The Goldfarb Corporation announces first quarter results

    TORONTO, May 27 /CNW/ - The Goldfarb Corporation (the "Corporation")
today announced its first quarter 2009 results.
    Revenues from operations for the first quarter of 2009 were $56,000
compared to $172,000 in 2008, a decrease of $116,000. The net loss for the
Corporation in the first quarter of 2009 was $87,000 or $0.01 per share
compared to a net loss of $1,960,000 or $0.33 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 Loss, Comprehensive Loss and Deficit
    (unaudited)                                           Three Months Ended
                                                               March 31
                                                           2009         2008
    (thousands of dollars except per share information)       $            $

    Interest Revenue                                         56          172
    Administrative expenses                                 207          830
                                                           (151)        (658)
    Litigation settlement (note8(b))                          -       (1,500)
    Depreciation                                             (1)          (1)
    Foreign exchange gains                                   65          199
    Net Loss and Comprehensive Loss                         (87)      (1,960)
    Deficit, beginning of period                        (33,224)     (28,276)
    Deficit, end of period                              (33,311)     (30,236)
    Basic Loss per Share                                  (0.01)       (0.33)
    Weighted average number of shares outstanding     5,936,660    5,936,660

    Cash Flow Statement
    (unaudited)                                           Three Months Ended
                                                               March 31
                                                           2009         2008
    (thousands of dollars)                                    $            $

    Operating Activities
    Net loss                                                (87)      (1,960)
    Add (deduct) items not involving cash:
      Depreciation                                            1            1
      Foreign exchange gains                                (65)        (199)
                                                           (151)      (2,158)
    Changes in non-cash working capital balances (note 5)   (28)       2,010
    Cash used in operating activities                      (179)        (148)

    Financing Activities
    Distribution to shareholders (note 4)                (6,530)           -
    Cash used in financing activities                    (6,530)           -
    Investing Activities
    Repayment of note receivable                            356            -
    Redemption of short-term investments                  6,582        9,491
    Interest received on long-term investments (note 2)     572            -
    Additions to capital assets, net                          -            3
    Cash provided by investing activities                 7,510        9,494

    Foreign exchange gain on cash held in foreign currency   40          149
    Increase in cash and cash equivalents for the period    841        9,495
    Cash and cash equivalents, beginning of period        5,180        4,521
    Cash and cash equivalents, end of period (note 5)     6,021       14,016

    Balance Sheet
                                                       March 31  December 31
    (unaudited)                                            2009         2008
    (thousands of dollars)                                    $            $

    Current Assets
    Cash and cash equivalents (note 5)                    6,021        5,180
    Short-term investments                                    -        6,582
    Accounts and prepaid expenses                            16           78
    Current portion of note receivable (note 3)           1,147          355
    Total Current Assets                                  7,184       12,195
    Long-term Investments (note 2)                        9,250        9,822
    Note Receivable (note 3)                                  -        1,123
    Capital Assets                                           16           17
                                                         16,450       23,157

    Current Liabilities
    Accounts payable and accrued liabilities                102          192
    Total Current Liabilities                               102          192
    Shareholders' Equity
    Capital stock (note 4)                               49,206       55,736
    Contributed surplus                                     453          453
    Deficit                                             (33,311)     (33,224)
    Total Shareholders' Equity                           16,348       22,965

    Contingency (note 9)
                                                         16,450       23,157

    Notes to Interim Financial Statements

    For the period ended March 31, 2009 (thousands of dollars)

    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 March 31, 2009 and the results of operations and cash
    flows for the periods ended March 31, 2009 and 2008.

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

    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.

    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:

                                      Interest Rate           March 31, 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
    Accrued interest receivable                                          246
    Valuation provision, including
     pre-structuring interest                                         (8,055)

    The Class A-1 and A-2 Notes, have been assigned an "A" rating by DBRS and
    will pay interest at floating rates on a quarterly basis. On April 24,
    2009, DBRS placed the rating of the Class A-2 Notes 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.

    On January 21, 2009, 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 has
    been accrued at March 31, 2009 and was subsequently received in May 2009.
    These amounts have been included in the calculation of the fair value of
    the long-term investments.

    There is currently no active market for the replacement notes. 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 March 31, 2009, the
    Corporation estimated the fair value of its long-term investments to be
    $9.25 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     2.3%
        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                                          8 years
        Recovery of Class A-1 and A-2 Note principal
         and interest                                          50% to 100%
        Recovery of Class B, C and Class 15 Note principal
         and interest                                          0% to 60%

    The fair value of these investments could range from $8.0 million to
    $11.1 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

    Currently, the Corporation has sufficient cash available to maintain its
    operations. The balance of the Corporation's investments totaling
    $5.9 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"):

                                                       March 31  December 31
                                                           2009         2008
                                                              $            $
    T-Note (US $918; 2008-US $1,209)                      1,147        1,478
    Less: Amount due within one year                      1,147         (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

    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.

    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:

                                                       March 31  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
                                                               March 31
                                                           2009         2008
                                                              $            $
    Decrease (increase) in accounts and other
     amounts receivable                                      62         (113)
    Increase (decrease) in accounts payable and
     accrued liabilities                                    (90)       2,123
    Changes in non-cash working capital balances            (28)       2,010

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

                                                                March 31
                                                           2009         2008
                                                              $            $
    Cash on hand and with banks                              94          104
    Short-term investments                                5,927       13,912
                                                          6,021       14,016

    c)  Income taxes

    There were no income tax payments or recoveries during the periods ended
    March 31, 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

    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 will be 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

    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 on August 6, 2008 but
    was appealed by the plaintiff. On May 11, 2009, the Illinois Court of
    Appeal denied the appeal.

    No amount has been accrued in the financial statements in connection with
    this claim.

    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

    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 March 31, 2009, the maximum exposure to credit risk was $16,434
    (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 March 31, 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 $24 for the three months ended March 31, 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 March 31, 2009, the
    Corporation had cash and cash equivalents, short-term investments and T-
    Note receivable of $3,356 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 March 31, 2009 would
    have increased or decreased the foreign exchange gain by approximately
    $336 for the three months ended March 31, 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 March 31, 2009, the Corporation's accounts payable and accrued
    liabilities were $102, 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 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 March 31, 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,

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