Wally Findlay Galleries International, Inc. and Subsidiaries - Page 6

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          no interest accrued, and no security was provided.  Under the               
          memorandum of agreement executed in 1971, which governed their              
          relationship, the subsidiary was required to remit amounts                  
          payable to the parent “as promptly as practicable.”  In practice,           
          WFGI permitted the French subsidiary to retain WFGI's 65-percent            
          share of sale proceeds to pay other creditors and finance its               
          working capital needs generally.  Although the French subsidiary            
          made payments from time to time, the intercompany account showed            
          a substantial balance due WFGI in every year from FY 1971 to                
          FY 1984.                                                                    
                    Intercompany Account Balance Payable to WFGI                      
          FY    Balance       FY  Balance         FY   Balance                        
          1971  $1,179,903    1976  $354,165      1981   $885,013                     
          1972     629,622   1977   453,777     1982    630,466                       
          1973     991,735   1978   348,369       1983  1,026,143                     
          1974     890,779    1979   286,419      1984  11,061,425                    
          1975     707,021   1980   990,982                                           
               1Prior to cancellation as of September 30, 1984.                       
               Owing to the large and persistent intercompany debt, the               
          French subsidiary's balance sheets showed a deficit in                      
          shareholder's equity in every one of these years as well.                   
          Consequently, to have caused the subsidiary to pay greater                  
          amounts to the parent would have jeopardized the subsidiary's               
          ability to continue paying its debts to third parties.  The                 
          officers of WFGI believe that any action by the parent company              
          that caused the subsidiary's insolvency to become publicly known            





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