The Goldfarb Corporation announces second quarter results

    TORONTO, Aug. 26 /CNW/ - The Goldfarb Corporation (the "Corporation")
today announced its second quarter results.
    Revenues from operations for the second quarter of 2008 were $127,000
compared to $385,000 in 2007, a decrease of $258,000. The net loss for the
Corporation in the second quarter of 2008 was $534,000 or $0.09 per share
compared to a net loss of $160,000 or $0.03 per share in 2007.
    For the first half of 2008, the Corporation's revenue was $299,000
compared to $783,000 in 2007, a decrease of $484,000. The net loss for the
first six months of 2008 was $2,494,000 ($0.42 per share) compared to $295,000
($0.05 per share) in 2007.
    The accompanying nine 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     Six Months Ended
                                           June 30               June 30
                                       2008       2007       2008       2007
    (thousands of dollars except
     per share information)               $          $          $          $

    Interest revenue                    127        385        299        783
    Administrative expenses             603         93      1,433        592
                                       (476)       292     (1,134)       191
    Litigation settlement (note 8(b))     -          -     (1,500)         -
    Depreciation                         (1)        (3)        (2)        (5)
    Foreign exchange gains (losses)     (57)      (449)       142       (481)
    Net Loss and Comprehensive Loss    (534)      (160)    (2,494)      (295)
    Deficit, beginning of period    (30,236)   (23,361)   (28,276)   (23,226)
    Deficit, end of period          (30,770)   (23,521)   (30,770)   (23,521)
    Basic and Diluted Loss per
     Share                            (0.09)     (0.03)     (0.42)     (0.05)
    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
                                       2008       2007       2008       2007
    (thousands of dollars)                $          $          $          $

    Operating Activities
    Loss from operations               (534)      (160)    (2,494)      (295)
    Add items not involving cash:
      Depreciation                        1          3          2          5
      Foreign exchange gains (losses)    57        447       (142)       481
                                       (476)       290     (2,634)       191
    Changes in non-cash working
     capital balances (note 5)          (96)      (276)     1,914        (26)
    Cash provided by operating
     activities                        (572)        14       (720)       165

    Financing Activities                  -          -          -          -

    Investing Activities
    Repayment of note receivable          -          -          -      2,545
    Redemption of short-term investments  -          -      9,491     21,871
    Acquisition of capital assets, net   (1)         -          2          -
    Cash provided by investing
     activities                          (1)         -      9,493     24,416

    Foreign exchange gain (loss) on
     cash held in foreign currency      (42)      (307)       107       (326)
    Increase (decrease) in cash and
     cash equivalents for the period   (615)      (293)     8,880     24,255
    Cash and cash equivalents,
     beginning of period             14,016     31,217      4,521      6,669
    Cash and cash equivalents,
     end of period (note 5)          13,401     30,924     13,401     30,924

    Balance Sheet
    (unaudited)                                     June 30      December 31
                                                      2008           2007
    (thousands of dollars)                                $                $

    Current Assets
    Cash and cash equivalents (note 5)               13,303            4,521
    Short-term investments                                -            9,491
    Accounts and other amounts receivable               234               83
    Income taxes recoverable                             34               34
    Total Current Assets                             13,571           14,129
    Long-term Investments (note 2)                   12,830           12,830
    Note Receivable (note 3)                          1,222            1,187
    Capital Assets                                       18               22
                                                     27,641           28,168

    Current Liabilities
    Accounts payable and accrued liabilities          2,222              255
    Total Current Liabilities                         2,222              255

    Shareholders' Equity
    Capital stock (note 4)                           55,736           55,736
    Contributed surplus                                 453              453
    Deficit                                         (30,770)         (28,276)
    Total Shareholders' Equity                       25,419           27,913

    Contingency (note 9)
                                                     27,641           28,168

    Notes to Interim Financial Statements

    For the period ended June 30, 2008 (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 should be read in conjunction with the annual
    financial statements for the year ended December 31, 2007.

    The unaudited interim financial statements are based upon accounting
    principles consistent with those used and described in the annual
    financial statements, except that effective January 1, 2008, the
    Corporation adopted three new Handbook Sections issued by the CICA:
    Section 3862 ("Financial Instruments-Disclosures"), Section 3863
    ("Financial Instruments-Presentation") and Section 1535 ("Capital
    Disclosures"). These sections require the Corporation to provided
    additional disclosures relating to its financial instruments and about
    the Corporation's capital (notes 10 and 11).

    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, 2008 and the results of operations and cash
    flows for the periods ended June 30, 2008 and 2007.

    2.  Asset-Backed Commercial Paper ("ABCP")

    The Corporation is currently holding three separate matured asset-backed
    commercial papers totaling $17.1 million that have not been paid out and
    remain outstanding at June 30, 2008. Aurora Trust ($5.0 million),
    Structured Investment Trust III ($5.0 million) and Structured Asset Trust
    ($7.1 million) did not redeem on their maturity date of August 13, 2007.
    These trusts were administered by Coventree Capital Group Inc. Each of
    these trusts had lines of credit from liquidity providers to finance the
    repayment of their notes upon maturity if need be. On August 13, 2007,
    the market stopped purchasing commercial paper from these trusts amongst
    others. The liquidity providers to those trusts refused to advance the
    requisite funds to enable these trusts to repay these notes upon their
    maturity dates. Since that time, the market for these asset-backed
    securities has been frozen. Dominion Bond Rating Service Limited ("DBRS")
    had rated commercial paper issued by these trusts as R-1 High at the time
    of purchase. Since August 16, 2007, these commercial papers have been
    rated R-1 High, Under Review with Developing Implications by DBRS. The
    Corporation continues to investigate these market issues which appear to
    be related to the lack of liquidity for Canadian third party asset-backed

    The securities have been the subject of a restructuring plan developed by
    the Pan-Canadian Investors Committee (the "Committee") which was formed
    to prepare and oversee such a restructuring plan. The Committee invited
    and received numerous proposals to restructure the ABCP market. During
    the period August 16, 2007 to March 17, 2008, the Committee developed a
    restructuring plan pursuant to which the holders of the ABCP, including
    the Corporation, will exchange their securities for new floating rate
    notes with maturities that match the maturities of the underlying assets.
    The assets of the various trusts are being pooled into two new legal

    On March 17, 2008, the Committee obtained an Order commencing a
    proceeding in respect of the trusts under the Companies' Creditors
    Arrangement Act (Canada) (the "CCAA") and filed a plan to implement the
    proposed restructuring (the "Plan"). The Plan was overwhelmingly approved
    by the creditors of the trusts at a meeting held on April 25, 2008.

    On May 12, 2008, the Committee sought the approval of the Plan by the
    Ontario Superior Court of Justice (the "Court"). A substantial number of
    holders of commercial paper, including the Corporation, opposed the
    approval by the Court of the Plan because the Plan contained releases of
    any claims the noteholders may have against third parties including
    fraud, gross negligence, negligence, failure to observe the "know your
    client" rule and failure to ensure that the investment was suitable for
    the client. The Court declined to approve the Plan after a two-day
    hearing. The Court indicated that it was prepared to approve a Plan that
    contained releases of all claims except fraud. The Court questioned
    whether it could or should approve a Plan containing releases of
    fraudulent conduct. The Court directed that the stakeholders consider
    establishing a procedure for resolving fraud claims.

    The Committee, with the support of the financial institutions providing
    liquidity pursuant to the Plan, filed an Amended Plan excluding certain
    fraud claims from the releases contained in the original Plan. The fraud
    claims excluded from the releases are narrowly defined and are limited to
    the seller of the ABCP. It will be difficult for any holder of ABCP to
    establish liability on the part of the financial institution which sold
    the ABCP to each such holder.

    The Committee, supported by the financial institutions providing
    liquidity pursuant to the Plan, certain holders of ABCP and other
    stakeholders, sought approval of the Amended Plan by the Court at a
    hearing held on June 3, 2008. A substantial number of holders of ABCP,
    including the Corporation, opposed the approval of the Amended Plan
    because the fraud claims excluded from the releases were too narrow and,
    in any event, no claims against third parties could or should be
    released. On June 5, 2008, the Court approved the Amended Plan.

    A number of holders of ABCP, excluding the Corporation, appealed the
    approval of the Amended Plan. The Corporation did not participate in the
    appeal because, if the appeal was allowed, the proponents of the
    restructuring may abandon the restructuring and liquidation would ensue.
    The Corporation was and remains of the view that its recoveries will be
    greater under the Amended Plan than they will be in a liquidation in
    which case the Corporation would be entitled to pursue recovery of its
    losses from third parties.

    The appeal was heard by the Ontario Court of Appeal on June 25 and 26,
    2008. The Court of Appeal ruled in favour of the Amended Plan on August
    18, 2008. If the Amended Plan is not appealed with the Supreme Court of
    Canada, the Committee expects the Amended Plan will be implemented
    effective September 30, 2008.

    If the Amended Plan fails and the underlying assets are liquidated, the
    Committee has advised the Stakeholders that the holders of the Commercial
    Paper will incur substantial losses. If the Amended Plan is implemented,
    there is significant uncertainty in estimating the amount and timing of
    cash flows from any restructuring. As a result, the Corporation has
    applied its best judgment to assess the market conditions at June 30,
    2008 using all information available from the Committee and DBRS.
    Management also considered current investment ratings and the composition
    and valuation estimates of the underlying assets. The valuation of each
    trust has been limited by a lack of information about the underlying
    assets as this information has not been made available by the trusts, the
    Committee nor the Monitor appointed by the Court in the CCAA proceeding.

    In estimating fair value, the Corporation's valuation approach considers
    two scenarios. The first scenario is where the Amended Plan is
    implemented effective September 30, 2008. The second scenario is where
    the Amended Plan is not implemented and the underlying assets are
    liquidated. If the Amended Plan is implemented, the Corporation will
    receive senior notes and subordinated notes both with floating interest
    rates. The senior notes are expected to receive an AA rating from DBRS
    while the subordinated notes are not expected to be rated.

    The Corporation has estimated the fair value of its investment in ABCP to
    be $12.8 million 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, 2008. As a result,
    an impairment charge of $4.3 million has been recorded as a reduction in
    fair value at December 31, 2007. No further impairment has been recorded
    in the period ended June 30, 2008. The significant assumptions used to
    value the Corporation's investment in these securities are as follows:

    Proportion of senior notes                                      90%
    Proportion of subordinated notes                                10%
    Margin facility cost                                           1.0%
    Restructuring fee                                              1.0%
    Timing of principal repayments                          at maturity
    Interest rate on senior and subordinated notes                 4.0%
    Interest rate earned prior to restructuring                   4.57%
    Term of notes                                               7 years
    Recovery of senior note principal and interest          60% to 100%
    Recovery of subordinated note principal and interest      0% to 80%

    The fair value of the Corporation's ABCP could range from $11.3 million
    to $14.4 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. Further, the
    valuation estimates depend on the timing and nature of the proposed
    restructuring. Interest has been accrued from the maturity date, August
    13, 2007, and is fully provided for.

    The Corporation's activities have not been impacted by this event.
    Currently, it has sufficient cash available to maintain its operations
    while the restructuring of asset-backed commercial paper is completed.
    The balance of the Corporation's investments totaling $13.0 million are
    invested in highly rated liquid instruments.

    3.  Note Receivable

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

                                                      June 30    December 31
                                                         2008           2007
                                                            $              $
    T-Note (US $1,209; 2007-US $1,209)                  1,222          1,187

    Less: Amount due within one year                        -              -
                                                        1,222          1,187


    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 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.
      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.

    The T-note is 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).
    In December 2007, an additional principal repayment of US $244 was
    received. The maturity date of the remaining principal of US $1,209 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

    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
                                                    2008                2007
                                                       $                   $
    5,754,660 Class A Subordinate Voting Shares   55,523              55,523
    182,000 Class B Shares                           213                 213
                                                  55,736              55,736

    The Corporation had 140,000 stock options outstanding all of which
    expired on April 1, 2007.

    Diluted income per share for the periods ended June 30, 2008 and 2007
    have not been adjusted since the effect of any exercise of outstanding
    stock options is anti-dilutive.

    5.  Supplementary Cash Flow Information

    a)  Changes in non-cash working capital balances

                                      Three Months Ended    Six Months Ended
                                           June 30               June 30
                                       2008       2007       2008       2007
                                          $          $          $          $
    Decrease (increase) in accounts
     and other receivables               60       (138)       (53)       122
    Increase (decrease) in accounts
     payable and accrued liabilities   (156)      (138)     1,967       (148)
    Changes in non-cash working
     capital balances                   (96)      (276)     1,914        (26)

    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:

                                                                June 30
                                                            2008        2007
                                                               $           $
    Cash on hand and with banks                              306         117
    Short-term investments                                12,997      30,807
                                                          13,303      30,924

    c)  Income taxes recovered
    There were no income tax payments or recoveries during the periods ended
    June 30, 2008 and 2007.

    6.  Income Taxes

    At December 31, 2007, the Corporation had non-capital losses available to
    reduce future taxable income of approximately $11.9 million that begin to
    expire in 2009. At December 31, 2007, 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, 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 as income
        upon resolution.

    (b) An action was filed against the Corporation and certain of its
        officers by the trustee of Fleming Packaging Corp. ("Fleming") in
        2004. Much of the claim was not quantified, however, the plaintiff
        had asserted ranges between US$ 3.0 million and US$ 26.0 million. 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. Any
        recovery will be recognized as income upon resolution.

    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
    is subject to appeal. The Corporation is of the view that it has
    meritorious defences. The Corporation will vigorously defend itself if
    and when required.

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

    10. Financial Instruments

    The carrying values reported in the balance sheet for cash and cash
    equivalents, short-term investments, accounts and other amounts
    receivable and accounts payable and accrued liabilities approximate fair
    values due to the short maturity of those instruments. The carrying value
    of the notes 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.

    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 notes
    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 investment is in asset-backed
    commercial paper. The Corporation does not believe that there is
    significant credit risk arising from any of its receivables and
    investments except in connection with its investment in ABCP 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, notes 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, 2008, the interest
    rate on the T-Note was 7.0%. A 1% increase in market interest rates would
    have increased interest revenue by approximately $76 for the six month
    period ended June 30, 2008.

    The Corporation also has interest rate risk relating to its investments
    in ABCP because the ultimate resolution of the proposed restructuring as
    described in note 2 is inherently uncertain. No interest is currently
    being paid on the Corporation's investments in ABCP.

    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, 2008, the Corporation
    had cash and cash equivalents, short-term investments and the T-Note
    receivable of $4.3 million and accounts payable of $2.1 million which
    were denominated in U.S. dollars. A 1% increase in the foreign exchange
    rate from Canadian dollars to United States dollars at June 30, 2008
    would have increased the foreign exchange gain by $89 for the six month
    period ended June 30, 2008.

    d) Fair value

    No market currently exists for the long-term investments. Management used
    valuation techniques to determine the value of these ABCP financial
    instruments (note 2).

    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. The Board will consider alternative
    methods of effecting a tax efficient distribution of the proceeds prior
    to making such a distribution. 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, 2008.

    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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