The Company's operations are classified into three reportable operating segments
and the parent corporate and administrative segment, which were determined based
on the nature of the products offered along with the markets being served.

The
segments are as follows:

· Industrial wood products

· Pet, Fencing and Other

· Seed processing and sales

· Corporate and administration






Quarterly Results

The following table summarizes quarterly financial results in fiscal 2022 and fiscal 2021. (Figures are thousands of dollars except per share amounts).





                                                 For the Year Ended August 31, 2022
                                     First        Second       Third        Fourth        Full
                                    Quarter      Quarter      Quarter      Quarter       Year*

Sales                               $ 12,918     $ 14,061     $ 20,922     $ 15,001     $ 62,902
Gross profit                           2,465        3,424        5,353        2,551       13,793
Net income (loss)                       (391 )        270        1,494         (209 )      1,164

Basic earnings (loss) per share     $  (0.11 )   $   0.08     $   0.43     $  (0.06 )   $   0.33
Diluted earnings (loss) per share   $  (0.11 )   $   0.08     $   0.43
$  (0.06 )   $   0.33




                                          For the Year Ended August 31, 2021
                              First        Second       Third        Fourth        Full
                             Quarter      Quarter      Quarter      Quarter        Year

Sales                        $ 10,316     $ 10,460     $ 21,620     $ 15,106     $ 57,502
Gross profit                    2,963        2,612        5,582        2,990       14,147
Net income (loss)                 489          (63 )      2,414          615        3,455
Basic earnings per share     $   0.14     $  (0.02 )   $   0.69     $   0.18     $   0.99
Diluted earnings per share   $   0.14     $  (0.02 )   $   0.69     $   0.18     $   0.99

* Fiscal 2022 quarterly per share earnings were calculated using weighted average

number of common shares outstanding as of August 31, 2022 of 3,493,807 (2021 -

3,486,537). The sum of the quarterly earnings per share may not equal the full

year earnings per share due to the use of the full year's weighted average


   share figure and rounding.




 10







RESULTS OF OPERATIONS

Fiscal 2022 was a difficult and unpredictable year. Although the challenges associated with the worldwide COVID pandemic began to fade, the recovery brought its own unique difficulties, both for the Company and our customers.





Sales for the year were $62,901,831, which was an increase of $5,400,288, or 9%,
from sales of $57,501,543 in fiscal 2021. Our cost of sales, however, increased
by $5,753,875, or 13%, which compressed our gross margins to 21.9% for the
current year from 24.6% in fiscal 2021. These higher costs were due to large
increases in raw material, energy, transportation, and freight costs during the
year. We were especially affected by the soaring ocean freight costs caused by
near-record high energy prices, port delays and shortages of vessels and
shipping containers in the Pacific region. For example, our container shipping
costs from China in the 4th quarter of fiscal 2022 were over 60% higher than we
paid in the 4thquarter of fiscal 2021, and over 900% higher than we paid in
fiscal 2020 and 2019. We also saw unprecedented increases in our shipping and
delivery costs within the United States, and the time to both receive and
deliver our goods also increased substantially.



Because of the increasing costs of shipping and uncertainty of the timing of
receipt of orders from China, coupled with rising inflation, we decided at the
end of the 2nd quarter to build our on-site inventory, particularly in our
highest volume items. This build began prior to the start of our traditionally
busiest Spring and Summer sales season in our 3rd and 4th quarters of our fiscal
year. It allowed us to mitigate the risks of shipping and supply chain
disruptions and ship ahead of several announced price increases from both
suppliers and shippers.



This higher level of inventory lowered some of our product costs while ensuring
high product availability of our most popular products and on-time fulfillment
during the 3rdquarter. However, the supply issues on certain products which we
experienced throughout the year worsened in the 4th quarter and reduced our
anticipated level of sales. We sold out of some products entirely and lost sales
while waiting for additional units to arrive from China. Due to both supplier
and shipping delays, some of our seasonal products arrived late and we missed
the primary sales window. Those sales could not be recouped. Several new
products, which we originally planned for release in fiscal 2021 but were pushed
back into 2022 due to the effects of the pandemic in China, had a slower than
expected roll-out as many of our customers were also experiencing inventory
issues and curtailed their orders. Our customers' inventory issues also
unexpectedly affected sales of some of our existing products, as certain
retailers did not order at their usual volumes. We have now met with these
customers to discuss and correct the issues to help ensure improved order
volumes going forward.



During the fourth quarter we evaluated the costs of our international sales and
decided that we will pause our effort to expand our sales in Europe. Our
strategy of selling our products through distributors was ultimately not
profitable, and we are evaluating new European sales strategies for the future.
However, in the near term, we determined that the deteriorating European
financial environment, which has been negatively affected by the strong US
dollar, the war in Ukraine, and likely upcoming energy shortages, is not an
opportune time to resume our sales efforts. Therefore, we will be liquidating
the inventory we currently have located in Europe during fiscal 2023. In the 4th
quarter, we recorded a $800,000 inventory allowance against our earnings, with a
good portion of this allowance for the carrying value of our European inventory.
We feel that there remains significant long-term potential to expand our sales
internationally and remain committed to international expansion. We intend to
formulate a new international growth plan, including in Europe, and will
consider new sales initiatives once financial conditions improve.



Our fiscal 2022 financial results were also negatively affected by the
settlement of a case brought by an association of California District Attorneys.
This case related to their ongoing investigation into the environmental labeling
and marketing of dog waste bags. The District Attorneys claim that labeling
certain dog waste bags, including the Company's, as biodegradable or compostable
were misleading due to the lack of industrial composting facilities that accept
dog waste. A number of major retailers also settled their portion of the case.
In June 2022, we agreed to settle for a $300,000 payment with no admission of
guilt by the Company. In response to the case, we have redesigned our packaging
and marketing materials for the poop bags which included feedback from the
District Attorneys to help ensure legal compliance for our future sales of the
products within California. We have moved forward with the lessons learned from
the issue. Sales with the new packaging have resumed throughout the US and are
selling well through both retailers and online which demonstrates the consumer's
desire for these types of new products.









 11







Building our inventory required greater cash outlays which we primarily funded
through our bank line of credit. Our plan is to repay the line of credit as the
inventory is sold and accounts receivable are collected. We reduced our
borrowing from a high during the year of $9.5 million to $7.0 million as of
August 31st. Because we are currently well stocked with inventory, we anticipate
that we will order and receive smaller amounts of inventory than we historically
order during the first quarter and into the second quarter of fiscal 2023. This
is expected to allow us to more effectively manage our working capital in fiscal
2023.




We have continued to strategically invest in our personnel, facilities, and
equipment. Effective January 1, 2022, Charlie Hopewell moved from the day-to-day
operational role as CEO to his overall strategy positions as a Director and
Board Chair. Chad Summers assumed the role of Chief Executive Officer in
addition to his prior position as President, and Mitch Van Domelen, CPA, was
promoted to Chief Financial Officer. Chad Summers was also named a Director in
November 2022. We also added new employees and promoted from within to fill
important skilled specialty roles to improve our efficiency and expand customer
engagement and service, including a new Chief Revenue Officer and newly created
positions of a Vice-President of Supply and a Vice-President of Fulfillment
formerly consolidated under the COO role. In both 2021 and 2022, we were named a
"Top Workplace" by the Oregonian Newspaper, based on employee survey responses
which has helped us to retain and attract talent and build a positive corporate
culture.



We expanded our facilities though the renovation of an existing warehouse
building which we will use for both custom order fulfilment and to support our
growing fence business. New investments have been made in technology
improvements, including Electronic Data Interchange (EDI) and customer order
automation through a Business to Business portal. Our corporate website was
upgraded with enhanced accessibility, functionality and modernized investor
relations and contact sections. We also redesigned our product section with
easier navigation and a more unified brand presentation within a new eCommerce
interface.



Although ocean shipping costs have recently fallen from the record highs seen in
fiscal 2022, other logistic issues remain. Because of these supply chain and
logistic issues, as well as the continuing tariffs levied on Chinese made goods,
management is exploring new sources for our raw materials and the manufacture of
certain finished products.



The predictions for worsening macroeconomic conditions in the US due to higher
rates of inflation and negative consumer sentiment clouds the outlook for fiscal
2023. Higher energy, food and housing prices have severely restrained consumers'
available discretionary income. This has negatively affected their willingness
to spend money on non-critical items as reflected in the recent significant
decline in the US Index of Consumer Sentiment, which may limit our ability to
grow our sales in the near-term. The rate of inflation experienced in fiscal
2022 has resulted in many of our product selling prices lagging our product
costs as our customers were slow to adopt our price increases. The rate of
inflation is anticipated to continue to increase in the near-term, and we may
not be able to increase our prices in response as quickly as our costs could
rise. Our current inventory is also being carried at historically high costs as
a result of the multiple supply chain and inflationary issues we have been
experiencing. This will reduce our gross profit in 2023, even if our other costs
fall from the elevated levels of fiscal 2022. Therefore, we expect our margins
will continue to be restrained during fiscal 2023.



Our management is cognizant of the current challenges facing our markets, and
those affecting our customers. We have carefully formulated a strategy for
fiscal 2023 which will utilize our traditional strengths. We will focus on
growing our core products, such as gates and kennels, and our popular new
products, including Eurofence and Lifetime Post. We also plan to offer more
eco-friendly products which build upon our early success selling our popular dog
waste bags. We intend to strengthen our historic sales channels such as with
big-box retailers and online within North America, while increasing our
efficiency and reducing our costs. Our revamped operations team is working with
our upgraded technology suite and its enhanced reporting capabilities to reduce
our order to cash timeline and improving our shipping by reducing costs and time
to receive and deliver our products. The unexpected economic disruptions caused
by the COVID pandemic are now subsiding. We believe we can now more effectively
manage our business by being able to fully apply the significant strategic and
operational investments we have made over the last several years.

Fiscal Years Ended August 31, 2022 and August 31, 2021

Fiscal 2022 sales totaled $62,901,831 compared to sales of $57,501,543 in fiscal 2021, which was an increase of $5,400,288, or 9%. The increase in sales was primarily due to higher sales at JCC.

Gross margin declined to 21.9% from 24.6% in fiscal 2021 due to higher raw material and shipping and logistic costs.







 12








Operating expenses increased by $1,416,552 to $11,823,506 from $10,406,954 in
fiscal 2021. The increase was due to higher selling, general and administrative
expenses of $4,008,166 from $3,204,945, and an increase in wages and employee
benefits, which rose to $7,495,723 from $6,957,730. The Company added additional
personnel in specialty areas and increased wages in response to the broad wage
inflation being experienced by most industries throughout the area and the
United States. Depreciation and amortization increased to $319,617 from
$244,279. Income from operations decreased to $1,969,553 from $3,739,692 in
fiscal 2021 due to the lower gross margins and the higher costs.

Including other items, income before income taxes was $1,581,000 in fiscal 2022 compared to $4,424,208 in fiscal 2021.





Other items in fiscal 2022 were a loss of ($230,034) which includes a payment of
$300,000 for the settlement of claims brought by the Association of California
District Attorneys regarding the labeling and marketing of the Company's dog
waste bags, and income of $5,000 as a portion of the parking area at JCS that
was formerly rented to an unrelated company for $1,000 per month through January
2022. The Company also recorded a gain of $64,000 in the current year related to
an evaluation of its reserve for deferred tax, which was determined to be
greater than its current liability. Interest expense for the Company's bank line
of credit was $163,045. Other items in fiscal 2021 were gain on extinguishment
of debt of $687,387, which was the forgiveness of the Company's PPP loans.
Interest and other expenses were $2,871. Income tax expense was $416,877
compared to $969,255 in fiscal 2021. The Company calculates income tax expense
based on combined federal and state rates that are currently in effect.



Net income for fiscal 2022 was $1,164,123, or $0.33 per common share, compared
to net income of $3,454,953, or $0.99 per common share, for fiscal 2021. Fiscal
2022 income was negatively affected by the $300,000 legal settlement and the
inventory allowance of $800,000, which was partially offset by the $64,000
recovery from deferred income tax. Fiscal 2021 income was positively affected by
the significant one-time gain on the forgiveness of the Company's PPP loans. The
weighted number of shares outstanding were 3,493,807 in fiscal 2022 and
3,486,537 in fiscal 2021.



Pet, Fencing and Other - JCC



The sales levels of certain other products, particularly gates and large
kennels, declined from their elevated pandemic levels and resulted in negative
year-over-year comparisons. These sales were impacted by several issues,
particularly supply chain and logistic delays, and by temporary disruptions
originating with some of our customers, including purchase restrictions due to
inventory management decisions and buyer turnover. A number of our other
products, however, recorded significant sales gains in 2022, including the
recently introduced Lifetime Steel Posts® and Eurofence products. Lumber sales
also increased in fiscal 2022 over the prior year. We were also successful in
raising our selling prices in the current period which partially offset our
higher raw material and logistic costs.



Sales at JCC were $57,915,828 in fiscal 2022 compared to sales of $51,732,129 in
fiscal 2021. Operating income at JCC for 2022 was $1,257,449 compared to
$4,052,624 in 2021, which was a decrease of $2,795,175, or 69%. Significantly
higher costs, including for raw materials, energy, and shipping and logistics,
reduced our margins in fiscal 2022. Our 2022 results were also negatively
affected by an inventory allowance of $800,000. This allowance was partially for
the inventory currently located in Europe, as management has decided to
temporarily withdraw from the European market due to the difficult economic
climate, and for the clearance of certain obsolete inventory.

The following table shows a breakdown between the pet, fencing and other categories in this segment.





                            Sales in Millions of Dollars                           Percent of Total Sales
Fiscal Year             Pet            Fencing           Other            Pet             Fencing             Other
2022                $ 19,706,515     $ 38,562,319     $   555,758              34 %               65 %                1 %
2021                $ 16,446,932     $ 33,805,909     $ 1,479,288              32 %               65 %                3 %

Industrial Wood Products - Greenwood





Sales at Greenwood in fiscal 2022 were $2,626,209, which was a nominal increase
of $28,933 from sales of $2,597,276 in fiscal 2021. Greenwood's sales have been
heavily impacted by the COVID-19 pandemic, as many of their products are sold to
municipalities and larger transit operators which continue to see reduced demand
for transit services. These customers have also been severely impacted by
shortages of components necessary to complete transit products due to logistics
and supply chain issues. Greenwood recorded operating income of $21,865 compared
to an operating loss of ($144,313) in fiscal 2021.







 13

Seed Processing and Sales - JCSC





Sales at JCSC were $2,359,794 in fiscal 2022 compared to sales of $3,172,138 in
fiscal 2021, which represents a decrease of $812,344, or 26%. Extreme
temperatures in the Pacific Northwest that occurred during last year's growing
season resulted in lower harvested yields which reduced demand for JCSC's seed
cleaning services. There were also delays in shipping certain grass seed orders
to China during fiscal 2022 due to their COVID related border shutdowns. Results
for 2022 were also negatively affected by higher equipment and facility
maintenance costs. JCSC had an operating loss of (517,453) in fiscal 2022
compared to an operating loss of ($64,538) in fiscal 2021.



Corporate - JC USA



JC USA, the holding company that provides professional and administrative
services for the wholly-owned operating subsidiaries had operating income of
$819,139 in fiscal 2022 compared to operating income of $580,435 in fiscal 2021.
The increase is due to higher rental and administrative fees charged to its
subsidiaries related to the inventory levels maintained throughout the year, and
the one-time recovery of $64,000 from reserves for deferred taxes. The results
of JC USA are inter-company transactions and are eliminated on consolidation.5

LIQUIDITY AND CAPITAL RESOURCES

Fiscal Year Ended August 31, 2022





As of August 31, 2022, the Company had working capital of $19,207,874 compared
to working capital of $19,073,194 as of August 31, 2021. The largest change
affecting working capital is an increase in inventory of $6,240,948 to
$20,632,313 from $14,391,365. Other changes in components of working capital
include a decrease in cash of $699,850, an increase in accounts receivable of
$105,143, a decrease in prepaid expenses of $1,193,245, and a decrease in
prepaid income taxes of $43,995. The decrease in cash is related to the
increases in inventory. Prepaid expenses, which is mostly deposits paid for
future inventory, declined as the Company's large current inventory position has
reduced the need for additional inventory purchases in the near term.



Accounts payable rose to $1,566,047 from $1,349,677 which is related to the
timing of payments due to suppliers. Accrued liabilities increased by $57,951 to
$1,856,039 from $1,798,088. Bank indebtedness, which is from the Company's line
of credit and has primarily been used to acquire inventory, was $7,000,000 as of
August 31, 2022 compared to $3,000,000 as of August 31, 2021. Deferred tax
liability fell to $Nil from $116,945.



As of August 31, 2022, accounts receivable and inventory represented 94% of
current assets and 81% of total assets. As of August 31, 2021, accounts
receivable and inventory represented 85% of current assets and 74% of total
assets. Our customers continue to pay on-time, with almost all of our
outstanding receivables classified as current. For the fiscal year ended August
31, 2022, the accounts receivable collection period or DSO was 42 days compared
to 45 days for the year ended August 31, 2021. Inventory turnover for the year
ended August 31, 2022 was 130 days compared to 99 days for the year ended August
31, 2021.

Short-term and Long-term Debt





External sources of liquidity include a line of credit from U.S. Bank of $10
million, of which $3 million was available as of August 31, 2022. Subsequent to
the end of the fiscal year, the Company has drawn an additional $600,000. As of
October 28, 2022, $2,400,000 remains available.



Borrowing under the Line of Credit is secured by an assignment of accounts
receivable and inventory. Interest was previously calculated solely on the
one-month LIBOR rate plus 175 basis points. Beginning with the monthly interest
payment due March 31, 2022, the Company's Bank Line of Credit agreement was
revised to change the calculation of the interest rate from the one-month LIBOR
rate to the one-month Secured Overnight Financing Rate (SOFR). Interest is now
calculated based on the one-month SOFR plus 157 basis points, which as of August
31, 2022 was 3.86% (2.29% + 1.57%). The line of credit has certain financial
covenants. The Company is in compliance with these covenants.

Current Working Capital Requirements


Based on the Company's current working capital position and the utilization of
its current line of credit, the Company expects to have sufficient liquidity
available to meet its working capital requirements for fiscal 2023.





 14







OTHER MATTERS

Contractual Obligations and Commercial Commitments

The Company currently has no material contractual obligations or commercial commitments other than to suppliers of products or services.





Inflation

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





These higher costs have negatively affected the Company's gross margins.
Typically, the Company passes cost increases on to the customer, and is
currently raising its product prices as much as the market will bear. Retailers
are currently more receptive to such increases than in the past due to a mutual
understanding of the current inflationary environment and the objective reasons
for such. Since the ability of the Company to pass through all of the current
increase in its product costs to its customers are somewhat limited and occur
after such costs are first incurred, management expects that its gross margins
will remain under pressure in fiscal 2023.

Environmental, Social and Corporate Governance (ESG)





Jewett-Cameron endeavors to be a good steward and provide sustainable products
with a positive impact. We strive to operate and grow in a way that honors our
environment and relationships for the long term. This also aligns with one of
our three value pillars: stewardship.

Environmental

For our products, the goal is that 90% of materials can be recycled. Our suppliers are audited to strict commercial and fair practice standards, including our own supplier qualifications regarding facilities, capacity, labor practices, and environmental awareness. Packaging is designed to maximize recyclability and re-use and minimize non-recycled materials, and all waste materials in our own facilities are segregated to maximize recycling. Our facilities have replaced high energy consumption infrastructure with energy efficient HVAC and lighting during our recent remodel.

Active products and designs utilize 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. The
Company also actively participates 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 Sarbanes-Oxley. Our financial controls are mapped,
executed, self-audited as well as regularly audited by outside experts as part
of our annual process. We have established risk mitigations that allows for
condensed reviews of risks and impacts with our systems in place. An IT
Governance Committee aligns execution and security both for ourselves and also
for parties with whom we communicate and do business.











 15

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.



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, 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.

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