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Investments in Foreign Joint Ventures | 9 Months Ended
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Sep. 30, 2019
Equity Method Investments and Joint Ventures [Abstract] |
Investments in Foreign Joint Ventures | Investments in Foreign Joint Ventures BOMAY. As a result of the completion of the Share Exchange on July 26, 2019, the Company holds a 40% interest in BOMAY Electric Industries Company, Ltd. (“BOMAY”) which builds electrical systems for sale in China. The majority partner in this foreign joint venture is Baoji Oilfield Machinery Co., Ltd. (a subsidiary of China National Petroleum Corporation). The Company made no sales to its joint venture in the three months ended September 30, 2019. Below is summary financial information for BOMAY at September 30, 2019 and operational results for the period from July 27, 2019 to September 30, 2019 in U.S. dollars (in thousands, unaudited):
| September 30, 2019
Assets: |
Total current assets | $ | 73,075 |
Total non-current assets | 3,304 |
Total assets | $ | 76,379 |
Liabilities and equity: |
Total liabilities | $ | 50,713 |
Total joint ventures’ equity | 25,666 |
Total liabilities and equity | $ | 76,379 |
| July 27 - September 30,
| 2019
Revenue | $ | 8,466 |
Gross Profit | 1,668 |
Earnings | 467 |
The following is a summary of activity in our investment in BOMAY for the period from July 27, 2019 to September 30, 2019 in U.S. dollars (in thousands, unaudited):
| September 30, 2019
Investments in BOMAY(1) |
Balance at July 26, 2019 | $ | 9,333 |
Undistributed earnings: |
Balance at July 26, 2019 | — |
Equity in earnings | 187 |
Dividend distributions | — |
Balance at end of period | 187 |
Foreign currency translation: |
Balance at July 26, 2019 | — |
Change during the period | (252 | )
Balance at end of period | (252 | )
Total investment in BOMAY at September 30, 2019(2) | $ | 9,268 |
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1. | Accumulated statutory reserves in equity method investments of $2.81 million at September 30, 2019 is included in our investment in BOMAY. 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.
2. | At September 30, 2019, the Company’s investment in BOMAY of $9.3 million differs from the Company’s 40% share of BOMAY’s equity of $10.3 million. The basis difference of approximately $1.0 million will be accreted over the remaining nine year life of the joint venture.
The Company accounts for its investment in BOMAY using the equity method of accounting. Under the equity method, the Company’s share of the joint venture operations earnings or losses is recognized in the consolidated statements of operations as equity income (loss) from foreign joint venture operations. Joint venture income increases the carrying value of the joint venture and joint venture losses reduce the carrying value. Dividends received from the joint venture reduce the carrying value. In accordance with our long-lived asset policy, when events or circumstances indicate the carrying amount of an asset may not be recoverable, management tests long-lived assets for impairment. If the estimated future cash flows are projected to be less than the carrying amount, an impairment write-down (representing the carrying amount of the long-lived asset which exceeds the present value of estimated expected future cash flows) would be recorded as a period expense. 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 at September 30, 2019. Energía Superior. On August 20, 2019, we completed the formation of Energía Superior, a joint venture with CryoMex, to pursue investments in distributed natural gas production and distribution assets in Mexico. CryoMex is controlled by Grupo CLISA, a Monterrey, Mexico-based developer and operator of businesses in multiple end markets including energy. We own a 50% interest in Energía Superior. As of September 30, 2019, the Company has not made any material investments in Energía Superior.

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- Definition The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -URI http://asc.fasb.org/topic&trid=2196965 + Details
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