Province gave Fatkat thousands in film credits

Sept. 9, 2009

This is part 4 of our look at documents obtained from the provincial government under the Right to Information Act regarding its dealings with Fatkat Animation.

As Fatkat requested more help from the province, Business New Brunswick required them to submit several years' worth of financial statements.

For the year ending June 30, 2004, Fatkat's unaudited statements of earnings and retained earnings showed revenue of $209,199 over 217 days.

Fatkat posted a gross profit of $96,673, $128,210 in wages and salaries, $16, 355 in salaries and retained earnings of $38,343.

On the company's balance sheet they listed $48,618 under "payable to shareholder, non-interest bearing, no set terms of repayment" which is the same amount listed under "advances from shareholder."

Fatkat only had one shareholder, whose name is not known because it was blacked out in the documents from the province.

Under the New Brunswick film tax credit, the province gave Fatkat a tax credit up to a maximum of 40 per cent of eligible salaries, which reduced the production costs for a project called "And Yet I Blame Hollywood" by $28,298.

By 2005, Fatkat posted revenues of $349,549 with a gross profit of $151,454, but took a net loss of $20,563 and only stayed in the black because of earnings from the previous year, which brought 2005's retained earnings down to $17,880.

Salaries for 2005 increased to $90,600 while wages and benefits rose to $202, 355.

The company listed long-term debt of $36,265 in the form of an interest free loan from the Atlantic Canada Opportunities Agency with a five-year repayment schedule.

Fatkat also had a $10,000 line of credit, of which they borrowed the total amount and pledged a NB Film Tax Credit for security.

For 2005 the province provided a film tax credit that reduced production costs for projects called "Horseback Salad" and "Odd Job Jack" by $44,409.

By 2006 Fatkat's revenue was up to $613,532 for a gross profit of $392,819 after expenses, such as $166,566 for wages and benefits.

Salaries in 2006 jumped to $217,918 and after general and administration costs, under which Fatkat listed bad debts of $14,377, the company posted net earnings of $82,122.

With the earnings from 2005, Fatkat posted retained earnings of $99,902 for 2006, which included $20,000 listed under "loan forgiveness."

Fatkat still maintained a $10,000 line of credit, but it was unused at year end, although the company's loan from ACOA increased to $94,628, along with an $8,000 interest free NB Film Development Loan.

Another source of Fatkat's funding in 2005 was Business New Brunswick under their Technology Adoption and Commercialization Program under which they received $9,000 for equipment and software costs in July 2005 and $6,000 in September 2005.

In January 2005, the Miramichi Regional Economic Development Fund sent a letter to Fatkat to inform them of approval of up to $15,350 in funding for marketing activities, which they listed as a laptop, materials, promotions, an LCD projector, a Blackberry, tradeshow booth, tradeshows and travel.

Later that year, the economic development fund sent another letter dated June 8 to confirm approval of up to $32,000 in further funding for a portion of costs associated with marketing activities, such as travel, accommodations and food and entertainment on sales trips, along with $14,000 for event sponsorship, $20,000 for signage and billboards, $4,000 in "disposable giveaways", $15,000 in "high-end giveaways" such as jerseys and $5,000 in miscellaneous costs, such as business cards and brochures.

In July 2006, the Business New Brunswick Minister, whose name was blacked out, sent a letter to Gene Fowler, whose name was blacked out, to congratulate them on their nomination as the Ernst and Young Entrepreneur of the Year award.

"You are one of a select group of business people. You have proven leadership in challenging and prosperous times, and commitment to your industry and community," the letter said.

On Aug. 25, 2006, the Community Economic Development Fund sent a letter to Fatkat stating they would issue a $1,612 cheque to cover 50 per cent of the costs for a growth potential assessment.

The documents provided by Business New Brunswick also included a direction of payment letter to the department's project executive from Fatkat that authorized Business New Brunswick to pay out of an unspecified loan of $125,000 to the Business Development Bank of Canada on Oct. 24, 2006.

Fatkat also provided the province with receipts from suppliers during their renovations, as well as statements from credit card companies showing where they were spending money.

Invoices listed where Fatkat was spending thousands of dollars, with money going to many local businesses, including Downeast Mobility, Lounsbury Furniture, Allison's Manufacturing and Miramichi Bolt and Screw.

Visa statements also listed purchases, such as at Boston Pizza in Miramichi and O'Briens Irish Pub in New York, with notations of either a P, check mark or X next to each purchase, with no indication of what the notations meant.

Some of the more sizeable purchases included $134.95 spent at Friday's Roast Beef in Ottawa, which had an X next to it and $907.50 for a company called Elite Limousine Inc. in Ottawa, which also had an X next to it on the statement.

A few of the purchases had hand written notes with the words "no receipt" scribbled next to them, while a charge for $47.91 at the Chatham Subway had "personal expense" written next to it with both a check mark and X.

A statement from July 14 to Aug. 14, 2006 showed a $353.40 charge from a business called Bejewel in Fredericton, $116.77 at a 7-11 in Flushing, N.Y., $146.41 at a Barnes and Noble in New Jersey, $120 at Boston Pizza in Miramichi and $116.77 in cash advances.

A November 2006 statement showed a $360 at Choo Choo's, along with a $60 charge from GTA Airport Limousine in Georgetown, Ont., $60 from Gill Limo in Lasalle, Que. and four charges of $36.95 each NB Liquor in Miramichi.

Each charge had an X next to it on the copy of the statement.

Another statement included a $3.66 cash advance interest charge, although no statements showed when the cash advance was withdrawn or how much was taken.