Article by Vanmala Subramaniam, Financial Post
A licensed cannabis producer facing significant financial issues is alleging the company’s own founders misappropriated approximately $14 million from its coffers, leaving hundreds of shareholders with little to show for their investments..A video obtained by the Financial Post of a private shareholders’ meeting on Jan. 14 shows executives of Green Relief Inc. detailing a series of transactions they allege were executed by two of the company’s co-founders — Warren and Lyn Bravo — resulting in millions being siphoned out of Green Relief for personal use over a period of six years..The Bravos have denied all allegations made by Green Relief executives against them..The Hamilton, Ont.-based private medical cannabis company, which touts itself as the world’s only cannabis company that uses aquaponics to grow medical marijuana, has been struggling to stay afloat since March 2019, a month after Warren Bravo stepped down from his position as chief executive..At the Jan. 14 meeting, Green Relief’s current chief executive, Dr. Neilank Jha, told shareholders that while he is actively seeking new investment, the company only had enough funds to survive till February. Jha later told the Post that Green Relief was still liquid, and would be for the “next few months.”.“As CEO, my goal is not to seek justice. My goal is not to worry about what people have done in the past. My goal is to advance Green Relief and protect your investments,” said Jha, a Toronto-based neurosurgeon specializing in concussions, who became Green Relief’s CEO in March 2019..The company’s investigation, led by chief financial officer Stephen Massel and general counsel Bota McNamara, spanned months and involved interviews with current and former employees, former auditors, contractors and suppliers, according to Green Relief executives..As Massel and McNamara — whom Jha said he brought in to help “clean up the balance sheet” — began to comb through hundreds of documents dating back to 2013 to understand how the company had been operating financially, Massel said they started noticing numbers that weren’t adding up..Since 2013, Green Relief had received $59.2 million in funding from various sources, primarily shareholders, and had used $45.1 million for long and short-term expenses — $14.1 million was unaccounted for, according to Massel and McNamara..In a series of slides, Massel and McNamara laid out how they alleged the founders were linked to the missing funds..“They were making payments from Green Relief, using fake invoices, that had nothing to do with the company,” Massel alleged..While many of the allegations made during the presentation were directed at Warren and Lyn Bravo, at times the executives instead referenced “the founders.” The company was founded by the Bravos and a third person, but that person was not named in relation to the allegations raised at the meeting.
.Green Relief was one of the earliest medical cannabis operators in Ontario, and obtained a Health Canada licence to cultivate in February 2016. It garnered significant media attention in late 2018 and early 2019 for cultivating cannabis through a pesticide-free process in an underground aquaponic farm..Aquaponics is an agricultural process that uses aquatic animals and hydroponics to grow plants. Green Relief used fish waste to fertilize cannabis plants that it grew in water.Two Green Relief investors who spoke to the Post on condition of anonymity said they were keen to invest after touring the company’s aquaponics facility, and being told the company would end up going public..In Feb. 2019, Bravo told Global News that an initial public offering was expected “within months” and would price 100 million Green Relief shares at $3.50..“Green Relief could break even within months, and expects to be profitable this year,” he said at the time..That, according to Jha, never happened..Jha joined the company in early 2019 through Green Relief’s acquisition of his research firm, Bodhi Research & Development, and he said that’s when he learned Green Relief was struggling..Within days, Jha claimed he wired $150,000 of his personal money to keep the company afloat..“There was a concern raised from the previous CFO of approximately $200,000 in misappropriated funds on my first day in office,” he said in an email to the Post..“The capital raised since 2013 and the assets did not make sense to me so I immediately initiated and led an organization-wide review of every dollar since Green Relief’s inception.”.Jha, Massel and McNamara allege they found numerous transactions linked to the founders that did not relate to Green Relief’s actual operations.For example, they allege the Bravos used corporate funds of approximately $1.3 million to pay for the construction of a private home, and to discharge a mortgage on a property owned by Lyn Bravo..Shareholders were also told that an additional $900,000 was allegedly used to pay for the founders’ personal expenses, such as leasing vehicles and paying off credit card bills..Pointing to a slide showing a December 2016 lease agreement for a vehicle rented by Lyn Bravo, who he said was not an employee of the company at the time, Massel noted: “If you go back to … the time that we signed that obligation, we had no money. I think there was $75,000 in the bank that day and we had payrolls to run.”.A further $2.9 million, Jha and his team allege, was used by the founders to personally invest in a number of businesses, including another aquaponics venture called Aquaponics International..“These were assets that were paid for by the company, but these assets aren’t in our name, they are in other people’s names,” McNamara told shareholders..McNamara also alleges that $3.7 million of Green Relief’s money was used to bail out the founders’ outside business interests, including two entities owned by the Bravos, Bravo Cement and Unique Restoration Ltd..They further allege the founders created fake invoices amounting to $2.3 million for equipment rentals and roof repairs that they allege never actually took place..The Bravos did not directly respond to specific questions from the Post about the allegations levelled against them by Green Relief, although an email from their lawyer John Hammond stated they “vehemently deny” the allegations..“These allegations are false, without merit, and constitute a malicious defamation against each of our clients,” the email stated.