Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation
The Company’s operations are classified into three reportable operating segments and the parent corporate and administrative segment, which were determined based on the nature of the products offered along with the markets being served. The segments are as follows:
Pet, Fencing and Other
Industrial wood products
Seed processing and sales
Corporate and administrative services
Sales, income before taxes, assets, depreciation and amortization, capital expenditures, and interest expense by segment are shown in the financial statements under Note 12 “Segment Information.”
Quarterly Results
The following table summarizes quarterly financial results in fiscal 2025 and fiscal 2024. (Figures are thousands of dollars except per share amounts).
For the Year Ended August 31, 2025
First
Second
Third
Fourth
Full
Quarter
Quarter
Quarter
Quarter
Year
Sales
Gross profit
Net (loss)
Basic (loss) per share
Diluted (loss) per share
For the Year Ended August 31, 2024
First
Second
Third
Fourth
Full
Quarter
Quarter
Quarter
Quarter
Year
Sales
Gross profit
Net income (loss)
Basic earnings (loss) per share
Diluted earnings (loss) per share
Fiscal 2025 quarterly per share earnings were calculated using weighted average number of common shares outstanding as of August 31, 2025 of 3,512,975 (2024 – 3,504,802). The sum of the quarterly earnings per share may not equal the full year earnings per share due to the use of the full year’s weighted average share figure and rounding.
RESULTS OF OPERATIONS
Our fiscal 2025 results were disappointing, as we are challenged by the increasing import tariffs, continued negative consumer sentiment, and certain operational matters discussed below. These issues significantly reduced our revenues, and negatively impacted our margins and operating results. Sales for fiscal 2025 declined by $5,847,036, or 12%, to $41,298,140. Our net loss for fiscal 2025 was ($4,130,092), or ($1.18) per share.
The most serious issue currently affecting our business operations remains the new worldwide import tariffs, primarily on our imported metal products. Since the imposition of these new tariffs began in February 2025, they have caused immense turmoil in our markets, both directly and indirectly. In addition to eroding consumer confidence, the impacts include increases to our supply chain and logistics costs. These higher costs resulted in a double-digit negative impact on our overall gross margins across the majority of our product lines. We have been able to somewhat mitigate a portion of these new tariff costs through our multi-country sourcing initiative. We recently began production of our Lifetime Steel Posts® in lower-tariffed Vietnam which should help us reduce our direct tariff costs and meet the higher demand for the product from the continuing roll-out of our in-store displayers.
These rapid and unpredictable changes to the tariff rates required significant attention from our management and financial teams, which diverted time and effort from our other operational requirements. As an example, the global rate on steel and tariff imports from all countries was set at 25% in March 2025. On May 30 th , it was announced that the rate would double to 50% and take effect in just 5 days. This left us with no time to plan or adjust import shipments, some of which were already in transit. When they left our suppliers, they were budgeted for one rate, but when they arrived on U.S. soil that rate had since doubled.
Although these higher tariff rates were announced and took effect very quickly, our ability to pass on the new tariff costs to our customers was limited. Our customer relationships are such that any of our price increases must be consented to by the customer. The customer may not agree to any increases or negotiate lower price increases, and any changes may only be accepted after 30 to 90 days, or longer, if at all. Many of our customers did not immediately accept higher prices for our products, which we adjusted in response to the increased costs associated with the tariffs and global trade disruption. By September, those remaining customers agreed to accept shipments with the higher prices which were implemented in the following weeks.
The frequent changes to tariff rates since February also caused some of the price changes we instituted in response to become obsolete before we could pass them on to our customers. This forced us to spend time to recalculate the new prices and begin the process of presenting them to, and negotiating with, our customers again, which further affected our ability to recapture our higher costs through increasing our sale prices. This resulted in an overall decrease in sales and forced us to temporarily absorb much of these higher tariff-related costs.
Although we consult with experts and legal counsel to accurately interpret how to properly apply the new tariff rates to our products to ensure compliance and to make sure our prices remain cost competitive, many of our customers paused their purchasing because of the general uncertainty about the tariffs and their costs. They have been reluctant to make long-term purchases at contracted prices that may decline based on rapidly changing tariff rates. Although both retailers and consumers will eventually adjust their buying to accept higher prices over time, it dampens demand in the short-term. These increased costs and the ongoing uncertainty over tariff assignments and rates will likely continue to negatively affect our margins and demand for certain of our products from our customers into fiscal 2026.
While the Company took actions to attempt to mitigate these unforeseen events, such as pivoting to alternative suppliers outside of China through an intensive search process which began two years ago, and reducing headcount by nearly 30%, these measures were not sufficient to withstand the headwinds we faced in 2025. However, we believe that the global economic environment is stabilizing and that customers and supply chain partners are employing reasonable and innovative policies to maintain equilibrium and continuity of commerce. Accordingly, we intend to focus on improving margins on our core fencing products through these reestablished partnerships, new sales channels, and by more controlled purchasing management.
During fiscal 2025, we also experienced operational issues with our agreement to supply cedar fencing to one of our larger consignment customers. Jewett-Cameron was originally founded as a lumber brokerage business, and we have maintained this segment as our product offerings have evolved over time. In 2023, we helped a major customer with their lumber supply after they lost their primary source of western red cedar fencing. At that point, we entered into a consignment program with this customer which provided them with a ready source of cedar fencing and provided us with a steadier flow of orders that stabilized the year-over-year lumber sale fluctuations that we commonly experienced as a secondary supplier to multiple big box retailers. It is customary to purchase ample supply ahead of the increase in demand each Spring, but in fiscal 2025 we failed to acquire an adequate supply to meet our actual demand. As a result, we were unable to fulfill all our customers’ orders during the third quarter, and our wood fencing sales were down 33% compared to the prior year’s third quarter. To ensure we could meet their needs for the remainder of the busy summer season, we quickly moved to secure additional Western Red Cedar from our supply partners. Unfortunately, much of the additional cedar fencing inventory was not needed by the customer. Under the consignment agreement, we are required to maintain enough inventory on hand to a maximum capacity requirement (“max cap”). This max cap, which is substantially higher than our average weekly sales, was not utilized and extended into September, which is past the fencing high demand season in these stores’ region. Therefore, we ended the 2025 fencing season with substantial excess cedar fencing inventory on hand. We have implemented important process changes to prevent other inventory . However, we were informed by this customer in November 2025 of their intention to transition away from the consignment agreement in calendar year 2026. Although the consignment program provided us with meaningful revenue, it the margin and we were accustomed to in our cedar sales prior this consignment arrangement as it required us to purchase and hold higher levels of inventory, and the added length of time to invoice reduced the of these sales. We are currently in discussions with this customer, as well as other third parties, regarding the purchase of our excess lumber inventory up to the 2026 fence building season.
The rollout of our Lifetime Steel Posts® (“LTP”) in-store displayers continues to show successful results. The replenishment requirements for the displayers have been steady and meeting expectations. During the third quarter, we temporarily paused deploying new display units to prioritize replenishing existing display units. Capacity constraints on both production and logistics at the factories outside of China temporarily led to a limited supply of new posts. The higher tariff rates on Chinese goods caused many U.S. companies to quickly shift production to other nations, and the available logistic infrastructure in these other countries has been overtaxed by the rapid increase in production and shipping demands. Therefore, we prioritized replenishing existing display units with our temporarily limited supply of new posts.
With the success of our in-store display units for both LTP and our established Adjust-A-Gate® products, we are developing new versions of displayers for both products. Our current display units are optimized for big box retailers but many other home improvement retailers may not have the shelf or floor space to fully deploy the existing displayers. We are working on new, smaller format displays for these smaller retailers. We are also exploring developing similar units for additional products in our core product lines.
The pet market continues to suffer from low consumer demand, and we remain burdened with high inventory levels, particularly in metal crates and kennels. The market has been slow to recover, and our on-hand inventory of price-advantaged pre-tariff inventory has not received the interest from retailers we anticipated. We are now engaging with non-traditional purchasers with the intent to clear a substantial amount of this older inventory from our warehouse and recapture some of our costs. Because we expect to sell this inventory at lower prices, we increased our allowance for obsolete inventory by $650,000 in fiscal 2025 over our allowance in fiscal 2024. We are also reducing our costs, including refining our development efforts to concentrate on improving our existing products, both in design and packaging, that can potentially provide market advantages.
Our MyEcoWorld® sales increased in fiscal 2025 over fiscal 2024 as consumers continue to look for high quality sustainable products as alternatives to disposable traditional single-use plastics. Some of this increase is due to shifting our entire LuckyDog® compostable dog waste bag line to a new MyEcoWorld® product. One part of our growth strategy for this line was to enter the grocery store segment. During fiscal 2025, we secured our first placement with the launch of Pet Waste Bags into 59 Tops Friendly Markets across the Northeast beginning in late February. However, the imposition of the new tariffs beginning in February 2025 made our products less price competitive and growth in the grocery segment much more challenging. Instead, we will be focusing on expanding upon our successful introductions into big box stores where we have existing strong supplier relationships, and into foreign markets that are unburdened by the new U.S. tariffs. We have been receiving strong demand from big box stores in Mexico where the absence of U.S. tariffs has made the product very competitive.
At Greenwood, sales in fiscal 2025 rose by 2% over our sales in fiscal 2024. Although demand for transit focused products continues to rebound from the pandemic lows as more workers return to the office, a transit seat shortage during fiscal 2025 restricted new bus construction and orders for our transit products. Demand for these transit products improved as the seat shortage was largely resolved by the fourth quarter of fiscal 2025. We have recently realigned some personnel’s duties to provide support to Greenwood by working to open new sales channels and adding new customers. We still believe this segment has growth potential in both our primary transit sector and in new industrial markets. However, as we intend to concentrate our operations on the fence and outdoor segment, we are evaluating strategic alternatives for Greenwood and its industrial wood operations.
The surplus Jewett-Cameron Seed property of 11.6 acres of land and 109,500 square feet of buildings remains listed for sale. The land is currently zoned with a rural industrial classification but is well situated on a corner lot at a major interchange immediately adjacent to US Highway 26 in Hillsboro, Oregon, which is one of the region’s busiest roadways. We explored the potential rezoning of the property to other higher value permitted uses, including the inclusion within any expanded Urban Growth Boundaries (UGB). The current sluggish economic conditions within both the nearby cities and in greater Portland has reduced the previously perceived need among the nearby cities to quickly expand the UGB, including extending the boundary toward the area containing JCSC property. Therefore, any inclusion of the property in expanded UGBs or reclassification of the property from its limited rural industrial classification now appears unlikely in the short-term among the prevailing economic and political environment in the surrounding area. We have relisted the property at a price of $7.223 million. We have also recently listed for sale our innovation lab property which is now surplus to our current needs, as we have moved the operations formerly housed in the building to our nearby headquarters and warehouse in North Plains. This property contains a renovated building of 2,000 square feet of flex space, and is listed for $795,000. For both the JCSC and lab properties, these are the current asking prices and there is no guarantee the properties will sell for this amount, if at all.
In October 2025, we experienced a cybersecurity incident. We learned that a threat actor had gained unauthorized access to portions of the Company’s information technology (“IT”) environment. We immediately activated our cyber incident response process to contain the intrusion, assess and investigate the incident and implement remedial measures, including retaining external cybersecurity experts and notifying law enforcement, including the Federal Bureau of Investigation. Based on the investigation to date, we believe the cybersecurity incident consisted of unauthorized access and deployment of encryption and monitoring software by a third party to a portion of the Company’s internal corporate IT systems. The incident caused disruptions and of access to portions of our business applications. We believe the activity was contained and our IT systems and individual computer devices were brought back online. As a result of the , we have taken additional cybersecurity measures. We believe that the costs associated with these activities will not be material and that the costs related to the services provided by experts and the to our business will be largely covered by the Company’s insurance policies, although there can be no assurance that the insurance carriers will accept liability for these costs, in which event our costs would increase and have a material effect on our future financial performance in the period in which we are required to absorb these costs.
We began fiscal 2025 with a positive outlook with a focus on continuing to lower costs, increase sales, improve margins, introduce innovative products and monetize surplus assets. However, due primarily to the volatility and uncertainty created by the introduction of various tariffs since February 2025 and the large purchases of lumber inventory in support of one of our larger customers, our goals to grow and return to profitability in fiscal 2025 were not achieved. Accordingly, management and the Board have reformulated our strategic plan to combat the challenges encountered during fiscal 2025, and focus on our core strengths during this difficult period. We intend to concentrate our resources on our successful fencing product lines while monetizing non-core assets and disposing of excess inventory. Management and the Board are also evaluating strategic alternatives for the Company as well as its individual operating segments and assets that prioritize the Company’s overall value.
We have continued our efforts to optimize our operations and reduce our costs. During fiscal 2025, we shifted some employees to better align our workforce with our strategic objectives, and have reduced our employee headcount by 27% year-over-year. We believe these changes will result in increased productivity and reduce our costs without compromising quality or service.
As of August 31, 2025, we had borrowed $2,101,835 against our credit line with Northrim Funding Services (“Northrim”). Under the current terms of the agreement, Northrim provides short-term operating capital by either purchasing the Company’s accounts receivable invoices or as a loan against our inventory position. The maximum we may borrow against the line is $6,000,000. As of November 28, 2025, our borrowings under this line is $4,304,853. We are currently discussing with Northrim to adjust the credit line to increase the maximum borrowing computation which would provide us with additional financial flexibility and to raise the maximum amount available to us. There is no assurance that we will be able to obtain the desired increases in our credit line, which could have a material adverse impact on our business and financial condition.
Due to the continued uncertainty and higher costs stemming from the high global tariff levels, we expect fiscal 2026 to remain challenging. We will continue to focus on our operational strengths while reducing costs where possible in our efforts to increase our sales and margins and return to profitability.
In addition, we are currently evaluating several different strategies to strengthen our liquidity position. These strategies may include, but are not limited to, disposition of certain non-core assets and unused real property, renegotiation of our credit line with Northrim and seeking additional financing from both the public and private markets through the issuance of equity or debt securities. There can be no assurance that we will be successful in achieving these strategies. See “ Management’s Discussion and Analysis – Liquidity and Capital Resources ” for additional information.
Fiscal Years Ended August 31, 2025 and August 31, 2024
Fiscal 2025 sales totaled $41,298,140 compared to sales of $47,145,176 in fiscal 2024, which was a decrease of $5,847,036, or 12%. Our sales during the first two quarters of fiscal 2025 were flat compared to the same quarters of fiscal 2024. Beginning in February 2025, the implementation of new import tariffs, particularly on steel and aluminum products, disrupted the markets and caused both consumers and retailers to pause or suspend their purchases of affected products. The tariffs have also caused rapid price changes to reflect the higher product costs, which further caused market disruptions by delaying customer and consumer acceptance.
The tariff-driven increases in our product costs and our lower sales volumes resulted in a decline in our gross margins, which fell overall to 15.1% in fiscal 2025 from 18.8% in fiscal 2024. Our 2025 margins were also negatively affected by an increase in our obsolete inventory reserve of $650,000 to $1,200,000 from $550,000 in fiscal 2024.
Operating expenses in fiscal 2025 were reduced to $10,002,622 from $10,654,054 in fiscal 2024. Selling, general and administrative expenses were relatively flat at $3,856,829 compared to $3,887,769. Wages and employee benefits fell to $5,823,262 from $6,413,419 as we reduced our headcount in fiscal 2025 to better align with our current business levels. Depreciation and amortization totaled $322,531 compared to $352,866. Loss from operations was ($3,750,626) compared to loss of ($1,770,410) for fiscal 2024.
For fiscal 2025, other income was $306, gain on sale of property, plant, and equipment was $800, and interest expense was ($136,504) which is primarily due to interest paid for our borrowing against our line of credit. For fiscal 2024, other income of $2,450,000 was from the successfully settled arbitration case against one of our former distributors. Other items for fiscal 2024 included a gain on sale of assets of $90,787, which largely is due to the sale of JCSC equipment, and net interest income of $33,446.
Including other items, the net loss before income taxes for fiscal 2025 was ($3,886,024) compared to income before income taxes of $803,823 in fiscal 2024. Income tax expense for fiscal 2025 was ($244,068) compared to income tax expense of ($82,070) in fiscal 2024. The Company calculates income tax expense based on combined federal and state rates that are currently in effect.
Net loss in fiscal 2025 was ($4,130,092), or ($1.18) per share, compared to net income of $721,753, or $0.21 per share, for fiscal 2024. The weighted number of shares outstanding were 3,512,975 in fiscal 2025 and 3,503,221 in fiscal 2024.
Pet, Fencing and Sustainable Products - JCC
Sales for JCC in fiscal 2025 were $37,495,349 compared to sales of $43,330,737 for fiscal 2024, which represents a decline of $5,835,388, or 13%. Orders for our metal products were negatively affected tariff driven price increases and lower consumer confidence. Our wood fencing sales were down year-over-year as we were temporarily unable to fulfill all our orders early in the Spring and Summer season. Demand for our pet products remains weak, which is in line with broader trends in the pet product industry.
The following table shows a breakdown between the pet, fencing and other categories in this segment.
Sales in Millions of Dollars
Percent of Total Sales
Fiscal Year
Pet
Fencing
Other
Pet
Fencing
Other
For fiscal 2025, JCC had an operating loss of ($4,242,719) compared to an operating loss of ($146,375) for fiscal 2024. The net loss in fiscal 2025 was negatively impacted by an increase in the allowance for obsolete inventory of $650,000 related to our older, slower moving pet inventory.
Industrial Wood Products - Greenwood
Sales in fiscal 2025 were $3,802,791 compared to sales of $3,728,165 in fiscal 2024, which is an increase of $74,626, or 2%. Sales in fiscal 2025 were negatively impacted by a seat shortage which reduced new bus construction and demand for our products, but demand for transit focused products improved as the seat shortage was largely resolved by the fourth quarter of fiscal 2025. We have recently realigned some personnel to support Greenwood by working to open new sales channels and adding new customers, both within the transit sector and in new industrial market sectors. For fiscal 2025, Greenwood had an operating loss of ($8,857) compared to operating income of $19,563 for fiscal 2024.
Seed Processing and Sales - JCSC
During fiscal 2023, we decided to close JCSC effective August 31, 2023. Sales for JCSC in fiscal 2025 were $Nil compared to sales of $86,274 in fiscal 2024, with fiscal 2024 operating income of $36,310. The fiscal 2024 revenue was derived from the sale of the remaining seed inventory and seed storage. We have disposed of the remaining seed inventory and equipment and have listed the surplus JCSC land and buildings for sale.
Corporate – JC USA
JC USA, the holding company that provides professional and administrative services for the wholly owned operating subsidiaries, had operating income of $365,552 in fiscal 2025 compared to operating income of $894,325 in fiscal 2024. The results of JC USA are inter-company transactions and are eliminated on consolidation.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity and Capital Resources
The recent volatile tariff and global trade situation created many challenges for our ability to effectively manage our supply chain, product costs, customer pricing, and overall operations. Failure to manage our cash inflows and outflows effectively can have a material adverse impact on our operations, ability to order products in a timely manner, and serve our customers effectively. Considering these developments, we believe that it is essential that we take immediate steps to strengthen our liquidity position to enable us to continue to weather the uncertainties that still exist in the global markets.
Although the Company will continue as a going concern as at August 31, 2025, our management and Board have reformulated our near-term and long-term strategies, which now focus on strengthening our liquidity position. We need additional funding to shield us from the continuing challenges that have severely impacted us and other companies as a result of the recent tariff and global economic situation in order to execute our business plan and continue operations in the normal course. Management is evaluating different strategies for reducing expenses, as well as pursuing financing strategies which include raising additional funds through the issuance of equity or debt securities, asset sales, and through arrangements with strategic partners. These strategies may involve selling our real estate assets and excess inventory, as well as increasing our borrowing capacity under our credit line with Northrim or securing alternative financing. We are dependent on our credit line which permits us to borrow funds against accounts receivable and inventory. However, our present borrowing is approaching the maximum allowed under the credit line’s current funding calculations. Although we are in discussions with Northrim to increase the amount of credit available to us, we are still in need of additional funding to bolster our cash availability for the near and long term. There can be no assurance that these discussions will result in an increase in borrowing capacity, which, if it does not, would have a material effect on our ability to operate our business in the normal course and significantly impact our ability to order product for the upcoming Spring selling season, which would in turn impact our operations, our ability to develop and execute our business plan, our financial condition, our liquidity and our continuation as a going will be subject to a high degree of risk and uncertainty.
If capital is not available to us when, and in the amounts needed, we could be required to liquidate our inventory and assets at below market prices, delay purchasing of products, or cease or curtail operations, which could materially harm our business, financial condition and results of operations. There can be no assurance that the Company will be able to sell its real estate, inventory or other assets in a timely manner or raise the capital it needs to continue operations.
We have historically funded our operations with cash flow from operations, and institutional loans or credit facility arrangements. Our principal uses of cash have been debt service, capital expenditures and working capital, and funding operations. For the year ended August 31, 2025, we incurred an operating loss of $4,130,092 and used cash in operations of $4,627,154. As of August 31, 2025, we had $2,101,835 of indebtedness and working capital of $17,026,472. As of November 28, 2025, we had approximately $4,304,853 million borrowed under our credit facility arrangement, which is near the current maximum amount we are permitted to borrow. We are currently in discussions with our lender to enhance our ability to borrow additional funds and increase the maximum borrowing capacity.
We have experienced a slower than expected sell-through of our pet inventory due to many factors, including an overall weakness in consumer demand across the entire sector and a surplus of goods in the channels commonly used to sell off this type of slow-moving, or obsolete inventory. We believe we will continue to reduce our inventory levels significantly through scaled back production, ordinary course sales of inventory, or accelerated liquidation sales. Accordingly, we have increased our inventory allowance by $650,000 for fiscal 2025 over the allowance for fiscal 2024.
In fiscal 2026, we will refocus our efforts to maximize value-enhancing business lines. However, to do this we will likely have to make investments in our working capital to support distribution with new and existing retailers coming online throughout the year. This investment in inventory ahead of sales has and may continue to put pressure on our liquidity position given the structure and terms of our credit facility, and arrangements with our customers. There can be no assurance that we will be successful in executing this strategy or that our liquidity position will not deteriorate further despite our efforts.
Fiscal Year Ended August 31, 2024
As of August 31, 2025, we had working capital of $17,026,472 compared to working capital of $20,548,093 as of August 31, 2024. The largest changes affecting working capital are a decrease in cash to $226,213 from $4,853,367, an increase in inventory of $2,728,346 to $15,885,589 from $13,157,243, and an increase in prepaid expenses to $1,000,439 from $891,690. Prepaid income taxes also increased to $180,151 from $50,326. The decrease in cash is primarily related to the increase in inventory. Prepaid expenses, which are mostly deposits paid for future inventory, increased slightly as we ordered additional metal fencing inventory for the anticipated need to replenish the in-store display units being rolled out in additional stores.
Accounts payable increased by $272,185 to $1,510,173 from $1,237,988 which is related to the timing of payments due to suppliers. Accrued liabilities declined by $317,770 to $1,083,612 from $1,401,382. Deferred tax assets declined to $3 from $341,029. Bank indebtedness, which is from our line of credit, was $2,101,835 as of August 31, 2025 (August 31, 2024 - $Nil). The amounts borrowed under the line have primarily been used to acquire inventory.
Accounts receivable and inventory represented 91% of current assets and 78% of total assets as of August 31, 2025. As of August 31, 2024, accounts receivable and inventory represented 74% of current assets and 61% of total assets. Our customers continue to pay on time, with almost all of our outstanding receivables classified as current.
For the fiscal year ended August 31, 2025, the accounts receivable collection period or DSO was 34 days compared to 28 days for the year ended August 31, 2024. Inventory turnover for the year ended August 31, 2025 was 151 days compared to 151 days for the year ended August 31, 2024.
Short-term and Long-term Debt
During fiscal 2024, we established a borrowing agreement with Northrim Funding Services (“Northrim”). Under the terms of the agreement, Northrim will provide short-term operating capital by either purchasing the Company’s accounts receivable invoices (“AR invoices”) or as a loan against our inventory position. The maximum amount of AR invoices Northrim will purchase at one time is limited to an amount equal to 80% of the net eligible accounts but is not to exceed $6,000,000. Borrowing against our inventory is computed as an amount equal to 25% of all eligible inventory but is not to exceed $4,000,000. The maximum total draw the Company may borrow under the line is $6,000,000. Interest is computed at the prime rate plus 4.75% with floor of 11% and is secured by certain or our assets. The line was renewed in June 2025 and now expires on June 30, 2026. As of August 31, 2025, the Company had outstanding borrowings of $2,101,835 under the line. As of November 28, 2025, the Company had outstanding borrowings of $4,304,853 under the line.
Prior to June 2024, we had a line of credit of $5,000,000 with U.S. Bank,. The line was secured by an assignment of accounts receivable and inventory. Calculation of the interest rate was based on the one-month Secured Overnight Financing Rate (SOFR) plus 157 basis points, which as of August 31, 2023 was 6.88% (5.31% + 1.57%). Indebtedness under the line as of August 31, 2023 was $1,259,259. All amounts borrowed under this line of credit were repaid in full during fiscal 2024 and the line has since been terminated.
OTHER MATTERS
Contractual Obligations and Commercial Commitments
We currently have no material contractual obligations or commercial commitments other than to suppliers of products or services in the ordinary course of business.
Inflation
Since fiscal 2021, a number of product costs have increased substantially, including raw materials, energy, and transportation/logistical related costs. These higher costs have negatively affected our gross margins. Historically, we have passed cost increases on to the customer, but the rapid rise of prices over the last several years has resulted in consumers significantly reducing discretionary spending which has made the market much more price sensitive. This has made retailers more reluctant to accept higher prices for our goods which has limited our ability to raise our selling prices quickly enough to match the rate of increase of our costs. Our ability to pass through all of the current increase in our product costs to our customers is somewhat limited and occur after such costs are first incurred. Although management is working to mitigate such cost increases through the new sourcing agreements and modifying logistic agreements, we expect that our gross margins will remain under pressure in fiscal 2026.
The increases in interest rates as a result of the higher level of inflation in the US economy experienced beginning in calendar 2021 and continuing through fiscal 2025 has also had a negative effect on our interest expense charged on any borrowing on our lines of credit. The interest rate on our current line of credit is computed using the Prime Interest Rate, which has risen from 3.25% in January 2022 to approximately 7.50% in August 2025. In March 2025, the Company began drawing against its asset-based line of credit to fund its usual seasonal build of inventory to meet its anticipated needs for the busier Spring and Summer seasons. As of the end of the fiscal year ended August 31, 2025, the Company has drawn $2,101,835 against this line of credit at a current interest rate of 12.25%.
Environmental, Social and Corporate Governance (ESG)
Jewett-Cameron endeavors to be a good steward and provide sustainable products with a positive impact. We strive to operate and grow in a way that honors our environment and relationships for the long term. This also aligns with one of our three value pillars: stewardship.
Environmental
For our products, the goal is that 90% of materials can be recycled. Our suppliers are audited to strict commercial and fair practice standards, including our own supplier qualifications regarding facilities, capacity, labor practices, and environmental awareness. Packaging is designed to maximize recyclability and re-use and minimize non-recycled materials, and all waste materials in our own facilities are segregated to maximize recycling. Our facilities have replaced high energy consumption infrastructure with energy efficient HVAC and lighting during our most recent remodel.
Active products and designs utilize either recycled or non-petroleum-based plastics to enhance recycling and composting. This includes the recently introduced compostable dog waste bag, a plant-based product that is less reliant on fossil fuels used in traditional plastic bags. We also dedicate a percentage of sales to support environmental cleanup efforts.
Social
Our social responsibilities include cultural standards of operations and values which we establish in conjunction with our employees. We regularly provide employees with a corporate engagement survey to benchmark their engagement, satisfaction, and ideas for change. We support educational programs that build the future workforce through active participation in regional and statewide organizations, including the CTE/STEM Employer Coalition and assisting teachers to connect traditional school subjects to practical job site applications. We also actively participate in the local community, supported by a Corporate Charitable Giving Charter.
Governance
As a public company, our processes are outlined and governed by multiple regulations, including the Sarbanes-Oxley Act of 2002. Our financial controls are mapped, executed, self-audited and regularly audited by outside experts as part of our annual process. We have established risk mitigations that allow for condensed reviews of risks and impacts with our systems in place. See also Item 1C. Cybersecurity for more information.
Uyghur Forced Labor Prevention Act
The Uyghur Forced Labor Prevention Act (“UFLPA”) is a US Federal Law which became effective on June 21, 2022. As enforced by U.S. Customs and Border Protection, the UFLPA prohibits any products that are made, mined, or manufactured, in part or in full, in China’s Xinjiang Uyghur Autonomous Region to be imported into the United States, as they are presumed to have been made with forced labor. Any imports of such goods will be detained and seized by U.S. Customs unless the importer is able to prove that these goods have not been made with forced labor. We ensure that each of our suppliers is in full compliance with the law and none of our products fall under the prohibited goods clause.
Critical Accounting Policies
Management is required to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements, the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On a regular basis, we evaluate our estimates and assumptions. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions.
We have not adopted any new accounting policies that would have a material impact on the consolidated financial statements, nor did we make changes to accounting policies. Management has discussed with the Audit Committee the development, selection and disclosure of accounting estimates used in the preparation of the consolidated financial statements.
Recent Accounting Pronouncements
Management has reviewed the new accounting guidance and determined that there is not a material impact on our financial statements.
