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 using 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; and,

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

Effective April 30, 2014 the Company withdrew from the AETI Alliance Group do Brazil Sistemas E Servicos Em Energia LTDA. (“AAG”) joint venture in exchange for a note from AAG of $0.64 million, receivable in 12 equal payments. The Company has received ten payments totaling $0.41 million through September 30, 2015. The outstanding balance of the note receivable at September 30, 2015 was $0.09 million, adjusted for foreign currency translation adjustments. The note was originally written as 0% subordinated note, with a maturity date of April 30, 2015, we have imputed interest at 5%. We have determined that collection of the remaining balance of the note is uncertain and, therefore, have fully reserved the remaining balance of the note.

Sales to joint ventures, made on an arm’s length basis, totaled $0.03 for both the three months ended September 30, 2015 and 2014. Sales to joint ventures totaled $0.19 million and $0.05 million for the nine months ended September 30, 2015 and 2014.

Summary (unaudited) financial information of our foreign joint ventures in U.S. dollars was as follows at September 30, 2015 and December 31, 2014 and for the three and nine months ended September 30, 2015 and 2014 (in thousands):

	BOMAY				MIEFE				AAG*
	2015		2014		2015		2014		2015		2014
Assets:
Total current assets	$	74,153	$	77,812	$	2,536	$	3,488	$	-	$	-
Total non-current assets		4,290		4,710		79		108		-		-
Total assets	$	78,443	$	82,522	$	2,615	$	3,596	$	-	$	-
Liabilities and equity:
Total liabilities	$	50,652	$	53,277	$	1,879	$	2,128	$	-	$	-
Total joint ventures’ equity		27,791		29,245		736		1,468		-		-
Total liabilities and equity	$	78,443	$	82,522	$	2,615	$	3,596	$	-	$	-

	Three Months Ended September 30,
	BOMAY				MIEFE					AAG*
	2015		2014		2015			2014		2015		2014

Revenue	$	13,533	$	9,995	$	1,282		$	1,359	$	-	$	-
Gross Profit	$	1,996	$	2,353	$	214		$	567	$	-	$	-
Earnings	$	755	$	712	$	(187	)	$	158	$	-	$	-


	Nine Months Ended September 30,
	BOMAY				MIEFE					AAG*
	2015		2014		2015			2014		2015		2014

Revenue	$	35,761	$	67,209	$	4,717		$	4,571	$	-	$	1,078
Gross Profit	$	5,830	$	9,812	$	901		$	1,686	$	-	$	154
Earnings	$	1,894	$	4,483	$	(324	)	$	339	$	-	$	4

*As of April 30, 2014, the Company withdrew from the AAG joint venture. Tables above include the operations of AAG for the period January 1, 2014 through April 29, 2014

The following is a summary of activity in investments in foreign joint ventures for the nine months ended September 30, 2015 (unaudited):

	September 30, 2015
	BOMAY**			MIEFE			TOTAL
	(in thousands)
Investments in foreign joint ventures:
Balance at December 31, 2014	$	11,548		$	506		$	12,054
Equity in earnings (loss) in 2015		758			(133	)	$	625
Dividend distributions in 2015		(1,033	)		(137	)	$	(1,170	)
Foreign currency translation adjustment		(385	)		67		$	(318	)
Investments, end of period	$	10,888		$	303		$	11,191

Components of investments in foreign joint ventures:
Investment in joint ventures	$	2,033		$	14		$	2,047
Undistributed earnings		7,882			88		$	7,970
Foreign currency translation		973			201		$	1,174
Investments, end of period	$	10,888		$	303		$	11,191

Accumulated statutory reserves of $2.61 million and $2.10 million in equity method investments at September 30, 2015 and December 31, 2014, respectively, 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 of accounting, 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.

The Company reviews its equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment may not be recoverable or the inability of the investee to sustain an earnings capacity that would justify the carrying amount of the investment.