The new company will focus on nutraceuticals after its recent acquisition.
BevCanna Enterprises Inc. (OTC: BVNNF) said it was done with cannabis in August when the company released its second-quarter filing.
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The company didn’t hold back when it said its departure was “…driven by the unsustainable cash flow drain that threatened the company’s financial stability. The public has become increasingly aware of the many companies in this industry that have completely collapsed, leaving behind millions of dollars in unpaid debts.”
The company also called the cannabis industry poorly managed.
“The rebranding to Forte Group reflects our ambition to become a leader in the health and wellness industry and aligns with our long-term strategic vision,” CEO Marcello Leone said. “We are poised to accelerate our growth with both new and existing high-quality product offerings under the Forte Group banner, and we look forward to capitalizing on the opportunities ahead.”
New name and symbol
In September, BevCanna said it bought the health and wellness nutraceutical products company Greenflame Distribution Ltd. for $2.5 million.
On Oct. 14, the company told investors that it was changing its name to Forte Group Holdings Inc. effective Oct. 18. In conjunction with the rebrand, the company’s trading symbol on the Canadian Securities Exchange will change to FGH. Trading symbols on the OTC Markets (OTC Pink) and Frankfurt Stock Exchange will remain unchanged, although the company said it plans to update its symbol on the OTC Pink at a later date.
Forte Group said it plans to grow its portfolio of lifestyle and wellness beverages and nutraceuticals under the flagship TRACE brand while expanding white-label production for partners. The new products are based on the company’s acquisition of Greenflame.
Here’s the problem
BevCanna didn’t hold back when it gave the reasons why it was leaving cannabis as it listed the following problems with the industry:
Operational costs: Health Canada’s stringent staffing requirements imposed a heavy operational burden, leading to redundant staffing positions and heightened costs.
Taxes: High taxes were payable in the form of prepayment of excise stamps, and excise taxes were to be paid at time of shipment, further straining the company’s financial resources.
Transportation: The transportation of cannabis products incurred significantly higher than the transportation of traditional consumer packaged goods, in some cases 3-5x the cost, adding to the company’s operational challenges.
Cash flow: The company’s provincial distributor customer(s), operated on Net 60- to 90-day payment terms, creating an unsustainable cash flow burden for the company.
Product returns: Discretionary product returns by provincial distributors, without a return authorization, resulted in unexpected withdrawals from the company’s bank accounts, amounting to hundreds of thousands of dollars in the aggregate. These discretionary product returns made it impossible to manage cash flow effectively after incurring production and labor costs.
Regulatory burdens: Despite heavy investment in capital expenditures, licensing fees, and compliance with regulations, the government’s failure to eliminate the grey market meant that the regulated market remained uncompetitive.
Banking: Despite operating within the federally legal cannabis industry, the company faced significant challenges in accessing conventional banking services, resulting in the company having to rely on more expensive and less favorable alternative financing arrangements.
Bankruptcy
At the end of June, BevCanna said that it had accumulated deficits of C$165 million, of which the noncash portion was C$130 million or 79%, and negative working capital of C$13 million that had primarily been funded through financing activities.
Prior to that its subsidiary Naturo Springs Inc. filed for bankruptcy in December 2023 and in January 2024, BevCanna filed for bankruptcy. The last piece of the company, Embark Health Inc. and its subsidiary Embark Delta Inc., filed for bankruptcy in July.
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