UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

(Amendment No. 1)

Current Report

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (date of earliest event reported):  December 6, 2018

ALLIED MOTION TECHNOLOGIES INC.

(Exact Name of Registrant as Specified in its Charter)

495 Commerce Drive, Suite 3

Amherst, New York 14228

(Address of Principal Executive Offices, including zip code)

(716) 242-8634

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o                                    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o                                    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o                                    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o                                    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company                                              o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.       o

Explanatory Note

This Amendment No. 1 on Form 8-K/A amends and supplements the Current Report on Form 8-K of Allied Motion Technologies Inc. (the “Company”), filed with the Securities and Exchange Commission on December 11, 2018 (the “Initial Form 8-K”) to include financial statements and pro forma financial information permitted pursuant to Item 9.01 of Form 8-K to be excluded from the Initial Form 8-K and filed by amendment to the Initial Form 8-K no later than 71 days after the date on which the Initial Form 8-K was required to be filed. As previously reported in the Initial Form 8-K, effective as of December 6, 2018 the Company completed the acquisition of TCI, LLC pursuant to a Unit Purchase Agreement dated as of December 6, 2018.

Item 9.01                                           Financial Statements and Exhibits

(a)                                 Financial Statements of Businesses Acquired.

The audited financial statements of TCI, LLC for the year ended December 31, 2017 and the related Independent Auditors Report thereon are included as Exhibit 99.1 to this Current Report on Form 8-K/A and are incorporated herein by reference.  The unaudited condensed consolidated balance sheet as of September 30, 2018 and the related unaudited condensed consolidated statements of operations and cash flows for the nine months ended September 30, 2018 and 2017 of TCI, LLC are filed as Exhibit 99.2 and incorporated herein by reference.

(b)                                 Pro Forma Financial Information.

The unaudited pro forma consolidated statements of operations for the nine-month period ended September 30, 2018 and the year ended December 31, 2017 and the unaudited pro forma consolidated balance sheet as of September 30, 2018 together with related explanatory notes, showing the pro forma effect on the Company’s financial statements of the Company’s acquisition of TCI, LLC are included as Exhibit 99.3 hereto and are incorporated herein by reference.

(d)                                 Exhibits.

2

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date:  February 15, 2019

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EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders of

Allied Motion Technologies Inc.:

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-149279, 333-155889, 333-170563, 333-187369, and 333-217654) and in the Registration Statements on Form S-3 (Nos. 333-229029 and 333-119090) of Allied Motion Technologies Inc. of our report dated February 21, 2018, with respect to the financial statements of TCI, LLC as of and for the year ended December 31, 2017, which appears in this Current Report on Form 8-K/A.

/s/ Baker Tilly Virchow Krause, LLP

Milwaukee, Wisconsin

February 15, 2019

Exhibit 99.1

TCI, LLC

Germantown, Wisconsin

CONSOLIDATED FINANCIAL STATEMENTS

Including Independent Auditors’ Report

As of and for the Year Ended December 31, 2017

TCI, LLC

TABLE OF CONTENTS

INDEPENDENT AUDITORS’ REPORT

Members and Board of Directors

TCI, LLC

Germantown Wisconsin

We have audited the accompanying consolidated financial statements of TCI, LLC, which comprise the consolidated balance sheet as of December 31, 2017, and the related consolidated statement of operations, members’ equity, and cash flows for the year then ended, and the related notes to the consolidated financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

1

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of TCI, LLC as of December 31, 2017 and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

/s/ Baker Tilly Virchow Krause, LLP

Milwaukee, Wisconsin

February 21, 2018

2

TCI, LLC

CONSOLIDATED BALANCE SHEET

As of December 31, 2017

See accompanying notes to consolidated financial statements.

3

TCI, LLC

CONSOLIDATED STATEMENT OF OPERATIONS

For the Year Ended December 31, 2017

See accompanying notes to consolidated financial statements.

4

TCI, LLC

CONSOLIDATED STATEMENT OF MEMBERS’ EQUITY

For the Year Ended December 31, 2017

See accompanying notes to consolidated financial statements.

5

TCI, LLC

CONSOLIDATED STATEMENT OF CASH FLOWS

For the Year Ended December 31, 2017

See accompanying notes to consolidated financial statements.

6

TCI, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of and for the Year Ended December 31, 2017

NOTE 1 - Summary of Significant Accounting Policies

Nature of Operations

TCI, LLC (the Company) is engaged in the manufacture and sale of harmonic filter (active and passive), reactors, and other line filter products for AC and DC drives.  The Company grants credit to its customers which are primarily original equipment manufacturers and distributors located throughout the United States, Canada and Mexico.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the parent company, TCI, LLC, and its wholly-owned subsidiary, TCI International, Inc. (DISC).  Significant intercompany accounts and transactions have been eliminated.

Cash and Cash Equivalents

The Company defines cash and cash equivalents as highly liquid, short-term investments with a maturity at the date of acquisition of three months or less.

Accounts Receivable

In the normal course of business, the Company extends limited unsecured credit to its customers.  Accounts receivable are uncollateralized customer obligations resulting from the sale of its products.  Accounts receivable are due in a variety of payment terms ranging from 30 to 60 days after the issuance of the invoice.  Payments of accounts receivable are applied to the specific invoices identified on the customer’s remittance advice, or if unspecified, to the earliest unpaid invoices.  Uncollected receivables are considered past-due after 30 days of the agreed-upon due date.  Receivables are written-off only after all collection attempts have failed and are based on the individual credit evaluation and specific circumstances of the customer.  Recoveries of receivables previously written-off are recorded when received.

The Company uses the allowance method to account for uncollectable accounts receivable.  Accounts receivable have been adjusted for all known uncollectable accounts.  The Company provides for an allowance for doubtful accounts, when appropriate, which is based upon a review of outstanding receivables, historical collection information, and existing economic conditions, on a per customer basis.  Accounts receivable are presented net of an allowance for doubtful accounts of $5,210 at December 31, 2017.

Inventories

Inventories are stated at the lower of cost (first-in, first-out method) or market.  Manufacturing related labor and overhead costs are capitalized into work in process and finished goods.

7

TCI, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of and for the Year Ended December 31, 2017

NOTE 1 - Summary of Significant Accounting Policies (cont.)

Property and Equipment

Property and equipment are stated at cost and depreciated using the straight-line method over their estimated useful lives. Major expenditures for property and equipment are capitalized. Maintenance, repairs, and minor renewals are expensed as incurred. When assets are retired or otherwise disposed of, their costs and related accumulated depreciation are removed from the accounts and resulting gains or losses are included in income.  For income tax reporting purposes, depreciation is calculated using applicable accelerated methods.

Other Intangible Assets

Other intangible assets relate to trade name, patented technology, customer lists and customer/vendor relationships acquired with the acquisition of Trans-Coil, Inc. in 2008.  The cost of the intangible assets are amortized on a straight-line basis over their estimated lives ranging from 10-15 years. Total amortization expense related to the intangible assets was $366,972 for the year ended December 31, 2017.

The following table presents detail of the company’s amortizable intangible assets at December 31, 2017:

Future amortization expense of the intangible assets will be as follows for the years ending December 31:

The Company accounts for intangible assets acquired during acquisition in accordance with accounting guidance related to business combinations.  Accordingly, intangible assets acquired in a business combination are recognized apart from goodwill if the intangible asset meets the separate recognition criteria, as defined in the accounting guidance.

8

TCI, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of and for the Year Ended December 31, 2017

NOTE 1 - Summary of Significant Accounting Policies (cont.)

Goodwill

The Company has allocated a portion of the purchase price of the business acquired to goodwill.  Goodwill is considered impaired to the extent it has been determined that carrying value is in excess of its fair value and is not recoverable.  The Company reviews for impairment annually based on a qualitative analysis of the business, the customer segments, the economy, competition, and other such factors.  Management believes there has been no impairment of the Company’s goodwill as of December 31, 2017.

Impairment of Long-Lived Assets

The Company reviews long-lived assets, including property and equipment, and intangible assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of an asset may not be fully recoverable.  An impairment loss would be recognized when the estimated future cash flows from the use of the asset are less than the carrying amount of that asset.  No such impairments were recognized for the year ended December 31, 2017.

Revenues

Revenue is recognized when products are shipped and title transfers to or services are performed for customers and payment is reasonably assured.

Shipping and Handling Costs

Shipping and handling costs charged to customers have been included in net sales.  Shipping and handling costs incurred by the Company have been included in cost of goods sold.

Advertising

Advertising costs are charged to operations when incurred.  Advertising expense was $196,249 for the year ended December 31, 2017.

Research and Development

Research and development costs are expensed as incurred and were $1,323,545 for the year ended December 31, 2017.

Product Warranties

The Company offers a standard one-year warranty against manufacturer’s defects on all products.  Estimated costs for product warranties are accrued and charged to operations when revenue is recognized.  Warranty expenses were $47,948 for the year ended December 31, 2017.

9

TCI, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of and for the Year Ended December 31, 2017

NOTE 1 - Summary of Significant Accounting Policies (cont.)

Income Taxes

The Company is treated as a Partnership for federal and state income tax purposes.  As such, the Company’s income, losses, and credits are included in the income tax returns of its members.

The Company recognizes the tax effects from uncertain tax positions only if the positions are more likely than not to be sustained under examination by a tax authority, based solely on the technical merits of the position.  As of December 31, 2017 the Company was not aware of any uncertain tax positions. The Company’s policy is to record interest and penalties related to income tax liabilities in income tax expense. The Company is not currently under examination by any taxing jurisdiction.

Distributions and Distributions Payable

The Company pays quarterly tax distributions based on the current year’s estimate of income tax obligations to be incurred by the members of the Company. To calculate the total tax distributions required, management estimates income tax obligations using the highest effective income tax brackets at the individual level and the anticipated Company taxable income, net of income tax credits. Management records distributions payable at each year end related to estimated income tax obligations resulting from that year’s activity. As of December 31, 2017, a distribution payable of $339,691 was recorded relating to taxable income generated during the year ended December 31, 2017.

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Subsequent Events

The Company has evaluated subsequent events through February 21, 2018, which is the date that the consolidated financial statements were available for issue.

10

TCI, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of and for the Year Ended December 31, 2017

NOTE 2 - Future Accounting Standards

ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment

During January 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-04, “Simplifying the Test for Goodwill Impairment.” ASU No. 2017-04 simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. ASU No. 2017-04 is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2021. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently assessing the effect that ASU No. 2017-04 will have on its results of operations, financial position and cash flows.

ASU No. 2016-02, Leases (Topic 842)

During February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” ASU No. 2016-02 requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet.  A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term.  ASU No. 2016-02 is effective for annual periods beginning after December 15, 2019. Early adoption is permitted. The Company is currently assessing the effect that ASU No. 2016-02 will have on its consolidated financial position.

ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) and Other ASUs Issued Amending Topic 606

During May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU No. 2014-09 establishes principles for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. During 2015 and 2016, the FASB also issued ASU No. 2015-14, which defers the effective date of ASU No. 2014-09; ASU No. 2016-08, “Principal versus Agent Considerations (Reporting Revenue Gross versus Net)”, which clarifies the implementation guidance on principal versus agent considerations in Topic 606; ASU No. 2016-10, “Identifying Performance Obligations and Licensing”, which clarifies the identification of performance obligations and the licensing implementation guidance; ASU No. 2016-12, “Narrow-Scope Improvements and Practical Expedients” and ASU No. 2016-20, “Technical Corrections and Improvements to Topic 606”, which both affect narrow aspects of Topic 606. Topic 606 (as amended) is effective for fiscal years beginning after December 15, 2018.  The Company may elect to apply the guidance earlier, but has not elected to do so. The amendments may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. The Company is currently assessing the effect that Topic 606 (as amended) will have on its results of operations, financial position and cash flows.

11

TCI, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of and for the Year Ended December 31, 2017

NOTE 3 - Inventories

Inventories consist of the following at December 31:

NOTE 4 - Property and Equipment

The major categories of property and equipment at December 31 are summarized as follows:

NOTE 5 - Line of Credit

The Company has a loan agreement with a bank which provides a line of credit totaling $7,000,000 subject to a percentage of eligible assets as defined in the agreement.  Borrowings bear interest at the rate of the one month London Interbank Offered Rate (LIBOR) plus applicable margin based on the Company’s funded debt to EBITDA ratio, as defined (4.74% at December 31, 2017). There were no outstanding borrowings on the line of credit at December 31, 2017. The bank debt (including the bank term note payable) is collateralized by substantially all business assets under a general business security agreement. The line of credit expires in 2020, and the Company’s line of credit agreement meets other accounting requirements to be classified as a long-term obligation.

12

TCI, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of and for the Year Ended December 31, 2017

NOTE 6 - Long-Term Debt

Long-term debt consists of the following at December 31:

Principal requirements on long-term debt for years ending after December 31, 2017 are as follows:

13

TCI, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of and for the Year Ended December 31, 2017

NOTE 6 - Long-Term Debt (cont.)

Applicable Margin

For the line of credit, the applicable margin ranges from LIBOR plus 3.25% to LIBOR plus 3.50%.  For the Bank term note, the applicable margin ranges from LIBOR plus 3.50% to LIBOR plus 3.75%.

Financial Covenants

The bank debt agreements contain financial covenants which, among others, require the maintenance of certain financial covenants related to the Company’s debt service coverage ratio and EBITDA levels. The Company was in compliance with these covenants at December 31, 2017.

Mandatory Prepayment of Debt

The line of credit and bank term note agreements contain mandatory prepayment terms which require the payment of principal in the amounts of net cash received from certain events relating to asset dispositions, issuance of capital securities, excess cash flow, or receipt of proceeds from life insurance policies as defined in the agreement. For the year ended December 31, 2017, the Company calculated the mandatory prepayment to be approximately $917,000.  This amount will be paid within 90 days of December 31, 2017, as required in the debt agreement. This payment is reflected in the principal requirements schedule above.

NOTE 7 - Members’ Equity

Common Units

The Company has 7,111 common units authorized to be issued, of which 711 were reserved as incentive units.  As of December 31, 2017, 365 of the incentive unit options have been exercised and converted into common units. The number of common units outstanding at December 31, 2017 was 6,765.  See below for more discussion of the incentive units.

14

TCI, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of and for the Year Ended December 31, 2017

NOTE 7 - Members’ Equity (cont.)

Incentive Units

Pursuant to the First Amendment to the TCI, LLC 2008 Common Unit Option Plan, the Company has reserved 711 common units for issuance to officers or directors of the Company in connection with a non-qualified equity incentive plan.  The options typically became exercisable over a 5 year vesting period from the effective date of grant, but exceptions can be made at the discretion of the board.  No options may be exercised more than 10 years from the date of grant.  Additionally, an option holder may not exercise their options more than 30 or 90 days after their employment terminates depending on the reason for termination.

The Company uses the modified prospective method to account for the incentive units.  All equity-based payments to employees, including grants of incentive units, are recognized as expense in the statements of operations based on an estimated fair value.  The amount of compensation expense is determined based on the fair value of the incentive units when granted and is expensed over the required service period, which is normally the vesting period.  The assumptions used to determine compensation expense were as follows:

The following is a summary of incentive units activity for the year ended December 31:

Compensation expense recognized was $51,583 for the year ended December 31, 2017.  At December 31, 2017, future compensation expense related to vested and unvested units will be approximately $96,000 and is expected to be recognized as expense through 2021. At December 31, 2017, 90 of the 346 units outstanding were unvested.

15

TCI, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of and for the Year Ended December 31, 2017

NOTE 8 - Leases

Operating Leases

In April 2014 the Company began leasing its manufacturing and office facilities in Germantown, Wisconsin under an operating lease that expires in April 2026. The real estate lease provides for monthly rental payments of approximately $45,000 with incremental 2.5% annual increases. Total rent payments for the term of the lease are expensed on a straight-line basis.  The rent expense under the lease was $611,000 for the year ended December 31, 2017. The Company is responsible for repairs and maintenance of the premises. The difference between lease payments made and the straight line expense was $194,544 at December 31, 2017. This amount is included as “Other accrued expenses” on the balance sheet.

Total rent expense related to all operating leases was $614,318 for the year ended December 31, 2017. The following is a schedule of future minimum lease payments under the operating lease agreements as of December 31, 2017:

NOTE 9 - Related Party Transactions

Management Fee

In 2008, the Company entered into agreements with two of the Company’s members to provide financial and management consulting services.  During 2017, the Company entered into an agreement with a third member to provide management consulting services and concurrently modified the two existing agreements to keep the annual fee at $100,000.

Two agreements each called for the Company to pay a quarterly management fee of $10,000 and reimbursement of any direct expenses related to the management services provided. The final agreement called for the Company to pay a quarterly management fee of $5,000 and reimbursement of any direct expenses. The term of the agreements shall continue until the occurrence of certain events.  The agreements are subordinate to the senior debt.  The Company expensed management fees under these agreements totaling $100,000 for the year ended December 31, 2017.  Management fees of $22,500 were accrued as of December 31, 2017.

16

TCI, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of and for the Year Ended December 31, 2017

NOTE 10 - Benefit Plan

The Company maintains a retirement savings and profit-sharing plan for substantially all employees meeting certain eligibility requirements.  The plan includes a provision, under Section 401(k) of the Internal Revenue Code, which allowed employees to contribute a portion of their compensation to the plan.  The Company matches 100% of employee contributions for contributions up to 3% of the employee’s compensation, plus 50% of employee contributions in excess of 3% but not in excess of 5% of the employee’s compensation. The Company matching contribution was $287,707 for the year ended December 31, 2017. The plan also allows for discretionary “profit sharing” contributions, and none were made during the year ended December 31, 2017.

NOTE 11 - Concentrations

Cash Balance

The Company maintains its cash balances primarily in one area bank.  At times, cash balances may exceed federally insured limits.  The Company has not experienced any losses in such accounts, and believes it is not exposed to any significant risk on cash.

Major Customers

One customer accounted for 13% of net sales for the year ended December 31, 2017. Accounts receivable from this customer totaled 19% of total receivables as of December 31, 2017.

17

Exhibit 99.2

TCI, LLC

Germantown, Wisconsin

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of September 30, 2018 and December 31, 2017 and for the
Nine Months Ended September 30, 2018 and 2017

1

TCI, LLC

TABLE OF CONTENTS

TCI, LLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

See accompanying notes to unaudited condensed consolidated financial statements

1

TCI, LLC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

See accompanying notes to unaudited condensed consolidated financial statements

2

TCI, LLC

CONDENSED CONSOLIDATED STATEMENTS OF MEMBERS’ EQUITY

(Unaudited)

See accompanying notes to unaudited condensed consolidated financial statements

3

TCI, LLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

See accompanying notes to unaudited condensed consolidated financial statements

4

TCI, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 — Basis of Preparation and Presentation

Nature of Operations

TCI, LLC (the Company) is engaged in the manufacture and sale of harmonic filter (active and passive), reactors, and other line filter products for AC and DC drives.  The Company grants credit to its customers which are primarily original equipment manufacturers and distributors located throughout the United States, Canada and Mexico.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the parent company, TCI, LLC, and its wholly-owned subsidiary, TCI International, Inc. (DISC).  Significant intercompany accounts and transactions have been eliminated.

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

The preparation of financial statements in accordance with U.S. GAAP requires management to make certain estimates and assumptions. Such estimates and assumptions affect the reported amounts of assets and liabilities as well as disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

It is suggested that the accompanying condensed consolidated financial statements be read in conjunction with the Consolidated Financial Statements including Independent Auditors’ Report as of and for the year ended December 31, 2017 that are included in this filing as Exhibit 99.1.

NOTE 2 — Other Intangible Assets

The following table presents detail of the company’s amortizable intangible assets at September 30, 2018:

5

TCI, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table presents detail of the company’s amortizable intangible assets at December 31, 2017:

Total amortization expense related to the intangible assets was $177,256 and $275,229 for the nine months ended September 30, 2018 and 2017, respectively.

NOTE 3 — Distributions and Distributions Payable

The Company pays quarterly tax distributions based on the current year’s estimate of income tax obligations to be incurred by the members of the Company. To calculate the total tax distributions required, management estimates income tax obligations using the highest effective income tax brackets at the individual level and the anticipated Company taxable income, net of income tax credits. Management records distributions payable at each year end related to estimated income tax obligations resulting from that year’s activity. As of September 30, 2018, a distribution payable of $127,639 was recorded related to taxable income generated during the nine months ended September 30, 2018.  As of December 31, 2017, a distribution payable of $339,691 was recorded relating to taxable income generated during the year ended December 31, 2017.

Actual results could differ from those estimates.

NOTE 4 - Inventories

Inventories consist of the following as of September 30, 2018 and December 31, 2017: