Misleading financials

The financial statement handed out by the board (Carrie, Precious, and Nina) at the annual meeting on Wednesday, April 5, 2017 misrepresents the financial condition of the co-op by omitting at least $49,500 in debt, which was also omitted from the 2017 Annual Report:

Annotated EOY 2016 balance sheet

The co-op signed a contract to pay $100,000 for Red Lodge Books & Tea. The schedule of payments from section 10 of the Asset Purchase Agreement specifies:

$10,000 at signing of the agreement (April 30)
$45,000 at the Closing (June 6)
$45,000 sixty days after closing

There’s a provision for that final payment to turn into monthly $10,000 payments if the funding goals weren’t met. The first two payments were made quite late. The final payment is now over a year late, and was omitted from both the financials distributed at the meeting and the 2017 annual report.

My personal credit card was used for over $11,000 in co-op purchases (mostly inventory). It was included on the financials distributed at the meeting, except for accrued interest.

I made a personally-guaranteed loan to the co-op of $4,500 through Paypal. I made it clear that the loan was for six months only. The board congratulated me for my ingenuity and thanked me for doing it (see below). The loan was omitted from the financials distributed at the meeting. It was also omitted from the 2017 annual report.

Here is the email chain regarding this loan. It’s pretty clear that the board approved of it:

Subject: Finance status
Date: Thu, 15 Sep 2016 12:20:23 -0600
From: Gary D. Robson <gary@thishouseofbooks.com>
Organization: This House of Books
To: Nina Hernandez <hernandez.nina@gmail.com>, Carrie La Seur <claseur@gmail.com>, Precious McKenzie <preciousmmckenzie@gmail.com>

As I told you yesterday, we have a $4,500 payment due for the flooring and insufficient funds to cover it. I figured out a way to handle this using my personal PayPal credit. It’s a bit complicated, and I want to make sure everybody’s on top of what I’m doing:

1. I created an invoice from the co-op’s PayPal account to my personal PayPal account for $4,500, using a promotion to offer myself 6-month payment terms with no interest (there’s still a fee, just no interest).

2. I paid the invoice using that credit deal, and then transferred the $4,500 from the co-op’s PayPal account to the Valley FCU checking account.

3. I wrote a co-op check to Covering Broadway for $4,500, and asked them not to deposit it until the bank transfer clears on Monday.

We’ll still have to come up with this money, but I just bought us six months for total fees of $130.80.

I am also buying a $500 preferred share today, so that will help with incidental payments.

Gary D. Robson
General Manager/CEO
This House of Books
224 North Broadway, Billings, MT 59101

Subject: Re: Finance status
Date: Thu, 15 Sep 2016 16:56:36 -0400
From: Carrie La Seur <claseur@gmail.com>
To: Gary D. Robson <gary@thishouseofbooks.com>
CC: Nina Hernandez <hernandez.nina@gmail.com>, Precious McKenzie <preciousmmckenzie@gmail.com>

Thank you for the (totally legal and legit) sleight of hand!

I just saw that Valley is offering HELOCs at 1.99% for 6 months. I don’t know if there’s any amount we can be certain we’ll be able to pay back within 6 months, but that could be another fairly easy source of cash – maybe to advance the co-op whatever we’re expecting from DBA?

Subject: Re: Finance status
Date: Thu, 15 Sep 2016 15:21:40 -0600
From: Nina Hernandez <hernandez.nina@gmail.com>
To: Carrie La Seur <claseur@gmail.com>
CC: Gary D. Robson <gary@thishouseofbooks.com>, Precious McKenzie <preciousmmckenzie@gmail.com>

Dang Gary, I’m impressed.

Thanks for figuring that out!

Sent from my iPhone