Goldfarb Announces Second Quarter Results

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 thefirst six months of 2008 was $2,494,000 ($0.42 per share) compared to $295,000 ($0.05 per share) in 2007.

For the period ended June 30, 2008 (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, 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, Section 3863 and Section 1535. 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 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 securities.

The securities have been the subject of a restructuring plan developed by the Pan-Canadian Investors 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 entities.

On March 17, 2008, the Committee obtained an Order commencing a proceeding in respect of the trusts under the Companies' Creditors Arrangement Act (Canada) and filed a plan to implement the proposed restructuring. 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. 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. -- www.cnxmarketlink.com