The Goldfarb Corporation announces second quarter results



    TORONTO, Aug. 27 /CNW/ - The Goldfarb Corporation (the "Corporation")
today announced its second quarter results.
    Revenues from operations for the second quarter of 2009 were $20,000
compared to $127,000 in 2008, a decrease of $107,000. The net income for the
Corporation in the second quarter of 2009 was $787,000 or $0.13 per share
compared to a net loss of $534,000 or $0.09 per share in 2008.
    For the first half of 2009, the Corporation's revenue was $76,000
compared to $299,000 in 2008, a decrease of $223,000. The net income for the
first six months of 2009 was $700,000 ($0.12 per share) compared to a net loss
of $2,494,000 ($0.42 per share) in 2008.
    The accompanying ten pages of unaudited interim 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 these interim
financial statements.

    
    Statement of Income (Loss), Comprehensive Income (Loss) and Deficit
    -------------------------------------------------------------------------
    (unaudited)                    Three Months Ended     Six Months Ended
                                        June 30               June 30
                                       2009       2008       2009       2008
    -------------------------------------------------------------------------
    (thousands of dollars except
     per share information)               $          $          $          $

    Interest revenue                     20        127         76        299
    Administrative expenses             298        603        505      1,433
    -------------------------------------------------------------------------
                                       (278)      (476)      (429)    (1,134)
    Litigation recovery (note 8(a))   1,315          -      1,315          -
    Litigation settlement
     (note 8(b))                          -          -          -     (1,500)
    Depreciation                         (1)        (1)        (2)        (2)
    Foreign exchange gains (losses)    (249)       (57)      (184)       142
    -------------------------------------------------------------------------
    Net Income (Loss) and
     Comprehensive Income (Loss)        787       (534)       700     (2,494)
    Deficit, beginning of period    (33,311)   (30,236)   (33,224)   (28,276)
    -------------------------------------------------------------------------
    Deficit, end of period          (32,524)   (30,770)   (32,524)   (30,770)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic Income (Loss)
     per Share                         0.13      (0.09)      0.12      (0.42)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Weighted average number of
     shares outstanding           5,936,660  5,936,660  5,936,660  5,936,660



    Cash Flow Statement
    -------------------------------------------------------------------------
    (unaudited)                    Three Months Ended     Six Months Ended
                                        June 30               June 30
                                       2009       2008       2009       2008
    -------------------------------------------------------------------------
    (thousands of dollars)                $          $          $          $

    Operating Activities
    Income (loss) from operations       787       (534)       700     (2,494)
    Add items not involving cash:
      Depreciation                        1          1          2          2
      Foreign exchange losses (gains)   249         57        184       (142)
    -------------------------------------------------------------------------
                                      1,037       (476)       886     (2,634)
    Changes in non-cash working
     capital balances (note 5)         (153)      (194)      (181)     1,816
    -------------------------------------------------------------------------
    Cash provided by (used in)
     operating activities               884       (670)       705       (818)

    Financing Activities
    Distribution to shareholders
     (note 4)                             -          -     (6,530)         -
    -------------------------------------------------------------------------
    Cash used in financing activities     -          -     (6,530)         -

    Investing Activities
    Acquisition of short-term
     investments                     (5,455)         -     (5,455)         -
    Redemption of short-term
     investments                          -          -      6,582      9,491
    Interest received on long-term
     investments (note 2)               248          -        820          -
    Repayment of note receivable          -          -        356          -
    Acquisition of capital assets,
     net                                  -         (1)         -          2
    -------------------------------------------------------------------------
    Cash (used in) provided by
     investing activities            (5,207)        (1)     2,303      9,493

    Foreign exchange gain (loss) on
     cash held in foreign currency     (163)       (42)      (123)       107
    -------------------------------------------------------------------------
    Increase (decrease) in cash and
     cash equivalents for the
     period                          (4,486)      (713)    (3,645)     8,782
    Cash and cash equivalents,
     beginning of period              6,021     14,016      5,180      4,521
    -------------------------------------------------------------------------
    Cash and cash equivalents, end
     of period (note 5)               1,535     13,303      1,535     13,303
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Balance Sheet
    -------------------------------------------------------------------------
    (unaudited)                                         June 30  December 31
                                                           2009         2008
    -------------------------------------------------------------------------
    (thousands of dollars)                                    $            $

    ASSETS
    Current Assets
    Cash and cash equivalents (note 5)                    1,535        5,180
    Short-term investments                                5,455        6,582
    Accounts receivable and prepaid expenses                163           78
    Current portion of note receivable (note 3)           1,061          355
    -------------------------------------------------------------------------
    Total Current Assets                                  8,214       12,195
    -------------------------------------------------------------------------
    Long-term Investments (note 2)                        9,002        9,822
    -------------------------------------------------------------------------
    Note Receivable (note 3)                                  -        1,123
    -------------------------------------------------------------------------
    Capital Assets                                           15           17
    -------------------------------------------------------------------------
                                                         17,231       23,157
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current Liabilities
    Accounts payable and accrued liabilities                 96          192
    -------------------------------------------------------------------------
    Total Current Liabilities                                96          192
    -------------------------------------------------------------------------
    Shareholders' Equity
    Capital stock (note 4)                               49,206       55,736
    Contributed surplus                                     453          453
    Deficit                                             (32,524)     (33,224)
    -------------------------------------------------------------------------
    Total Shareholders' Equity                           17,135       22,965
    -------------------------------------------------------------------------

    Contingency (note 9)
    -------------------------------------------------------------------------
                                                         17,231       23,157
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Notes to Interim Financial Statements
    -------------------------------------------------------------------------
    For the period ended June 30, 2009 (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 are based upon accounting principles consistent with
    those used and described in the annual financial statements for the year
    ended December 31, 2008. The unaudited interim financial statements
    should be read in conjunction with the annual financial statements for
    the year ended December 31, 2008.

    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 June 30, 2009 and the results of operations and cash
    flows for the periods ended June 30, 2009 and 2008.

    2.  Long-Term Investments (formerly Asset-Backed Commercial Papers
        ("ABCP"))

    In July 2007, the Corporation invested $17.1 million in three separate
    non-bank sponsored asset-backed commercial papers that did not redeem on
    their maturity date of August 13, 2007. Dominion Bond Rating Service
    Limited ("DBRS") had rated these commercial papers as R-1 High at the
    time of purchase. These investments did not settle on maturity as a
    consequence of liquidity issues in the non-bank sponsored ABCP market.
    Since that time, the market for these asset-backed securities has been
    frozen. As a result, the Corporation reclassified its investment in ABCP
    from cash and cash equivalents to held for trading long-term investments.
    These investments are recorded at fair value with unrealized holding
    gains and losses included in earnings.

    The securities were subject to restructuring by the Pan-Canadian
    Investors Committee (the "Committee") which was formed to prepare and
    oversee a restructuring plan, pursuant to which the holders of the ABCP,
    including the Corporation, would exchange their securities for new
    floating rate notes with maturities that match the maturities of the
    underlying assets. On January 12, 2009, the Ontario Superior Court of
    Justice granted an order for the implementation of the Committee's final
    amended restructuring plan for the ABCP. The restructuring was completed
    on January 21, 2009 and on closing, the Corporation exchanged their
    holdings of ABCP for $17.1 million of long-term floating rate notes from
    Master Asset Vehicle 2 ("MAV 2") consisting of:


                                               June 30,
    Note Categories        Interest Rate          2009
    ---------------        -------------       --------
                                                     $
    Class A-1                BA - 50 bps         5,983
    Class A-2                BA - 50 bps         8,497
    Class B                  BA - 50 bps         1,542
    Class C                          20%           496
    Class 15 Tracking Notes     Floating           541
                                               --------
                                                17,059
    Accrued interest receivable                     25
    Valuation provision,
     including pre-
     restructuring
     interest                                   (8,082)
                                               --------
                                                 9,002
                                               --------
                                               --------

    On closing, interest (net of actual and future estimated restructuring
    fees and expenses) of $572 was received on the ABCP for the period from
    August 13, 2007 to August 31, 2008. Interest for the period from
    September 1, 2008 through January 21, 2009 in the amount of $246 was
    received in May 2009. These amounts have been included in the calculation
    of the fair value of the long-term investments.

    The Class A-1 and A-2 Notes will pay interest at floating rates on a
    quarterly basis. The Class A-1 Notes has been assigned an "A" rating by
    DBRS. On August 11, 2009, DBRS downgraded the rating of the Class A-2
    Notes to BBB (low) from A and maintained the rating Under Review with
    Negative Implication. The remaining notes are not rated. The Class B and
    C Notes will accrue interest at floating rates and will not be paid until
    after the Class A-1 and A-2 Notes are fully repaid. The Class 15 Notes
    will pay interest quarterly on a floating rate basis to the extent that
    proceeds are realized and cash is available for that note.

    Interest rates on the MAV 2 Notes are mostly based on prevailing Banker's
    Acceptance rates. First quarter interest on the Class A-1 and A-2 Notes
    was not paid when it became due in April 2009. Because the prevailing
    banker's acceptance rates are currently so low, there were insufficient
    funds to pay the fixed expense of the margin funding facility ("MFF")
    that is required to be paid prior to interest being paid. By July 2009,
    rates had improved sufficiently to pay the accrued MFF shortfall and both
    the first and second quarter interest due on these notes. These amounts
    have been accrued at June 30, 2009. First quarter interest on the Class
    15 Notes was paid in April 2009. Second quarter interest on these notes
    was paid in July 2009 and has been accrued at June 30, 2009.

    There is currently a very illiquid market for the MAV 2 notes. Trading
    has been limited and at extremely distressed prices. It is uncertain when
    or if this market will develop. As a result, the Corporation will
    continue to estimate the fair value of its long-term investments using a
    valuation technique which incorporates a probability weighted discounted
    cash flow approach considering the best available market data for such
    investments. At June 30, 2009, the Corporation estimated the fair value
    of its long-term investments to be $9.0 million (June 30, 2008 -
    $12.8 million).

    The significant assumptions used to value the Corporation's investment in
    these securities are as follows:


    Margin facility cost                                       1.0%
    Timing of principal repayments                             at maturity
    Risk free interest rate on Class A-1 and A-2 Notes         3.13%
    Discount rate on Class B, C and Class 15 Notes             30%
    Interest rate on Class A-1 and A-2 Notes                   2.0%
    Interest rate on Class B, C and Class 15 Notes             2.0% to 20.0%
    Term of notes                                              6-8 years
    Recovery of Class A-1 and A-2 Note principal and interest  40% to 100%
    Recovery of Class B and C Note principal and interest      0% to 40%
    Recovery of Class 15 Note principal and interest           50% to 100%


    The fair value of these investments could range from $7.6 million to
    $10.6 million using the same valuation methodology with alternative
    reasonably possible assumptions. In subsequent periods, the recorded fair
    values may change materially from the estimated fair values. No changes
    to the fair value resulted from the completion of the restructuring in
    January 2009. A 1% change in the discount rate would increase or decrease
    the estimated fair value of these long-term investments by approximately
    $0.6 million.

    Currently, the Corporation has sufficient cash available to maintain its
    operations. The balance of the Corporation's investments totaling $6.9
    million are invested in highly rated liquid instruments.

    3.  Note Receivable

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

                                                        June 30  December 31
                                                           2009         2008
                                                              $            $
                                                     ------------------------
    T-Note (US $918; 2008-US $1,209)                      1,061        1,478
    Less: Amount due within one year                      1,061         (355)
                                                     ------------------------
                                                              -        1,123
                                                     ------------------------
                                                     ------------------------

    The T-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 was 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.

    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.

    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 is July 8, 2009. The
    Purchaser has guaranteed the remaining principal balance. The noteholders
    agreed to subordinate the remaining outstanding principal to new
    increased senior bank financing of the Purchaser. In December 2007, an
    additional principal repayment of US $244 was received. In January 2009,
    a further principal repayment of US $291 was received. The remaining
    outstanding balance, plus accrued interest, was received on July 8, 2009.

    4.  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:

                                                        June 30  December 31
                                                           2009         2008
                                                     ------------------------
                                                              $            $
    5,754,660 (2008-5,754,660) Class A Subordinate
     Voting Shares                                       49,193       55,523
    182,000 Class B Shares                                   13          213
                                                     ------------------------
                                                         49,206       55,736
                                                     ------------------------
                                                     ------------------------

    On February 6, 2009, the shareholders of the Corporation passed a special
    resolution approving the reduction of the Corporation's stated capital by
    an aggregate of $6.5 million, resulting in a distribution of $1.10 per
    Class A Subordinate Voting Share and Class B Share. The distribution was
    made on February 18, 2009.

    5.  Supplementary Cash Flow Information

    a) Changes in non-cash working capital balances

                                    Three Months Ended     Six Months Ended
                                          June 30               June 30
                                       2009       2008       2009       2008
                                    -----------------------------------------
                                          $          $          $          $
    Increase in accounts and other
     receivables                       (147)       (38)       (85)      (151)
    Increase (decrease) in accounts
     payable and accrued liabilities     (6)      (156)       (96)     1,967
                                    -----------------------------------------
    Changes in non-cash working
     capital balances                  (153)      (194)      (181)     1,816
                                    -----------------------------------------
                                    -----------------------------------------

      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 365 days or less. Cash and cash equivalents included in
    cash flow statements comprise the following balance sheet amounts:

                                                                June 30
                                                           2009         2008
                                                     ------------------------
                                                              $            $
    Cash on hand and with banks                              89          306
    Short-term investments                                1,446       12,997
                                                     ------------------------
                                                          1,535       13,303
                                                     ------------------------
                                                     ------------------------

    c) Income taxes recovered

    There were no income tax payments or recoveries during the periods ended
    June 30, 2009 and 2008.

    6.  Income Taxes

    At December 31, 2008, the Corporation had non-capital losses available to
    reduce future taxable income of approximately $14.5 million. If unused,
    these losses expire as follows:

          Year Of Expiry        Amount
         ------------------------------
                                     $
              2009                  80
              2010               1,094
              2026              10,702
              2028               2,576
                             ----------
                                14,452
                             ----------
                             ----------

    No tax benefit has been recognized on these losses because it is more
    likely than not that the benefit of these losses will not be realized. At
    December 31, 2008, the Corporation had capital losses available to offset
    future capital gains of approximately $27.0 million. These capital losses
    do not expire.

    7.  Segmented Information

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

    8.  Litigation Settlements

    (a) 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 $12 million. The Board of
        Directors of the Corporation appointed a committee of independent
        directors to represent the Corporation's interest in this litigation.
        Amongst other things, the committee approved the payment of the
        settlement and applicable expenses of all defendants, being the
        Corporation's Chairman, Secretary, its former Executive-Vice
        President and its former Chief Financial Officer. The Corporation, on
        behalf of the defendants, sought reimbursement of a portion of the
        settlement from the insurer of the Corporation's directors and
        officers. In April 2009, a panel of arbitrators ruled in favour of
        the Corporation and determined that the insurer should contribute
        US$ 960 plus related interest costs. On April 30, 2009, the
        Corporation received Cdn $1.32 million. The recovery has been
        recorded as income in the second quarter of 2009.

    (b) An action was filed against the Corporation and certain of its
        directors and officers by the trustee of Fleming Packaging Corp.
        ("Fleming"). In May 2008, the Corporation reached a settlement with
        the plaintiff for US$ 1.45 million. The settlement was approved by
        the Illinois Bankruptcy Court on June 3, 2008. The Corporation is
        seeking contribution toward the settlement amount from the insurer of
        the Corporation's directors and officers. The amount to be
        contributed by the insurance company has not been determined at this
        time.

    9.  Contingency

    In 2003, 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. A claim was filed in connection with this notice in 2007. The
    claim was dismissed by the Illinois District Court in August 2008 but was
    appealed by the plaintiff. On May 11, 2009, the judgment of the district
    court was affirmed. On August 10, 2009, the appeal period for the
    plaintiff expired and the claim is now fully concluded.

    10. Financial Instruments

    The carrying values reported in the balance sheet for cash and cash
    equivalents, short-term investments, accounts receivable, interest
    receivable and accounts payable and accrued liabilities approximate fair
    values due to the short maturity of those instruments. The carrying value
    of the note receivable approximates fair value because the interest rate
    on this instrument changes with market interest rates. Long-term
    investments are carried at estimated fair value.

    The nature of these financial instruments and the Corporation's structure
    as an investment holding company expose the Corporation to credit risk,
    interest rate risk, currency risk and liquidity risk. The Corporation
    manages its exposure to these risks by employing risk management
    strategies and policies to ensure that any exposure to risk is in
    compliance with the Corporation's capital management objectives and risk
    tolerance levels. These risks are monitored in relation to market
    conditions. The Board of Directors has overall responsibility for the
    establishment and oversight of the Corporation's risk management
    framework.

    a) Credit risk

    Financial instruments that potentially subject the Corporation to
    concentrations of credit risk consist of cash and cash equivalents,
    short-term and long-term investments, accounts receivable and the note
    receivable. The Corporation's cash and cash equivalents and short-term
    investments consist of bank deposits and investments in highly rated
    liquid investments with Canadian financial institutions. The T-Note
    receivable represents the Corporation's pro-rata share of the promissory
    note issued by Speedy arising from the sale of its Car-X business in 2002
    as described in Note 3. The long-term investments are in floating rate
    notes receivable (formerly ABCP).

    Financial instruments are exposed to credit risk as a result of the risk
    of the counter-party defaulting on its obligations. The Corporation
    monitors and limits its exposure to credit risk on a continuous basis.
    The Corporation provides reserves for credit risks based on the financial
    condition and short and long-term exposures to counter-parties.

    As at June 30, 2009, the maximum exposure to credit risk was $17,216
    (December 31, 2008 - $23,140) being the carrying value of its cash and
    cash equivalents, short-term and long-term investments, accounts
    receivable and the note receivable. None of the financial assets that are
    fully performing have been renegotiated during the year with the
    exception of ABCP. The Corporation does not believe that there is
    significant credit risk arising from any of its receivables and
    investments except in connection with its long-term investments as
    disclosed in Note 2.

    b) Interest rate risk

    The Corporation is exposed to interest rate risk arising from
    fluctuations in interest rates on its cash and cash equivalents, short-
    term investments, note receivable and long-term investments. Cash and
    cash equivalents which are in excess of day-to-day requirements are
    placed on short-term deposit with Canadian financial institutions and
    earn interest at rates available at the time the deposits are made. The
    T-Note receivable has a floating interest rate which is based on the Wall
    Street Journal prime rate of interest. At June 30, 2009, the interest
    rate on the T-Note was 5.25% (2008 - 7.25%). A 1% change in market
    interest rates would have increased or decreased interest revenue by
    approximately $46 for the six months ended June 30, 2009. The Corporation
    also has interest rate risk relating to its long-term investments as
    disclosed in Note 2.

    c) Currency risk

    The Corporation has financial assets which are denominated in U.S.
    dollars and are subject to fluctuations in exchange rates of the Canadian
    dollar with the U.S. dollar. The Corporation does not utilize any
    financial instruments or cash management policies to mitigate the risks
    arising from changes in exchange rates. At June 30, 2009, the Corporation
    had cash and cash equivalents and T-Note receivable of $1,086 and
    accounts payable of $24 which were denominated in U.S. dollars. A 10%
    change in the foreign exchange rate from Canadian dollars to United
    States dollars at June 30, 2009 would have increased or decreased the
    foreign exchange gain by approximately $0.6 million for the six months
    ended June 30, 2009.

    d) Liquidity risk

    The Corporation's approach to managing liquidity is to ensure that it
    will have sufficient liquidity to meet its liabilities when they are due.
    The Corporation manages liquidity risk through timing the maturities of
    its investments to match its financial obligations and ensuring that it
    invests in secure instruments. The Corporation's contractual obligations
    are specifically related to its accounts payable and accrued liabilities.
    At June 30, 2009, the Corporation's accounts payable and accrued
    liabilities were $96, all of which become due for payment within the
    normal terms of trade, generally between 30 and 60 days (December 31,
    2008 - $192).

    11. Capital Management

    The Corporation defines its capital as cash and cash equivalents, short-
    term investments and long-term investments. Since the sale of Speedy, the
    Board of Directors have been evaluating the various alternatives for the
    use of the cash proceeds from the transaction, including determining the
    cash available for distribution to shareholders. The Board has also
    considered alternative methods of effecting a tax efficient distribution
    and obtained approval from the Canada Revenue Agency. The Corporation's
    objectives in managing its capital are to provide an appropriate return
    on investment to its shareholders while maintaining capital preservation.

    There were no changes in the Corporation's approach to capital management
    in the period ended June 30, 2009.

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

    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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