Note 6 - Investment in Foreign Joint Venture

12 Months Ended

Dec. 31, 2025

Notes to Financial Statements

Equity Method Investments and Joint Ventures Disclosure [Text Block]

6. INVESTMENTS IN FOREIGN JOINT VENTURES

BOMAY

We hold 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), who owns 51%. The remaining 9% is owned by AA Energies, Inc. The Company made no sales to its joint venture during 2025 and 2024.

We account for our 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. The Company considers dividend distributions received from its equity method investments which do not exceed cumulative equity in earnings subsequent to the date of investment to be a return on investment and classifies these distributions as operating activities in the accompanying Consolidated Statements of Cash Flows.

The tables below present a summary of BOMAY's assets and liabilities and its operational results as of and for the years ended December 31, 2025 and 2024 in U.S. dollars (in thousands):

		*Year Ended December 31,*
		*2025*				*2024*
Revenues		$	107,340			$	117,459
Gross profit			13,646				14,458
Earnings			3,309				4,101

		*December 31,*
		*2025*				*2024*
Assets:
Total current assets		$	98,619			$	124,253
Total non-current assets			4,154				9,496
Total assets		$	102,773			$	133,749
Liabilities and equity:
Total liabilities		$	70,145			$	101,562
Total joint ventures’ equity			32,628				32,187
Total liabilities and equity		$	102,773			$	133,749

The following is a summary of activity in our investment in BOMAY for the years ended December 31, 2025 and 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			—				1,770				—				1,770
Less: dividend distributions			—				(1,716	)			—				(1,716	)
Foreign currency translation loss			—				—				(404	)			(404	)
Balance at December 31, 2024			9,333				3,021				(695	)			11,659
Equity in earnings			—				1,453				—				1,453
Less: dividend distributions			—				(1,637	)			—				(1,637	)
Foreign currency translation gain			—				—				471				471
Balance at December 31, 2025		$	9,333			$	2,837			$	(224	)		$	11,946

(1)

Accumulated statutory reserves in equity method investments of $2.66 million at December 31, 2025 and 2024 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 eight years (the expected life of the joint venture). The Company's accretion during the years ended December 31, 2025 and 2024 were both approximately $0.1 million, and is included in income from equity investments in foreign joint ventures in the accompanying Consolidated Statements of Operations. The remaining basis difference is summarized in the following table at December 31, 2025 and 2024 (amounts in thousands):

		*December 31,*
		*2025*				*2024*
Original basis difference		$	1,165			$	1,165
Less accumulated accretion			(831	)			(702	)
Net remaining basis difference, net at end of period		$	334			$	463

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. There were no impairments recognized in the years ended December 31, 2025 and 2024.