Editors Note: This story was updated on March 23, 2020.
Since this story was published on Friday, March 20, 2020, Green Growth Brands informed its laid-off workers that they would get paid. A spokesman for the company said, “At the time of the decision, the company remained uncertain of its ability to fund the payroll for the period ending today, March 20, 2020. As of this writing, I can confirm that such funding has been secured, that payroll has been initiated, and that all associates released will be paid for their time worked.”
The spokesman also confirmed that Horvath resigned voluntarily and would receive no severance pay. According to the company’s Management Information Circular, “If Mr. Horvath had been terminated by the Company without cause or had resigned from the Company for good reason as at June 30, 2019, Mr. Horvath would have been entitled to a payment of $2,550,000.”
Green Growth Brands (OTC: GGBXF) was paying its executive’s handsome salaries, while at the same time stiffing its hourly employees. This week the company told its Seventh Sense CBD kiosk workers that it was closing due to the Covid-19 virus. Then two days later the company told employees that the kiosks were closing for good and it couldn’t pay their back wages.
Employee Senia Cotto said, “Our last checks were delayed. They claimed it was an error on the Payroll Companies end.” Another employee who worked as a Lead Guide Austin Grishaber said, “The company paid us late two weeks ago and they said it was a mistake and that they had the payroll and we were all okay with our jobs. Yesterday we got a message from them stating that we are all basically fired and said ‘Unfortunately, we’re not in the position to fund payroll, your termination date is official as of March 19, 2020.’ they blindsided us. They had the district guides and lead guides blinded so we wouldn’t leave the company early.” Another employee Emily Rivera also confirmed that she was told there was no money for back pay.
On February 26, 2020, former CEO Peter Horvath said in this company’s earnings call about the CBD business, “While we’re currently in the process of selling the CBD business, we’re extremely proud of how we grew this business from a mere idea to products that have reached over 300,000 consumers in just 9 short months. We’re proud of our team, which includes nearly 1,000 guys in the field as well as our home office associates, all of whom developed and launched the most comprehensive topical CBD assortment in the world, an assortment with quality that is resonating with consumers, garnering an average rating of 4.5 out of 5 points, with 75% of our consumer responses at a 5 out of 5.”
Horvath resigned from his position as CEO on Thursday after the market closed and left his position on the board as well. The company has not responded to a request for comment.
No Breaks, Late Pay
While Horvath was lauding his employees, the employees were grousing on the website GlassDoor that they didn’t get breaks and were paid late. One Lead Guide from Nashville TN wrote, “Ridiculous sales goals and expectations from the home office. They have no money to send store supplies (cleaning products, bags, etc) Low inventory, using third party products for bailouts. People are literally working for “buttons” they use as incentives, hah! They’ve paid employees late more than once, which is illegal.” He went on to add, “If your shop can’t make $100 a day, you are penalized for it. WELL….you can’t force someone to buy something, just saying.”
Another part-time employee wrote, “No communication, Blatant Lies from Higher Ups, Not always paid on time, No breaks, no place to rest, standing for hours without breaks.”
A current employee from Massachusetts wrote, “Long shifts by yourself. No product to sell. $100 minimum sales a day or you get written up. You aren’t allowed to sit or take breaks your entire shift. The company has run out of money and can’t pay employees leaving most of us stranded with late bills and overdraft fees.”
The company was certainly not telling shareholders that they were paying their hourly employees late or that the kiosks had inventory issues.
Handsome Executive Salaries
The head office salaries for the most recent quarter were $5,367,010, Also included in general and administrative costs for the quarter ending December 28, 2019, were termination and severance payment of $199,293. The company paid $2.8 million for the same time period in 2018 for the head office. Stock-based compensation expenses related to stock options and restricted stock units granted were $1,649,401
For the year ending June 30, 2019, the company’s expenses for key employees included $2,397,044, for salary or consulting fees paid to key management personnel, included in consulting fees. In addition, for the year ended June 30, 2019, included in stock-based compensation expense is $1,119,345 in connection with stock awards to key management personnel and Directors. In addition, in connection with the successful award of seven additional dispensary licenses in the state of Nevada and as a condition of NOR Agreement, the company paid $1,000,000 in a bonus which was settled with the issuance of 426,992 shares of the company at the then market price per share of CAD$3.13 per share.
Maybe the unpaid employees can take some comfort in knowing that any of the stock compensation paid to the executives is essentially worthless now. The stock was lately selling at six cents down from its 52-week high of $4.49.
CFO Brags About CBD Biz Just Weeks Ago
The company’s Chief Financial Officer Brian Logan actually bragged about how well the CBD business was doing. On the February 26, 2020 earnings conference call he said, “During the quarter, we opened 56 shops, bringing the total number of shops opened to 195 across 34 states. CBD gross margin was 40%, up from 11% in the prior quarter, resulting in gross profit of $4.4 million. CBD operating expense was $16.4 million, up from $11.2 million in the prior quarter but down significantly as a percent of sales. The increase in operating expense was driven predominantly by payroll and occupancy expense related to new shops. We also incurred $3 million of advertising expense tied to the holiday marketing campaign and new shop grand openings, which will be scaled back considerably in future quarters.”
Not only were the employees bamboozled by executives, but shareholders weren’t told the extent of the company’s problems. The closest it got was writing in the company’s filing, “The Company has a working capital deficit, and therefore does not have sufficient liquidity and capital resources at December 28, 2019, to fully execute on its business plan and satisfy its commitments over the next twelve months.” Understatement of the year.