Note 2 - Investment in Innolectric

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Investment [Text Block]

2. INVESTMENT IN INNOLECTRIC

On February 1, 2023, the Company closed on a noncontrolling (one-third) investment in Germany-based innolectric AG (“innolectric”) for consideration of €8.0 million (approximately $8.8 million). Transaction costs associated with the Company's investment in innolectric amounted to $1.3 million and these costs have been recorded as part of the carrying value of the investment. Under the terms of the investment agreement, if innolectric achieves certain profitability thresholds within a specified timeframe, the Company would be committed to acquiring the remaining shares of innolectric at that time. The original $8.8 million investment includes both the value of the one-third equity method investment and the value associated with the purchase option for the remaining shares outlined in the agreement in the event certain profitability thresholds are met.

This passive investment will create a strategic alliance that is focused on Electric Vehicles (“EV”) on-board power electronics, and in particular next generation fast-charging technology. With no product overlap, this relationship expands the Bel eMobility Power portfolio, further enhancing Bel's competitive position in this emerging field. Our investment in innolectric is accounted for using the equity method and we have determined that the innolectric investment is not a variable interest entity (VIE). Results from this investment, which were not recorded in the first three months of March 31, 2023 due to immateriality, will be included in Bel's Power Solutions and Protection segment in future periods.

Related Party Transactions

From time to time, the Company provides cash loans to innolectric to fund working capital needs and further business development. During the first quarter of 2023, the Company provided loans to innolectric in the aggregate amount of €1.8 million (approximately $2.0 million). These loans bear interest at a rate of5% per annum. This balance is shown as a related-party note receivable on the accompanying condensed consolidated balance sheet at March 31, 2023.