Jewett-Cameron Trading Company

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

These unaudited financial statements are those of the Company and its wholly owned subsidiaries. In the opinion of management, the accompanying consolidated financial statements of Jewett-Cameron Trading Company Ltd., contain all adjustments, consisting only of normal recurring adjustments, necessary to fairly state its financial position as of February 28, 2026 and August 31, 2025 and its results of operations and cash flows for the three and six month periods ended February 28, 2026 and 2025 in accordance with U.S. GAAP. Operating results for the three and six month periods ended February 28, 2026 are not necessarily indicative of the results that may be experienced for the fiscal year ending August 31, 2026. Overall, the operating results of JCC are seasonal with the first two quarters of the fiscal year historically being slower than the final two quarters of the fiscal year.

 

Business Description

 

We are committed to improving the lives of professionals and do-it-yourselfers with innovative products that enrich outdoor spaces in their quality, performance, and ease to work with.

 

The Company’s operations are classified into two 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

•	Corporate and Administrative Services

 

Pet, Fencing and Other Operating Segment

 

We have concentrated on building a customer base for Pet, Fencing and our sustainable related products. Management believes this market is less sensitive to downturns in the U.S. economy than the market for new home construction as its products serve both new and existing home and pet owners. However, the home improvement business is seasonal, with higher levels of sales occurring between February and August. Inventory buildup occurs until the start of the season in February and then gradually declines to seasonal low levels at the end of the summer.

 

Our wood products, distributed through JCC, are not unique and are available from multiple suppliers and retail outlets. However, the metal products that JCC manufactures and distributes may be somewhat differentiated from similar products available from other suppliers. We have been successful in garnering key patents and trademarks on multiple products that assist their ability to continue to differentiate based on design and functionality.

 

We own the patents and manufacturing rights connected with the Adjust-A-Gate® and Fit-Right® products, which are the gate support systems for wood, vinyl, chain link, and composite fences, in addition to our trade secret industry practices and well-known trademarked brands. We believe the ownership of these patents and trademarks is an important competitive advantage for these and certain other products. We completed our purchase of the full global trademark rights for Adjust-A-Gate® and filed its registration with the US Patent and Trademark Office in February 2023. As of the close of fiscal 2025, the Company owns 7 US Patents and 1 patent application pending in the United States, Canada and Mexico pertaining to its fencing products.

 

Backlog orders have typically not been a factor in this business as customers may place firm priced orders for products for shipments to take place three to four months in the future which gives us time to order, manufacture and receive the goods at our warehouse in time to fulfill the customer’s order.

 

Industrial Wood Products - Greenwood

 

Greenwood is a wholesale distributor of a variety of specialty wood products. Current products are focused on the transportation industry. Greenwood’s total sales for fiscal 2025 and 2024 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 transportation sectors. However, these markets sustained some contractions in recent years due to COVID-19 as work shifted from offices to homes, and many individuals utilized public transit less due to concerns over exposure. In addition, this segment is prone to disruption of supply chain support which can impact other commodities outside of those specific to the disruption.

 

Greenwood utilizes contract manufacturers to supply its products. Inventory is maintained at non-owned warehouses and wood treating facilities throughout the United States and is primarily shipped to customers on a just-in-time basis. Inventory is generally not purchased on a speculative basis in anticipation of price changes as we order the products from the manufacturers and warehouses once a customer places an order with us.

 

Greenwood has no significant backlog of orders.

 

Seed Processing and Sales - JCSC

 

The Company formerly operated agricultural seed processing and sales operations through its Jewett-Cameron Seed Company (“JCSC”) subsidiary. JCSC operated out of a Company-owned 11.6 acre facility located adjacent to North Plains, Oregon. We ended regular operations at JCSC effective August 31, 2023. In July 2024, we listed the JCSC property for sale or lease. The combined size of the buildings is approximately 109,500 square feet. One of the buildings is specialized for the seed industry, while most are metal warehouse buildings with power, allowing a wide array of possible uses. The property is currently zoned “Rural Industrial” (RIND), which allows for use of the existing property, or development of the site, as approved by Washington County. The current listing price for the property is $7.223 million. This is the current asking price, and there is no guarantee the property will sell for this amount, if at all. If we are able to complete a sale, the net proceeds will be reduced by brokers’ commissions, expenses related to the sale, and taxes.

 

Corporate and Administrative Services – JC USA

 

JC USA is the parent company for Greenwood, JCC and JCSC as described above. JC USA operates out of our offices in North Plains, Oregon and provides professional and administrative services, including warehousing, accounting and credit services, to JCTC’s subsidiary companies.

 

Company Products

 

The Company’s mission is to improve the lives of professionals and do-it-yourselfers with innovative products that enrich outdoor spaces. We design, source, commercialize and distribute our products. Many are patent protected and all are well crafted for their quality, performance, and ease to work with.

 

The Fencing, Pet and Other businesses are conducted by JCC, which operates out of a 5.6 acre owned facility located in North Plains, Oregon that includes offices, a warehouse, and a paved yard. JCC uses contract manufacturers to make all products. Some of the products that JCC distributes flow through our distribution center located in North Plains, Oregon, and some are shipped direct to the customer from the manufacturer. Primary customers are home centers, eCommerce providers, other retailers, and direct sales to consumers.

 

The Industrial Wood Products segment is conducted by Greenwood, a processor and distributor that operates out of the same facilities in North Plains, Oregon. Greenwood contracts with custom manufacturers for its products. Inventory is maintained at non-owned warehouses and wood treating facilities throughout the United States and is primarily shipped to customers on a just-in-time basis.

 

Fencing Products

 

Our fencing business crafts durable, functional fencing solutions that bolster security, privacy, and beauty. Our primary products include:

 

·

The Adjust-A-Gate® family of products are straightforward, lifelong solutions that eliminate measurement issues. Complete steel frame gate kits to perfectly fit openings for wood fences and never sag. Easy enough for homeowners, but with superior quality that meets the demands of the professional contractor.

·

Fit-Right® is a fully adjustable gate system for chain link gates. This custom solution is perfect for when a special sized chain link gate opening is needed. Equipped with all the necessary parts, building a gate on-site eliminates measurement issues for the right fit the first time and every time.

 

 

 

·	Lifetime Steel Post® offers unmatched strength and versatility in fencing. This post offers versatile support for a range of fence designs and styles, allowing flexibility to showcase the posts or keep them discreetly hidden.

·	Euro Fence offers the beauty of wood without the upkeep, featuring durable wood/plastic composite materials. With locking tongue & groove composite and aluminum boards, it provides UV protection, never needs paint or stain, and installs easily in-ground or mounted.

·	Perimeter Patrol® Portable Security Panels create an enclosed space or linear fence for outdoor areas. Perfect for crowd control, job site security, outdoor events, enclosed storage areas and more.

·	Cedar fencing is a premium softwood known for its unique blend of beauty and durability. Its natural resistance to decay enhances its longevity, while its ease of cutting, sawing, and nailing with standard tools makes it a preferred choice for versatile applications.

 

Pet Products

 

Our Lucky Dog® brand is dedicated to keeping pets safe and happy with exceptional quality, long-lasting products that put your pet first. Our primary pet products are:

 

·	Lucky Dog® STAY Series Studio Kennels built with long-lasting steel frames and powder coated finish. The waterproof polyester cover offers UPF 50+ protection and is designed for ultimate comfort.

·	Lucky Dog® Outdoor Kennel Covers provide durable, waterproof protection with UPF 50+ sun defense. Designed for year-round comfort, they fit securely over Lucky Dog® Kennels.

·	Lucky Dog® Dwell Series® Crates offers peace of mind with secure latches, rust-resistant E-coating along with a patented sliding side door and patented corner stabilizers. With a top handle for easy transport and a divider panel for flexible space, they offer durability and convenience.

·	Lucky Dog® Exercise Pens provide a secure space for pets with sturdy, rust-resistant wire construction. Featuring a step-thru door, tool-free setup, and fold-flat design for easy storage, these pens are perfect for both indoor and outdoor use.

 

Sustainable Products

 

We sell Sustainable and Post-Consumer Recycled (“PCR”) bag products under the MyEcoWorld® brand. These products are making a tangible, positive difference to the planet by working to reduce conventional single-use plastic in our daily lives.

 

We offer two types of bag products. The Compostable bags are made with 30% corn. The PCR Products are certified to the Global Recycled Standard (GRS) to contain recycled material that has been independently verified at each stage of the supply chain, from the source to the final product, and cost less than compostable bags.

 

Our primary Sustainable Products are:

 

·	Food Waste Bags that are certified compostable and worm-safe. These durable bags offer puncture resistance, odor control, and pest deterrence, ensuring reliable use and a cleaner kitchen environment.

·	Yard Waste Bags that are suitable for a variety of composting methods, including home, curbside pickup, and industrial composting facilities.

·	Pet Poop Bags that ensure no breaks or leaks while keeping the user’s hands clean.

 

Industrial Wood Products

 

Greenwood Products specializes in engineering advanced noise and vibration reduction panels for transit buses, motor coaches, light rail cars, and boats. Our dB-Ply® proprietary acoustical panel is a cost-effective product designed to reduce vibration and sound transmission to meet mandated interior noise requirements. Greenwood’s other products include durable, high-performance structural panels tailored for a wide range of industrial applications, and Jumbo Concrete Forms designed to reduce installation time and lower job-site labor costs.

 

Tariffs

 

Our metal and other products have historically been mostly manufactured in China and are imported into the United States. Beginning in 2018, the Office of the United States Trade Representative (“USTR”) instituted new tariffs on the importation of a number of products into the United States from China. These initial tariffs were a response to what the USTR considers to be certain unfair trade practices by China. The tariffs began at 10%, and subsequently were increased to 25% as of May 2019.

 

 

 

Prior to fiscal 2024, our metal products were primarily manufactured in China and subject to the full 25% tariff rate. During fiscal 2024, we engaged suppliers in countries outside of China, including Bangladesh, Vietnam, Malaysia, and Taiwan. Products manufactured in and imported from these countries were not subject to the China-specific tariffs, but were subject to other duties and fees that are typically much lower than the then 25% tariff on Chinese manufactured metal products.

 

Beginning in February 2025, the new administration in the United States began to increase tariff rates on numerous products from a range of nations. Imported steel and aluminum products from all countries globally were assigned a new tariff rate of 25% in addition to any specific country or product rates. In early April 2025, the U.S. imposed a universal baseline 10% tariff rate on imports globally along with a list of product exemptions. As of June 4, 2025, the tariff on steel and aluminum imports was raised to 50%. Our steel products imported from countries other than China are subject to the 50% tariff rate, but not the 10% universal baseline tariff. China, however, has been assigned special rates which are considerably higher than those assigned to other nations.

 

In February 2026, the Supreme Court of the United States ruled the President did not have the authority to impose tariffs under the International Emergency Economic Powers Act (IEEPA). This ruling invalidated certain of the current tariffs levied since February 2025, including the additional country-specific tariffs and the fentanyl related levy. However, the tariffs on imported steel and aluminum products were not affected by the ruling, as those tariffs were levied under a different section of the Trade Act which was not subject to the Court’s determination. We may be eligible to receive refunds of certain tariffs we paid that were levied under the IEEPA. If it is determined that we are eligible for refunds, the availability, amount and timing of such refunds is uncertain and subject to further developments. However, a majority of the tariffs we have paid since the new tariffs were first announced in February 2025 have been levied under Section 232, including the steel and aluminum tariff and other historic tariffs which are unaffected by this court decision. Therefore, any potential refund will only be a small percentage of the overall tariffs we have paid over the prior 12 months.

 

Since the Supreme Court ruling, the Presidential Administration has announced its intent to levy new sets of tariffs imposed under a different section of the Trade Act which would not fall under the IEEPA. On February 24^th, a new temporary 10% global import duty took effect for 150 days. However, imports covered under Section 232 tariffs, which include the steel and aluminum products, are excluded from this additional 10% rate. On April 2, 2026, the Section 232 steel and aluminum tariffs were adjusted. Under the new rule, the Section 232 steel and aluminum tariffs were adjusted. Previously, a 50% tariff was levied on the original value of the foreign metal in the imported product. Under the new rule, the tariff rates on most imported steel and aluminum products will range from 25 to 50%, but will now be calculated on the full value of the imported products, which in some cases may potentially increase the amount of tariff due. We are currently evaluating the new tariff proclamation and how it will apply to our imported products.

 

It remains uncertain which countries or products may be subject to possible additional tariffs which may be levied in the future, and how they may be applied in relation to the other existing tariffs. We also face uncertainty in the interpretation of new and existing tariffs and their applicability, including with respect to customs valuation, product classification and country-of-origin determinations. Although we and our suppliers seek to comply with applicable customs laws and regulations, the application of rules regarding new tariffs can be subject to varying interpretations or future re-interpretations. It is possible that U.S. or other relevant authorities could, upon review or audit, disagree with the valuation, rules of origin or classification methods applied to certain products. Any such disagreement could result in the retroactive assessment of additional duties with interest, the imposition of penalties, or other enforcement actions without the ability to mitigate such penalties, thereby adversely affecting our operations or financial results. Furthermore, certain of our competitors may be better positioned than us to withstand or react to border taxes, tariffs or other restrictions on global trade and as a result, we may lose market share to such competitors. Due to broad uncertainty regarding the timing, content and extent of any regulatory changes in the U.S. or abroad, we cannot predict with certainty the impact, if any, that these changes could have to our business, financial condition and results of operations. 

 

Results of Operations

 

During the second quarter, we made important progress toward our goals to refocus on our operational strengths while reducing costs. We successfully sold the majority of our excess lumber inventory and continued to grow our Lifetime Steel Post sales through both our existing accounts and through the addition of new customers.

 

 

Our sales for the second quarter increased by $1,482,259, or 16% over Q2 2025. Our current six-month sales rose by $868,726, or 5%, over the first six months of fiscal 2025. However, approximately $2.5 million of these sales were from the liquidation of certain pet inventory and the sale of our excess cedar fencing inventory, and those sales will not be repeated in future periods. Our net loss for the second quarter was ($1,248,928), or ($0.35) per share, and our net loss for the six months was ($5,193,067), or ($1.48) per share. Our six-month results were negatively affected by an inventory write-down of $2,208,813 we took in the first quarter related to the liquidation sales.

 

In November 2025, we received notice from one of our largest fencing customers that they would be terminating our cedar fencing supply agreement in calendar 2026. We originally entered into a consignment agreement with this customer in 2023 after they lost their primary source of Western Red Cedar fencing. This program 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. However, under the agreement, we were required to maintain a higher level of fencing inventory on hand than we had previously in order to quickly meet all the potential demand under the customer’s sales forecasts. During the Spring of 2025, we failed to acquire an adequate supply of fencing to meet our actual demand and were unable to fulfill all our customers’ orders during the 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 to meet their forecasted level of sales for the remainder of the summer season. Unfortunately, this customer’s actual level of fencing sales for the remainder of the season fell short of their forecasts. Volatility in lumber markets during this period resulted in higher prices which led to consumers restraining their elective purchases. As a result, we ended the 2025 fencing season with excess cedar fencing inventory on hand.

 

With the customer’s notice they were terminating the consignment agreement, this excess inventory became surplus to our needs. This inventory was not only incurring storage costs and represented a significant drain on our available capital, it also was subject to the potential of weathering or other deterioration which would further erode its value over time. During the first quarter, we took a write-down on its value to reflect our estimates of its current value. During the second quarter we successfully negotiated with the consignment customer for them to purchase the portion of the inventory already present in their distribution facilities at the originally contracted prices. We then sold the remaining excess inventory to a lumber wholesaler. The inventory we sold to the consignment customer at the contracted prices resulted in a small profit, but the other excess inventory was sold below our cost. However, the sale of this inventory unlocked a significant amount of stranded capital which we are utilizing to acquire other inventory for our traditionally busier Spring and Summer season while reducing the need for us to borrow additional amounts under our line of credit.

 

Although the consignment program provided us with meaningful revenue, it eroded the margin, profitability, and pricing flexibility we were accustomed to in our cedar sales prior to this consignment arrangement. This consignment sales agreement accounted for the majority of our lumber fencing sales, but we are continuing to offer cedar fencing as we have other current customers for these products.

 

Import tariffs remain a significant issue for our operations. Since the implementation of the additional tariffs beginning in February 2025, our tariff costs have increased substantially. Since 2023, we have successfully migrated much of our production from China to other lower-tariffed countries. This has helped us successfully mitigate some of the 2025 tariffs, particularly the China-specific levies, that otherwise would have resulted in greater import costs.

 

In February 2026, the United States Supreme Court ruled that tariffs that were imposed under the International Emergency Economic Powers Act (IEEPA) were not legal. This ruling invalidated certain of the current tariffs levied since February 2025. We may be eligible to receive refunds of certain IEEPA related tariffs, but if so, any refunded amounts will be a small fraction of the overall amounts we have paid in tariffs over the last year. Most of the tariffs levied on our imported goods are unaffected by the Supreme Court ruling and remain in effect, including the 50% Section 232 steel and aluminum tariffs. As set forth above, we are currently evaluating the new Section 232 tariffs and how it will apply to our imported products. However, this change is unlikely to relieve much, if any, of the overall tariff rate on our imported metal products, and may in some cases increase the tariffs we are required to pay.

 

These tariffs have tremendously disrupted our markets and consumer buying habits. In addition to increasing our direct costs, the shift in manufacturing away from China has caused increases to logistical and shipping costs as the supply chains from these alternative countries are less developed than from China. These higher costs resulted in a double-digit reduction in overall gross margins across the majority of our product lines.

 

 

The implementation of the new tariffs also placed a strain on our capital position beginning in March 2025. The new tariffs became effective almost immediately after they were first announced. That gave us very little time to adjust to the higher costs, and we were required to pay these tariffs immediately upon effectiveness. This increased our cash outlays which we were not able to immediately recoup in the form of higher sales prices for the affected goods. Our customers must consent to any price increases, and although we negotiate with our customers to accept higher prices, they may not immediately accept these 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, but by September 2025, those remaining customers agreed to accept shipments with the higher prices which began during the following weeks. However, the volume of these shipments was significantly lower than in prior years, and that trend continued in the second quarter. Due to the uncertainty around tariff changes, some of our customers have resisted placing long-term purchases at contracted prices which has further negatively affected our revenue. Although our customers have slowly begun to accept higher product prices, consumers have not yet fully adjusted their expectations. Consumer confidence has declined, and they continue to resist paying the higher product prices which restrains their elective purchases. It is highly probable these increased tariff related costs and their effects will continue to negatively affect our margins and demand for our products for the remainder of fiscal 2026.

 

Sales in our metal fencing were down year-over-year which is largely attributable to difficult market conditions from the tariff situation. Higher sales of our Lifetime Steel Post® (LTP) were offset by lower sales for our Adjust-A-Gate and other fencing products. Our in-store displayers continue to drive consumer engagement. We have added new customers to the display program, including orders for new in-store display units from other retailers which are shipping in the third quarter. Significant growth opportunities remain in the fencing sector, both through the expansion of our existing products into more stores and through new sales channels. We are developing improvements and enhancements to our existing products, and evaluating outside products from third parties that complement our current product lines and to expand our product offerings.

 

The pet market has been particularly hard hit by the weakness in consumer purchases. Pet adoptions declined drastically post-pandemic as workers returned to the office, which reduced demand for our non-consumable product offerings such as metal crates and kennels. This trend has continued as consumers continue to restrain their discretionary spending which has further depressed the overall pet market. As a result, we have been burdened with excess pet inventory above our forecasted sales, which we have been liquidating during the current six-month period. Although these sales recapture some of our inventory costs and will reduce our ongoing warehousing costs, these sales have been made at below cost which have depressed our overall margins. Although we believed we had made adequate inventory allowances in the previous fiscal year to reflect market conditions, we recorded an additional $550,000 inventory allowance in the current period to reflect the difference between our costs and the revenue from these sales. Overall, our pet sales are down about 40% year over year as retailers have sufficient inventory on hand and are currently limiting their inventory purchases.

 

Greenwood revenues increased by 37% compared to the first six months of fiscal 2025. Demand for transit related products continues to recover from the post-pandemic lows, and the seat shortage that slowed transit construction in fiscal 2025 has been resolved. Our sales have also risen due to a recently added non-transit industrial customer and new product pricing. We will continue to focus on acquiring new customers and expanding our offerings, particularly in non-transit 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.

 

We are continuing our efforts to reduce our operating and administrative costs to match our anticipated future revenue levels. Due to our work force reduction in fiscal 2025, our wages and employee expenses were 23% lower in the current six-month period compared to the first six months of fiscal 2025 while not compromising our levels of quality or service. We also continue our efforts to sell surplus assets, including our surplus Jewett-Cameron Seed property and our innovation studio property, both of which remain on the market for sale at listing prices of $7.223 million and $795,000, respectively. For both properties, these are the current asking prices and there is no guarantee the properties will sell for this amount, if at all.

 

There has been no further incidents related to the cybersecurity intrusion we experienced in October 2025. A threat actor 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 implemented remedial measures, including retaining external cybersecurity experts and notifying law enforcement. We believe the unauthorized activity was contained and our IT systems and individual computer devices were brought back online, and we implemented additional cybersecurity measures. The incident caused disruptions and limitation of access to portions of our business applications, which affected our ability to process and ship orders for several weeks. We believe that our direct costs associated with these activities are not material as the costs related to the services provided by experts and the disruption to our business have largely been covered by the Company’s insurance policies.

 

 

In December 2025 we successfully negotiated a revised borrowing agreement with Northrim Funding Services (“Northrim”). Under the new terms, the maximum amount of AR invoices Northrim will purchase at one time is limited to an amount equal to 90% of the maximum eligible accounts and is not to exceed $8,000,000, which was increased from the prior 80% of the net eligible accounts and a $6,000,000 limit. Borrowing against the Company’s inventory was increased to an amount equal to 50% of all eligible inventory from the prior 25%, and the maximum amount the Company may borrow was increased to $6,500,000 from $4,000,000. Amounts provided by Northrim will be secured by certain of the Company’s real estate assets. Proceeds from the sale of any such assets will be used to pay down the credit line and thereafter the funding arrangement will revert to the original conditions and limits set forth prior to the recent amendments. The increase in our line provides us with additional flexibility to provide funds to help our operational realignment and the purchase of inventory ahead of our traditionally busier Spring and Summer seasons. In addition to the revised credit line with Northrim, we are currently evaluating other 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 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.

 

Due to the continued uncertainty and higher costs stemming from the high global tariff levels and the conflict in the Middle East, we expect fiscal 2026 to remain challenging. Fuel prices have risen dramatically worldwide since the outbreak of miliary action in the Persian Gulf in March 2026. We are now beginning to incur higher shipping and logistic costs as our providers are raising their rates and implementing immediate fuel surcharges to cover their higher costs, but our ability to quickly pass on these costs to our customers is limited. We expect this will further compress our margins for the remainder of the fiscal year. In addition, periods of high fuel prices, particularly gasoline, have historically led to significant decreases in discretionary spending by American consumers which may negatively affect demand for our products during our traditionally busier Spring and Summer seasons.

 

We are continuing the implementation of our strategic plan to concentrate our resources on our successful fencing and pet product lines while monetizing non-core assets, including the disposal of excess inventory. Our focus remains on reinforcing our operational strengths while reducing costs where possible in our efforts to increase our sales and margins and return to profitability. Management and the Board have engaged consultants that augment our efforts to return the Company to profitability. These outside professionals have been very constructive in helping us navigate our recent challenges and refining our strategic plan. We expect we will continue to engage such services for the remainder of the fiscal year as we proceed with implementation of our plan.

 

We are also evaluating strategic options for the Company that prioritize the Company’s overall value. Strategic options under consideration may include mergers, acquisitions, divestitures, joint ventures and other business collaborations and partnerships that would potentially involve specific assets or business lines of the Company. There can be no assurance that these discussions will result in definitive agreements or the completion of any transaction. The Company does not intend to provide further updates on these discussions unless and until a definitive agreement is reached.

 

Three Months Ended February 28, 2026 and Three Months Ended February 28, 2025

 

Sales for the three months ended February 28, 2026 were $10,537,210 compared to sales of $9,054,951 for the three months ended February 28, 2025, which was an increase of $1,482,259, or 16%. Sales in the current quarter were increased by the higher LTP sales, higher sales at Greenwood, and the liquidation of certain pet and fencing inventory.

 

Sales at JCC were $9,086,177 in the three months ended February 28, 2026, compared to sales of $7,943,319 in the three months ended February 28, 2025. This represents an increase of $1,142,858, or 14%. The increase in revenue was due to higher LTP sales and higher sales at Greenwood. We also liquidated certain slow-moving pet inventory and our excess cedar fencing which was acquired prior to the termination of our consignment sales agreement with a major retailer, and those sales will not be repeated in future periods. Operating loss for the current quarter was ($814,083) compared to an operating loss of ($834,127) for the quarter ended February 28, 2025. The operating results of JCC are historically seasonal with the first two quarters of the fiscal year being slower than the final two quarters of the fiscal year.

 

Sales at Greenwood were $1,451,034 compared to sales of $1,111,632 for the three months ended February 28, 2025, which is an increase of $339,402, or 31%. Demand from transit customers continue to recover from workers returning to offices. We are also receiving higher sales from non-transit customers. For the three months ended February 28, 2026, Greenwood had an operating profit of $167,242 compared to an operating loss of ($24,035) for the three months ended February 28, 2025.

 

JC USA is a holding company for the wholly-owned operating subsidiaries, and thus the overall results of JC USA are eliminated on consolidation. For the quarter ended February 28, 2026, JC USA had an operating loss of ($602,446) compared to an operating profit of $97,078 for the quarter ended February 28, 2025.

 

 

Gross margin for the three months ended February 28, 2026 was 15.7% compared to 20.1% as of February 28, 2025. The decrease was primarily due to the liquidation of certain pet inventory and surplus cedar fencing at prices below cost. We also sold higher volumes of lower margin products in the current period. Our costs have also continued to rise, due to higher raw material costs, higher shipping and logistic costs, and the new import tariffs which began in March 2025.

 

Operating expenses increased by $174,898 to $2,761,093 compared to expenses of $2,586,195 for the three months ended February 28, 2025. Selling, General and Administrative expenses rose to $1,435,093 from $940,168, which was primarily due to higher professional fees related to the engagement of outside consultants in the period. Wages and Employee Benefits declined to $1,263,765 from $1,564,799 due to a lower headcount during the current quarter. Depreciation and Amortization decreased to $62,235 from $81,228. Interest expense, which was largely due to interest on the line of credit, was ($137,459) compared to interest income of $9,096 in the year-ago quarter. Other income in the current quarter was $Nil compared to income of $306 in the quarter ended February 28, 2025.

 

Income tax recovery for the three-month period ended February 28, 2026 was $359 compared to recovery of $187,991 in the three months ended February 28, 2025. The Company estimates income tax expense for the quarter based on combined federal and state rates that are currently in effect.

 

Net loss for the quarter ended February 28, 2026 was ($1,248,928), or ($0.35) per basic and diluted share, compared to a net loss of ($573,094), or ($0.16) per basic and diluted share, for the quarter ended February 28, 2025.

 

Six Months Ended February 28, 2026 and February 28, 2025

 

Sales were $19,190,677 for the six months ended February 28, 2026 compared to sales of $18,321,951 for the six months ended February 28, 2025, which is an increase of $868,726, or 5%.

 

Sales at JCC rose slightly to $16,515,191 from sales of $16,368,287 for the six months ended February 28, 2025. Some of our customers have not yet fully accepted the higher prices for our products caused by inflation and tariffs, which reduced our sales in the period. Our sales were also negatively affected by the cybersecurity event in October, which hampered our ability to ship products for several weeks. Current sales were assisted by the one-time liquidation of certain pet inventory and the sale of excess cedar fencing. Operating loss at JCC for the six months ended February 28, 2026 was ($4,707,241) compared to an operating loss of ($1,754,365) in the prior six months ended February 28, 2025. Higher raw material, shipping and tariff costs hurt our margins in the current period, which were also negatively affected by the liquidation of the certain pet inventory and excess fencing. Overall, the operating results of JCC are seasonal with the first two quarters of the fiscal year being slower than the final two quarters of the fiscal year.

 

Sales at Greenwood increased to $2,675,486 from $1,953,665 for the six months ended February 28, 2025. Demand by municipalities and transit operators has continued to recover from the post-pandemic lows as more workers return to offices. We also added new non-transit industrial customers during the current six months. For the six months ended February 28, 2026, Greenwood had an operating profit of $292,523 compared to an operating loss of ($47,865) for the six months ended February 28, 2025.

 

JC USA, the holding company that provides professional and administrative services for the wholly-owned operating subsidiaries had operating loss of ($748,333) compared to operating income of $205,798 for the six months ended February 28, 2025. The results of JC USA are eliminated on consolidation.

 

Gross margin for the six-month period ended February 28, 2026 was 3.0% compared to 19.2% for the six months ended February 28, 2025. Our margins were negatively affected in the current six months due to higher product, shipping and tariff costs, and the liquidation sales of certain pet inventory and surplus cedar fencing at below cost which was supported by the $2,208,813 in additional inventory write-downs we took during the first quarter. Our sales also shifted to a higher volume of lower margin products.

 

Operating expenses for the six months ended February 28, 2026 were $5,466,776 compared to $5,138,242, which is an increase of $328,534, or 6%. The increase was due to higher Selling, General and Administrative expenses, which rose to $2,836,128 from $1,749,380 which was primarily due to higher professional fees related to the engagement of consultants to assist us with operations and strategic planning. Wages and Employee Benefits declined 23% to $2,490,803 from $3,226,567 due to a lower employee headcount during the current six months. Depreciation and Amortization decreased to $139,845 from $162,295 for the six months ended February 28, 2025.

 

Interest expense related to borrowing against the line of credit was ($266,608) in the current six-month period. The prior six month period ended February 28, 2025 had other income of $306, interest income of $31,094 and gain on sale of assets of $800. Income tax expense for the six months ended February 28, 2026 was ($30,015) compared to income tax recovery of $364,621 for the six months ended February 28, 2025. The Company estimates income tax expense for the period based on combined federal and state rates that are currently in effect.

 

Net loss for the six months ended February 28, 2026 was ($5,193,067), or ($1.48) per basic and diluted share, compared to a net loss of ($1,231,811), or ($0.35) per basic and diluted share, for the six months ended February 28, 2025.

 

 

LIQUIDITY AND CAPITAL RESOURCES

 

As of February 28, 2026, the Company had working capital of $12,450,122 compared to working capital of $17,026,472 as of August 31, 2025, a decrease of $4,576,350.

 

Cash and cash equivalents totaled $546,614, an increase of $320,401 from cash of $226,213 as of August 31, 2025. The increase was due to the timing of collection of accounts receivable, which increased to $6,518,143 from $3,863,678, and prepaid expenses, which are largely related to down payments for future inventory purchases, which increased to $1,012,351 from $1,000,439. Inventory declined by $6,289,713, or 40%, to $9,595,876 from $15,885,589 as we sold most of our excess cedar fencing and liquidated certain of our older pet inventory. Prepaid income taxes declined to $167,401 from $180,151.

 

Current liabilities rose to $6,292,074 from $4,695,620 as bank indebtedness increased to $4,275,261 from $2,101,835. Accounts payable declined to $963,050 from $1,510,173, and accrued liabilities fell slightly to $1,053,763 from $1,083,612.

 

As of February 28, 2026, accounts receivable and inventory represented 86% of current assets and 74% of total assets compared to 91% of current assets and 78% of total assets as of August 31, 2025.

 

For the three months ended February 28, 2026, the accounts receivable collection period, or DSO, was 56 compared to 55 for the three months ended February 28, 2025. For the six-month period ended February 28, 2026, the DSO was 61 compared to 55 for the six months ended February 28, 2025. Inventory turnover for the three months ended February 28, 2026 was 117 days compared to 175 days for the three months ended February 28, 2025. For the six months ended February 28, 2026, inventory turnover was 124 days compared to 172 days for the six months ended February 28, 2025.

 

External sources of liquidity include an asset-based line of credit agreement with Northrim Funding Services (“Northrim”) which we originally established in fiscal 2024. Under the terms of the agreement, Northrim will provide short-term operating capital by either purchasing the Company’s accounts receivable invoices (“AR invoices”) or as a loan against our inventory position. Subsequent to the end of the quarter, we completed a revised borrowing agreement with Northrim. Under the revised agreement, the maximum amount of AR invoices Northrim will purchase at one time is limited to an amount equal to 90% of the maximum eligible accounts and is not to exceed $8,000,000, which was increased from the prior 80% of the net eligible accounts and a $6,000,000 limit. Borrowing against the Company’s inventory was increased to an amount equal to 50% of all eligible inventory from the prior 25%, and the maximum amount the Company may borrow was increased to $6,500,000 from $4,000,000. Amounts provided by Northrim will be secured by certain of the Company’s real estate assets. Proceeds from the sale of any such assets will be used to pay down the credit line. Interest is computed at the prime rate plus 4.75% with floor of 11% and is secured by certain or our assets. The line expires on June 30, 2026. As of February 28, 2026, we have borrowed $4,275,261 against the line at a current interest rate of 11.5%.

 

During the six months ended February 28, 2026, the Company issued the Company issued 3,782 common shares to officers, directors and employees under the Restricted Share Plan. The value of these shares was $9,077. In December 2025, the Company cancelled 1,788 common shares valued at $8,301 which were previously issued but unvested under the Restricted Share Plan for an employee who left the Company.

 

Current Working Capital Requirements

 

Based on the Company’s current working capital position, combined with the expected timing of accounts receivable and the capital available under our newly revised credit arrangement, the Company is expected to have sufficient liquidity available to meet the Company’s working capital requirements for the next 12 months.

 

OTHER MATTERS

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 most recent fiscal period ended February 28, 2026, the Company has drawn $4,275,261 against this line of credit at a current interest rate of 11.5%.

 

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 as well as regularly audited by outside experts as part of our annual process. We have established risk mitigations that allows for condensed reviews of risks and impacts with our systems in place. An IT Governance Committee aligns execution and security both for ourselves and also for parties with whom we communicate and do business.

 

Uyghur Forced Labor Prevention Act

 

The Uyghur Forced Labor Prevention Act (“UFLPA”) is a US Federal Law signed by President Biden in December 2021 which became effective on June 21, 2022. As enforced by U.S. Customs and Border Protection, the UFLPA prohibits any products that are made, mined, or manufactured, in part or in full, in China’s Xinjiang Uyghur Autonomous Region to be imported into the United States, as they are presumed to have been made with forced labor. Any imports of such goods will be detained and seized by U.S. Customs unless the importer is able to prove that these goods have not been made with forced labor. The Company has ensured that each of its suppliers is in full compliance with the law and none of its products fall under the prohibited goods clause.

 

Risk Factors

 

This quarterly report includes “forward–looking statements” as that term is defined in Section 21E of the Securities Exchange Act of 1934. Forward-looking statements can be identified by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “could,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates,” “anticipates,” or “hopeful,” or the negative of those terms or other comparable terminology, or by discussions of strategy, plans or intentions. For example, this section contains numerous forward-looking statements. All forward-looking statements in this report are made based on management’s current expectations and estimates, which involve risks and uncertainties, including those described in the following paragraphs.

 

Risks Related to Our Business

 

Due to the uncertainty of the current global tariff and trade environment, we will require additional cash to fund our operations in the near and longer term.

 

Our management must continually evaluate whether there are conditions or events, considered in the aggregate, that raise significant concerns in our ability to manage our cash flow and our business. 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. 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. In light of 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. Accordingly, our management and Board have reformulated our near-term and long-term strategies, which now focus on strengthening our liquidity position, which may involve selling our real estate assets and excess inventory, as well as optimizing 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. Although we have successfully agreed with Northrim to increase the amount of credit available to us, we may require additional funding to bolster our cash availability in the future. There can be no assurance that we will be successful in locating additional sources of liquidity in the near term, which, if we cannot, would have a material adverse effect on our ability to operate our business in the normal course and significantly impact our ability to order product for the Spring selling season, which would in turn negatively impact our operations, our ability to develop and execute our business plan, our financial condition, our liquidity and our continuation as a going concern will be subject to a high degree of risk and uncertainty.

 

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, execute our business plan and continue operations in the normal course. 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 we will be able to raise the capital when we need it to continue our operations.

 

Any substantial doubt about our ability to continue as a going concern may affect the price of our common stock, may impact our relationship with third parties with whom we do business, including our customers, vendors, lenders and employees, and may impact our ability to raise additional capital.

 

Needed financing may not be available to us on acceptable terms, or at all. Our ability to obtain additional financing will be subject to several factors, including market conditions, our operating performance and investor sentiment and any financial or operating covenants required. These factors may make the timing, amount, terms or conditions of additional financing unattractive, even if available. If we cannot generate sufficient funds from operations or raise additional capital on a timely basis when needed, our growth or operations could be impeded and our ability to continue as a going concern would be materially impacted.

 

 

Political conflict is resulting in higher fuel and energy prices, which will negatively affect our costs and alter consumer behavior

 

The current conflict in the Middle East has caused a substantial sudden increase in fuel and energy prices. These increases are impacting shipping and logistic costs, both domestically and internationally. Beginning in April 2026, providers have begun to pass on their higher costs to us through higher rates and fuel surcharges. However, our ability to pass on these higher costs to our customers is limited. Our attempts to increase our selling prices may be resisted by our customers, and even if we are able to successfully increase our prices, those increases may be delayed several months after we first incur the higher costs. Therefore, we may not be able to fully recoup our higher costs. Historically, higher energy prices, in particular gasoline, has had a significant negative effect on consumer purchasing in the United States. As consumers are forced to spend a larger percentage of their income on gasoline and other fuel, their discretionary spending tends to decrease proportionally. This trend may result in decreased demand for our products during this period of high energy prices.

 

We have substantial liquidity needs and may not be able to obtain sufficient liquidity to operate in the normal course and if we cannot satisfy our liquidity needs, we may be forced to seek protection under the bankruptcy code.

 

Although we have reduced our capital budget, our business remains capital intensive. In addition to the cash requirements necessary to fund ongoing operations, we need to purchase inventory in anticipation of our upcoming Spring selling season. If we cannot submit and pay for purchase orders in a timely manner, our ability to provide product and satisfy demand may be impaired. We can provide no assurance that our current liquidity is sufficient to allow us to continue to operate our business or meet our projected operating needs or that we will be able to raise needed capital through real estate, inventory and assets sales. In the event we cannot obtain additional capital or alternative financing on acceptable terms, we may need to reduce the scale of our operations, which may result in curtailing non-profitable business lines and business lines that do not contribute significantly to profitability. If we cannot obtain sufficient liquidity to operate in the normal course, we may be forced to seek protection under the U.S. Bankruptcy Code, including initiating liquidation proceedings thereunder, in which event, our business operations would continue, but under the supervision of the bankruptcy court. It is possible that a trustee would be appointed or elected by creditors to liquidate our assets for distribution in accordance with the priorities established by the bankruptcy code.

 

We have a history of operating losses and may not be able to achieve or sustain profitability in the future; we are substantially dependent on our ability to successfully market and sell our products at reasonable margins.

We have, in recent years, operated at a loss and have been highly dependent on sales of higher margin products. However, the imposition of significant tariffs on goods manufactured in most countries outside the U.S. has substantially eroded historical and projected margins, and in some cases, have resulted in costs that could not be passed on as price increases. Our prospects for achieving and sustaining profitability in the future will depend primarily on how successful we are in increasing sales, prices and margins. If we are not successful in executing our business plan, we may not achieve or sustain profitability and even if we do so, we may not meet sales and margin expectations. Also, even if we are successful in executing our business plan, our ability to achieve and sustain profitability in the future will also depend on our ability to manage our operating costs, and profitability may fluctuate from period to period due to our level of investments in sales and marketing, promotional activities, inventory purchases and timing of supply chain logistics and payments.

 

Our restructurings and associated organizational changes may not adequately reduce our expenses and our inability to satisfy our liquidity needs, may lead to additional workforce attrition, and may cause operational disruptions.

 

We have recently experienced workforce attrition in various functions across our business, which may be attributable to our prior corporate restructurings, our current business circumstances, a combination of both, or other factors. Our efforts to adjust our operations with the reduced workforce may not be successful in preventing disruption to our business, and with the reduced workforce, we lack redundancy in important functions across our business. We are increasingly relying on the services of contract sales representatives or other similar arrangements in response to substantial sales force attrition. Further loss of one or more of our key employees, additional loss of multiple employees in particular functions, and/or our inability to attract replacement or additional qualified personnel could substantially impair our ability to operate our business and implement our business plan, which would have a material adverse effect on our business and financial condition, as well as our stock price.

 

In the event we are unable to satisfy our liquidity needs, we may experience employee attrition, and our employees may face considerable distraction and uncertainty. A loss of key personnel or material erosion of employee morale could adversely affect our business and results of operations. Our ability to engage, motivate and retain key employees or take other measures intended to motivate and incentivize key employees will be limited. The loss of services of members of our senior management team and other key employees could impair our ability to execute our business strategies and implement operational initiatives, which may have a material adverse effect on our business, cash flows, liquidity, financial condition and results of operations.

 

 

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 goods, including steel and aluminum products, in addition to country specific tariffs, including China, has the effect of increasing our costs and negatively affecting our business. There also exists the possibility of new or increased tariffs being levied on manufactured goods imported into the United States. We cannot control the duration or depth of such actions which may increase our product costs which would in turn reduce our margins and potentially decrease the competitiveness of our products. These actions could have a negative effect on our business, results of operations, or financial condition.

 

We also face uncertainty in the interpretation of new tariffs and their applicability, including with respect to customs valuation, product classification and country-of-origin determinations. Although we and our suppliers seek to comply with applicable customs laws and regulations, the application of rules regarding new tariffs can be subject to varying interpretations or future re-interpretations. It is possible that U.S. or other relevant authorities could, upon review or audit, disagree with the valuation, rules of origin or classification methods applied to certain products. Any such disagreement could result in the retroactive assessment of additional duties with interest, the imposition of penalties, or other enforcement actions without the ability to mitigate such penalties, thereby adversely affecting our operations or financial results. Furthermore, certain of our competitors may be better positioned than us to withstand or react to border taxes, tariffs or other restrictions on global trade and as a result, we may lose market share to such competitors. Due to broad uncertainty regarding the timing, content and extent of any regulatory changes in the U.S. or abroad, we cannot predict with certainty the impact, if any, that these changes could have to our business, financial condition and results of operations. However, the imposition of various tariffs since February 2025 has had a significant negative impact on our costs, margins and financial condition. 

 

If our top customers were lost, we could experience lower sales volumes.

 

For the fiscal year ended August 31, 2025 our top ten customers represented 97% of our total sales. Our single largest customer was responsible for 39% of our total sales and our two largest customers were responsible for 74% of total sales in 2025. We would experience a significant decrease in sales and profitability and would have to cut back our operations, if these customers were lost and could not be replaced. Our top ten customers are located in North America and are primarily in the retail home improvement and pet industries.

 

We are dependent upon third-party manufacturers and suppliers for substantially all of our products

 

We do not have any manufacturing capabilities and rely on a limited number of contract manufacturers located outside the United States for the majority of our products. Our reliance on contract manufacturers involves certain risks, including:

 

·	Production disruptions or delays at the factory as a result of political instability, labor unrest, mechanical issues, natural disasters, or pandemic outbreaks;

·	Capacity constraints;

·	Inability to control the quality of the finished products;

·	Inability to control manufacturing and delivery schedules; and

·	Inability to supply products due to increased costs related to imposition of significant tariffs.

 

If our products are delayed or cannot be supplied in a timely manner, we risk losing revenue and customers. Developing alternate sources of supply for our products that meet our requirements may be time-consuming, difficult, and costly, and we may not be able to source our products on terms that are acceptable to us, or at all, which will have a negative effect on our revenue and financial condition.

 

We face significant competition, which could reduce the demand for our products.

 

Our revenue depends in part on maintaining and growing the sales of our current products in both existing and new markets, but also by improving existing products and developing new products. There is substantial competition among companies in each of our market sectors, and a number of companies market products that compete directly with our products. Current and potential customers may consider these products from our competitors to be superior to or less expensive than our products. Some of these competitors may also have greater financial, manufacturing, and sales and market resources than us. If we are unable to effectively compete with these other products and companies, we would likely lose market share which would result in a decrease in revenue and profitability.

 

 

We could experience delays in the delivery of our products to our customers causing us to lose business.

 

We purchase our products from other vendors and a delay in shipment from these vendors to us could cause significant delays in our delivery to our customers. Such disruptions may include adjustments to ocean shipping schedules, labor strikes or other job-related actions by workers within the supply chain, geopolitical unrest, longshoreman or rail strikes, geopolitical unrest, or government actions. This could result in a decrease in sales orders to us and we would experience a loss in profitability. Additionally, certain of our customers may impose penalties for orders not delivered on time, which could be significant and have a material adverse effect on our margins and financial results.

 

Inflation could adversely affect our business

 

Inflation has many impacts on our business, including increasing our direct costs for raw materials, manufacturing, shipping and logistics, labor, and energy. Our ability to pass on these higher costs to our customers is limited. When we are able to increase our selling prices, it may be delayed several months after we first incur the higher costs and we may not be able to fully recoup the difference. In addition, high rates of inflation can reduce consumer’s discretionary spending and reduce demand for our products. These actions could have a negative effect on our business, results of operations, or financial condition.

 

Outdoor product sales are highly seasonal and subject to adverse weather.

 

Our fencing and outdoor products are primarily bought by consumers during the spring and summer. The majority of our revenues and income from these products occur during the third and fourth quarters of our fiscal year (March through August). Demand for these products is highly affected by the weather. Adverse weather, including abnormally wet conditions or unseasonably hot or cold temperatures, can negatively affect demand for our products and cause our customers to delay, or reduce, their orders. This would have a negative effect on our business, results of operations, or financial condition.

 

Competitors may infringe on our intellectual property which would negatively affect our business and financial condition

 

We rely on our intellectual property rights, including patents, patent applications, and trademarks, to provide us with competitive advantages and protect us from theft of our intellectual property.  We believe that our patents are valid, enforceable, and valuable. If third parties infringe on our intellectual property, we may be forced to pursue litigation which would consume significant amounts of our management and financial resources. There is no guarantee that we will have the financial resources necessary to engage in litigation, or that any litigation we do pursue will result in a favorable outcome. Such infringements or unfavorable outcomes of litigation would have a negative effect on our business, results of operations, or financial condition.

 

Our products may have issues that could lead to product liability claims

 

The products we manufacture and distribute expose us to potential product liability risks. Although we seek to insure against such risks, there can be no assurance that such insurance coverage will be sufficient to cover any claims or adverse legal judgements, and our costs to defend any litigation could be significant. A successful product liability claim in excess of our insurance coverage could have a material negative effect on our business and financial condition. In addition, it could significantly increase our costs of this insurance on commercially reasonable terms or make it unavailable to us altogether.

 

We depend on sophisticated information technology systems to operate our business and a cyberattack or other breach of these systems, or a system error, could have a material adverse effect on our business and results of operations.

 

We are increasingly and substantially dependent upon information technology systems and infrastructure to operate our business. In the ordinary course of our business, we collect, store, process, and transmit sensitive data on our networks and systems, including our proprietary or confidential business information and personal information with respect to our employees, customers, and our business partners. In the ordinary course of our business, this type of data is also collected, stored, processed, and transmitted on the networks and systems of business partners and vendors from whom we purchase software and/or technology-based services.

 

The size and complexity of our and third-party information technology systems and infrastructure, and their connection to the Internet, make such systems potentially vulnerable to service interruptions, system errors leading to data loss, data theft, unauthorized disclosure, and/or cyberattacks. These incidents could result from inadvertent or intentional actions or omissions by our employees and consultants, or those of our business partners and vendors, or from the actions of third parties with criminal or other malicious intent. Notwithstanding our efforts to combat cyber threats, including through the use of third party software, consultants and monitoring agents, as with most other companies, our information technology systems have been, and will likely continue to be, subject from time to time to computer viruses, malicious codes, unauthorized access, and other forms of cyberattack, and we expect the sophistication and frequency of such efforts to continue to increase.

 

 

We are increasingly relying on the networks and systems of third-party vendors as we seek to migrate the storage and processing of business and other information from our own computer servers and networks to “cloud”-based storage and software systems and services maintained by third-party vendors. While we believe there are potential cost savings and other benefits from this migration strategy, we do not control how third-party vendors maintain their networks and systems, what technology they implement to protect their systems from cyber-attack or other malicious behavior, or what corrective or remedial measures they would take in response to service issues or a criminal or other malicious attack. Also, many of these vendors are large, well-known technology companies that maintain substantial volumes of information for a large number of companies, and whose systems may therefore be larger targets for criminal or other malicious actors as compared to our own networks and systems. Accordingly, our migration to third-party networks and system could increase the risk that business and other information maintained by us could be subject to a breach, theft, unauthorized disclosure, or other forms of cyberattacks even if we are not specifically targeted.

 

Breaches of information technology systems and technology can be difficult to detect, and any delay in identifying any such incidents may lead to increased harm of the type described above. While we have implemented security measures to protect our information technology systems and infrastructure, and monitor such systems and infrastructure on an ongoing basis for any current or potential threats through sophisticated third party cyber defense companies, there can be no assurance that these measures will prevent the type of incidents that could have a material adverse effect on our business and results of operations.

 

On October 15, 2025, we learned that a threat actor had gained unauthorized access to portions of our information technology (“IT”) environment and claimed to have unlawfully accessed certain Company information and data. We immediately activated our cyber incident response plan to contain the intrusion, assess and investigate the incident and implement remedial measures. We also immediately notified law enforcement, including the FBI, and retained external cybersecurity experts to assist. Based on our investigation to date, we believe that the cybersecurity incident consisted of unauthorized access and deployment of encryption and monitoring software by a third party to a portion of our internal corporate IT systems. The incident caused disruptions and limitation of access to portions of our business applications supporting aspects of our operations and corporate functions, which we voluntarily took offline as a precautionary measure. Based on the information reviewed to date, we believe the unauthorized activity has been contained and we were able to bring the impacted portions of our IT systems and individual computer devices back online and operate at full capacity within a week of detection of the unauthorized access.

 

We believe that the threat actors unlawfully accessed certain computer systems and exfiltrated images of video meetings and computer screens that may contain sensitive information. The threat actors threatened to release this information publicly if we did not provide them with a monetary payment, which we did not. The threat actors have made public certain of our information and that of some of our vendors and customers. However, we do not believe that the threat actor was able to infiltrate the computer systems of any of our customers or vendors, and we have no current evidence that any personally identifiable information of any employees, customers, suppliers or vendors has been compromised

 

We have taken additional cybersecurity measures in response to this incident including closing off the point of unlawful access and bolstering our cyber defensive capabilities, including use of third-party cybersecurity experts. The costs associated with these activities and the disruption to our operations have largely been covered by our cyber security insurance policy.

 

Compliance with global privacy and data security requirements could result in additional costs and liabilities to us or inhibit our ability to collect and process data globally, and our failure to comply with data protection laws and regulations could lead to government actions, which could cause our business and reputation to suffer.

 

Evolving state, federal, and foreign laws, regulations and industry standards regarding privacy and security apply to our collection, use, retention, protection, disclosure, transfer and other processing of personal data. Privacy and data protection laws may be interpreted and applied differently from country to country and state to state in the U.S. and may create inconsistent or conflicting requirements, which can increase the costs incurred by us in complying with such laws, which may be substantial. For example, the European Data Protection Regulation (“GDPR”) imposes a broad array of requirements for processing personal data, including elevated disclosure requirements regarding collection and use of such data, and the California Consumer Privacy Act (“CCPA”) substantially expands privacy obligations of many businesses, including requiring new disclosures to California consumers, imposing new rules for collecting or using information about minors and affording consumers the right to know whether their data is sold or disclosed, the right to request that a company delete their personal information, the right to opt-out of the sale of personal information and the right to non-discrimination in terms of price or service when a consumer exercises a privacy right. Like the GDPR, the CCPA establishes potentially significant penalties for violation. The California Privacy Rights Act (“CPRA”), which became operational on July 1, 2023, expands on the CCPA, creating additional consumer rights and protections, including the right to correct personal information, the right to opt out of the use of personal information in automated decision making, the right to opt out of sharing consumer’s personal information for cross-context behavioral advertising, and the right to restrict use of and disclosure of sensitive personal information. Similar restrictions are also included in the privacy laws of other states in the U.S.

 

 

We are evaluating our privacy program as a result of these privacy laws, and it is likely we will incur additional expense and investment of resources in our efforts to comply. If we are unable to implement a suitable compliance program relating to these or future privacy laws and regulations, we may face increased exposure to regulatory actions, including substantial fines and penalties.

 

We have identified significant deficiencies in our internal controls. If we are unable to remediate these deficiencies, or if we experience additional significant deficiencies or material weaknesses and are unable 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, negatively affect investor confidence in the Company, and subject us to regulatory scrutiny.

 

We have completed a management assessment of internal controls as prescribed by Section 404 of the Sarbanes-Oxley Act, which we were required to do in connection with our audit of our financial statements for the year ended August 31, 2025. Based on this process, we identified the following significant deficiencies in our internal controls:

 

·	The company did not maintain effective controls over certain aspects of financial reporting process including year-end reconciliations of the consignment inventory balances held and year end cut-off procedures, because of the company restructuring that occurred during the year.

·	Implementation of formal process surrounding average costing for inventory held due to certain economic pressures including significant tariffs passed for import products from China, where some of the Company's main suppliers are located.

 

Although these deficiencies do not rise to the level of material weaknesses and no material weaknesses have been identified, and our disclosure controls and procedures were effective at the reasonable assurance level as of August 31, 2025, our management is undertaking remediation measures to ensure that our disclosure controls and procedures remain effective. We have implemented new procedures to address the identified issues. However, we cannot guarantee that in the future we will not identify any material weaknesses or significant deficiencies in connection with this ongoing process, which could result in significant expense to remediate any such deficiencies. Additionally, any inability to report our financial results accurately could result in untimely filing of our public reports, a halt in trading of our securities, shareholder lawsuits and regulatory inquiry or investigations.

 

A contagious disease outbreak could have an adverse effect on our operations and financial condition

 

Our business could be negatively affected by an outbreak of an infectious disease due to the consequences of the actions taken by companies and governments to contain and control such an outbreak. These consequences include:

 

·	The inability of our third-party manufacturers to manufacture or deliver products to us in a timely manner, if it all.

·

Isolation requirements may prevent our employees from being able to report to work or being required to work from home or other off-site location which may prevent us from accomplishing certain functions, including receiving products from our suppliers and fulfilling orders for our customers, which may result in an inability to meet our obligations.

·	Our new product launches may be delayed or require unexpected changes to be made to our new or existing products.

·	The effect of the outbreak on the economy may be severe, including an economic downturn and decrease in employment levels which could result in a decrease in consumer demand for our products.

 

The financial impact of such an outbreak are outside our control and are not reasonable to estimate but may be significant. The costs associated with any outbreak may have an adverse impact on our operations and financial condition and not be fully recoverable or adequately covered by insurance.

 

Risks Related to Our Common Shares

 

We may issue additional shares of common stock, securities convertible into common stock, or securities with superior rights to our common stock, in the future, including to raise capital, for strategic transactions, or to attract and retain employees, which would have a dilutive effect on existing stockholders.

 

The issuance of a substantial number of additional shares of our common stock, securities convertible into common stock, or securities with superior rights to our common stock, or the perception that such sales could occur, could have a material adverse effect on the market price of our common stock. In addition, future sales and issuances of our common stock will result in dilution to our existing stockholders, and new investors could gain rights superior to those of our existing stockholders. This dilution would reduce the ownership percentage and voting power of existing stockholders and could also cause a decline in earnings per share, which could further reduce the market price of our common stock.

 

 

If we raise additional funds by selling preferred stock or securities, including debt securities, convertible into shares of our common stock, the new shares may have rights, preferences or privileges senior to those of the rights of our existing common shares. If common shares are issued in return for additional funds, the price per share could be lower than that paid by our current stockholders. The result of these actions would be a decrease of each present shareholder’s relative percentage interest in our Company.

 

Our stock price may be volatile and you may lose all or a part of your investment.

 

The Company’s common shares currently trade within the NASDAQ Capital Market in the United States. There is limited trading volume in our common shares, and investors could find it difficult to purchase or sell our common stock or experience significant volatility in the price of our common stock.

 

Our stock price could fluctuate significantly due to a number of factors, including:

 

·	issuance of additional shares of our common stock or securities convertible into shares of our common stock, and the expected dilution to our stockholders resulting therefrom, which may occur upon the refinancing of our debt or in connection with other capital raising transactions;

·	regulatory developments in the U.S. and foreign countries;

·	sales of substantial amounts of our stock or short selling activity by investors;

·	variations in our anticipated or actual operating results;

·	conditions or trends in our industry generally; and

·	events that affect, or have the potential to affect, general economic conditions, including but not limited to political unrest, global trade wars, natural disasters, acts of war, terrorism, or disease outbreaks.

 

Many of these factors are beyond our control, and we believe that period-to-period comparisons of our financial results will not necessarily be indicative of our future performance. If our revenues in any particular period do not meet expectations, we may not be able to adjust our expenditures in that period, which could cause our operating results to suffer. If our operating results in any future period fall below the expectations of securities analysts or investors, our stock price may fall by a significant amount.

 

Future sales of our common stock by shareholders could cause our stock price to decline, and future issuances of common stock could cause substantial dilution.

 

If our existing stockholders sell a large number of shares of our common stock, or the public market perceives that existing stockholders might sell shares of common stock, the market price of our common stock could decline significantly. Sales of substantial amounts of shares of our common stock in the public market by our executive officers, directors, 5% or greater stockholders or other stockholders, or the prospect of such sales, could adversely affect the market price of our common stock. To the extent that option holders exercise outstanding options or we issue additional shares in the future, there may be further dilution and the sales of shares into the marketplace could cause our stock price to drop further.

 

We will continue to incur substantial costs and obligations as a result of being a public company.

 

As a publicly-traded company, we will continue to incur significant legal, accounting and other expenses. In addition, new and changing laws, regulations and standards relating to corporate governance and public disclosure for public companies, including the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), regulations related thereto and the rules and regulations of the United States Securities and Exchange Commission (“SEC”) and the Nasdaq Stock Market, have increased the costs and the time that must be devoted to compliance matters. We expect these rules and regulations will continue to increase our legal and financial costs and lead to a diversion of management time and attention from revenue-generating activities.

 

We are subject to reporting and other obligations under applicable Canadian securities laws, SEC rules and the rules of the Nasdaq Stock Market. These reporting and other obligations place significant demands on our management, administrative, operational and accounting resources. Moreover, any failure to maintain effective internal controls could cause us to fail to meet our reporting obligations or result in material misstatements in our consolidated financial statements. If we cannot provide reliable financial reports or prevent fraud, our reputation and operating results could be materially harmed, which could also cause investors to lose confidence in our reported financial information, which could result in a lower trading price of our common shares.