first six months of the fiscal year during the COVID-19 pandemic continued into the current quarter. There has also been strong market acceptance of the Company’s newly introduced products, including the compostable dog waste bags.remains strong. Sales during the current ~~period~~quarter were ~~somewhat restrained~~also boosted by ~~logistical issues, particularly during~~fulfilment of backorders originally caused by shipment delays in prior periods. At the ~~final month~~end of the ~~quarter.~~second quarter, backorders totaled $329,000. Margins have been compressed by higher raw material and shipping costs, but the Company has been able to successfully raise its selling prices and pass through some of these higher costs to its customers. Operating profit for the current quarter was ~~$3,104,805~~$129,841 compared to ~~income~~an operating loss of ~~$1,909,079~~($53,164) for the quarter ended ~~May 31, 2020.~~February 28, 2021. 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 ~~for the quarter were $637,718 compared~~rose to $585,559 from sales of ~~$485,678~~$520,593 for the three months ended ~~May 31, 2020,~~February 28, 2021, which ~~was~~is an increase of ~~$152,040,~~$64,966, or ~~31%~~12%. ~~Demand for~~ Greenwood’s ~~products from governments and transit operators remains weak due to~~sales have been heavily impacted by the COVID-19 ~~pandemic~~shutdowns, as ~~well as supply shortages due~~many of their products are sold to ~~logistics.~~municipalities and larger transit operators. For the three months ended ~~May 31, 2021,~~February 28, 2022, Greenwood had an operating loss of ($~~9,794)~~26,003) compared to an operating loss of ($~~24,093)~~21,240) for the three months ended ~~May 31, 2020.~~February 28, 2021.

Sales at JCSC were ~~$961,814~~$1,117,714 compared to sales of $1,046,439 for the three months ended ~~May 31,~~February 28, 2021, ~~compared to sales of $264,520 for the three months ended May 31, 2020. This is~~which was an increase of ~~$697,294,~~$71,275, or ~~264%~~7%. ~~Management’s recent efforts to more closely align with~~The historic heat wave across the ~~needs of growers and focus on service has led to significantly greater cleaning volumes~~Pacific Northwest during the ~~current period.~~summer of 2021 damaged many crops and reduced harvested yields which has decreased demand for the Company’s seed cleaning services. Operating loss at JCSC for the quarter ended February 28, 2022 was ($20,398) compared to an operating profit of $1,915 for the quarter ended February 28, 2021.

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 ~~May 31, 2021, JCSC~~February 28, 2022, JC USA had an operating ~~income~~profit of ~~$42,934~~$284,681 compared to an operating loss of ($~~103,639) in the quarter ended May 31, 2020.~~


	~~- 23 -~~

~~JC USA is the holding company for the wholly-owned operating subsidiaries. For the quarter ended May 31, 2021, JC USA had operating income of $181,169 compared to operating income of $153,415~~8,370) for the quarter ended ~~May 31, 2020. The increase in operating income is largely due to higher inventory levels in the current quarter.~~February 28, 2021. The results of JC USA are eliminated on ~~consolidation~~consolidation.

Gross margin for the three months ended ~~May 31, 2021~~February 28, 2022 was ~~25.8%~~24.4% compared to ~~26.5%~~25.0% for the three months ended ~~May 31, 2020. Margins in the current quarter were negatively impacted by logistic issues, particularly the~~February 28, 2021. The decline was primarily due to higher ~~cost of shipping and shipping containers from China, trucking issues in the United States, and greater~~ sales of lower margin ~~lumber.~~wood products and higher raw material and shipping costs in the current quarter.

Operating expenses increased by ~~$548,329~~$52,749 to ~~$2,944,240 from $2,395,911~~$2,727,487 compared to expenses of $2,674,738 for the three months ended ~~May 31, 2020.~~February 28, 2021. Selling, General and Administrative ~~rose~~Expenses declined to ~~$966,299~~$684,116 from ~~$706,079 which is commensurate with the higher level of sales in the current quarter.~~$895,974. Wages and Employee Benefits increased to ~~$1,908,588~~$1,959,300 from ~~$1,635,051~~$1,723,474 as the Company added additional staff to support its new sales and marketing initiatives and roll-out of new products. Depreciation and Amortization increased ~~its employee headcount compared~~to $84,071 from $55,290. Other income in the current quarter was $2,000, and interest expense related to the ~~prior year’s quarter. Depreciation rose to $69,353 from $54,781. Other income includes a one-time gain on~~Company’s Bank Line of Credit was $30,620. In the ~~extinguishment~~current quarter, the Company also accrued $300,000 for the settlement of ~~debt~~claims brought by the Association of ~~$687,387 which is~~California District Attorneys regarding the ~~principal~~labeling and ~~accrued interest~~marketing of the Company’s two SBA PPP loans which were forgiven during the current quarter. Interest and other income was an expense of ($6,282) compared to a gain of $3,217 in the year-ago quarter, as the Company incurred interest from the draw on its line of credit. There was no gain on Sale of Property, Plant and Equipment in the current period compared to $2,200 in the quarter ended May 31, 2020.dog waste bags.

Income tax expense for the three ~~months ended May 31, 2021 was $904,638 compared to $522,026 for the three~~ month period ended ~~May 31, 2020.~~February 28, 2022 was ($98,300) compared to a recovery of $6,998 for the quarter ended February 28, 2021. The Company estimates income tax expense for the quarter based on combined federal and state rates that are currently in ~~effect, and the increase in taxes is consistent with the higher income for the current quarter.~~effect.

Net ~~income~~profit for the quarter ended ~~May 31, 2021, including the one-time gain on the extinguishment of debt of $687,387,~~February 28, 2022 was ~~$2,414,477,~~$269,820, or ~~$0.69~~$0.08 per basic and diluted share, compared to net ~~income~~loss of ~~$1,396,973,~~($53,164), or ~~$0.40~~($0.02) per basic and diluted share, for the quarter ended ~~May 31, 2020.~~February 28, 2021.

~~Nine~~Six Months Ended ~~May 31,~~February 28, 2022 and February 28, 2021 ~~and May 31, 2020~~

For the ~~nine~~six months ended ~~May 31, 2021,~~February 28, 2022 sales ~~totaled $42,396,591 compared~~increased by $6,201,836, or 30%, to $26,978,475 from sales of ~~$30,918,345 for~~$20,776,639 recorded in the ~~nine months~~six month period ended ~~May 31, 2020. This represents an increase of $11,478,246, or 37%.~~February 28, 2021.

Sales at JCC were ~~$37,843,379~~$24,203,362 for the ~~nine~~six months ended ~~May 31, 2021~~February 28, 2022 compared to sales of ~~$27,493,875~~$17,822,958 for the ~~nine~~six months ended ~~May 31, 2020,~~February 28, 2021, which was an increase of ~~$10,349,504,~~$6,380,404, or ~~38%~~36%. The increase in sales is primarily due to higher ~~consumer~~ demand for fencing and pet products. The Company has also successfully raised its selling prices on many products ~~during~~in the ~~COVID-19 pandemic as well as strong market acceptance of~~current period. Operating loss at JCC for the ~~Company’s newly introduced products, including the compostable dog waste bags. The prior year’s~~current six month period was negatively affected by the initial stages of the COVID-19 pandemic which resulted in lower product demand from certain customers and some shipping delays from Chinese manufacturers. Operating income at JCC was $3,592,546($569,856) compared to ~~income~~an operating profit of ~~$1,626,378~~$487,741 for the ~~nine~~six months ended ~~May 31, 2020.~~February 28, 2021. Overall, the operating results of JCC are seasonal with the first two quarters of the fiscal year being much slower than the final two quarters of the fiscal year.

Sales at Greenwood were ~~$1,883,064~~$1,119,670 for the six months ended February 28, 2022 compared to sales of ~~$1,955,669~~$1,245,346 for the ~~nine~~six months ended ~~May 31, 2020.~~February 28, 2021. This represents a decrease of ~~$72,605,~~$125,676, or 4%10%. ~~Demand for~~ Greenwood’s ~~products from governments and transit operators remains weak due to~~sales have been heavily impacted by the COVID-19 ~~pandemic.~~shutdowns, as many of their products are sold to municipalities and larger transit operators. Greenwood is currently introducing new products to both existing and new customers. Management is also actively seeking new brokers to both open new sales channels and broaden its customer base, particularly in the housing and construction sectors. For the ~~nine~~six months ended ~~May 31, 2021,~~February 28, 2022, Greenwood had an operating ~~loss~~profit of ~~($46,258)~~$43,956 compared to an operating loss of ($~~69,619)~~36,464) for the ~~nine~~six months ended ~~May 31, 2020.~~February 28, 2021.

Sales at JCSC for the ~~nine~~six months ended ~~May 31, 2021~~February 28, 2022 were ~~$2,670,149~~$1,655,443 compared to sales of ~~$1,230,765~~$1,708,335 for the ~~nine~~six months ended ~~May 31, 2020, which was an increase~~February 28, 2021. This represents a decrease of ~~$1,439,384,~~$52,892, or ~~117%~~3%. Management ~~has worked~~continues to refocus JCSC to better provide local growers with cleaning, ~~services which has led to significantly higher cleaning volumes. JCSC is also advancing its strategy to increase its~~ seed brokering and sales services. ~~Sales in~~However, the ~~prior year’s period were negatively affected by poor planting seasons caused by wet weather~~historic heat wave across ~~North America which~~the Pacific Northwest during the summer of 2021 damaged many crops and reduced ~~the demand for the Company’s clover seed as a cover crop.~~ harvested yields, creating an industry-wide supply shortage. For the ~~nine-month period ended May 31, 2021, JCSC had operating income of $94,339 compared to an operating loss of ($60,458) for the nine~~six months ended ~~May 31, 2020.~~

The MSI-Pro division was wound up in fiscal 2020 as the Company exited the industrial tools segment. Sales at MSI for the nine months ended May 31, 2020 was $238,036 which represented the final liquidation of all of MSI’s remaining inventory, much of which was sold at a significant discount to the Company’s carrying value. For the nine months ended May 31, 2020 MSIFebruary 28, 2022, JCSC had an operating loss of ($~~238,195).~~121,748) compared to operating income of $51,405 for the six months ended February 28, 2021, as higher equipment and property maintenance expenses contributed to the operating loss in the current period.


	~~- 24 -~~

JC USA, the holding company that provides professional and administrative services for the wholly-owned operating subsidiaries had operating income of ~~$245,108~~$531,321 for the six months ended February 28, 2022 compared to income of ~~$505,597~~$63,939 for the ~~nine~~six months ended ~~May 31, 2020. The decrease is due to the addition of new personnel and higher administrative costs in the current period, and the costs of capital improvements.~~February 28, 2021. The results of JC USA are eliminated on consolidation.

Gross margin for the ~~nine-month~~six month period ended ~~May 31, 2021~~February 28, 2022 was ~~26.3%~~21.8% compared to ~~27.0%~~26.8% for the ~~nine~~six months ended ~~May 31, 2020.~~February 28, 2021. The lower margin in the current period was primarily due to higher ~~costs related to shipping and logistical issues, and increased~~ sales of lower margin ~~lumber.~~wood products and higher raw material and shipping costs.

Operating expenses ~~rose by $1,334,691 to $7,958,094 from operating expenses of $6,623,403~~ for the ~~nine~~six months ended ~~May 31, 2020.~~February 28, 2022 were $5,659,530 compared to $5,013,854 for the six month period ended February 28, 2021. Selling, General and Administrative ~~expenses~~Expenses increased to ~~$2,556,902~~$1,672,403 from ~~$2,118,999 which is commensurate with the higher level of sales in the current period.~~$1,590,603. Wages and Employee Benefits increased to ~~$5,226,021~~$3,833,418 from ~~$4,343,412, an increase of $882,609,~~$3,317,433 as the Company ~~has hired~~added additional ~~personnel for its growth initiatives in the current period.~~staff. Depreciation and ~~amortization rose~~Amortization increased to ~~$175,171~~$153,709 from ~~$160,992.~~

~~Other income in~~$105,818 for the current nine-month period includes a one-time gain on the extinguishment of debt of $687,387 which is the principal and accrued interest of the Company’s two SBA PPP loans which were forgiven during the current period. Interest and other income was a loss of ($283) compared to income of $21,414 in the prior year’s period, as the Company drew against its line of credit and incurred interest charges.six months ended February 28, 2021. Other items in the ~~prior nine-month~~current six month period ~~ended May 31, 2020 included Gain~~include other income of $5,000 as a portion of the parking area at JCS was formerly rented to an unrelated company for $1,000 per month through January 2022. Interest expense on the ~~Sale~~Bank Line of ~~Property, Plant~~Credit was $50,896. The Company also accrued $300,000 for the settlement of claims brought by the Association of California District Attorneys regarding the labeling and ~~Equipment~~marketing of ~~$2,600.~~the Company’s dog waste bags.

Income tax expense infor the ~~current nine month period~~six months ended February 28, 2022 was ~~$1,035,896~~$4,985 compared to ~~$547,614~~expense of $131,258 for the ~~nine~~six months ended ~~May 31, 2020.~~February 28, 2021. The Company estimates income tax expense for the period based on combined federal and state rates that are currently in effect.

Net ~~income~~loss for the ~~nine~~six months ended ~~May 31, 2021, including the one-time gain on the forgiveness of the Company’s PPP loans of $687,387,~~February 28, 2022 was ~~$2,849,839,~~($121,322), or ~~$0.82~~($0.03) per basic and diluted share, compared to net income of ~~$1,216,089,~~$435,363, or ~~$0.33~~$0.12 per basic and diluted share, for the ~~nine~~six months ended ~~May 31, 2020.~~February 28, 2021.

LIQUIDITY AND CAPITAL RESOURCES

As of ~~May 31, 2021,~~February 28, 2022, the Company had working capital of ~~$18,495,447~~$18,174,194 compared to working capital of ~~$16,815,454~~$19,073,194 as of August 31, ~~2020, an increase~~2021, a decrease of ~~$1,679,993.~~$899,000. Cash and cash equivalents totaled ~~$2,170,046,~~$899,055, a decrease of ~~$1,630,991~~$285,258 from cash of ~~$3,801,037.~~$1,184,313. Accounts receivable ~~increased~~rose to ~~$11,051,061~~$9,137,254 from ~~$6,274,426~~$7,086,503 due to the seasonal cycle of sales to customers and the related timing of cash receipts. Inventory ~~fell~~increased by ~~$1,430,506~~$4,238,783 to ~~$7,767,640, including an allowance~~$18,630,148 from $14,391,365 as additional inventory was stocked in preparation of ~~$250,000 for obsolete inventory, which increased from~~ the ~~allowance of $65,000 as of August 31, 2020.~~Company’s historically busier Spring and Summer seasons. Prepaid expenses, which is largely related to down payments for future inventory purchases, increased by $254,073. Prepaid income taxes rose ~~by $1,544,728. Delays in receiving products~~to $258,205 from ~~China~~$252,958. Deferred tax liability increased slightly to $125,834 from $116,945.

Current liabilities increased to $13,239,100 from $6,147,765, with most of the increase due to ~~shipping delays and other logistical issues has contributed~~the additional draw of $6,500,000 from the Company’s bank line of credit to ~~the lower inventory level and higher prepaid expenses~~$9,500,000 as of ~~May~~February 28, 2022 from $3,000,000 as of August 31,^st. 2021. Accounts payable rose to ~~$1,557,721~~$1,660,664 from ~~$1,095,061, an increase of $462,660. Accrued~~$1,349,677, and accrued liabilities increased to ~~$2,290,235~~$2,078,436 from ~~$2,016,300. Bank indebtedness was $996,010 compared to $Nil as~~$1,798,088, including the accrual of August 31, 2020 as the Company drew on its line of credit during the third quarter. Income taxes payable increased by $189,594 to $230,190. Notes payable, which are the promissory notes PPP loans received$300,000 in the 3^rd ~~quarter, declined by $680,707~~current period for the anticipated settlement of claims related to ~~$Nil as~~ the ~~SBA forgave the entire amount of both loans~~Company’s dog waste bag sales in ~~the period. Deferred tax liability fell to $39,184 from $96,952.~~California.

As of ~~May 31,~~February 28, 2022, accounts receivable and inventory represented 88% of current assets and 77% of total assets. As of February 28, 2021, accounts receivable and inventory represented ~~80%~~76% of current assets and ~~69%~~65% of total ~~assets compared to 72% of current assets and 63% of total assets as of May 31, 2020.~~assets. For the three months ended ~~May 31, 2021,~~February 28, 2022, the accounts receivable collection period, or DSO, was 4758 compared to 3944 for the three months ended ~~May 31, 2020.~~February 28, 2021. For the ~~nine-month~~six month period ended ~~May 31, 2021,~~February 28, 2022, the DSO was 7061 compared to 6144 for the ~~nine~~six months ended ~~May 31, 2020.~~February 28, 2021. Inventory turnover for the three months ended ~~May 31, 2021~~February 28, 2022 was 51154 days compared to 54112 days for the three months ended ~~May 31, 2020.~~February 28, 2021. For the ~~nine~~six months ended ~~May 31, 2021,~~February 28, 2022, inventory turnover was 75143 days compared to 80115 days for the ~~nine~~six months ended ~~May 31, 2020.~~February 28, 2021.


	~~- 25 -~~

		21

External sources of liquidity include a ~~line~~Line of ~~credit~~Credit from U.S. Bank of ~~$5,000,000, which was increased from $3,000,000 subsequent to the end of the fiscal period.~~$10,000,000. As of ~~May 31, 2021,~~ February 28, 2022, the Company had a borrowing balance of ~~$996,010,~~$9,500,000, leaving ~~$2,003,990 available.~~$500,000 available. Borrowing under the ~~line~~Line of ~~credit~~Credit is secured by an assignment of accounts receivable and inventory. The interest rate is calculated solely on the one month LIBOR rate plus 175 basis points. As of ~~May 31, 2021,~~February 28th, the one month LIBOR rate plus 175 basis points was ~~1.875% (0.125%~~1.83% (0.08% + 1.75%). ~~With~~Due to the ~~expected phase-out of~~worldwide banking industry’s phasing out LIBOR, the ~~Company expects~~interest rate computation formula has been changed as of March 1, 2022 from LIBOR to the ~~calculated rate on the line of credit will be changed~~one-month Secured Overnight Financing Rate (SOFR), plus 157 basis points. The new formula is not expected to ~~another published reference standard before the planned cessation of LIBOR quotations sometime~~result in ~~2021. However, the Company does not anticipate this change will have~~ any significant ~~effect on~~change to the ~~terms and conditions, and ability to access, the line~~interest rate, which as of ~~credit, or on its financial condition.~~March 1, 2022 was calculated as 1.62% (0.05% + 1.57%). The line of credit has certain financial covenants. The Company is in compliance with these covenants.

During the 3^rd quarter of fiscal 2020, the Company applied for and received two loans under the Paycheck Protection Program (the “PPP”) as part of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) administered by the U.S. Small Business Administration (“SBA”). The Company ~~felt~~believed the PPP funds were necessary because the Company was quickly depleting its available cash in April due to inventory purchases to fulfil customer orders ahead of its busiest selling season, some delays in receiving inventory from China due to reduced availability of ocean shipping, and the danger of potential COVID-19 infections. If any of the Company’s employees on site were to contract the virus during this time, the Company would behave been required to shut down the facility for a minimum of 14 days to clean and disinfect, and no product would be shipped to customers. Without the cash flow from product sales, the Company would have likely had to immediately layoff or furlough many of its employees, which would further delay the Company’s ability to recover after the shutdown. All of the proceeds from the PPP loans were used for employee payroll expenses.

The principal amount of the PPP loans was $680,707. They had a term of 2 years with a 1% annual interest rate. Payments were originally deferred for 6 months, after which the repayment of principal and interest is required to be made in equal monthly payments over 18 months beginning December 4, 2020. However, the SBA subsequently revised the due date to either the date that SBA remits the borrower’s loan forgiveness amount to the lender or, if the borrower does not apply for loan forgiveness, 10 months after the end of the borrower’s loan forgiveness covered ~~period.~~period. In April 2021, the SBA approved the Company’s application for forgiveness of the entire amount of both loans. ~~The~~For the year ended August 31, 2021, he Company ~~has~~ recorded a one-time gain on the extinguishment of debt of $687,387 consisting of the principal of $680,707 and accrued interest of $6,680.

Based on the Company’s current working capital position, its policy of retaining earnings, and the line of credit available, the Company has adequate working capital to meet its needs for the remainder of the current fiscal year.

The Company has historically used a portion of its excess cash to repurchase and cancel common shares. No common shares were repurchased during the first ~~nine~~six months of fiscal ~~2021~~2022 ended ~~May 31, 2021.~~February 28, 2022. During the ~~period,~~first quarter of fiscal 2022, the Company issued ~~7,999~~3,681 common shares to officers, directors and employees as compensation under the Company’s Restricted Share Plan at a deemed price of ~~$8.80~~$10.70 per share.

Current Working Capital Requirements

Based on the Company’s current working capital position, combined with the expected timing of accounts receivable and the Bank Line of Credit, the Company is expected to have sufficient liquidity available to meet the Company’s working capital requirements for the remainder of fiscal 2022.

OTHER MATTERS

Inflation

Inflation did not have a material impact during fiscal 2020. Beginning in fiscal 2021, a number of product costs increased substantially, including raw materials, energy, and transportation/logistical related costs.

These higher costs have negatively affected the Company’s gross margins in the shorter term. Typically, the Company passes cost increases on to the customer, and is currently raising its product prices as much as the market will bear. Retailers are currently more receptive to such increases than in the past due to a mutual understanding of the current inflationary environment and the objective reasons for such. Since the ability of the Company to pass through all of the current increase in its product costs to its customers are somewhat limited and occur after such costs are first incurred, management expects that its gross margins will remain under pressure for the remainder of fiscal 2022.

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 recent remodel.

Active products and designs utilize recycled content, plant-based material, or elimination of unnecessary components (such as a wasteful inner core for poop bag rolls) to enhance recycling and reduce greenhouse gas emissions in production. This includes the recently introduced dog waste bag which is a plant-based product that is less reliant on fossil fuels used in traditional plastic bags. We also dedicate a percentage of sales to organizations dedicated to improving the environment.

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. The Company also actively participates in the local community, supported by a Corporate Charitable Giving Charter. We are committed to devoting resources to enhance the accessibility of our corporate website and have upgraded the website to improve accessibility and operability for users, including persons with disabilities.

Governance

As a public company, our processes are outlined and governed by multiple regulations, including Sarbanes-Oxley. 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.

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.

~~Approach to Risk Mitigation~~

We have completed a system wide risk mitigation matrix outlining possible impacts to the business due to such risks as well as mitigations in place. In addition, each category of risk is assigned to a senior management member who will monitor, act upon and report on such risks and mitigations. While these risks are broad, the management team has assigned probabilities of occurrence and used such for prioritization of actions. This process will remain an active part of ongoing risk oversight. The risks identified below are not meant to be exhaustive and are offered as those with greater probable impact.


	~~- 26 -~~

Risks Related to Our Common Stock

We may decide to acquire assets or enter into business combinations, which could be paid for, either wholly or partially with our common stock 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 stock, which could dilute the ownership interest of present stockholders.

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 stock may have rights, preferences or privileges senior to those of the rights of our existing stock. If common stock is 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.

Our shareholders could experience significant dilution if we issue our authorized 10,000,000 preferred shares.

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 on NASDAQ was ~~4,980~~3,290 shares for the ~~nine~~six months ended ~~May 31, 2021.~~February 28, 2022. With this limited trading volume, investors could find it difficult to purchase or sell our common stock.

Risks Related to Our Business

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 the virus. These consequences include:

The inability of our third-party manufacturers in China and elsewhere 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 products 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.

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 ~~nine~~six months ended ~~May 31 2021,~~February 28, 2022, our top ten customers represented ~~82%~~79% 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 ~~the U.S., Canada and Mexico~~North America and are primarily in the retail home improvement ~~industry.~~ and pet industries.


	~~- 27 -~~

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. 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 which we purchase from suppliers in China. The company has multiple options to assist in mitigating the cost impacts of these government actions. However, we cannot control the duration or depth of such actions which may increase our product costs which would 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.

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 U.S. Bank in the amount of ~~$5,000,000,~~$10,000,000, of which ~~$4,003,990~~$500,000 is available. We are currently in compliance with the requirements of our existing line of credit. If we lost access to this credit it could become impossible to pay some of our creditors 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. We have just recently performed a system wide assessment which included security risks by a third party, formed an IT Governance Committee and are both reviewing and acting on items found during the assessment. This body will remain a key part of our ongoing IT infrastructure. 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 year ended August 31, ~~2020.~~2021. Based on this process we did not identify any material weaknesses. Although we believe our internal controls are operating effectively, we cannot guarantee that in the future we will not identify any material weaknesses in connection with this ongoing process.

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

~~Item 3.~~

~~Quantitative and Qualitative Disclosures about Market Risk~~

Interest Rate Risk

The Company does not have any derivative financial instruments as of ~~May 31, 2021.~~February 28, 2022. 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 has a line of credit whose interest rate may fluctuate over time based on economic changes in the environment. The Company is subject to interest rate risk and could be subject to increased interest payments if market interest rates fluctuate. The Company does not expect any change in the interest rates to have a material adverse effect on the Company’s results from operations.


	~~- 28 -~~

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 China, currency exchange rates can influence the Company’s purchasing costs.

Item 4.

Controls and Procedures

~~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 ~~has~~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

~~Item 1.~~

~~Legal Proceedings~~

The Company is a named party in a Civil Action in Pennsylvania. The matter is an action seeking compensation for personal injuries and is based on theories of product liability as to ~~Jewett-Cameron.~~the Company. The matter arises out of a dog allegedly escaping from a Jewett-Cameron kennel product and causing personal injuries to three individuals. ~~Jewett-Cameron~~The Company is currently one of three named Defendants. A trial date has not been set at this time. At the present time it is speculative to predict as to its outcome. It is the Company’s intention to vigorously defend the lawsuit. ~~Jewett Cameron’s~~The Company’s applicable liability insurer is providing a defense covering ~~Jewett-Cameron’s~~the Company’s legal fees and costs.

The Company has initiated arbitration against a former distributor asserting a breach of the distribution agreement and seeking damages. ~~This distributor had also raised a counter claim~~Arbitration is scheduled to commence in ~~Illinois federal court against~~ the ~~Company asserting a breach~~first week of August 2022. While the ~~same contract and seeking damages. That counter claim has been rejected by Illinois courts. While~~ company is robustly pursuing its rights and defending itself against claims, the arbitration and lawsuit are in their initial stages and therefore it is speculative to predict as to its ~~outcome~~ outcome.

A consortium of California District Attorneys has contacted the Company in regard to possible liabilities related to environmental labeling of its plant-based Lucky Dog Poop Bags previously sold in the State of California. The ~~company was made aware that it might likely see~~Company has since modified its product marketing statements in response to their concerns, and during the period ended February 28, 2022, and has accrued $300,000 in anticipation of a claim initiated based on a State and Federal web accessibility concern. The company is in conference with the parties legal counsel seeking an opportunity to better understand the basis of the claim and means by which such claim can be addressed.settlement.

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~~

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

---No Disclosure Required---

~~Item 3.~~

~~Defaults Upon Senior Securities~~

Item 3.

Defaults Upon Senior Securities

---No Disclosure Required---

~~Item 4. Mine Safety Disclosures~~

Item 4.

Mine Safety Disclosures

---No Disclosure Required---


	~~- 29 -~~

~~Item 5.~~

~~Other Information~~

Item 5.

Other Information

---No Disclosure Required---

Item 6.

Exhibits

~~Item 6.~~

~~Exhibits~~

~~3.1~~

~~Amended and Restated Articles of Incorporation of Jewett-Cameron Lumber Corporation~~

~~-= Filed as an exhibit to the 10-Q Quarterly Report filed on January 13, 2014 =-~~

~~3.2~~

~~Articles of Incorporation Jewett Cameron Company~~

~~-= Filed as an exhibit to the 10-Q Quarterly Report filed on January 13, 2014 =-~~

~~31.1~~

~~Certification of Chief Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act, Charles Hopewell~~

~~32.1~~

~~Certification of Chief Executive Officer and Principal Financial Officer pursuant to 18 U.S.C., 1350 (Section 906 of the Sarbanes-Oxley Act), Charles Hopewell~~

~~101.INS~~

~~XBRL Instance Document~~

~~101.SCH~~

~~XBRL Taxonomy Extension Schema Document~~

~~101.CAL~~

~~XBRL Taxonomy Extension Calculation Linkbase Document~~

~~101.DEF~~

~~XBRL Taxonomy Extension Definition Linkbase Document~~

~~101.LAB~~

~~XBRL Taxonomy Extension Label Linkbase Document~~

~~101.PRE~~

~~XBRL Taxonomy Extension Presentation Linkbase Document~~

3.1		Amended and Restated Articles of Incorporation of Jewett-Cameron Lumber Corporation
	~~- 30 -~~	-= Filed as an exhibit to the 10-Q Quarterly Report filed on January 13, 2014 =-
3.2		Articles of Incorporation of Jewett-Cameron Company.
	-= Filed as an exhibit to the 10-Q Quarterly Report filed on January 13, 2014 =-
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act, Chad Summers
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act, Mitch Van Domelen
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C., 1350 (Section 906 of the Sarbanes-Oxley Act), Chad Summers
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C., 1350 (Section 906 of the Sarbanes-Oxley Act), Mitch Van Domelen

101.INS	Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

~~SIGNATURES~~

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, 2022

/s/ “Chad Summers”

~~Date: July 14, 2021~~

~~/s/ “Charles Hopewell”~~

~~Charles Hopewell,~~Chad Summers,

~~CEO/CFO~~President and Chief Executive Officer

Date: April 14, 2022		/s/ “Mitch Van Domelen”
	~~- 31 -~~Mitch Van Domelen,

	Chief Financial Officer


	May 31, 2021		August 31, 2020

Continued

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Accounts payable	$	1,557,721	$	1,095,061
Bank indebtedness (note 7)		996,010		-
Current portion of notes payable (note 8)		-		342,326
Income taxes payable		230,190		40,596
Accrued liabilities		2,290,235		2,016,300

Total current liabilities		5,074,156		3,494,283

Long-term liabilities
Notes payable (note 8)		-		338,381

Deferred tax liability (note 6)		39,184		96,952

Total liabilities		5,113,340		3,929,616

Stockholders’ equity
Capital stock (note 9, 10)
Authorized
21,567,564 common shares, without par value
10,000,000 preferred shares, without par value
Issued
3,489,161 common shares (August 31, 2020 – 3,481,162)		823,171		821,284
Additional paid-in capital		687,211		618,707
Retained earnings		20,758,193		17,908,354

Total stockholders’ equity		22,268,575		19,348,345

Total liabilities and stockholders’ equity	$	27,381,915	$	23,277,961


	Three Month Period Ended May 31,				Nine Month Period Ended May 31,							Three Month Periods at the end of February						Six Month Periods at the end of February
	2021		2020		2021			2020				2022			2021			2022			2021

SALES	$	21,619,952	$	16,241,239		$	42,396,591		$	30,918,345		$	14,060,751		$	10,460,355		$	26,978,475		$	20,776,639

COST OF SALES		16,037,702		11,931,746			31,239,866			22,555,253			10,636,524			7,848,779			21,089,386			15,202,164

GROSS PROFIT		5,582,250		4,309,493			11,156,725			8,363,092			3,424,227			2,611,576			5,889,089			5,574,475

OPERATING EXPENSES
Selling, general and administrative expenses		966,299		706,079			2,556,902			2,118,999			684,116			895,974			1,672,403			1,590,603
Depreciation and amortization		69,353		54,781			175,171			160,992			84,071			55,290			153,709			105,818
Wages and employee benefits		1,908,588		1,635,051			5,226,021			4,343,412			1,959,300			1,723,474			3,833,418			3,317,433
Total Operating Expenses												2,727,487			2,674,738			5,659,530			5,013,854

		2,944,240		2,395,911			7,958,094			6,623,403

Income from operations		2,638,010		1,913,582			3,198,631			1,739,689
Income (loss) from operations												696,740			(63,162	)		229,559			560,621

OTHER ITEMS
Gain on sale of property, plant and equipment		-		2,200			-			2,600
Gain on extinguishment of debt		687,387					687,387
Interest and other income		(6,282)		3,217			(283)			21,414
Other income												2,000			3,000			5,000			6,000
Interest expense												(30,620	)		—			(50,896	)		—
Accrual for legal claim												(300,000	)		—			(300,000	)
Total other items												(328,620	)		3,000			(345,896	)		6,000
		681,105		5,417			687,104			24,014
Income (loss) before income taxes												368,120			(60,162	)		(116,337	)		566,621

Income before income taxes		3,319,115		1,918,999			3,885,735			1,763,703
Income tax (expense) recovery												(98,300	)		6,998			(4,985	)		(131,258	)

Income tax expense		(904,638)		(522,026)			(1,035,896)			(547,614)
Net income (loss)											$	269,820		$	(53,164	)	$	(121,322	)	$	435,363

Net income	$	2,414,477	$	1,396,973		$	2,849,839		$	1,216,089
Basic earnings (loss) per common share											$	0.08		$	(0.02	)	$	(0.03	)	$	0.12

Basic earnings per common share	$	0.69	$	0.40		$	0.82		$	0.33

Diluted earnings per common share	$	0.69	$	0.40		$	0.82		$	0.33
Diluted earnings (loss) per common share											$	0.08		$	(0.02	)	$	(0.03	)	$	0.12

Weighted average number of common shares outstanding:
Basic		3,489,161		3,481,162			3,485,525			3,672,858			3,492,842			3,486,495			3,491,969			3,483,814
Diluted		3,489,161		3,481,162			3,485,525			3,672,858			3,492,842			3,486,495			3,491,969			3,483,814


	Capital Stock
	Number of Shares	Amount	Additional paid-in capital	Retained earnings	Total
August 31, 2019	3,971,282	$ 936,903	$ 618,707	$ 18,875,256	$ 20,430,866

Shares repurchased and cancelled (note 10)	(490,120)	(115,619)	-	(3,751,427)	(3,867,046)
Net income	-	-	-	1,216,089	1,216,089

May 31, 2020	3,481,162	$ 821,284	$ 618,707	$ 16,339,918	$ 17,779,909

Net income	-	-	-	1,568,436	1,568,436

August 31, 2020	3,481,162	$ 821,284	$ 618,707	$ 17,908,354	$ 19,348,345

Shares issued pursuant to compensation plans (note 11)	7,999	1,887	68,504	-	70,391
Net income	-	-	-	2,849,839	2,849,839

May 31, 2021	3,489,161	$ 823,171	$ 687,211	$ 20,758,193	$ 22,268,575


	Six Month Period at the end of February,
	2022			2021

CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income	$	(121,322	)	$	435,363
Items not involving an outlay of cash:
Depreciation and amortization		153,709			105,818
Stock-based compensation expense		39,386			—
Deferred income taxes		8,889			(84,080	)

Changes in non-cash working capital items:
(Increase) decrease in accounts receivable		(2,050,751	)		1,184,865
(Increase) in inventory		(4,238,783	)		(837,400	)
(Increase) in prepaid expenses		(254,073	)		(462,085	)
Increase (decrease) in accounts payable and accrued liabilities		591,335			(424,881	)
(Increase) in prepaid income taxes		(5,247	)		(307,433	)

Net cash used in operating activities		(5,876,857	)		(389,833	)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment		(908,401	)		(519,470	)

Net cash used in investing activities		(908,401	)		(519,470	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank indebtedness		6,500,000			—

Net cash provided by financing activities		6,500,000			—

Net decrease in cash		(285,258	)		(909,303	)

Cash, beginning of period		1,184,313			3,801,037

Cash, end of period	$	899,055		$	2,891,734


2.	~~- 9 -~~
	��
		SIGNIFICANT ACCOUNTING POLICIES (cont’d…)

Office equipment		3-7 years
Warehouse equipment	~~Office equipment~~	~~3-7~~2-10 years
Buildings	~~Warehouse equipment~~	~~2-10~~5-30 years
	~~Buildings~~	~~5-30 years~~


2.	~~- 10 -~~

		SIGNIFICANT ACCOUNTING POLICIES (cont’d…)


	Three Month Periods ended May 31,				Nine Month Periods ended May 31,

	2021		2020		2021		2020

Net income	$	2,414,477	$	1,396,973	$	2,849,839	$	1,216,089

Basic weighted average number of common shares outstanding		3,489,161		3,481,162		3,485,525		3,672,858

Effect of dilutive securities
Stock options		-		-		-		-

Diluted weighted average number of common shares outstanding		3,489,161		3,481,162		3,485,525		3,672,858