Note 8 – DISCONTINUED OPERATION - EXCALIBUR

On October 25, 2008, the Company through its wholly-owned subsidiary, EFT Investment, acquired a 48.81% equity interest in Excalibur for $19,193,000. The Company initially loaned funds to Excalibur in July 2008 and subsequently has continued to provide Excalibur with loan capital to fund its operations.

The Company consolidates Excalibur based on a three-month lag with the Company’s reporting periods. All inter-company accounts and transactions were eliminated in consolidation. The following table provides a summary of balance sheet and statement of operations information for Excalibur, which is consolidated in the Company’s financial statements:

	Excalibur International Marine Corporation
	June 30, 2014				December 31, 2013
	NTD*		USD		NTD*		USD
Total assets, net		7,132,128		234,147		8,244,403		275,827
Total liabilities, net		100,485,251		3,298,924		105,326,659		3,523,808
Net assets		(93,353,123)		(3,064,777)		(97,082,256)		(3,247,981)
48.81% ownership		(45,565,659)		(1,495,918)		(47,385,849)		(1,585,340)

	For the three months ended
	June 30, 2014				June 30, 2013
	NTD*		USD		NTD*		USD
Operating cost		-		(197)		3,534,931		117,848
Selling, general and administrative expenses		13,639		273		995,582		33,120
Interest income		(75)		(2)		(741)		(25)
Interest expense		812,155		26,723		-		-
Foreign exchange (gain)/loss		-		710		(26)		355
(Gain)/loss on disposal of fixed assets		55,119		1,819		-		(6)
Other income		-		-		3,060		703
Net loss		880,838		29,326		4,532,806		151,995
48.81% ownership		429,937		14,314		2,212,463		74,189

	For the six months ended
	June 30, 2014				June 30, 2013
	NTD*		USD		NTD*		USD
Operating cost		1,105,876		36,605		6,998,820		235,096
Selling, general and administrative expenses		1,031,267		34,138		2,250,284		75,590
Interest income		(75)		(2)		(741)		(25)
Interest expense		1,720,802		56,961		-		-
Foreign exchange (gain)/loss		(4,025,712)		(133,257)		(1,380,278)		(46,365)
Gain on disposal of fixed assets		89,626		2,967		25,740		865
Other income		-		-		(2,322,707)		(78,022)
Net (income)/loss		(78,216)		(2,588)		5,571,118		187,139
48.81% ownership		(38,177)		(1,263)		2,719,263		91,343

*NTD: New Taiwan Dollar

On August 8, 2010, the Company’s vessel, the Ocean LaLa, was damaged when sailing in the Taiwan Strait. As a result of the damage suffered, the Ocean LaLa has been taken out of service and management estimated that the net book value of the equipment exceeded its market value and an impairment loss of $5.4 million has been provided for the year ended March 31, 2011.

Since August 2010, the Ocean LaLa has remained in dry dock and its damage has not been repaired. As such, professional valuations of the Ocean LaLa have been difficult to obtain. Therefore, alternative methods have been utilized. The Company searched ship broker information to get a market price for a similar (i.e., those with similar size and capacity) but fully functional vessel, since the Company could not find a similar vessel with the exact damage as the Ocean LaLa. The market value of the Ocean LaLa was then calculated by subtracting the quoted repair estimate for the Ocean LaLa from the market value of such similar vessel. In addition, in March 2013, the Company received an offer from an independent third party to purchase the Ocean LaLa. The adjusted market value described above exceeded the net carrying value of the vessel, but the offer to purchase the Ocean LaLa was below the net book value. Based on the above analysis, the Company concluded that the net carrying value of the equipment exceeded its fair value and a further impairment loss of $5.5 million was recorded during the year ended March 31, 2013.

During the period ended September 30, 2013, Excalibur’s management obtained approval from its shareholders to sell the vessel. The transportation equipment was then classified as held for sale as it met all the criteria outlined by ASC 360-10-45-9. In December 2013, Excalibur signed a memorandum of agreement with a potential buyer to sell the Ocean LaLa for $1,500,000. The vessel was delivered to the seller on March 15, 2014 and the title to the vessel was then passed to the buyer on the same date. A commission of 3% based on the purchase price was paid to the broker handling the transaction. A gain on disposal of NTD 13,915,488, equivalent to $467,590, has been recognized for the subsequent increase in selling price less cost to sell the vessel, but not in excess of the cumulative impairment loss recognized in accordance with ASC 360.

Following the disposal of the Ocean LaLa in March 2014, the operating results associated with the transportation business have been classified as discontinued operations in the consolidated financial statements. The Company recorded income of $2,588 in the six months ended September 30, 2014, primarily relating to exchange gain associated with the disposal, partly offset by Company expenses during the period. Even though the Company has discontinued the operations related to the shipping segment, the Company continues certain wrap-up activities related to several ongoing lawsuits involving its investment in this segment. Additional information concerning Excalibur is included in Note 17 (Litigation).