Wally Findlay Galleries International, Inc. and Subsidiaries - Page 8

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          French law to notify the French authorities of the company's                
          financial situation, which could result in a judicial declaration           
          of insolvency and involuntary liquidation proceedings.  They                
          recommended that WFGI capitalize the intercompany account in                
          order to cure the deficit.                                                  
               Sales recovered in the next fiscal year, exceeding the level           
          attained in FY 1980.  Nevertheless, the French subsidiary                   
          reported another large loss.  The consolidated financial                    
          statements of the group for FY 1981 through FY 1983 attributed              
          40 percent of the cumulative losses sustained by the French                 
          subsidiary during this period to losses in currency exchange                
          transactions caused by the appreciation of the U.S. dollar                  
          against the franc.                                                          
               A series of events in FY 1984 compounded the French                    
          subsidiary's problems.  For many years the company's accounts at            
          Banque de la Cite had been continuously overdrawn.  The bank had            
          honored overdrafts, charging interest on the funds beginning in             
          1982.  In February 1984 the French subsidiary was asked to                  
          transfer a Rouault painting from its collection to the bank as              
          security.  In March the bank announced that it would no longer              
          honor checks drawn on the subsidiary's accounts without a                   
          guarantee from the parent.  WFGI acceded to the bank's demand,              
          arranging for its own bank in the United States to issue a letter           
          of credit on behalf of the French subsidiary.                               

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