Wally Findlay Galleries International, Inc. and Subsidiaries - Page 17

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          assets shown on the balance sheet for FY 1984 was $26,228.  To              
          the extent that the balance sheet may have understated the amount           
          that could be realized upon the sale of the subsidiary or its               
          assets by more than $26,228, a portion of the intercompany debt             
          could have been recoverable.                                                
               WFGI's auditors opined that in the event that the French               
          subsidiary had been liquidated at the end of FY 1984, it would              
          have incurred additional liquidation liabilities of approximately           
          $200,000.  Assuming this estimate to be correct, any                        
          understatement of asset values on the balance sheet would have to           
          have been very large in order for sale of the subsidiary's assets           
          at the end of FY 1984 to have yielded enough to repay any of the            
          intercompany debt.  Prompt liquidation, however, was only one of            
          the scenarios contemplated by WFGI's officers at the time, and              
          the least desirable.  During and after FY 1984 they were actively           
          promoting the sale of the French subsidiary or the group as a               
          whole.  There was sufficient expression of interest from                    
          prospective buyers to support a reasonable expectation that                 
          liquidation could be avoided.  To have assumed that the                     
          additional liabilities estimated by their auditors were                     
          inevitable would not have been consistent with the expectations             
          driving the marketing efforts.                                              
               There are reasons to question whether the financial                    
          statements accurately reflect the capacity of the French                    

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