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Note 6 - Investment in Foreign Joint Venture | 9 Months Ended
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Sep. 30, 2024
Notes to Financial Statements |
Equity Method Investments and Joint Ventures Disclosure [Text Block] | 6. INVESTMENT IN FOREIGN JOINT VENTURE The Company holds a 40% interest in BOMAY, which builds electrical systems. The majority partner in this foreign joint venture is Baoji Oilfield Machinery Co., Ltd. (a subsidiary of China National Petroleum Corporation), which owns 51%. The remaining 9% is owned by AA Energies, Inc. The Company made no sales to its joint venture during the three and nine months ended September 30, 2024 and 2023. The tables below present a summary of BOMAY's assets, liabilities and equity at September 30, 2024 and December 31, 2023, and its operational results for the three and nine months ended September 30, 2024 and 2023 in U.S. dollars (in thousands):
|  | September 30, |  |  | December 31, |
|  | 2024 |  |  | 2023 |
Assets: |  |  |  |  |  |  |  |
Total current assets |  | $ | 125,397 |  |  | $ | 135,217 |
Total non-current assets |  |  | 2,839 |  |  |  | 3,003 |
Total assets |  | $ | 128,236 |  |  | $ | 138,220 |
Liabilities and equity: |  |  |  |  |  |  |  |
Total liabilities |  | $ | 96,174 |  |  | $ | 104,760 |
Total joint ventures’ equity |  |  | 32,062 |  |  |  | 33,460 |
Total liabilities and equity |  | $ | 128,236 |  |  | $ | 138,220 |
|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | September 30, |
|  | 2024 |  |  | 2023 |  |  | 2024 |  |  | 2023 |
Revenue |  | $ | 34,330 |  |  | $ | 18,565 |  |  | $ | 73,631 |  |  | $ | 70,148 |
Gross profit |  | $ | 4,056 |  |  | $ | 2,754 |  |  | $ | 9,122 |  |  | $ | 8,640 |
Net income |  | $ | 1,355 |  |  | $ | 749 |  |  | $ | 2,662 |  |  | $ | 3,422 |
The table below presents the components of our investment in BOMAY and a summary of the activity within those components for the nine months ended September 30, 2024 in U.S. dollars (in thousands):
|  | Initial Investment at Merger (1), (2) |  |  | Undistributed Earnings |  |  | Cumulative Foreign Exchange Translation Adj |  |  | Investment in BOMAY |
Balance at December 31, 2023 |  | $ | 9,333 |  |  | $ | 2,967 |  |  | $ | (291 | ) |  | $ | 12,009 |
Equity in earnings |  |  | — |  |  |  | 1,162 |  |  |  | — |  |  |  | 1,162 |
Less: dividend distributions |  |  | — |  |  |  | (1,716 | ) |  |  | — |  |  |  | (1,716 | )
Foreign currency translation gain (loss) |  |  | — |  |  |  | — |  |  |  | 102 |  |  |  | 102 |
Balance at September 30, 2024 |  | $ | 9,333 |  |  | $ | 2,413 |  |  | $ | (189 | ) |  | $ | 11,557 |
| (1) | Accumulated statutory reserves in equity method investments of $2.7 million at September 30, 2024 and December 31, 2023 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) | The Company’s initial investment in BOMAY differed from the Company’s 40% share of BOMAY’s equity as a result of applying fair value accounting pursuant to ASC 805. The basis difference is being accreted over an original period of nine years (the expected life of the joint venture). The Company's accretion during the nine months ended September 30, 2024 and 2023 both totaled approximately $97 thousand each, respectively, and is included in income from equity investment in foreign joint venture in the accompanying Condensed Consolidated Statements of Operations. The remaining basis difference, net of accumulated accretion at September 30, 2024 and December 31, 2023 is summarized in the following table (in thousands):
|  | September 30, |  |  | December 31, |
|  | 2024 |  |  | 2023 |
Original basis difference |  | $ | 1,165 |  |  | $ | 1,165 |
Less accumulated accretion |  |  | (670 | ) |  |  | (573 | )
Net remaining basis difference at end of period |  | $ | 495 |  |  | $ | 592 |
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 of our investment in BOMAY is necessary for the period ending September 30, 2024.

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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://www.xbrl.org/2003/role/recommendedDisclosureRef -Topic 740 -SubTopic 323 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147478156/740-323-50-2 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 323 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 3 -Subparagraph (a)(3) -Publisher FASB -URI https://asc.fasb.org/1943274/2147481687/323-10-50-3 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 323 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 3 -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org/1943274/2147481687/323-10-50-3 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Name Accounting Standards Codification -Topic 323 -Publisher FASB -URI https://asc.fasb.org/323/tableOfContent + Details
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