Cannabis Company Phoena to Wind Down Business Under Creditor Protection

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Cannabis Company Phoena to Wind Down Business Under Creditor Protection

The Rise and Fall of Phoena Holdings Inc.: From Accusations of Unlicensed Growing to Creditor Protection

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Phoena Holdings Inc., formerly known as CannTrust Holdings Inc., is seeking to wind down its business and has obtained creditor protection for the second time. This article will discuss the reasons for Phoena’s financial troubles, its attempts to revive its business, and its decision to liquidate assets.

Background

Phoena is an Ontario-based cannabis company that has faced several challenges in recent years. In 2018 and 2019, the company was accused of growing cannabis in unlicensed rooms at a facility in Fenwick, Ont. The Ontario Securities Commission brought a case against three former executives of the company, Peter Aceto, Eric Paul, and Mark Litwin, for offences linked to the alleged unlicensed growing. However, midway through the case, the securities regulator revealed it no longer had a reasonable prospect of convicting the men, and they were acquitted by the court last year.

Insolvency

Despite the acquittal, Phoena faced financial troubles. The company lost its cannabis licenses and was delisted from the Toronto Stock Exchange. Although Phoena was eventually able to get its licenses reissued, it struggled to regain the trust of its customers. According to court records, the company had 68,000 registered patients in Canada as of March 2019. However, it was unable to recover the patient base that was lost during the period when its licenses were suspended.

In its most recent full fiscal year, Phoena had a net loss of $24.8 million based on gross revenue of $13.2 million. In the one-month period ending January 31, the company had a $317,000 loss on gross revenue of $1.2 million.

Wind Down

Given its financial troubles, Phoena is now seeking to wind down its business and liquidate its assets. The company has obtained creditor protection under the Companies’ Creditors Arrangement Act to allow it to pursue this course of action. Interim CEO Cornelis Pieter Melissen stated in an affidavit that the company sought creditor protection because it needed “breathing room and stability.”

Melissen founded Kenzoll B.V., a subsidiary of Netherlands-based private equity investment firm, and took the helm of Phoena when former CEO Greg Guyatt stepped down in February. Phoena had previously received $17 million in financing from Kenzoll.

Conclusion

In conclusion, Phoena Holdings Inc., formerly known as CannTrust Holdings Inc., is seeking to wind down its business and liquidate its assets due to financial troubles. The company faced several challenges, including accusations of unlicensed growing and the loss of its cannabis licenses. Despite attempts to revive its business, Phoena was unable to generate a profit and has now sought creditor protection under the Companies’ Creditors Arrangement Act.

FAQs

  1. What is Phoena Holdings Inc.? Phoena Holdings Inc. is an Ontario-based cannabis company that was formerly known as CannTrust Holdings Inc.
  2. Why is Phoena seeking creditor protection? Phoena is seeking creditor protection to pursue a wind down of its business and liquidate its assets.
  3. What were the accusations against Phoena? Phoena was accused of growing cannabis in unlicensed rooms at a facility in Fenwick, Ont., in 2018 and 2019.
  4. What happened to Phoena’s cannabis licenses? Phoena lost its cannabis licenses and was delisted from the Toronto Stock Exchange after the allegations of unlicensed growing.
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