5. Investments in Foreign Joint Ventures

Effective May 1, 2014, we have interests in two joint ventures, outside of the United States of America (“U.S.”) which are accounted for on the equity method:

—	BOMAY Electric Industries Company, Ltd. (“BOMAY”), in which the Company holds a 40% interest, Baoji Oilfield Machinery Co., Ltd. (a subsidiary of China National Petroleum Corporation) holds a 51% interest, and AA Energies, Inc., holds a 9% interest;

—	M&I Electric Far East, Ltd. (“MIEFE”), in which the Company holds a 41% interest, MIEFE’s general manager holds a 8% interest and, Sonepar, (private company) of France holds a 51% interest, and;

AETI Alliance Group do Brazil Sistemas E Servicos Em Energia LTDA. (“AAG”), in which the Company held a 49% interest, and Beppe Hans Eddy Askerbo, of Brazil, held a 51% interest. Effective April 30, 2014 the Company withdrew from the joint venture. We are scheduled to receive the book value at April 30, 2014 of approximately $0.6 million in 12 equal monthly payments.

Sales to joint ventures are made on an arm’s length basis.

Summary (unaudited) financial information of our foreign joint ventures in U.S. dollars was as follows at June 30, 2014 and December 31, 2013 and the three months and six months ended June 30, 2014 and 2013 (in thousands):

	BOMAY				MIEFE				AAG
	2014		2013		2014		2013		2014*		2013
Assets:
Total current assets	$	85,660	$	94,220	$	3,498	$	3,855	$	-	$	2,572
Total non-current assets		4,914		5,122		124		114		-		1,550
Total assets	$	90,574	$	99,342	$	3,622	$	3,969	$	-	$	4,122
Liabilities and equity:
Total liabilities	$	62,879	$	72,644	$	2,227	$	1,197	$	-	$	1,291
Total joint ventures’ equity		27,695		26,698		1,395		2,772		-		2,831
Total liabilities and equity	$	90,574	$	99,342	$	3,622	$	3,969	$	-	$	4,122

*As of April 30, 2014, the Company withdrew from the AAG Joint Venture.

	Three Months Ended June 30,
	BOMAY				MIEFE				AAG
	2014		2013		2014		2013		2014*		2013

Revenue	$	37,611	$	31,483	$	2,388	$	2,824	$	297	$	4,514
Gross Profit	$	4,524	$	3,309	$	760	$	805	$	44	$	1,876
Earnings	$	2,400	$	1,619	$	275	$	337	$	77	$	945

*Items represent the Joint Venture's final month of April 2014.

	Six Months Ended June 30,
	BOMAY				MIEFE				AAG
	2014		2013		2014		2013		2014*		2013

Revenue	$	57,214	$	64,992	$	3,212	$	5,491	$	1,078	$	7,999
Gross Profit	$	7,459	$	7,597	$	1,119	$	1,287	$	154	$	3,432
Earnings	$	3,771	$	4,120	$	181	$	386	$	4	$	1,837

*Items represent the Joint Venture’s final four months ending April 2014.

The following is a summary of activity in investments in foreign joint ventures for the six months ended June 30, 2014 (unaudited):

	June 30, 2014
	BOMAY**			MIEFE			AAG			TOTAL
	(in thousands)
Investments in foreign joint ventures:
Balance at December 31, 2013	$	10,609		$	1,138		$	1,286		$	13,033
Equity in earnings (loss) in 2014		1,508			74			2			1,584
Dividend distributions in 2014		(1,042	)		(650	)		(830	)		(2,522	)
Foreign currency translation adjustment		(86	)		(93	)		178			(1	)
Withdrawal from joint venture*	—			—				(636	)		(636	)
Investments, end of period	$	10,989		$	469		$	-		$	11,458

Components of investments in foreign joint ventures:
Investment in joint ventures	$	2,033		$	15		$	-		$	2,048
Undistributed earnings		7,611			294		—				7,905
Foreign currency translation		1,345			160		—				1,505
Investments, end of period	$	10,989		$	469		$	-		$	11,458

*	Represents the 49% of the net book value at April 30, 2014 and $46,000 has been received. No gain or loss was recorded because the receivable equals the Company’s total investment in AAG. The receivable is included in accounts receivables.

Accumulated statutory reserves in equity method investments of $1.86 million at June 30, 2014 and December 31, 2013 are included in AETI’s consolidated retained earnings. In accordance with the People’s Republic of China, (“PRC”), regulations on enterprises with foreign ownership, an enterprise established in the PRC with foreign ownership is required to provide for certain statutory reserves, namely (i) General Reserve Fund, (ii) Enterprise Expansion Fund and (iii) Staff Welfare and Bonus Fund, which are appropriated from net profit as reported in the enterprise’s PRC statutory accounts. A non-wholly-owned foreign invested enterprise is permitted to provide for the above allocation at the discretion of its board of directors. The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends.

Under the equity method, the Company’s share of the joint ventures’ operations’ earnings or loss is recognized in the condensed consolidated statement of operations as equity income (loss) from foreign joint ventures’ operations. Joint venture income increases the carrying value of the joint venture investment and joint venture losses, as well as dividends received from the joint ventures, reduce the carrying value of the investment. Each reporting period, the Company evaluates the carrying value of these equity method investments as to whether an impairment adjustment may be necessary. In making this evaluation, a variety of quantitative and qualitative factors are considered including national and local economic, political and market conditions, industry trends and prospects, liquidity and capital resources and other pertinent factors. Based on this evaluation for this reporting period, the Company does not believe an impairment adjustment is necessary.