The Goldfarb Corporation announces 2006 year end and fourth quarter results



    TORONTO, March 6 /CNW/ - The Goldfarb Corporation (the "Corporation")
today announced its fourth quarter and fiscal 2006 results.
    Revenues from operations for the fourth quarter of 2006 were $559,000
compared to $548,000 in 2005, an increase of $11,000. The net loss for the
Corporation in the fourth quarter of 2006 was $11,362,000 or $1.91 per share
compared to a net loss of $101,000 or $0.01 per share in the fourth quarter of
2005. For the year ended December 31, 2006, the Corporation's revenues from
operations were $3,043,000 compared to $1,956,000 in 2005, an increase of
$1,087,000. The net loss for 2006 was $10,713,000 or $1.80 per share compared
to net income of $221,000 ($0.04 per share) in 2005.
    In November 2006, the Corporation settled litigation in connection with
an action commenced in 2004. The claim, filed against the Corporation and
certain of its officers in the amount of $110 million, was settled at a cost
to the Corporation of $12 million. A portion of that settlement cost is
expected to be recovered from the Corporation's directors and officers
insurer.
    The accompanying six pages of unaudited interim and annual financial
statements have been prepared by and are the responsibility of the
Corporation's management. The Corporation's auditor has not performed a review
of the interim financial statements.


    
    Statement of Income (Loss) and Deficit
    -------------------------------------------------------------------------
                                     Three Months Ended        Year Ended
                                         December 31           December 31
                                       2006       2005       2006       2005
    -------------------------------------------------------------------------
    (thousands of dollars except
     per share information)
     (unaudited)                          $          $          $          $

    Interest Revenue (note 4)           559        548      3,043      1,956
    Administrative expenses             157        614      1,760      1,529
    -------------------------------------------------------------------------
                                        402        (66)     1,283        427
    Litigation settlement (note 5)  (12,000)         -    (12,000)         -
    Depreciation                         (3)        (4)       (14)       (15)
    Foreign exchange gains (losses)     239        (31)        18       (191)
    -------------------------------------------------------------------------
    Net Income (Loss)               (11,362)      (101)   (10,713)       221
    Deficit, beginning of period    (11,864)   (12,412)   (12,513)   (12,734)
    -------------------------------------------------------------------------
    Deficit, end of period          (23,226)   (12,513)   (23,226)   (12,513)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic and Diluted Income (Loss)
     per Share                        (1.91)     (0.01)     (1.80)      0.04
    -------------------------------------------------------------------------
    Weighted average number of
     shares outstanding           5,936,660  5,936,660  5,936,660  5,936,660


    Cash Flow Statement
    -------------------------------------------------------------------------
                                     Three Months Ended        Year Ended
                                         December 31           December 31
                                       2006       2005       2006       2005
    -------------------------------------------------------------------------
    (thousands of dollars)
     (unaudited)                          $          $          $          $

    Operating Activities
    Income (loss) from operations   (11,362)      (101)   (10,713)       221
    Add items not involving cash:
      Depreciation                        3          4         14         15
      Foreign exchange losses
       (gains)                         (300)        31        (79)       191
      Loss on disposal of capital
       assets                             -          1          -          1
    -------------------------------------------------------------------------
                                    (11,659)       (65)   (10,778)       428
    Changes in non-cash working
     capital balances (note 6)           23        217        (11)        (7)
    -------------------------------------------------------------------------
    Cash provided by (used in)
     operating activities           (11,636)       152    (10,789)       421
    -------------------------------------------------------------------------

    Investing Activities
    Repayment of notes receivable       300      2,422     10,048      2,422
    Redemption of short-term
     investments                          -          -     17,489          -
    Acquisition of short-term
     investments                       (287)         -    (21,871)   (17,489)
    Additions to capital assets           -          -          -         (5)
    -------------------------------------------------------------------------
    Cash provided by (used in)
     investing activities                13      2,422      5,666    (15,072)
    -------------------------------------------------------------------------

    Foreign exchange gain (loss) on
     cash held in foreign currency       80         (8)        79        (22)
    -------------------------------------------------------------------------
    Increase (decrease) in cash and
     cash equivalents for the
     period                         (11,543)     2,566     (5,044)   (14,673)
    Cash and cash equivalents,
     beginning of period (note 6)    18,212      9,147     11,713     26,386
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period (note 6)           6,669     11,713      6,669     11,713
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Balance Sheet
    -------------------------------------------------------------------------
    As at December 31                                        2006       2005
    -------------------------------------------------------------------------
    (thousands of dollars)(unaudited)

    ASSETS                                                      $          $
    Current Assets
    Cash and cash equivalents (note 6)                      6,669     11,713
    Short-term investments                                 21,871     17,489
    Accounts and other amounts receivable                     314        336
    Current portion of notes receivable (note 2)            2,545        564
    Income taxes recoverable                                   34         34
    -------------------------------------------------------------------------
    Total Current Assets                                   31,433     30,136
    -------------------------------------------------------------------------
    Notes Receivable (note 2)                               1,692     13,721
    -------------------------------------------------------------------------
    Capital Assets                                             26         40
    -------------------------------------------------------------------------
                                                           33,151     43,897
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current Liabilities
    Accounts payable and accrued liabilities                  188        221
    -------------------------------------------------------------------------
    Total Current Liabilities                                 188        221
    -------------------------------------------------------------------------
    Shareholders' Equity
    Capital stock (note 3)                                 55,736     55,736
    Contributed surplus                                       453        453
    Deficit                                               (23,226)   (12,513)
    -------------------------------------------------------------------------
    Total Shareholders' Equity                             32,963     43,676
    -------------------------------------------------------------------------

    Contingencies (note 7)
    -------------------------------------------------------------------------
                                                           33,151     43,897
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Notes to Interim Financial Statements
    -------------------------------------------------------------------------
    For the period ended December 31, 2006 (thousands of dollars)
    (unaudited)

    1.  Significant Accounting Policies

    The disclosures contained in these unaudited interim financial statements
    do not include all requirements of generally accepted accounting
    principles for annual financial statements. The unaudited interim
    financial statements should be read in conjunction with the annual
    financial statements for the year ended December 31, 2005.

    The unaudited interim financial statements are based upon accounting
    principles consistent with those used and described in the annual
    financial statements.

    The unaudited interim financial statements reflect all adjustments,
    consisting only of normal recurring accruals, which are, in the opinion
    of management, necessary to present fairly the financial position of the
    Corporation as of December 31, 2006 and the results of operations and
    cash flows for the periods ended December 31, 2006 and 2005.

    2.  Notes Receivable

    The following notes represent the Corporation's pro-rata share (48.4%) of
    the promissory notes issued by SMK Speedy International Inc. ("Speedy"):


                                                                December
                                                             2006       2005
                                                        ---------------------
                                                                $          $
    T-Note (US $3,633; 2005-US $4,359)                      4,237      5,083
    Acquisition Note                                            -      9,202
                                                        ---------------------
                                                            4,237     14,285
    Less: Amount due within one year                        2,545        564
                                                        ---------------------
                                                            1,692     13,721
                                                        ---------------------


    T-Note

    This note has terms and conditions that match the note that Speedy
    received from the purchaser, Tuffy Associates Corp. (the "Purchaser"),
    upon the sale of its Car-X business in 2002 and is comprised of:
    a.  A note in the amount of US $1,453 bearing interest at US prime plus
        3%, payable quarterly, with the principal due July 8, 2007 or at an
        earlier date under certain circumstances. During 2006, principal
        repayments of US $242 were received.
    b.  A further note in the amount of US $2,906 bearing interest at US
        prime plus 2% payable quarterly, with US $484 of principal payments
        due on July 8 in each of the years 2007 through 2009 with the balance
        of US $969 due on July 2, 2010. During 2006, principal repayments of
        US $484 were received.

    These notes are collateralized by the assets of the Purchaser and its
    subsidiary, Car-X Associates Corp. The note bearing interest at U.S.
    prime plus 3% is further collateralized by a guarantee of the Purchaser.
    The Corporation is entitled to receive interest and principal payments
    only to the extent that such amounts are received from the Purchaser and
    has no further recourse against Speedy.

    In February 2007, the Purchaser renegotiated certain terms and conditions
    of the note which resulted in an immediate prepayment of all principal
    amounts due in 2007 and 2008 plus related accrued interest (US $2,219).
    The maturity date of the remaining principal of US $1,453 is now July 8,
    2009. The Purchaser has guaranteed the remaining principal balance. The
    noteholders have agreed to subordinate the remaining outstanding
    principal to new increased senior bank financing of the Purchaser.

    Acquisition Note

    The Acquisition Note was subordinate to any senior debt and was repayable
    over 5 years to 2009. On the $9,202 principal amount, the total yield was
    14% per annum of which 8% per annum was calculated and payable quarterly
    in arrears. The remaining 6% per annum accrued and compounded annually,
    and was due in full on the date that the promissory note was paid in
    full. The Corporation accrued the 6% interest and fully provided against
    it because of the timing of payment. The remaining $2,422 of principal
    had a money market yield and was repaid in December 2005.

    In November 2005 and February 2006, the Corporation and other holders of
    the acquisition notes approved certain amendments to the repayment terms
    of the notes. These amendments were requested by Speedy in order to
    facilitate operations of Speedy. On May 15, 2006, the note and interest
    was repaid. The Corporation received $10,067 representing full and early
    repayment of the Acquisition Note together with accrued interest, partial
    deferred interest plus transaction fees. The reduction in deferred
    interest of $857 was partially offset by transaction fees of $218. No
    further payments will be made on the notes.

    3.  Capital Stock

    The Corporation's authorized capital stock is as follows:

    -   Unlimited number of Preference Shares, issued in series;
    -   Unlimited number of Class A Subordinate Voting Shares;
    -   182,000 Class B Shares carrying 15 votes per share, convertible into
        Class A Subordinate Voting Shares on a one-for-one basis. In certain
        prescribed circumstances, additional Class B Shares as may be
        required to effect the conversion of Class A Subordinate Voting
        Shares into Class B Shares.

    The issued share capital is summarized as follows:

                                                               December 31
                                                             2006       2005
                                                        ---------------------
                                                                $          $
    5,754,660 (2005 - 5,754,660) Class A
     Subordinate Voting Shares                             55,523     55,523
    182,000 Class B Shares                                    213        213
                                                        ---------------------
                                                        ---------------------
                                                           55,736     55,736
                                                        ---------------------
                                                        ---------------------

    At December 31, 2006, the Corporation had 140,000 (2005 - 140,000) stock
    options outstanding of which all were exercisable.

    Diluted income (loss) per share for the periods ended December 31, 2006
    and 2005 have not been adjusted since the effect of any exercise of
    outstanding stock options is anti-dilutive.

    4.  Segmented Information

    The Corporation's sole business segment is an investment holding company.
    The Corporation's operations reside entirely in Canada.

    5.  Litigation Settlement

    In the fourth quarter of 2006, the Corporation settled the
    $110 million claim that had been filed against the Corporation and
    certain of its officers by the purchaser of Goldfarb Consultants, the
    market research and consulting business sold by the Corporation in 1998.
    The settlement was in the amount of $12 million. The Board of Directors
    of the Corporation appointed a committee of independent directors to
    represent the Corporation's interest in this litigation. Amongst other
    things, the committee approved the payment of the settlement and
    applicable expenses of all defendants, being the Corporation's Chairman,
    Secretary, its former Executive-Vice President and its former Chief
    Financial Officer. The Corporation, on behalf of the defendants, is
    seeking reimbursement of a portion of the settlement from the insurer of
    the Corporation's directors and officers. The amount of recovery from the
    insurance company is not currently determinable. Any recovery will be
    recognized upon resolution.

    6.  Supplementary Cash Flow Information

    a)  Changes in non-cash working capital balances


                                     Three Months Ended        Year Ended
                                         December 31           December 31
                                       2006       2005       2006       2005
                                    -----------------------------------------
                                          $          $          $          $

    Decrease (increase) in accounts
     and other receivables               (7)        37         22         43
    Increase (decrease) in accounts
     payable and accrued
     liabilities                         30        180        (33)       (50)
                                    -----------------------------------------
    Changes in non-cash working
     capital balances                    23        217        (11)        (7)
                                    -----------------------------------------
                                    -----------------------------------------

    b)  Cash and cash equivalents

    Cash and cash equivalents consist of cash on hand and with banks, and
    short-term investments in highly liquid instruments with original
    maturities of three months or less. Cash and cash equivalents included in
    cash flow statements comprise the following balance sheet amounts:


                                                               December 31
                                                             2006       2005
                                                        ---------------------
                                                                $          $
    Cash on hand and with banks                               202        251
    Short-term investments                                  6,467     11,462
                                                        ---------------------
                                                            6,669     11,713
                                                        ---------------------
                                                        ---------------------

    c)  Income taxes recovered

                                     Three Months Ended        Year Ended
                                         December 31           December 31
                                       2006       2005       2006       2005
                                    -----------------------------------------
                                          $          $          $          $
    Income taxes recovered                -          -          -          -

    7.  Contingencies

    An action was filed against the Corporation in connection with the
    bankruptcy of a former subsidiary of the Corporation, Fleming Packaging
    Corporation ("Fleming"), seeking damages arising from the February 10,
    2003 amendment of Fleming's loan agreements with its bankers and the
    subsequent payment of $900 to the Corporation on September 4, 2003. The
    claim is currently expressed in the amount of $900 with potential
    additional liability undefined in the claim. Initial depositions have
    been completed. Mediation occurred in December 2006 without successful
    conclusion. The Corporation is preparing for further depositions. The
    Corporation continues to be of the view that it has meritorious defences
    and is vigorously defending the claim.

    In 2004, the Corporation received a notice of withdrawal liability
    assessment and demand for payment of US$900 from the GCIU-Employer
    Retirement Fund in connection with the unionized employees' pension plan
    of Fleming. There has been no further communications since that time. The
    Corporation is of the view that the Corporation has meritorious defences.
    The Corporation will vigorously defend itself if and when required.

    No amounts have been accrued in the financial statements in connection
    with any of the claims or possible claims.

    8.  Income Taxes

    At December 31, 2006, the Corporation has non-capital losses available to
    reduce future taxable income of approximately $6.2 million that begin to
    expire in 2009. At December 31, 2006, the Corporation has capital losses
    available to offset future capital gains of approximately $27.0 million.
    These capital losses do not expire.

    9.  Subsequent Event

    Certain terms and conditions of the T-Note receivable were renegotiated
    in February 2007 as further described in Note 2.

    -------------------------------------------------------------------------

    The Goldfarb Corporation trades on the NEX Board of the TSX Venture
    Exchange under the symbol GDF.H.

    

    %SEDAR: 00002535E




For further information:

For further information: Karen Killeen, Chief Financial Officer, at
(416) 928-3710, Toronto, info@goldfarbcorp.com

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GOLDFARB CORPORATION

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