UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-K

x

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year endedAUGUST 31, 20192020

Or

¨

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.

(Name of registrant as specified in its charter)

_________British Columbia, Canada_______                  _________N/A________

(State or Incorporation or Organization)                           (IRS Employer ID No.)

32275 NW Hillcrest, North Plains, Oregon, USA  97133

(Address of principal executive offices)

Registrant’s Telephone Number503-647-0110

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act              ¨ Yes    x No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.          ¨ Yes    x No

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 twelve 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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

x Yes     ¨ No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.                        ¨

Indicate by check mark whether the registrant is a large accelerated filer, andan accelerated filer, or a non-accelerated filer.fi ler, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated fi ler,” “accelerated filer,” “smaller reporting company,”and "emerging growth company" in Rule 12b-2 of the Exchange Act.  

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 financialfinancial accounting standards provided pursuant to Section 13(a) of the Exchange Act.Act..

x

Indicate by check mark whether the registrant has filed a report on and attestation to its management Yes    ’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

¨ No

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).                     

¨ Yes       x No

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter:

February 28, 20192020 = $18,705,499$17,543,960

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of November 13, 2019:  3,971,28210, 2020:  3,481,162

Jewett-Cameron Trading Company Ltd.

Form 10-K Annual Report

Fiscal Year Ended August 31, 20192020

TABLE OF CONTENTS

PART I

ITEM 1.  BUSINESS

Forward-Looking Statements

This Annual Report on Form 10-K contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words like “plans”, “expects”, “aims”, “believes”, “projects”, “anticipates”, “intends”, “estimates”, “will”, “should”, “could” and similar expressions in connection with any discussion, expectation, or projection of future operating or financial performance, events or trends.  Forward-looking statements are based on management's current expectations and assumptions, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict.  Actual outcomes and results may differ materially from these expectations and assumptions due to changes in global political, economic, business, competitive, market, regulatory and other factors.  We undertake no obligation to publicly update or review any forward-looking information, whether as a result of new information, future developments or otherwise.

These factors include, but are not limited to the fact that the Company is in a highly competitive business and may seek additional financing to expand its business, and are set forth in more detail elsewhere in this Annual Report, including in the sections, ITEM 1A, “Risk Factors”, and ITEM 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations”.

Introduction

Jewett-Cameron Trading Company Ltd. is organized under the laws of British Columbia, Canada.  In this Annual Report, the “Company”, “we”, “our” and “us” refer to Jewett-Cameron Trading Company Ltd. and its subsidiaries.  

The Company’s operations are classified into fourthree reportable operating segments, one discontinued segment (Industrial Tools) 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

·

Industrial toolsCorporate and clampsadministration

Effective September 1, 2013, the Company reorganized certain of its subsidiaries. Jewett-Cameron Lumber Corporation (“JCLC”) was changed to JC USA Inc. (“JC USA”), which has the following fourthree wholly-owned subsidiaries.  

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 to the transportation industry.

The lawn, garden, pet and other segment reflects the business of the newly incorporated Jewett-Cameron Company (“JCC”). JCC is a wholesaler of wood products and a manufacturer and distributor of specialty metal products formerly conducted by JCLC. Wood products include fencing and landscape timbers, while metal products include dog kennels, proprietary gate support systems, perimeter fencing, and greenhouses.  JCC uses contract manufacturers to make the specialty metal products.  Some of the products that JCC distributes flow through the Company’s distribution center located in North Plains, Oregon, and some are shipped direct to the customer from the manufacturer.  Primary customers are home centers, eCommerce providers, and 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.

The Company also formerly operated in the industrial tools and clamps segment reflects the business ofthrough MSI-PRO (“MSI”).  MSI importsimported and distributesdistributed products including pneumatic air tools, industrial clamps, and saw blades.  These products arewere primarily sold to retailerswholesalers that in turn sellsold to contractors and end users. During fiscal 2020, the Company decided to exit this segment. The remaining inventory was liquidated, and MSI was wound-up and closed.

JC USA provides professional and administrative services, including accounting and credit services, to each of its wholly-owned subsidiary companies.

Total Company sales were approximately $45.4$44.9 million and $53.9$45.4 million during fiscal years ended August 31, 20192020 and 2018,2019, respectively.

The Company's principal office is located at 32275 NW Hillcrest Street, North Plains, Oregon; and the Company’s website address iswww.jewettcameron.com.  Mail is not delivered to the street address. The Company’s primary mailing address is P.O. Box 1010, North Plains, OR 97133.  The Company’s phone number is (503) 647-0110, and the fax number is (503) 647-2272.

The Company files reports and other information with the Securities and Exchange Commission located at 100 F. Street NE, Washington, D.C. 20549.  Copies of these filings may be accessed through their website atwww.sec.gov.  Reports are also filed under Canadian regulatory requirements on SEDAR, and these reports may be accessed atwww.sedar.com.

The contact person for the Company is Charles Hopewell, President, Chief Executive Officer, Director, Board Chair, and Principal Financial Officer.

The Company’s authorized capital includes 21,567,564 common shares without par value; and 10,000,000 preferred shares without par value. As of August 31, 20192020 and November 13, 2019,10, 2020, there were 3,971,282common3,481,162common shares outstanding. The Company's common shares are listed on the NASDAQ Capital Market in the United States with the symbol “JCTCF”.

The Company's fiscal year ends on August 31st.

General Development of Business

Incorporation and Subsidiaries

Jewett-Cameron Trading Company Ltd. was incorporated under the Company Act of British Columbia on July 8, 1987 as a holding company for Jewett-Cameron Lumber Corporation (“JCLC”), which was incorporated in September 1953.  Jewett-Cameron Trading Company, Ltd. acquired all the shares of JCLC through a stock-for-stock exchange on July 13, 1987, and at that time JCLC became a wholly owned subsidiary.  Effective September 1, 2013, the Company completed a reorganization of certain of its subsidiaries and JCLC’s name was changed to JC USA Inc. (“JC USA”). JC USA has the following wholly owned subsidiaries.  MSI-PRO Co. (“MSI”), incorporated in April 1996, Jewett-Cameron Seed Company, (“JCSC”), incorporated in October 2000, Greenwood Products, Inc. (“Greenwood”), incorporated in February 2002, and Jewett-Cameron Company (“JCC”) incorporated in September 2013.  Jewett-Cameron Trading Company, Ltd. and its subsidiaries have no significant assets in Canada.

Corporate Development

Incorporated in 1953, JC USA operated as a small lumber wholesaler based in Portland, Oregon.  In September 1984, the original stockholders sold their interest in the corporation to a new group of investors.  Two members of that group remained active in the Company.  These individuals are Donald Boone, who passed away in May, 2019, and who was the previous Chairman and Director and the former President, Chief Executive Officer, Treasurer, and Principal Financial Officer, transitioning to strictly the Board Chair in 2017; and Michael Nasser, who remains active in the business and is both a Director and the Corporate Secretary.

In July 1987, the Company acquired JC USA in what was not an arms-length transaction.

In early 1986, prior to JC USA being acquired by the Company, JC USA acquired Material Supply International (“Material Supply”).  Material Supply was engaged in the importation and distribution of pneumatic air tools and industrial clamps.  The product line was re-branded as “MSI-PRO” and MSI was incorporated in 1996 to carry-on the business of Material Supply.

In October 2000, JCSC was incorporated in anticipation of JC USA acquiring the business and certain assets of a firm called Agrobiotech Inc.  JCSC operates as a seed storage, processing and sales business.

In February 2002, Greenwood was incorporated in anticipation of JC USA acquiring the business and certain assets of Greenwood Forest Products Inc.  Greenwood is involved in the processing and distribution of specialty wood products.

In June 2012, the Company acquired land and fixed assets located in Manning, Oregon for $250,000 cash. The property was sold in an arms-length transaction in the second quarter of fiscal 2019 for $325,000 cash.

In May 2019 Chairman and Co-Founder of the Company Donald M. Boone passed away. Mr. Boone served asPresident and CEO from 1984 until 2017 when he voluntarily retired from his officer positions and oversaw the addition and successful integration of new management and directors.

In September 2019 the Board of Directors decided to permanently close the Company’s MSI-Pro division. Recent effortsEfforts to drive further sales and margin growth were unsuccessful due to a lack of market differentiation and changing customer patterns. The remaining inventory will behas been liquidated, and the personnel will bewere moved into different positions with the Company. As of August 31, 2020, MSI was wound-up and the division closed.

Narrative Description of Business

The Company’s operations are classified into four segments.segments: Industrial wood products; Lawn, garden, pet and other; Seed processing and sales; and corporate and administration.  Sales, income before taxes, assets, depreciation and amortization, capital expenditures, and interest expense by segment are shown in the footnotes to the financial statements.statements under Note 14 “Segment Information”.

Lawn, Garden, Pet and Other – JCC

The lawn, garden, pet and other segment reflects the business of Jewett-Cameron Company (JCC), which is a manufacturer and distributor of specialty metal products and a wholesaler of wood products formerly conducted by JCLC.

JCC operates out of a 5.6 acre owned facility located in North Plains, Oregon that includes an office, a warehouse, and a paved yard.  This business is a wholesaler of wood products and a manufacturer and distributor of specialty metal products.  Wood products are primarily fencing, while metal products include an array of pet enclosures, kennels, and pet welfare and comfort products, proprietary gate support systems, perimeter fencing, greenhouses, canopies and umbrellas. Examples of the Company’s brands include Lucky Dog, Animal House and AKC (used under license from the American Kennel Club) for pet enclosures and kennels; Adjust-A-Gate, Fit-Right, Perimeter Patrol, and Lifetime Post for gates and fencing; Early Start, Spring Gardner, and Weatherguard for greenhouses; and TrueShade for patio umbrellas, furniture covers and canopies.  JCC uses contract manufacturers to make the specialty metal 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 partners, and other retailers.  

The home improvement business is seasonal, with higher levels of sales occurring between February and August.  Inventory buildup occurs until the start of the season in February and then gradually declines to seasonal low levels at the end of the summer.  

JCC has concentrated on building a customer base for lawn, garden, and pet related products.  Management believes this market is less sensitive to downturns in the U.S. economy than is the market for new home construction as its products serve both new and existing home and pet owners.

The wood products that JCC distributes are not unique and are available from multiple suppliers.  However, the metal products that JCC manufactures and distributes may be somewhat differentiated from similar products available from other suppliers. The company has been successful garnering key patents and trademarks on multiple products that assist their ability to continue to differentiate based on design and functionality.

JCC owns the patents and manufacturing rights connected with the Adjust-A-Gate and Fit-Right products, which are the gate support systems for wood, vinyl, chain link, and composite fences.  Management believes the ownership of these patents results in an important competitive advantage for these and certain other products. During fiscal 2018,2020, the Company applied for zeroNil new patents (fiscal 20182019 – 2)Nil), while 1Nil other patent waspatents were granted (fiscal 20182019 – 3)1). One of the patentsA patent granted in 2018 was an update of the Adjust-a-Gate, which will extend the protection on the Adjust-a-Gate products for an additional 15 years. In addition to the patents, JCC also has two licensing agreements to market pet products.

Backlog orders are a factor in this business as customers may place firm priced orders for both wood and metal products for shipments to take place three to four months in the future.

Industrial Wood Products - Greenwood

Greenwood is a wholesale distributor of a variety of specialty wood products. Operations are co-located in the building utilized by JCC and MSI.JCC.

Historically, a major product category has been treated plywood that is sold to the transportation industry.  In February 2014, the Company sold its remaining and excess inventory related to the marine industry. Greenwood’s total sales for fiscal 2020 and 2019 were 5% and 2018 were 9% and 8% respectively of total Company sales.

The primary market in which Greenwood competes has decreased in economic sensitivity as users are incorporating products into the municipal and mass transit transportations sectors. However, these markets may sustain some contractions due to COVID-19 related patterns of individuals utilizing transit and mass transit less due to concerns over exposure.

Inventory is maintained at non-owned warehouse and wood treating facilities throughout the United States and is primarily shipped to customers on a just-in-time basis.  Inventory is generally not purchased on a speculative basis in anticipation of price changes.

Greenwood has no significant backlog of orders.  

Seed Processing and Sales - JCSC

JCSC operates out of an approximately 12 acre owned facility located adjacent to North Plains, Oregon. 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.  Sales of seed has some seasonality, but it is most affected by weather patterns in multiple parts of the United States that also affectutilize cyclical planting. The annual weather plays an important part in year-to-year sales volatility.volatility and specific crop demand.  However, profitability around the month of August may be unusually high based on a seasonal surge in cleaning sales, which are much more profitable than product sales.

JCSC has nomay periodically have a backlog of sales orders.orders based on the market’s need for specific crops due to seasonal patterns.

Industrial Tools and Clamps - MSI

This business operates fromMSI is a former division of the same owned facilities as JCC.  MSI importsCompany that imported and distributesdistributed products including pneumatic air tools, industrial clamps, and saw blades.  These products arewere primarily sold to wholesalers that in turn sellsold to contractors and end users. Sales of these products tend to be relatively uniform throughoutThis business operated from the year.same owned facilities as JCC.  

MSI’s product lineThe MSI division was expanded in 2007 to include saw blades, digital calipers,permanently closed and laser guides.  MSI brands include MSI-Pro, Avenger, and ProMax.all remaining inventory was liquidated during fiscal 2020.

In September 2019,Administrative Services – JC USA

JC USA Inc. is the Board of Directors decidedparent company for the Company’s wholly-owned subsidiaries as described above.  JC USA provides professional and administrative services, including warehousing, accounting and credit services, to permanently close the MSI division.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.

The company was notifiedThese new tariffs were temporarily reduced on many of the Company’s imported products in September 2019 thatunder a deemed one-year exemption. The 25% tariff rate was restored on the Company’s products that it had imported would be excepted from tariff treatment moving forward. This exception applies to most ofin September 2020 when the products the company imports.exemption expired.

Customer Concentration

The top ten customers were responsible for 77%76% and 85%77% of total Company sales for the years ended August 31, 20192020 and August 31, 2018,2019, respectively.  Also, the Company’s single largest customer was responsible for 33%30% and 38%33% of total Company sales for the years ended August 31, 20192020 and August 31, 20182019 respectively.

Employees

As of August 31, 20192020 the Company had 5863 full-time employees (August 31, 20182019 – 5758 full-time employees).  By segment these employees were located as follows: Greenwood 1, JCC 30,38, JCSC 8, MSI 2, and JC USA 17.16.  None of these employees are represented by unions at the Company.  Jewett-Cameron Trading Company Ltd. has no direct employees, and the CEO of the Company is employed by JC USA.

ITEM 1A. RISK FACTORS

Investors should carefully consider the following risk factors and all other information contained in this Annual Report.  There is a great deal of risk involved.  Any of the following risks could affect our business, its financial condition, its potential profits or losses, and could result in you losing your entire investment if our business became insolvent.  The risks and uncertainties described below are not the only ones we face.  Additional risks and uncertainties, including those not presently known to us or that we currently deem immaterial, also may result in decreased revenues, increased expenses or other events which could result in a decline in the price of our common stock.

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.

The Company’s common shares currently trade within the NASDAQ Capital Market in the United States. The common shares also formerly traded on the Toronto Stock Exchange in Canada until the Company voluntarily delisted from the Toronto Stock Exchange on October 11, 2012.  The average daily trading volume of our common stock was approximately 5,2751,765 shares on NASDAQ for the fiscal year ended August 31, 2019.2020.  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 fiscal year ended August 31, 20192020 our top ten customers represented 77%76% of our total sales, and our single largest customer was responsible for 33%30% of our total sales. We would experience a significant decrease in sales and profitability and would have to cut back our operations, if these customers were lost and could not be replaced.  Our top ten customers are located in North America and are primarily in the retail home improvement industries.  

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 whichthat 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 $3 million, of which $3 million is available.  We are currently in compliance with the requirements of our existing line of credit.  If we lost 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 addressesaddress many of the primary causes of cyber threat with all our employees, such threats change and morph almost daily. There is no guarantee our actions will secure our information systems against all threats and vulnerabilities. The compromise or failure of our information systems could have a negative effect on our business, results of operations, or financial condition.

If we fail to maintain an effective system of internal controls, we may not be able to detect fraud or report our financial results accurately, which could harm our business and we could be subject to regulatory scrutiny.

We have completed a management assessment of internal controls as prescribed by Section 404 of the Sarbanes-Oxley Act, which we were required to do in connection with our year ended August 31, 2019.2020.  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 1B. UNRESOLVED STAFF COMMENTS

         --- No Disclosure Necessary ---

ITEM 2. PROPERTIES

The Company’s executive offices are located at 32275 NW Hillcrest Street, North Plains, OR 97133.  The 5.6 acre facility, which is owned, consists of 55,250 square feet of covered space (6,000 office and 49,250 warehouse), a little over three acres of paved yard space, and was originally completed in October 1995. A 12,000 square foot warehouse expansion was completed in fiscal 2017 which the Company is using for several new product lines. The facility provides office space for JC USA, including all of the Company’s executive offices, and is used as a distribution center to service the Company’s customer base for JCC Greenwood and MSI.Greenwood.

The property associated with JCSC, which is owned, consists of 11.7 acres of land, 105,000 square feet of buildings, rolling stock, and equipment.  It is currently used for seed processing and storage.  It is located at 31345 NW Beach Road, Hillsboro, OR 97124, which is adjacent to North Plains, OR.

During fiscal 2010, the Company purchased a 2,000 square foot building that previously housed a seed testing lab located at 31895 NW Hillcrest Street, North Plains, OR 97133.  The Company formerly leased the property for $729 per month until the expiration of the lease on January 4, 2010.  At that time, the Company exercised its option to buy the land and building for a total cost of $150,946. In fiscal 2020, the Company began a renovation of this building into its new innovation center which will focus on new product development for the Company’s subsidiaries. The renovation is expected to be completed by the end of the first quarter of fiscal 2021.

In June 2012, the Company acquired land and fixed assets located in Manning, Oregon for $250,000 cash. The land consists of 7.5 acres and the fixed assets included 12,000 square feet of buildings. During the second quarter of fiscal 2019, the Company sold the property for $325,000 cash.

The company is currently acquiring bidsfinalizing its plans to expand within current building spacesrenovate a portion of its older existing warehouse space into 2 floors of office space as office and employee growth has exceeded existing capacity. ItConstruction is likely this expansion will be launched in early calendar 2020.expected to begin during the second quarter of fiscal 2021.

ITEM 3.  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 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.  As of this date, no formal responses have been made and no dates have been established governing the litigation proceedings. This matter is in its early stages making it speculative to predict as to its outcome. It is 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.

ITEM 4.  MINE SAFETY DISCLOSURES

         --- No Disclosure Necessary ---

PART II

ITEM 5.  

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common shares trade on the NASDAQ Capital Market (formerly the NASDAQ Small Cap Market) in the United States.  The trading symbol for our common stock is “JCTCF” and the CUSIP number for the stock is 47733C-20-7.  Our common stock began trading on the NASDAQ Small Cap Stock Market in April 1996.

The Company declared a two for one stock split of its common stock with a record date of the close of business on May 22, 2018. Shareholders received one additional common share for each common share held as of the record date. The stock split was effective as of May 29, 2018.

Table No. 1 lists the volume of trading along with the high, low, and closing sales prices on the NASDAQ Capital Market for the Company's common shares. Prices are adjusted to reflect the common stock split effective May 29, 2018.

Table No. 1

NASDAQ Capital Market

Common Shares Trading Activity

(US Dollars)

Holders

Computershare Investor Services Inc. which is located in Vancouver, British Columbia, Canada is the registrar and transfer agent for the common shares.

On October 24, 201921, 2020 there were 1514 registered shareholders and 3,971,2823,481,162 shares of the Company’s common shares outstanding.

Dividends

The Company has not declared any dividends since incorporation and does not anticipate that it will do so in the foreseeable future.  The present policy of the Company is to retain earnings for use in its operations, expansion of its business, and the possible repurchase of Company shares.  There are no restrictions that limit the ability of the Company to pay dividends on common equity or that are likely to do so in the future.  Any dividends paid by the Company to U.S. shareholders would be subject to Canadian withholding tax.

Recent Sales of Securities: Use of Proceeds from Securities

The Company has sold no securities in the last 3 fiscal years.

Purchases of equity securities by the issuer and affiliated purchasers

During the fiscal years ended August 31, 2019 and 2018, the Company has repurchased common shares through share repurchase plans approved by the Board of Directors in accordance with Rule 10b-18 under the U.S. Securities Exchange Act of 1934.

On May 23, 2017, the Company announced the Board of Directors had authorized a share repurchase plan to purchase for cancellation up to 225,000 common shares through the facilities of NASDAQ. Transactions may involve Jewett-Cameron insiders or their affiliates executed in compliance with Jewett-Cameron's Insider Trading Policy. The share repurchase plan was effected in accordance with Rule 10b-18 under the U.S. Securities Exchange Act of 1934, which contains restrictions on the number of shares that may be purchased on a single day, subject to certain exceptions for block purchases, based on the average daily trading volumes ("ADTV") of Jewett-Cameron's shares on NASDAQ. Purchases shall be limited to one “Block” purchase per week in lieu of the 25% of ADTV limitation for compliance with Rule 10b-18(b)(4). A “block” as defined under Rule 10b-18(a)(5) means a quantity of stock that, among other things, is at least 5,000 shares and has a purchase price of at least US$50,000.  The plan commenced on June 1, 2017 and terminated on August 31, 2017. Under the Plan, the Company repurchased a total of 83,600 common shares at a cost of $526,941 which is an average price of $6.30 per share.

On June 6, 2018, the Company announced the Board of Directors had authorized a new share repurchase plan to purchase for cancellation up to 250,000 common shares through the facilities of NASDAQ. Transactions may involve Jewett-Cameron insiders or their affiliates executed in compliance with Jewett-Cameron's Insider Trading Policy. The share repurchase plan was effected in accordance with Rule 10b-18 under the U.S. Securities Exchange Act of 1934, which contains restrictions on the number of shares that may be purchased on a single day, subject to certain exceptions for block purchases, based on the average daily trading volumes ("ADTV") of Jewett-Cameron's shares on NASDAQ. Purchases shall be limited to one “Block” purchase per week in lieu of the 25% of ADTV limitation for compliance with Rule 10b-18(b)(4). A “block” as defined under Rule 10b-18(a)(5) means a quantity of stock that, among other things, is at least 5,000 shares and has a purchase price of at least US$50,000.   The Plan commenced on June 11, 2018 and terminated upon the completion of the 250,000 share repurchase on October 25, 2018. Under the Plan, the Company repurchased and cancelled a total of 250,000 common shares at a total cost of $2,164,975 which was an average price of $8.66 per share.

On February 7, 2019, the Company announced the Board of Directors had authorized a new share repurchase plan to purchase for cancellation up to 250,000 common shares through the facilities of NASDAQ under similar terms to the June 2018 plan. The Plan commenced on February 18^th and terminated upon the completion of the 250,000 repurchase on July 22, 2019. A total of250,000 shares of common stock was repurchased at a total cost of $2,168,065 which represents an average share price of $8.67 per share. 

The following table detailsDuring the Company’s repurchase of its common shares during the fourth2^nd quarter of fiscal 20192020 ended August 31, 2019.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.

ITEM 6.  SELECTED FINANCIAL DATA

--- No Disclosure Necessary for Smaller Reporting Companies ---

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

The Company’s operations are classified into fourthree reportable operating segments, one discontinued segment (Industrial Tools) 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 (Greenwood) – Distribution of specialty wood products.

·

Lawn, garden, pet and other (JCC) – Wholesaling of wood products and manufacturing and distribution of specialty metal products.

·

Seed processing and sales (JCSC) – Processing and distribution of agricultural seed.

·

Corporate and administration

During fiscal 2020, the Company closed its Industrial toolsTools segment operated by MSI and clamps (MSI) – Importing and distribution of products including pneumatic air tools, industrial clamps, and saw blades.liquidated the remaining inventory.

Quarterly Results

The following table summarizes quarterly financial results in fiscal 20192020 and fiscal 2018.2019.  (Figures are thousands of dollars except per share amounts.)

Fiscal 2019 quarterly per share earnings were calculated using weighted average number of common shares outstanding of 4,233,304 (2018 – 4,430,940)amounts).

RESULTS OF OPERATIONS

During fiscal 2019, extremely wet weather present across much of North America extended deep into the third quarter, which delayed purchases of outdoor merchandise. The US tariffs on certain Chinese manufactured goods increased from 10% to 25% during the third quarter, which included a number of the Company’s products and continued to restrain demand from retailers and consumers. These were the factors primarily responsible for the decline in the Company’s sales and income for fiscal 2019.

Most of the Company’s metal products are manufactured in China and have been subject to the new United States Trade Representative (USTR) tariffs. During the year, the Company’s supplier appealed the classification of certain products to the US Customs Service. Subsequent to the fiscal 2019 year-end, the Company received notice that a number of its products will be reclassified and will no longer be subject to the 25% tariffs on imported Chinese goods, although some products will remain under tariff. This reclassification should allow the Company to remain competitive in both the retail and eCommerce sectors.

The Company continues to develop new products that complement their presence in multiple product and sales channels. The company debuted a new patented steel fence post, LIFETIME POST™ at the National FenceTech show in early March 2019 which is now being shipped to major retailers, new distributors, and end users. The product continues to position the company firmly in the fencing market. The product was specifically designed to complement Jewett Cameron’s already long running, successful Adjust-A-Gate™ products, thus building a stronger branding in this market segment.

Fiscal 2020 quarterly per share earnings were calculated using weighted average number of common shares outstanding as of August 31, 2020 of 3,623,413 (2019 – 4,233,304).

In addition to the LIFETIME POST™, the Company has other products in development, primarily in the fencing and pet segments. Management intends to continue to add new products through its internal development process, but may also seek to acquire products that will provide complementary benefits to its existing offerings. To drive these initiatives, the Company is continuing to build their product development capabilities during fiscal 2020.

Management continues to add personnel to support new marketing and sales initiatives. A new Chief Revenue Officer has been added to focus on integrating marketing strategy and sales, including the introduction of new products, and opening and expanding sales channels. The new position of VP Business Development was filled in October 2019. This key role will focus on tangible ways to leverage current business assets and entities, such as Greenwood’s specialty lumber sales and lumber trading, and products and product lines.

The Company is implementing a new Enterprise Resource Planning (ERP) system. The ERP program will streamline inventory management and distribution to improve product management and shipping procedures. It will also automate interfaces with customers and tie in all forecasting and planning which allow the Company to better scale these processes now and in the future as the Company grows with new products and customers.RESULTS OF OPERATIONS

Management and the Board have also implementedplanned for Fiscal 2020 to be a strategic review“investment” year. This plan included exiting the underperforming industrial tools segment and increasing the focus on the remaining three operational segments through the development of new products, important capital investments, key staff additions, and rebranding of product lines across both existing and new sales channels. Although the Company was successful in executing its strategic investment plan for the fiscal year, the Company’s sales and operations were heavily affected by outside forces, namely tariffs and the COVID-19 Coronavirus pandemic.

The COVID-19 pandemic significantly impacted the Company and its customers throughout calendar 2020, but the first part of fiscal 2020 was negatively affected by uncertainty over tariffs on the Company’s products manufactured in China. During the first quarter, the Company received notice that a number of the Company’s secondary business operationsmetal products manufactured in China would be reclassified and assets. The industrial tools and seed segments have seen stagnant growth for several yearsreceive lower tariffs. Several of the Company’s major customers delayed their expected first quarter purchases into the second quarter in order to receive better pricing due to increased competitionthe reduced tariffs.

Although sales of the previously tariffed products began to improve in these markets andthe second quarter, demand for a general shiftnumber of the Company’s seasonal products were negatively affected by the Coronavirus in wholesale buying patterns. This strategic reviewChina beginning in January. Extended factory shut-downs after the Chinese New Year holiday to reduce the spread of the virus resulted in the decision in September 2019 to permanently close the MSI division, which has recently been a very minor contributorinterruptions to the Company’s overallsupply chain and delayed the Company’s ability to receive and deliver goods during the period. The lower sales recorded during the first and second quarters due to these events, combined with the costs of the MSI closure, contributed to the Company recording a net loss during the first six months of fiscal 2020.

The impact of the COVID-19 control measures taken by governments and the public began to affect the Company’s product sales and has been posting operating losses. The remaining personnel will be shifted to other positionsoperations early in the Company. For JCSC,third fiscal quarter, which is the Company remains committed to the seed business and grower community. The Company will continue to focus on improving and growing its seed operations and market share as overall sales and service opportunities have decreased given the region’s changes to its agricultural base.

During the second quarter of fiscal 2019, the Company sold its surplus Manning property and buildings to an arms-length party that had a contiguous business and will use the property for their expansion. The Manning property was originally acquired as an investment and the property was not in close proximity to anybeginning of the Company’s current business operations. Once purchased,historically busiest period. With the company had leased itshutdown of businesses and imposition of stay-at-home orders across the United States, consumers shifted much of their buying patterns to a third party. Proceeds fromonline shopping. As people spent more time in their homes, DIY home improvement projects became more popular. Pet adoptions also increased tremendously during the sale totaled $324,675, which represents a gain of $105,365 over the property’s original purchase price net closing costs.

In fiscal 2020, management also intendsquarantine period. This led to focus on promotionhigher sales volumes in certain of the Jewett-Cameron brand, both its individual brandsCompany’s categories, including fencing and pet products, beginning in each segmentMarch and continuing through the Company’s name overall. The intent is to make the consumer more aware of Jewett-Cameron and drive more cross-over business to each segment and product line. This focus will involve social media, other online communications, and omnichannel branding. In conjunction with this initiative, the Company also intends to broaden its product presence in more channels, including retailers and e-commerce, both in the US and internationally.

During the third quarter offourth fiscal 2019, the Company suffered the loss of its Chairman of the Board, Donald Boone, who passed away on May 9^th, 2019. Mr. Boone was co-founder of the Company and served as President, CEO and as a Director from 1984 to 2017. As Chairman, Mr. Boone oversaw the successful transition and integration of experienced new management and Directors in order to strengthen the Company and continue its success well into the future. These changes included the addition of Charles Hopewell as the new President and CEO in 2017, and several accomplished Directors added to the Board. In place of Mr. Boone, the Company named Michael Nasser, the other co-founder of the Company and current Corporate Secretary, to the Board of Directors and approved Mr. Hopewell as the new Chairman. The entire Company will continue to operate with the same core principles and commitment of service to its customers, suppliers, employees and shareholders that Mr. Boone established.quarter.

A campaign to re-brand both the primary enterprise and each business unit and products was launched in the second fiscal quarter. The overall goal is to connect the consumer across all retail and eCommerce platforms with a consistent look and statement of value. This will expand the Company’s touch in more sales channels and greater integration with retailers and e-commerce providers. The intent is to make the consumer more aware of Jewett-Cameron and drive more cross-over business to each segment and product line. This focus involve social media, other online communications, and omnichannel branding. The Company also intends to increase its product presence in more channels, including retailers and e-commerce, both in the US and internationally.

New product development is being emphasized to expand both existing and new product lines. Several new products were released in fiscal 2020, including the new Lucky Dog® Zero Plastic Poop Bags. These 100% compostable dog waste bags, which were launched at the Global Pet Show in Orlando in February, are made from a vegetable-based product and contain no traditional polymers, dyes or chemicals. It is strong, leak-proof and easy to open while being certified compostable. When used to pick up dog waste, the entire bag breaks down in aerobic environments and returns to the earth in 90-180 days while leaving no micro-plastic residue like many other pet waste bags currently on the market. The new product has been well-accepted by both retailers and consumers and has strengthened our conversations with existing sales channels about complementary products. We have also added a significant pet market partner with a strong reach who has rapidly advanced to being one of our stronger customers. In August 2020, the Company announced a new supply agreement with SECOS Group of Australia to produce the Zero Plastic Poop Bags from SECOS’ proprietary biopolymer resins. This agreement is expected to provide us with the capacity to meet demand for the Bags from our retail channel partners and online, in both domestic and international markets. We have joined with new European distributors for the Poop Bags and several other products, with the initial shipments scheduled to arrive in Europe in November 2020.

The new patented steel fence post, LIFETIME POST™, continues to position the company firmly in the fencing market. The product was specifically designed to complement Jewett Cameron’s already long running, successful Adjust-A-Gate™ products, thus building a stronger branding in this market segment. The Company has other products in development, primarily in the fencing and pet segments. Besides its internal new product development process, management may also seek to acquire products that will provide complementary benefits to its existing products and product lines.

During the year, the Company continued to useadd to its excess cashinfrastructure and staff to repurchasesupport its current and cancel common shares. During 2019, a total of 345,671 common shares were repurchased and cancelled at a total cost of $3,061,441. The Company’s cash position remains strong, totaling $9,652,310 as of August 31^st, 2019. The Board may consider utilizing a portion of the Company’s cash position to repurchase additional sharesfuture business initiatives. Additional employees have been hired, particularly in the future.

Fiscal Years Ended August 31, 2019areas of sales and August 31, 2018

Fiscal 2019marketing, and business and new product development. A new Enterprise Resource Planning (ERP) software system which will support the sales totaled $45,446,362 compared to sales of $53,923,152 inand marketing programs and streamline reporting functions has been installed and tested during fiscal 2018, which was a decrease of $8,476,790, or 16%. The decrease in sales was primarily due to lower sales at JCC.

Gross margin rose slightly to 21.9% from 21.5% in fiscal 2018 primarily due to an increase in sales of higher margin metal products in the current year.

Operating expenses declined by $94,514 to $7,226,881 from $7,321,395 in fiscal 2018. The decrease was due to decreases in depreciation and amortization to $191,819 from $274,065 and wages and employee benefits to $4,907,766 from $4,943,431. Selling, general and administrative rose to $2,127,296 from $2,103,899 as the Company increased its sales efforts in several key areas. Income from operations fell to $2,737,550 in fiscal 2019 from $4,276,419 in fiscal 2018.

Including other items, income before income taxes was $2,888,144 in fiscal 2019 compared to $4,279,423 in fiscal 2018. Other items included gain on sale of property, plant and equipment of $105,366, which was largely2020. However, due to the sale of the Manning property, compared to a loss of $27,022 in fiscal 2018. Interest and other income rose to $45,228 in fiscal 2019 from $30,026 in fiscal 2018 due to higher rates of interest on cash balances from short-term investments. Income tax expense was $787,692 in fiscal 2019 compared to $1,358,784 in fiscal 2018. The Company calculates income tax expense based on combined federal and state rates that are currently in effect.

Net income for fiscal 2019 was $2,100,452, or $0.50 per basic and diluted shares, compared to net income of $2,920,639, or $0.66 per basic and diluted share, for fiscal 2018. The income per share was positively affected by the repurchase and cancellation of common shares during both fiscal 2019 and 2018,COVID-19 situation and the weighted number of shares outstanding were 4,233,304 in fiscal 2019 and 4,430,940 in fiscal 2018, after adjustment for the 2-for-1 stock split effective May 29, 2018.

Lawn, Garden, Pet and Other - JCC

Sales at JCC were $38,510,213 in fiscal 2019 compared to sales of $47,197,251 in fiscal 2018. Operating income at JCC for 2019 was $2,040,631 in 2019 compared to $3,652,467 in fiscal 2018, which was a decrease of $1,611,836, or 44%. Extended wet and cold weather across much of North Americastrong product demand during the Spring of 2019 significantly delayed,3^rd and ultimately reduced, demand for4^th quarters, management decided to delay the Company’s lawn and garden products duringfull implementation date until the year. The Company also experienced lower overall demand for metal products during the current period as retailers stocked up on extra inventory last year ahead of the announced tariffs on Chinese made products. The tariffs caused uncertainly in the marketplace and had a negative effect on the sales of the Company’s affected products beginning in the 42^thnd quarter of fiscal 2018 and through the entirety of fiscal 2019. Sales in fiscal 2018 were positively affected by higher sales of specialty lumber, particularly cedar fencing, which were damaged by tropical storms which did not reoccur in fiscal 2019. Overall, the operating results of JCC are seasonal with the first two quarters2021. This is typically one of the fiscal year being much slower thanCompany’s slowest sales periods which will limit possible business disruptions. Other current capital projects include the final two quartersrenovation of the fiscal year.

Duringformer seed laboratory into a new Creative Center for new product development. Completion is expected at the end of the first quarter of fiscal 2018, the2021. The Company instituted a voluntary recallhas also been planning an extensive renovation of a specific product which was sold to a single retail store customer. After two incidents of breakage, the Company and the retailer immediately and permanently ceased all salesportion of the products in early December 2017,older warehouse space into a two-story office structure as the existing office space is older and issued a voluntary safety advisorycramped due to the new hires. The construction of the new space could begin prior to the US Consumer Product Safety Commission issuing a formal recallend of calendar 2020.

In response to the COVID-19 pandemic, the Company has instituted strong protocols within its facility consistent with the State of Oregon’s requirements and CDC guidelines. This includes appropriate social distancing and cleaning protocols. The entire workforce has been retained without any lay-offs or reductions in shifts or work hours, and there have been no adverse costs related to remote work or the implementation of the productnew processes needed for the home-based workers. Although some employees previously working remotely have returned to work at the facility, approximately 40% of the workforce continues to work from home. This arrangement of 60/40 work at the facility/work from home will continue where appropriate to the functions of each employee’s role and responsibilities.

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 March 2018. The actions taken bythe warehouse facilities contract the virus, the Company included a recallwould 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 result in delayed or lost revenue, and increased costs. For this reason, we will continue to be aggressive in ways to protect our operations and cash flows against the virus and take all precautions for any potential shut-downs or adjustments to our operations. Any change to the current State of units sold. This recall had a negative effect on JCC’s salesOregon orders regarding workplaces and income during fiscal 2018, astravel restrictions could result in the Company providedhaving to temporarily close its facilities altogether. Our suppliers and many of our customers are subject to the retailer with a return allowance for the units and destroyed all remaining inventory of the recalled product.same risks.

Specific COVID-19 protocols are in place for all of the Company’s facilities and for all personnel which are designed to minimize potential exposure and maintain safety. There have been a limited number of instances of probable virus exposure to some of our personnel that have occurred outside our facilities. Those potentially exposed individuals were sent home with continuing compensation and were not permitted to return to work until they received a negative COVID-19 test. To date, there have been no cases of COVID-19 virus among any of the Company’s employees, which demonstrates employees have been following the procedures and protocols.

In order to mitigate the tremendous impact of COVID-19, the Company received two loans under the Paycheck Protection Program (the “PPP”) as part of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). This program was designed to help smaller American companies with retaining their employees and maintaining their business during the economic slowdown caused by the pandemic, and to better position these businesses to ultimately recover from the crisis more quickly. The PPP funds were essential in supporting the Company’s ability to continue to operate without interruption during the COVID-19 crisis and retain 100% of its workforce, which was integral to the Company’s recovery in the 3^rd and 4^th quarters. All of the borrowed funds were spent on qualifying employee salaries and costs, and no employees were laid-off.  

The rebound in business shown in the 3^rd and 4^th quarters is encouraging, but due to the ongoing COVID-19 situation and its severe effects on the overall economy, the outlook for fiscal 2021 is uncertain. We have increased our inventory levels going into fiscal 2021 in order to minimize any potential supply disruptions caused by new COVID-19 outbreaks. We remain committed to grow our business, add new sales channels and widening our marketing base. This requires the continued investment in multiple areas to achieve these goals, including our facilities, equipment, and personnel. The development and introduction of new products is a key component of our strategic plan. This will broaden our product selection for both our distribution partners and consumers. For 2021, we plan to continue to strengthen and broaden our product offerings. Our goal is to begin to counter the historic seasonality of our sales through new promotional programs and launch of new products which are more tuned to year-round sales cycles.

Fiscal Years Ended August 31, 2020 and August 31, 2019

Fiscal 2020 sales totaled $44,945,263 compared to sales of $45,446,362 in fiscal 2019, which was a decrease of $501,099, or 1%. The decrease in sales was primarily due to lower sales at Greenwood and the closure of MSI.

Gross margin rose slightly to 27.8% from 21.9% in fiscal 2019 primarily due to a more favorable mix of product sales away from lower margin lumber sales in the current year.

Operating expenses increased by $1,388,166 to $8,615,047 from $7,226,881 in fiscal 2019. The increase was due to higher selling, general and administrative expenses of $2,502,989 compared to $2,127,296 and an increase in wages and employee benefits, which rose to $5,894,346 from $4,907,766. Both increases are related to the Company’s investment efforts to support the Company’s growth initiatives. Depreciation and amortization increased to $217,712 from $191,819. Income from operations increased to $3,858,136 in fiscal 2020 from $2,737,550 in fiscal 2019.

Including other items, income before income taxes was $3,889,156 in fiscal 2020 compared to $2,888,144 in fiscal 2019. Other items included gain on sale of property, plant and equipment of $6,600 compared to a gain of $105,366, which was largely due to the sale of the Manning property, in fiscal 2019. Interest and other income declined to $24,420 in fiscal 2020 from $45,228 in fiscal 2019 due to lower rates of interest on cash balances from short-term investments. Income tax expense was $1,104,631 compared to $787,692 in fiscal 2019. The Company calculates income tax expense based on combined federal and state rates that are currently in effect.

Net income for fiscal 2020 was $2,784,525, or $0.77 per basic and diluted share, compared to net income for fiscal 2019 of $2,100,452, or $0.50 per basic and diluted shares. The income per share was positively affected by the repurchase and cancellation of common shares during both fiscal 2020 and 2019, and the increased profitability in 2020. The weighted number of shares outstanding were 3,623,413 in fiscal 2020 and 4,233,304 in fiscal 2019.

Lawn, Garden, Pet and Other - JCC

Sales at JCC were $40,348,660 in fiscal 2020 compared to sales of $38,510,213 in fiscal 2019.

Operating income at JCC for 2020 was $3,936,491 compared to $2,040,631 in 2019, which was an increase of $1,895,860, or 93%. Demand was weak during the first two quarters of fiscal 2020 as many customers had stocked up on metal products prior to the imposition of tariffs. During the second half of fiscal 2020, the COVID-19 pandemic’s stay-at-home orders drove strong demand for certain of JCC’s DIY product lines, particularly in the Pet and Fencing segments. In fiscal 2019, extended wet and cold weather across much of North America during the Spring significantly delayed, and ultimately reduced, demand for the Company’s lawn and garden products during the year. 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.

The following table shows a breakdown between the metal and wood categories in this segment.

Sales in Millions of Dollars

Percent of Total Sales

Fiscal Year

Metal

Wood

Total

Metal

Wood

Total

2020

$32.2

$  8.1

$40.3

80%

20%

100%

2019

$26.4

$12.1

$38.5

69%

31%

100%

2018

$32.5

$14.7

$47.2

69%

31%

100%

The Company’s metal products are manufactured in China and are imported into the United States. Many of the Company’s metal products have been subject to the newadditional USTR tariffs on the importation of Chinese manufactured products in the United States. These additionalnew tariffs went into effect on September 24, 2018 at an initial 10% rate but later rose to a 25% rate. Uncertainty over the tariffs began to negatively affect the Company’s business in the fourth quarter of fiscal 2018 as customers were attempting to formulate their approach to the tariffs and stalled or delayed acceptance of initial price increases. The implementation of these additional tariffs reduced the Company’s margins and overall demand for metal products during all of fiscal 2019. During 2019, the Company’s supplier appealed to USTR the classification of many of its metal products as subject to specific tariff classes. Subsequent to the fiscal-year end,In September 2019, the Company was informednotified that manycertain of its products in both the fencing and pet categories would not be subject to these tariffs going forward. This action will assistUnfortunately, those tariff reductions were temporary, and the companyadditional tariff rates on the Company’s imported metal products were raised back to the 25% rate in remaining competitive with their products in the marketplace.September 2020.

Industrial Wood Products - Greenwood

Sales at Greenwood in fiscal 20192020 were $3,910,117,$2,285,250, which was an increasea decrease of $409,358,$1,624,867, or 12%,42% from sales of $3,500,759 in fiscal 2018. Margins also rose in fiscal 2019, as management’s efforts to refine the product mix and redirecting sales directly to end users has led to the improvements. The Company also wrote-off $67,189 of obsolete inventory during fiscal 2018 and $53,365 of inventory$3,910,117 in fiscal 2019. Greenwood’s sales were heavily impacted by the COVID-19 shutdowns, as many of their products are sold to municipalities and larger transit operators. Greenwood is currently exploring several new product offerings, particularly in the housing and construction sectors, which would open new sales channels and broaden its customer base. Greenwood recorded an operating loss of ($122,088) in fiscal 2020 compared to an operating income of $71,192 in fiscal 2019 compared to operating income of $494 in fiscal 2018.2019.

Seed Processing and Sales - JCSC

Sales at JCSC were $2,233,406$2,071,157 in fiscal 20192020 compared to sales of $2,282,281$2,233,406 in fiscal 2018,2019, which represents a decrease of $48,875,$162,249, or 2%7%. PoorWet weather resulted in poor planting seasons across much of North America in bothlate 2018 and in 2019 and 2018 curtailed planting schedules throughoutwhich reduced the Midwest United States which hurt demand for the Company’s clover seed as a cover crop during both fiscal 2020 and 2019.  Management’s recent efforts to focus JCSC on service and to more closely align with the needs of growers has led to significantly greater cleaning volumes in early fiscal 2021 compared to the prior years. JCSC will continue to work with growers on both cleaning and marketing seed which management believes will better position JCSC for use as cover crops.higher revenues going forward. JCSC had an operating loss of $222,191($181,712) in fiscal 20192020 compared to an operating loss of $58,438($222,191) in fiscal 2018.2019.

Industrial Tools and Clamps - MSI

Sales at MSI were $792,626 in fiscal 2019 compared to sales of $942,861 in fiscal 2018, which was a decrease of $150,235, or 16%. During fiscal 2018, management initiated a review of the segment to improve margins, which includes reducing inventory holding costs of slower selling items. This review led to the write-offwrite-offs of approximately $71,000 in obsolete inventory in 2018 andof $66,000 in fiscal 2019 but was2019. Unfortunately, management’s efforts were ultimately unsuccessful in increasing sales or marginsdue to a lack of market differentiation and changing customer patterns. Therefore, the Board of Directors has decided to permanently close MSI effective September 2019. TheAll of the fiscal 2020 sales for MSI represent the liquidation of the entire remaining inventory will be liquidated, and the personnel transferredinventory.

Sales at MSI were $240,196 in fiscal 2020 compared to other positions within the Company.$792,626 in fiscal 2019. Operating loss at MSI in fiscal 20192020 was $159,914($237,133) compared to an operating loss of $72,417 for($159,914) in fiscal 2018.2019. With the disposal of the remaining inventory, MSI has now been closed, and the subsidiary wound-up and dissolved.

Corporate – JC USA

JC USA, the holding company that provides professional and administrative services for the wholly-owned operating subsidiaries had operating income of $1,158,426$493,598 for fiscal 20192020 compared to operating income of $757,317$1,158,426 for fiscal 2018.2019. The increasedecrease is due to higherlower rental and administrative fees charged to its subsidiaries related to the inventory levels maintained throughout the year. The results of JC USA are inter-company transactions and are eliminated on consolidation.

LIQUIDITY AND CAPITAL RESOURCES

Fiscal Year Ended August 31, 20192020

As of August 31, 2019,2020, the Company had working capital of $17,761,616$16,477,073 compared to working capital of $18,346,414$17,761,616 as of August 31, 2018,2019, which is a decrease of $584,798.$1,284,543. The largest changes affecting working capital include an increasea decrease in cash of $3,554,847, a decrease$5,851,273, an increase in accounts receivable of $1,316,540,$3,438,474, an increase in inventory of $2,820,341, a decrease in note receivable of $2,803, a decrease in inventory of $3,425,392 as management has worked to reduce excess inventory in certain products,$1,197, an increase in prepaid expenses of $46,288,$642,589, and an increasea decrease in prepaid income taxes of $109,110.$223,420. The decrease in cash is related to the increases in inventory and accounts receivable as the COVID-19 pandemic adjusted the product mix and usual sale cycle from prior years.

Accounts payable rose slightly by $32,935 to $410,027$1,095,061 from $377,092$410,027 which is related to the timing of payments due to suppliers. Accrued liabilities fellincreased to $2,016,300 from $1,312,580, from $1,795,207, a decreasean increase of $482,627.$703,720. Income taxes payable totaled $40,596 compared to $Nil in fiscal 2019. Current portion of notes payable, which are the promissory notes PPP loans received in the 3^rd quarter, is $342,326, and the remainder of the PPP loans have been classified as long-term liabilities totaling $338,381. The ratio of current assets to current liabilities, or current ratio, was 11.35.8 as of August 31, 20192020 (August 31, 2018 - 9.4)2019 – 11.3).

For the fiscal year ended August 31, 2019,2020, the accounts receivable collection period or DSO was 2351 days compared to 2823 days for the year ended August 31, 2018.2019. Inventory turnover for the year ended August 31, 20192020 was 8388 days compared to 8083 days for the year ended August 31, 2018.2019.

The Company has been utilizing its cash position to repurchase common shares under formal repurchase plans in order to increase shareholder value.

During the 2^nd quarter of fiscal years2020 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.

During fiscal 2019 ended August 31, 2019, and 2018, the Company has repurchased for cancelation 345,671 common shares through a share repurchase plansplan approved by the Board of Directors in accordance with Rule 10b-18 under the U.S. Securities Exchange Act of 1934. During fiscal 2019, the Company repurchased for cancelationThe shares were purchased at a total of 345,671 common shares which used cashcost of $3,061,441. During fiscal 2018, the Company repurchased for cancellation 154,329 common shares which used cash of $1,271,599.

The Company also issued 2,294 common shares to its President and CEO in fiscal 2019 pursuant to the Company’s Restricted Share Plan as consideration for a portion of his fiscal 2018 bonus.

Based on the Company’s current working capital position, its policy of retaining earnings, and the line of credit available, the Company believes it has adequate working capital to meet its needs for the coming fiscal year.2021.

Short-term and Long-term Debt

External sources of liquidity include a line of credit from U.S. Bank of $3 million, of which $3 million is available. Borrowing under the line of 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 August 31, 20192020 the one month LIBOR rate plus 175 basis points was 3.92% (2.17%3.32% (1.57% + 1.75%). With the expected phase-out of LIBOR, the Company expects the calculated rate on the line of credit will be changed to another published reference standard before the planned cessation of LIBOR quotations in 2021. However, the Company does not anticipate this change will have any significant effect on the terms and conditions, and ability to access, the line of credit, or on its financial condition.  The line of credit also 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 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 be 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.

The principal amount of the PPP loans totals $680,707. They have a term of 2 years with a 1% annual interest rate. There is no prepayment penalty. If proceeds are used for qualifying expenses as defined by the CARES Act and the modifying PPP Flexibility Act, including payroll costs, health care benefits, rent and utilities, the Company can apply for forgiveness within 10 months of the end of their “covered period” of 24 weeks from the date of the loan for all or any portion of the promissory note used for such qualifying expenses. Once an application for forgiveness is submitted, all repayments are deferred until the lender receives a decision from the SBA, which can take as long as 150 days from submission date.

OTHER MATTERS

Contractual Obligations and Commercial Commitments

The Company currently has no contractual obligations or commercial commitments.

Inflation

The Company does not believe that inflation had a material impact during fiscal 20192020 or 2018.2019.  Typically, the Company passes price increases on to the customer.

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.

During the year ended August 31, 2019,2020, the Company adopted Topic 842, Leases, which 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, 2021, 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.

Other than Topic 842, the Company did not adopt any new accounting policies that would have a material impact on the consolidated financial statements, nor did it make changes to accounting policies. Senior 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.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

The Company did not have any derivative financial instruments as of August 31, 2019,2020, and the Company does not use derivative instruments for trading purposes.

Changes in U.S. interest rates affect the interest earned on the Company’s cash as well as interest paid on debt.  The Company has a line of credit with an interest rate based on published rates that 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.

Foreign Currency Risk

The Company operates primarily in the United States.  However, a relatively small amount of business is conducted in currencies other than U.S. dollars.  Also, to the extent that the Company uses contract manufacturers in China, currency exchange rates can influence the Company’s purchasing costs.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

The financial statements and notes thereto are attached hereto. The audit report of Davidson & Company, LLP Chartered Accountants is included herein immediately preceding the audited consolidated financial statements.

Audited Consolidated Financial Statements: fiscal 20192020 and 20182019

Report of Independent Registered Accounting Firm dated November 13, 201910, 2020

Consolidated Balance Sheets  

Balance Sheets at August 31, 20192020 and August 31, 20182019

Consolidated Statements of Operations

  For the years ended August 31, 20192020 and August 31, 20182019

Consolidated Statements of Stockholders’ Equity

  For the years ended August 31, 20192020 and August 31, 20182019

Consolidated Statements of Cash Flows

  For the years ended August 31, 20192020 and August 31, 20182019

Notes to Financial Statements

Report of Independent Registered Accounting Firm dated November 13, 201910, 2020

Schedule II: Valuation and Qualifying Accounts

JEWETT-CAMERON TRADING COMPANY LTD. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

AUGUST 31, 2019

2020

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Directors of

Jewett-Cameron Trading Company Ltd.

Opinion on the Consolidatedconsolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Jewett-Cameron Trading Company Ltd. (the “Company”), as of August 31, 20192020 and 2018,2019, and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for the years ended August 31, 2020 and 2019, and the related notes (collectively referred to as the “financial statements”).  In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Jewett-Cameron Trading Company Ltd. as of August 31, 20192020 and 2018,2019, and the results of its operations and its cash flows for the years ended August 31, 2020 and 2019 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatements of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

We have served as the Company’s auditor since 2002.

“DAVIDSON & COMPANY LLP”

JEWETT-CAMERON TRADING COMPANY LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Expressed in U.S. Dollars)

AS OF AUGUST 31

- Continued -

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

JEWETT-CAMERON TRADING COMPANY LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Expressed in U.S. Dollars)

AS OF AUGUST 31

Contingency (Note 15)

Subsequent Events (Note 16)

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

JEWETT-CAMERON TRADING COMPANY LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Expressed in U.S. Dollars)

YEARS ENDED AUGUST 31

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

JEWETT-CAMERON TRADING COMPANY LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

(Expressed in U.S. Dollars)

YEARS ENDED AUGUST 31

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

JEWETT-CAMERON TRADING COMPANY LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Expressed in U.S. Dollars)

AS OF AUGUST 31

Contingency (Note 17)

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

JEWETT-CAMERON TRADING COMPANY LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Expressed in U.S. Dollars)

YEARS ENDED AUGUST 31

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

JEWETT-CAMERON TRADING COMPANY LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

(Expressed in U.S. Dollars)

YEARS ENDED AUGUST 31

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

JEWETT-CAMERON TRADING COMPANY LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in U.S. Dollars)

YEARS ENDED AUGUST 31