What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-03-10 compared with 2020-03-11 · 516 added, 1056 removed, 320 unchanged (83% of the section changed)

1 unchanged sentence

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of Allied Motion

Technologies Inc.

To the stockholders and the Board of Directors of Allied Motion Technologies Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets

of Allied Motion Technologies Inc.

and subsidiaries (the "Company") as of December 31, 2019 and 2018, the related

consolidated statements of income and comprehensive income, stockholders’

equity, and cash flows for the years ended December 31,

2019 and 2018, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial

statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018,

and the results of its operations and its cash flows for the years ended December 31, 2019 and 2018, in conformity with accounting

principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the

Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of

December 31, 2019, based on criteria established in Internal Control —

Integrated Framework (2013) issued by

the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 11, 2020 expressed an unqualified

opinion on the Company's internal control over financial reporting.

We have audited the accompanying consolidated balance sheets of Allied Motion Technologies Inc.

and subsidiaries (the "Company") as of December 31, 2020 and 2019, the related consolidated statements of income and comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 10, 2021 expressed an unqualified opinion on the Company's internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 1 to the financial statements, the Company

has changed its method of accounting for leases in fiscal year 2019 due to the adoption of Accounting Standards Update No.

Leases (Topic 842) , as amended, using the option to not restate comparative periods and apply the standard as of the date

of initial application.

In fiscal 2019, the Company changed its method of accounting for leases due to the adoption of Accounting Standards Update No.

2016-02, Leases (Topic 842) , as amended, using the option to not restate comparative periods and apply the standard as of the date of initial application.

Basis for Opinion

These financial statements are the responsibility of the Company's

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public

accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial

statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess

the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond

to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial

Our audits also included evaluating the accounting principles used and significant estimates made by management, as

well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis

for our opinion.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Inventories – Refer to Note 1 to the financial statements

Critical Audit Matter Description

Inventories are measured on a first-in, first-out basis at the lower of cost or net realizable value.

The valuation of inventory requires the Company to estimate obsolete or excess inventory, as well as inventory that is not of saleable quality.

The Company’s estimate of the appropriate amount of obsolete or excess inventory, as well as inventory that is not of saleable quality, uses certain inputs and involves judgment.

Such inputs include data associated with historic trends, the demand forecast for inventory on-hand which includes customer purchase order data, and item-specific estimates about the timing or level of demand for a specific part.

Inventories at December 31, 2020 totaled $63 million.

We identified the estimate of obsolete or excess inventory, as well as inventory that is not of saleable quality, as a critical audit matter because of the significant amount of judgment required by management when evaluating demand forecasts and assumptions for item-specific estimates about the timing or level of demand for a specific part.

This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate the reasonableness of the demand forecast for inventory on-hand and item-specific estimates about the timing or level of demand for a specific part.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the valuation of obsolete or excess inventory, as well as inventory that is not of saleable quality, included the following, among others:

● We tested the effectiveness of controls over management’s review of the periodic calculation of the valuation for obsolete or excess inventory, or inventory that is not of saleable quality.

● We tested management’s process for determining the valuation of inventory, including:

o We evaluated the appropriateness of specified inputs supporting management’s estimate, including the historic inventory trends and the demand forecasts.

o We tested the demand forecasts by obtaining documentation to support customer orders, historical and future sales used in the Company’s analysis.

o We evaluated the appropriateness of management’s methodology and assumptions used in developing the estimate, including item-specific estimates about the timing or level of demand for a specific part.

o We evaluated management’s ability to accurately estimate obsolete, excess, or inventory that is not of saleable quality by comparing actual results to management’s historical estimates.

o We evaluated inventory write-offs subsequent to December 31, 2020, for indications that the estimate for obsolete, excess, or inventory that is not of saleable quality may be understated.

/s/ Deloitte & Touche LLP

2 unchanged sentences

We have served as the Company’s auditor since 2018.

Report of Independent Registered Public

Accounting Firm

To the Shareholders and Board of Directors

ALLIED MOTION TECHNOLOGIES INC.

and subsidiaries

Amherst, New York

OPINION ON THE (CONSOLIDATED) FINANCIAL STATEMENTS

We have audited the accompanying consolidated

statements of income and comprehensive income, stockholders’

equity, and cash flows for the year ended December 31,

and the related notes (collectively referred to as the “financial statements”) of Allied Motion Technologies Inc

and subsidiaries (the “Company”).

In our opinion, the financial statements

referred to above present fairly, in all material respects, the results of its operations and its cash flows for the year then

ended in conformity with accounting principles generally accepted in the United States of America.

BASIS FOR OPINION

These financial statements are the responsibility

of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (the “PCAOB”)

and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable

rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with

the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether

the financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures

to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures

that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures

in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by

management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provide a reasonable

basis for our opinion.

/s/ EKS&H LLP

March 15, 2018

Denver, Colorado

We began serving as the Company's auditor in 2006.

we became the predecessor auditor.

ALLIED MOTION TECHNOLOGIES INC.

CONSOLIDATED BALANCE SHEETS

(In thousands except share and per share data)

(In thousands, except per share data)

Current assets:

Cash and cash equivalents

Trade receivables, net of allowance for doubtful accounts of $405 and $530 at

December 31, 2019 and 2018, respectively

Trade receivables, net of provision for credit losses of $ 382 and allowance for doubtful accounts of $ 405 at December 31, 2020 and December 31, 2019, respectively

Prepaid expenses and other assets

3 unchanged sentences

Intangible assets, net

Right of use asset

Right of use assets

Other long-term assets

Liabilities and Stockholders’

Liabilities and Stockholders’ Equity

Current liabilities:

5 unchanged sentences

Pension and post-retirement obligations

Right of use liability

Right of use liabilities

Other long-term liabilities

1 unchanged sentence

Commitments and contingencies (Note 11)

Stockholders’

Stockholders’ Equity:

Common stock, no par value, authorized 50,000 shares;

9,599 and 9,485 shares issued and outstanding at December 31, 2019 and 2018, respectively

9,754 and 9,599 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively

Preferred stock, par value $ 1.00 per share, authorized 5,000 shares;

issued or outstanding

no shares issued or outstanding

Retained earnings

Accumulated other comprehensive loss

Total stockholders’

Total Liabilities and Stockholders’

See accompanying notes to consolidated financial

Total stockholders’ equity

Total Liabilities and Stockholders’ Equity

See accompanying notes to consolidated financial statements.

ALLIED MOTION TECHNOLOGIES INC.

CONSOLIDATED STATEMENTS OF INCOME AND

COMPREHENSIVE INCOME

For the year ended

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(In thousands, except per share data)

For the year ended

Cost of goods sold

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Operating income

Other expense (income):

Other expense, net:

Interest expense

Other (income) expense, net

Other expense (income), net

Total other expense, net

7 unchanged sentences

Diluted weighted average common shares

Other comprehensive income:

Foreign currency translation adjustment

2 unchanged sentences

Comprehensive income

(1) Net of tax of ($218) and $132 for the years ended December 31, 2019 and 2018, respectively.

(2) Net of tax of $186, $2 and ($21) for the years ended December 31, 2019, 2018 and 2017, respectively.

See accompanying notes to consolidated financial

See accompanying notes to consolidated financial statements.

ALLIED MOTION TECHNOLOGIES INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

Other Comprehensive Income (Loss)

(In thousands

except per share data)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except per share data)

Accumulated Other Comprehensive Income (Loss)

Foreign Currency

Cost of Equity

1 unchanged sentence

Stockholders'

Balances, December 31, 2016

transactions under employee benefit stock plans

Issuance of restricted

stock, net of forfeitures

Stock compensation expense

withheld for payment of employee payroll taxes

Comprehensive income (loss)

Dividends to stockholders

- $0.10 per share

(In thousands except per share data)

Balances, December 31, 2017

transactions under employee benefit stock plans

Issuance of restricted

stock, net of forfeitures

Stock transactions under employee benefit stock plans

Issuance of restricted stock, net of forfeitures

Stock compensation expense

withheld for payment of employee payroll taxes

Shares withheld for payment of employee payroll taxes

Comprehensive (loss) income

Dividends to stockholders

- $0.115 per share

Dividends to stockholders - $ 0.115 per share

Balances, December 31, 2018

transactions under employee benefit stock plans

Issuance of restricted

stock, net of forfeitures

Stock transactions under employee benefit stock plans

Issuance of restricted stock, net of forfeitures

Stock compensation expense

withheld for payment of employee payroll taxes

Shares withheld for payment of employee payroll taxes

Comprehensive loss

Dividends to stockholders

- $0.12 per share

Dividends to stockholders - $ 0.12 per share

Balances, December 31, 2019

See accompanying notes to consolidated financial

Stock transactions under employee benefit stock plans

Issuance of restricted stock, net of forfeitures

Stock compensation expense

Shares withheld for payment of employee payroll taxes

Comprehensive income (loss)

Dividends to stockholders - $ 0.12 per share

Balances, December 31, 2020

See accompanying notes to consolidated financial statements.

ALLIED MOTION TECHNOLOGIES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the year ended

(In thousands)

For the year ended

Cash Flows From Operating Activities:

8 unchanged sentences

Restricted stock compensation

Changes in operating assets and liabilities, net of acquisitions:

(Increase) decrease in trade receivables

(Increase) decrease in inventories

(Increase) decrease in prepaid expenses and other assets

Increase (decrease) in accounts payable

Increase (decrease) in accrued liabilities and other liabilities

Changes in operating assets and liabilities, net of acquisition:

Trade receivables

Prepaid expenses and other assets

Accounts payable

Accrued liabilities

Net cash provided by operating activities

1 unchanged sentence

Consideration paid for acquisitions, net of cash acquired

Purchase of property, plant and equipment

Purchase of property and equipment

Net cash used in investing activities

Cash Flows From Financing Activities:

Borrowings (repayments) on lines-of-credit

Repayments on lines of credit

Principal payments of long-term debt

4 unchanged sentences

Tax withholdings related to net share settlements of restricted stock

Stock transactions under employee benefit stock plans

Net cash (used in) provided by financing activities

Net cash provided by (used in) financing activities

Effect of foreign exchange rate changes on cash

3 unchanged sentences

Supplemental disclosure of cash flow information:

Net cash paid during the period for:

See accompanying notes to consolidated financial

ALLIED MOTION

TECHNOLOGIES INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

thousands, except share and per share data)

Interest paid

Income taxes paid

Property, plant and equipment purchases in accounts payable or accrued expenses

See accompanying notes to consolidated financial statements.

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Allied Motion Technologies Inc.

(“Allied Motion”

or the “Company”) is engaged in the business of designing, manufacturing and selling controlled motion solutions, which

include integrated system solutions as well as individual controlled motion products, to a broad spectrum of customers throughout

the world primarily for the industrial, automotive, medical, and aerospace and defense markets.

(“Allied Motion” or the “Company”) is engaged in the business of designing, manufacturing and selling precision and specialty controlled motion components and systems, which include integrated system solutions as well as individual controlled motion products, to a broad spectrum of customers throughout the world primarily for the vehicle, medical, aerospace and defense, and industrial markets.

Principles of Consolidation

The accompanying consolidated financial statements include the

accounts of the Company and its wholly-owned subsidiaries.

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.

All intercompany accounts and transactions are eliminated in consolidation.

For business combinations, we record net assets acquired and

liabilities assumed at their estimated fair values.

For business combinations, we record net assets acquired and liabilities assumed at their estimated fair values.

Cash and Cash Equivalents

Cash and cash equivalents include instruments which are readily

convertible into cash (original maturities of three months or less) and which are not subject to significant risk of changes in

interest rates.

Cash and cash equivalents include instruments which are readily convertible into cash (original maturities of three months or less) and which are not subject to significant risk of changes in interest rates.

Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount

and do not bear interest.

The allowance for doubtful accounts is the Company’s best estimate of the amount of probable

credit losses in the Company’s existing accounts receivable;

however, changes in circumstances relating to accounts receivable

may result in a requirement for additional allowances in the future.

Activity in the allowance for doubtful accounts for

2019 and 2018 was as follows:

Trade accounts receivable are recorded at the invoiced amount and do not bear interest.

The provision for credit losses is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable;

however, changes in circumstances relating to accounts receivable may result in a requirement for additional provisions in the future.

Activity in the provision for credit losses for 2020 and 2019 was as follows (in thousands):

December 31, 2020

4 unchanged sentences

Ending balance

Inventories include costs of materials, direct labor and manufacturing

overhead, and are stated at the lower of cost (first-in, first-out basis) or net realizable value, as follows:

Inventories include costs of materials, direct labor and manufacturing overhead, and are stated at the lower of cost (first-in, first-out basis) or net realizable value, as follows (in thousands):

December 31, 2020

3 unchanged sentences

Finished goods

MOTION TECHNOLOGIES INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

thousands, except share and per share data)

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Property, Plant and Equipment

2 unchanged sentences

Machinery, equipment, tools and dies

Construction work in progress

Furniture, fixtures and other

1 unchanged sentence

Property, plant and equipment, net

Depreciation expense is provided using the straight-line method

over the estimated useful lives of the assets.

Amortization of building improvements is provided using the straight-line

method over the life of the lease term or the life of the assets, whichever is shorter.

Maintenance and repair costs are

charged to operations as incurred.

Depreciation expense is provided using the straight-line method over the estimated useful lives of the assets.

Amortization of building improvements is provided using the straight-line method over the life of the lease term or the life of the asset, whichever is shorter.

Maintenance and repair costs are charged to operations as incurred.

Major additions and improvements are capitalized.

The cost and related accumulated

depreciation of retired or sold property are removed from the accounts and the resulting gain or loss, if any, is reflected in

Depreciation expense was $9,139, $7,921 and $7,055 in 2019,

2018 and 2017, respectively .

Non-cash capital expenditures were $376 and $598 for the years

ended December 31, 2019 and 2018, respectively.

The cost and related accumulated depreciation of retired or sold property are removed from the accounts and the resulting gain or loss, if any, is reflected in earnings.

Depreciation expense was $ 10,057 , $ 9,139 and $ 7,921 in 2020, 2019 and 2018, respectively.

Intangible Assets

Intangible assets, other than goodwill, are recorded at cost

and are amortized over their estimated useful lives using the straight-line method.

This method approximates the pattern of expected

cash flows over the remaining useful lives of the intangible assets.

Intangible assets, other than goodwill, are recorded at cost and are amortized over their estimated useful lives using an accelerated or straight-line method which approximates the pattern of expected cash flows over the remaining useful lives of the intangible assets.

Impairment of Long-Lived Assets

The Company reviews the carrying values of its long-lived assets,

including property, plant and equipment and intangible assets, whenever events or changes in circumstances indicate that such carrying

values may not be recoverable.

Long-lived assets are carried at historical cost if the projected cash flows from their use

will recover their carrying amounts on an undiscounted basis and without considering interest.

If projected cash flows are

less than their carrying value, the long-lived assets must be reduced to their estimated fair value.

Considerable judgment

is required to project such cash flows and, if required, estimate the fair value of the impaired long-lived assets.

did not record any impairment charges for the years ended December 31, 2019, 2018 and 2017.

Goodwill represents the excess of the purchase price over the

fair value of identifiable net tangible and intangible assets acquired in a business combination.

Goodwill is not amortized, but is reviewed for impairment at

least annually or more frequently if impairment indicators arise.

The Company has defined one reporting unit that is the

same as its operating segment.

Goodwill is evaluated for impairment by first performing a qualitative assessment to determine

whether a quantitative goodwill test is necessary.

If it is determined, based on qualitative factors, that the fair value

of the reporting unit may be more likely than not less than carrying amount, or if significant adverse changes in the Company’s

future financial performance occur that could materially impact fair value, a quantitative goodwill impairment test would be required.

Additionally, the Company can elect to forgo the qualitative assessment and perform the quantitative test .

The first step of the quantitative test compares the fair value

of the reporting unit to its carrying amount, including goodwill.

If the carrying amount of a reporting unit exceeds its fair value,

there is a potential impairment and the second step must be performed.

The second step compares the implied fair value of goodwill

with the carrying amount of goodwill.

If the carrying amount of goodwill exceeds the implied fair value, the excess is required

to be recorded as an impairment charge.

The implied fair value of goodwill is determined by assigning

the fair value of the reporting unit to all the assets and liabilities of that unit (including any unrecognized intangible assets)

as if it had been acquired in a business combination.

The Company has elected to perform the annual impairment assessment

for goodwill each year in the fourth quarter.

ALLIED MOTION

TECHNOLOGIES INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

thousands, except share and per share data)

At October 31, 2019, we performed our annual assessment

of fair value and concluded that there was no impairment related to goodwill.

The Company did not record any impairment charges

for the years ended December 31, 2019, 2018 or 2017 .

The Company reviews the carrying values of its long-lived assets, including property, plant and equipment and intangible assets, on an annual basis and whenever events or changes in circumstances indicate that such carrying values may not be recoverable.

Long-lived assets are carried at historical cost if the projected cash flows from their use will recover their carrying amounts on an undiscounted basis and without considering interest.

If projected cash flows are less than their carrying value, the long-lived assets must be reduced to their estimated fair value.

Considerable judgment is required to project such cash flows and, if required, estimate the fair value of the impaired long-lived assets.

The Company did not record any impairment charges for the years ended December 31, 2020, 2019 and 2018.

Goodwill represents the excess of the purchase price over the fair value of identifiable net tangible and intangible assets acquired in a business combination.

Goodwill is not amortized, but is reviewed for impairment at least annually or more frequently if impairment indicators arise.

The Company has defined one reporting unit that is the same as its operating segment.

Goodwill is evaluated for impairment by first performing a qualitative assessment to determine whether a quantitative goodwill test is necessary.

If it is determined, based on qualitative factors, that the fair value of the reporting unit may be more likely than not less than carrying amount, or if significant adverse changes in the Company’s future financial performance occur that could materially impact fair value, a quantitative goodwill impairment test would be required.

Additionally, the Company can

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

elect to forgo the qualitative assessment and perform the quantitative test.

If the qualitative assessment indicates that the quantitative analysis should be performed, or if management elects to bypass a qualitative assessment, the Company then evaluates goodwill for impairment by comparing the fair value of the reporting unit to its carrying amount, including goodwill.

At October 31, 2020, we performed our annual goodwill impairment test and determined, after performing a qualitative test of the reporting unit, that it is more likely than not that the fair value of the reporting unit exceeds its carrying amount.

Accordingly, there was no indication of impairment and the quantitative impairment test was not performed.

The Company did not record any impairment charges for the years ended December 31, 2020, 2019 or 2018.

Other Long-Term Assets

Other long-term assets include securities that the Company has

purchased with the intent of funding the deferred compensation arrangements for certain executives of the Company.

items are accounted for at fair value on a recurring basis.

Any changes in value are included in net income in the Company’s

consolidated statements of income and comprehensive income.

Other long-term assets include securities that the Company has purchased with the intent of funding the deferred compensation arrangements for certain executives of the Company.

These items are accounted for at fair value on a recurring basis.

Any changes in value are included in net income in the Company’s consolidated statements of income and comprehensive income.

The Company offers warranty coverage for its products.

The length of the warranty period for its products is generally three months to two years and varies significantly based on the

product sold.

The Company estimates the costs of repairing products under warranty based on the historical average cost of

The assumptions used to estimate warranty accruals are re-evaluated periodically in light of actual experience

and, when appropriate, the accruals are adjusted.

Estimated warranty costs are recorded at the time of sale of the related product,

and are considered a cost of goods sold.

Changes in the Company’s reserve for product warranty

claims during 2019, 2018 and 2017 were as follows (in thousands):

The length of the warranty period for its products is generally three months to two years and varies significantly based on the product sold.

The Company estimates the costs of repairing products under warranty based on the historical average cost of the repairs.

The assumptions used to estimate warranty accruals are re-evaluated periodically in light of actual experience and, when appropriate, the accruals are adjusted.

Estimated warranty costs are recorded at the time of sale of the related product, and are considered a cost of goods sold.

Changes in the Company’s reserve for product warranty claims during 2020, 2019 and 2018 were as follows (in thousands):

Warranty reserve at beginning of the year

4 unchanged sentences

Accrued Liabilities

Accrued liabilities consist of the following

(in thousands):

Accrued liabilities consist of the following (in thousands):

Compensation and fringe benefits

1 unchanged sentence

Income taxes payable

Right of use liability

Right of use liabilities

Other accrued expenses

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Foreign Currency Translation

The assets and liabilities of the Company’s foreign subsidiaries

are translated into U.S.

The assets and liabilities of the Company’s foreign subsidiaries are translated into U.S.

dollars using end of period exchange rates.

Changes in reported amounts of assets and liabilities

of foreign subsidiaries that occur as a result of changes in exchange rates between foreign subsidiaries’

functional currencies

Changes in reported amounts of assets and liabilities of foreign subsidiaries that occur as a result of changes in exchange rates between foreign subsidiaries’ functional currencies and the U.S.

dollar are included in foreign currency translation adjustment.

Foreign currency translation adjustment is included

in accumulated other comprehensive loss, a component of stockholders’

equity in the accompanying consolidated statements

of stockholders’

Revenue and expense transactions use an average rate prevailing during the month of the related

Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency

other than the functional currency of each of the operating locations are included in the results of operations as incurred.

ALLIED MOTION TECHNOLOGIES INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

thousands, except share and per share data)

Foreign currency translation adjustment is included in accumulated other comprehensive loss, a component of stockholders’ equity in the accompanying consolidated statements of stockholders’ equity.

Revenue and expense transactions use an average rate prevailing during the month of the related transaction.

Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency of each of the operating locations are included in the results of operations as incurred.

Revenue Recognition

Refer to Note 3, Revenue Recognition , for description

of the Company’s policies regarding revenue recognition.

Refer to Note 3, Revenue Recognition , for description of the Company’s policies regarding revenue recognition.

Engineering and Development Costs

The Company is engaged in a variety of engineering and design

activities as well as basic research and development activities directed to the substantial improvement or new application of the

Company’s existing technologies.

Engineering and development costs are expensed as incurred.

The Company is engaged in a variety of engineering and design activities as well as basic research and development activities directed to the substantial improvement or new application of the Company’s existing technologies.

Engineering and design as well as research and development costs are expensed as incurred.

Basic and Diluted Income per Share

Basic income per share is computed by dividing net income or

loss by the weighted average number of shares of common stock outstanding.

Diluted income per share is determined by dividing

the net income by the sum of (1) the weighted average number of common shares outstanding and (2) if not anti-dilutive,

the effect of stock awards determined utilizing the treasury stock method.

Basic and diluted weighted-average shares outstanding are as

Basic income per share is computed by dividing net income or loss by the weighted average number of shares of common stock outstanding.

Diluted income per share is determined by dividing the net income by the sum of (1) the weighted average number of common shares outstanding and (2) if not anti-dilutive, the effect of stock awards determined utilizing the treasury stock method.

Basic and diluted weighted-average shares outstanding are as follows (in thousands):

Year ended December 31,

2 unchanged sentences

Diluted weighted average shares outstanding

For 2019, 2018 and 2017, the anti-dilutive common shares excluded

from the calculation of diluted income per share were immaterial.

For 2020, 2019 and 2018, the anti-dilutive common shares excluded from the calculation of diluted income per share were immaterial.

Comprehensive Income

Comprehensive income is defined as the change in equity of a

business enterprise during a period from transactions and other events and circumstances from non-owner sources.

all changes in equity during a period except those resulting from investments by and distributions to stockholders.

Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources.

It includes all changes in equity during a period except those resulting from investments by and distributions to stockholders.

Fair Value Accounting

Authoritative guidance defines fair value as the price that

would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants

at the measurement date.

The guidance establishes a framework for measuring fair value,

which utilizes observable and unobservable inputs.

Observable inputs reflect market data obtained from independent sources, while

unobservable inputs reflect the Company’s market assumptions.

Authoritative guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date.

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

The guidance establishes a framework for measuring fair value, which utilizes observable and unobservable inputs.

Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions.

Preference is given to observable inputs.

These two types of inputs create the following three-level fair

value hierarchy:

These two types of inputs create the following three-level fair value hierarchy:

Quoted prices for identical assets or liabilities in active markets.

3 unchanged sentences

Significant inputs to the valuation model that are unobservable.

MOTION TECHNOLOGIES INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

thousands, except share and per share data)

The Company’s financial assets and liabilities include

cash and cash equivalents, accounts receivable, debt obligations, accounts payable, and accrued liabilities.

The carrying amounts

reported in the consolidated balance sheets for these assets approximate fair value because of the immediate or short-term maturities

of these financial instruments.

The following table presents the Company’s financial assets

that are accounted for at fair value on a recurring basis as of December 31, 2019 and 2018, respectively, by level within

the fair value hierarchy (in thousands):

The Company’s financial assets and liabilities include cash and cash equivalents, accounts receivable, debt obligations, accounts payable, and accrued liabilities.

The carrying amounts reported in the consolidated balance sheets for these assets approximate fair value because of the immediate or short-term maturities of these financial instruments.

The following table presents the Company’s financial assets that are accounted for at fair value on a recurring basis as of December 31, 2020 and 2019, respectively, by level within the fair value hierarchy (in thousands):

December 31, 2020

1 unchanged sentence

Pension plan assets

Other long-term assets

Deferred compensation plan assets

Interest rate swaps

2 unchanged sentences

Pension plan assets

Other long-term assets

Deferred compensation plan assets

Interest rate swaps

Derivative Financial Instruments

FASB’s Accounting Standards Codification (“ASC”)

815, Derivatives and Hedging (“ASC 815”), provides the disclosure requirements for derivatives and

hedging activities with the intent to provide users of financial statements with an enhanced understanding of:

why an entity uses derivative instruments, (b) how the entity accounts for derivative instruments and related hedged items,

and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance,

and cash flows.

Further, qualitative disclosures are required that explain the Company’s objectives and strategies for using

derivatives, as well as quantitative disclosures about the fair value of and gains and losses on derivative instruments, and disclosures

about credit-risk-related contingent features in derivative instruments.

As required by ASC 815, the Company records

all derivatives on the balance sheet at fair value.

The accounting for changes in the fair value of derivatives depends on

the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply

hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting.

designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted

transactions, are considered cash flow hedges.

Hedge accounting generally provides for the matching of the timing of gain or loss

recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that

are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash

The Company may enter into derivative contracts that are intended to economically hedge certain of its risk, even though

hedge accounting does not apply, or the Company elects not to apply hedge accounting.

The Tax Cuts and Jobs Act of 2017 (“Act”) was enacted

in the United States on December 22, 2017.

The provisions of the Act significantly revised the U.S.

Federal corporate

income tax rules and reduced the corporate tax rate from 35% to 21% for 2018 and future years.

The Act also required companies

to record a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred.

The Company completed the accounting for the tax effects of enactment of the Act by December 31, 2018.

MOTION TECHNOLOGIES INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

thousands, except share and per share data)

The current provision for income taxes represents actual or

estimated amounts payable or refundable on tax return filings each year.

Deferred tax assets and liabilities are recorded for the

estimated future tax effects of temporary differences between the tax basis of assets and liabilities and amounts reported in the

accompanying consolidated balance sheets, and for operating loss and tax credit carryforwards.

The change in deferred tax assets

and liabilities for the period measures the deferred tax provision or benefit for the period.

Effects of changes in enacted tax

laws on deferred tax assets and liabilities are reflected as adjustments to the tax provision or benefit in the period of enactment.

A valuation allowance may be provided to the extent management deems it is more likely than not that deferred tax assets will not

The ultimate realization of net deferred tax assets is dependent upon the generation of future taxable income, in

the appropriate taxing jurisdictions, during the periods in which temporary differences, net operating losses and tax credits become

Management believes that it is more likely than not that the Company will realize the benefits of these temporary differences

and operating loss and tax credit carryforwards, net of valuation allowances.

It is the Company’s policy to include interest and penalties

related to income tax liabilities in income tax expense on the Consolidated Statements of Income and Comprehensive Income.

the Company records uncertain tax positions in accordance with ASC 740, Income Taxes , (“ASC 740”).

740 provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the financial

There were no uncertain tax benefits for the years ended December 31, 2019, 2018 and 2017 and no amounts were

recorded for interest and penalties related to unrecognized tax positions for the years ended December 31, 2019, 2018, and

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification ("ASC") No.

815, Derivatives and Hedging ("ASC 815"), provides the disclosure requirements for derivatives and hedging activities with the intent to provide users of financial statements with an enhanced understanding of:

(a) how and why an entity uses derivative instruments, (b) how the entity accounts for derivative instruments and related hedged items, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows.

Further, qualitative disclosures are required that explain the Company’s objectives and strategies for using derivatives, as well as quantitative disclosures about the fair value of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative instruments.

As required by ASC 815, the Company records all derivatives on the balance sheet at fair value.

The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting.

Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge.

The Company may enter into derivative contracts that are intended to economically hedge certain of its risk, even though hedge accounting does not apply, or the Company elects not to apply hedge accounting.

The current provision for income taxes represents actual or estimated amounts payable or refundable on tax return filings each year.

Deferred tax assets and liabilities are recorded for the estimated future tax effects of temporary differences between the tax basis of assets and liabilities and amounts reported in the accompanying consolidated balance sheets, and for operating loss and tax credit carryforwards.

The change in deferred tax assets and liabilities for the period measures the deferred tax provision or benefit for the period.

Effects of changes in enacted tax laws on deferred tax assets and liabilities are reflected as adjustments to the tax provision or benefit in the period of enactment.

A valuation allowance may be provided to the extent management deems it is more likely than not that deferred tax assets will not be realized.

The ultimate realization of net deferred tax assets is dependent upon the generation of future taxable income, in the appropriate taxing jurisdictions, during the periods in which temporary differences, net operating losses and tax credits become realizable.

Management believes that it is more likely than not that the Company will realize the benefits of these temporary differences and operating loss and tax credit carryforwards, net of valuation allowances.

It is the Company's policy to include interest and penalties related to income tax liabilities in income tax expense on the consolidated statements of income and comprehensive Income.

In addition, the Company records uncertain tax positions in accordance with ASC 740, Income Taxes , ("ASC 740").

ASC 740 provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the financial statements.

There were no uncertain tax benefits for the years ended December 31, 2020, 2019 and 2018 and no amounts were recorded for interest and penalties related to unrecognized tax positions for the years ended December 31, 2020, 2019, and 2018.

Pension and Postretirement Welfare Plans

The Company records the service cost component of net benefit

costs in Cost of goods sold, Selling, and General and administrative expenses.

The interest cost component of net benefit costs

is recorded in Interest expense and the remaining components of net benefit costs, amortization of net losses and expected return

on plan assets is recorded in Other (income) expense, net.

The Company records the service cost component of net benefit costs in Cost of goods sold, Selling, and General and administrative expenses.

The interest cost component of net benefit costs is recorded in Interest expense and the remaining components of net benefit costs, amortization of net losses and expected return on plan assets is recorded in Other expense, net.

Concentration of Credit Risk

Trade receivables subject the Company to the potential for credit

To reduce this risk, the Company performs evaluations of its customers’

financial condition and creditworthiness

at the time of sale, and updates those evaluations when necessary.

See Note 13, Segment Information, for

additional information regarding customer concentration.

Trade receivables subject the Company to the potential for credit risk.

To reduce this risk, the Company performs evaluations of its customers’ financial condition and creditworthiness at the time of sale, and updates those evaluations when necessary.

See Note 13, Segment Information, for additional information regarding customer concentration.

Use of Estimates

The preparation of financial statements in accordance with accounting

principles generally accepted in the United States of America 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 consolidated financial statements and the reported amounts of revenues and expenses during the

reporting period.

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

Reclassifications

Certain items in the prior year’s consolidated financial

statements and notes to consolidated financial statements have been reclassified to conform to the 2019 presentation.

The reclassifications

had no effect on the reported results of operations.

The tabular reconciliation of the Company’s income tax rates to the

federal statutory rates in Note 9, Income Taxes has been adjusted for 2018 and 2017 to conform to the 2019 presentation.

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Recently adopted accounting pronouncements

In February 2016, the FASB issued Accounting

Standards Update (“ASU”) No.

2016-02, Leases (Topic 842), which requires lessees to recognize a

right-of-use (“ROU”) asset and a lease liability for all leases with terms greater than 12 months and also

requires disclosures by lessees and lessors about the amount, timing and uncertainty of cash flows arising from leases.

Subsequent to the issuance of Topic 842, the FASB clarified the guidance through several ASUs;

hereinafter the collection of

lease guidance is referred to as “ASC 842”.

MOTION TECHNOLOGIES INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

thousands, except share and per share data)

On January 1, 2019, the Company adopted ASC 842 using the

modified retrospective method for all lease arrangements at the beginning of the period of adoption.

Results for reporting periods

beginning January 1, 2019 are presented under ASC 842, while prior period amounts were not adjusted and continue to be reported

in accordance with the Company’s historic accounting under ASC 840, Leases.

The standard had a material impact on the Company’s

consolidated balance sheet but did not have a significant impact on the Company’s consolidated net income and cash flows.

The most significant impact was the recognition of ROU assets and lease liabilities for operating leases.

For leases that commenced

before the effective date of ASC 842, the Company elected the permitted practical expedients to not reassess the following:

any expired or existing contracts contain leases;

(ii) the lease classification for any expired or existing leases;

and (iii) initial

direct costs for any existing leases.

The Company also elected to exclude leases with a term of 12 months or less in the recognized

ROU assets and lease liabilities, when the likelihood of renewal is not probable.

As a result of the cumulative impact of adopting ASC 842, the

Company recorded operating lease ROU assets of $19,728 and operating lease liabilities of $20,350 as of January 1, 2019, primarily

related to real estate, equipment and automobile leases, based on the present value of the future lease payments on the date of

Refer to Note 10 - Leases for the additional disclosures required by ASC 842.

The Company determines if an arrangement is a lease at inception.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent an

obligation to make lease payments arising from the lease.

ROU assets and lease liabilities are recognized at the lease commencement

date based on the present value of lease payments over the lease term.

As most of the Company’s leases do not provide an

implicit interest rate, the Company uses its incremental borrowing rate based on the information available at commencement date

in determining the present value of lease payments.

The ROU asset also consists of any prepaid lease payments and deferred rent

The lease terms used to calculate the ROU asset and related lease liability include options to extend or terminate

the lease when it is reasonably certain that the Company will exercise that option.

Lease expense for operating leases is recognized

on a straight-line basis over the lease term as an operating expense.

The Company has lease agreements which require payments for

lease and non-lease components and has elected to account for these as a single lease component.

In February 2018, the FASB issued ASU No.

2018-02, Income

Statement-Reporting Comprehensive Income (Topic 220) Reclassification of Certain Tax Effects from Accumulated Other Comprehensive

Income, to address a specific consequence of Act by allowing a reclassification from accumulated other comprehensive income

to retained earnings for stranded tax effects resulting from the Act’s reduction of the U.S.

federal corporate income tax

The Company adopted this ASU on January 1, 2019 on a prospective basis.

Recently issued accounting pronouncements

In August 2018, the FASB issued ASU No.

2018-13, Fair

Value Measurement (Topic 820) , which modifies the disclosures on fair value measurements by removing the requirement to disclose

the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and the policy for timing of such

The ASU expands the disclosure requirements for Level 3 fair value measurements, primarily focused on changes in unrealized

gains and losses included in other comprehensive income (loss).

The ASU is effective for public entities for fiscal years beginning

after December 15, 2019 The Company has not historically had any transfers between Level 1 and Level 2 or assets or liabilities

measured at fair value under Level 3.

The Company does not expect the adoption of this ASU to have a material impact on its consolidated

financial statements.

In September 2016, the FASB issued ASU 2016-13, Financial

Instruments - Credit Losses (Topic 326):

In June 2016, FASB issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments .

This guidance requires the

measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current

conditions and reasonable and supportable forecasts.

This guidance also requires enhanced disclosures regarding significant estimates

and judgments used in estimating credit losses.

This guidance requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts.

This guidance also requires enhanced disclosures regarding significant estimates and judgments used in estimating credit losses.

The new guidance is effective for fiscal years beginning after December 15, 2019.

The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial

The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles

- Goodwill and Other (Topic 350):

The Company adopted this ASU on January 1, 2020 applying the modified retrospective approach and the adoption did not have a material impact on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment .

The guidance in ASU 2017-04 eliminates the

requirement to determine the fair value of individual assets and liabilities of a reporting unit to measure goodwill impairment.

Under the amendments in the new ASU, goodwill impairment testing will be performed by comparing the fair value of the reporting

unit with its carrying amount and recognizing an impairment charge for the amount by which the carrying amount exceeds the reporting

unit’s fair value.

ASU 2017-04 is effective for annual and interim goodwill impairment tests in fiscal years beginning after

December 15, 2019, and should be applied on a prospective basis.

The Company is currently evaluating the impact of adopting

this guidance on the Company’s consolidated financial statements.

The Company does not expect the adoption of this ASU to

have a material impact on its consolidated financial statements.

MOTION TECHNOLOGIES INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

thousands, except share and per share data)

On December 6, 2018, the Company entered into a Unit Purchase

Agreement (the “Purchase Agreement”) with TCI, LLC, a Wisconsin limited liability company (“TCI”), and

the members of TCI (“Sellers”), pursuant to which Allied Motion acquired 100% of the issued and outstanding common

units of TCI from Sellers (the “Acquisition”) in a transaction valued at $64,135.

A portion of the Acquisition consideration

was placed in escrow to secure payment of any post-closing adjustments to the purchase price and to secure the Sellers’

indemnification

obligations to Allied Motion.

Cash consideration was funded from borrowings on the Company’s existing credit facilities.

The TCI acquisition broadened and strengthened the Company’s

position as a leading global diversified solutions provider in the controlled motion market.

TCI has adjacent technologies and

capabilities that enable more efficient and longer life solutions for motion devices in a wide variety of demanding applications.

TCI’s technology and products are expected to be a valuable addition to the Company’s expanding suite of solution offerings.

The Company incurred $413 of transaction costs related to the

acquisition of TCI.

Transaction costs are included in business development expenses on the consolidated statements of income and

comprehensive income.

The Company accounted for the acquisition pursuant to ASC 805, Business Combinations .

The allocation

of the purchase price paid for TCI is based on estimated fair values of the assets acquired and liabilities assumed of TCI as of

December 6, 2018 (in thousands):

The guidance in ASU 2017-04 eliminates the requirement to determine the fair value of individual assets and liabilities of a reporting unit to measure goodwill impairment.

Under the amendments in the new ASU, goodwill impairment testing will be performed by comparing the fair value of the reporting unit with its carrying amount and recognizing an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value.

ASU 2017-04 is effective for annual and interim goodwill impairment tests in fiscal years beginning after December 15, 2019.

The Company adopted this standard on January 1, 2020 on a prospective basis and the adoption did not have a material impact on its consolidated financial statements.

In August 2018, the FASB issued ASU No.

2018-13, Fair Value Measurement (Topic 820) , which modifies the disclosures on fair value measurements by removing the requirement to disclose the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and the policy for timing of such transfers.

The ASU expands the disclosure requirements for Level 3 fair value measurements, primarily focused on changes in unrealized gains and losses included in other comprehensive income (loss).

The ASU is effective for public entities for fiscal years beginning after December 15, 2019.

The Company has not historically had any transfers between Level 1 and Level 2 or assets or liabilities measured at fair value under Level 3.

The Company adopted this ASU on January 1, 2020 on a prospective basis and the adoption did not have a material impact on its consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting .

This guidance provides relief for impacted areas as it relates to impending reference rate reform and contains optional expedients and exceptions for applying U.S.

GAAP to contracts, hedging relationships, and other areas or transactions, subject to meeting certain criteria, that are impacted by reference rate reform.

This ASU is effective upon issuance for all entities and elections of certain optional expedients are required to apply the provisions of the guidance.

The Company adopted this ASU effective January 1, 2020 on a prospective basis, and the Company has elected the expedients related to the probability of hedged interest payments, regardless of any expected future modification in terms related to reference rate reform, as well as the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives.

Should the Company elect further optional expedients as it relates to reference rate reform, disclosure of those elections will be done in the fiscal period in which the elections are made.

The adoption did not have a material impact on its consolidated financial statement s.

Dynamic Controls

On March 7, 2020, the Company acquired 100 % of the issued and outstanding share capital of the Dynamic Controls Group (“Dynamic Controls”), a wholly owned subsidiary of Invacare Corporation, a market-leading designer and manufacturer of equipment for the medical mobility and rehabilitation markets.

The purchase price was funded using borrowings under the Amended Revolving Facility (Note 7).

The purchase price was subject to adjustments based on a determination of closing net working capital.

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Dynamic Controls brings strong leadership and a very experienced electronics and software engineering design team, providing market leading electronic control solutions and products that will further strengthen the Company’s medical market position, as well as enable it to further develop higher level solutions with embedded electronics across our other major served markets.

The Company incurred $ 473 of transaction costs related to the acquisition of Dynamic Controls in 2020, which are included in business development expenses on the consolidated statements of income and comprehensive income.

The Company accounted for the acquisition pursuant to FASB ASC 805, Business Combinations .

The allocation of the purchase price paid for Dynamic Controls is based on estimated fair values of the assets acquired and liabilities assumed of Dynamic Controls as of March 7, 2020 and is as follows (in thousands):

Cash and cash equivalents

Accounts receivable

1 unchanged sentence

Property, plant and equipment

Amortizable intangible assets

Right of use assets

Intangible assets

Current liabilities

Lease liabilities

Net deferred income tax liabilities

Net purchase price

During the second quarter 2019, the purchase price allocation

was revised to reflect an updated valuation of inventory, resulting in the adjusted purchase price of $64,135.

The purchase price

excluded any cash on hand and any debt of TCI.

The allocation of the purchase price was completed during the fourth quarter 2019.

The intangible assets acquired consisted of customer lists,

technology and a trade name, which are being amortized over 16, 15 and 19 years, respectively.

Goodwill generated in the acquisition

is related to the assembled workforce, synergies between Allied Motion’s other locations and TCI that are expected to occur

as a result of the combined engineering knowledge, the ability of each of the locations to integrate each other’s products

into more fully integrated system solutions and Allied Motion’s ability to utilize TCI’s management knowledge in providing

complementary product offerings to the Company’s customers.

The goodwill resulting from the TCI acquisition is tax deductible.

MOTION TECHNOLOGIES INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

thousands, except share and per share data)

Pro forma Condensed Combined Financial Information (Unaudited)

The following presents the Company’s unaudited pro forma

financial information for the years ended December 31, 2018 and 2017 giving effect to the acquisition of TCI as if it had

occurred at January 1, 2017.

Included in the pro forma information is:

the additional depreciation and amortization resulting

from the valuation of amortizable tangible and intangible assets;

interest on borrowings made by the Company;

amortization of deferred

finance costs incurred to issue the borrowings;

and removal of acquisition related transaction costs.

During the second quarter of 2020, measurement period adjustments primarily related to deferred income taxes and the true-up of closing net working capital were recognized, which resulted in a reduction of goodwill by $ 268 .

During the third quarter of 2020, measurement period adjustments related primarily to tax liabilities were recognized, which resulted in an increase of goodwill by $ 77 .

The allocation of the purchase price was finalized during the fourth quarter of 2020.

The intangible assets acquired consist of customer lists of $ 4,400 , technology of $ 1,900 and a trade name of $ 1,500 , which are being amortized over 16 , 13 and 18 years , respectively.

Goodwill generated in the acquisition is related to the assembled workforce, synergies between Allied Motion’s other operations and Dynamic Controls that are expected to occur as a result of the combined engineering knowledge, the ability of each of the operations to integrate each other’s products into more fully integrated system solutions and Allied Motion’s ability to utilize Dynamic Controls’ management knowledge in providing complementary product offerings to the Company’s customers.

The operating results of this acquisition are included in our consolidated financial statements beginning on the date of the acquisition.

Included within the consolidated statement of income and comprehensive income for the year ended December 31, 2020, revenues and earnings related to Dynamic Controls were $ 24,124 and $ 945 , respectively.

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

The following unaudited pro forma financial information presents the combined results of operations if the Dynamic Controls acquisition had occurred as of January 1, 2019 (in thousands):

For the year ended

Diluted earnings per share

The pro forma financial results do not reflect adjustments for

anticipated operating efficiencies that the Company expects to achieve as a result of this acquisition.

The pro forma financial

information is for informational purposes only and does not purport to present what the Company’s results would actually

have been had these transactions actually occurred on the date presented or to project the combined company’s results of

operations or financial position for any future period.

Maval OE Steering

On January 19, 2018, the Company purchased substantially

all of the operating assets associated with the original equipment steering business of Maval Industries, LLC (“Maval”)

for $13,312 in cash.

Consistent with the Company’s strategy to provide higher level system solutions, the addition of the

Maval OE steering (“Maval OE Steering”) product line enables Allied to provide a fully integrated steering system solution

to its customers.

The following table represents the purchase price allocation

and summarizes the aggregate estimated fair value of the assets acquired (in thousands):

January 19, 2018

Intangible assets

Assets acquired (net of liabilities assumed)

Fair value of net assets acquired

represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired.

The purchase price allocation was completed during the fourth quarter 2018.

The goodwill resulting from the Maval OE Steering acquisition

is tax deductible.

Earnings per share - basic

Earnings per share - diluted

The pro forma information includes certain adjustments, including depreciation and amortization expense, interest expense, and certain other adjustments, together with related income tax effects.

The pro forma amounts do not reflect adjustments for anticipated operating efficiencies that the Company expects to achieve as a result of this acquisition.

The pro forma financial information is for informational purposes only and does not purport to present what the Company’s results would have been had these transactions actually occurred on the date presented or to project the combined company’s results of operations or financial position for any future period.

The goodwill resulting from the Dynamic Controls acquisition is not tax deductible.

REVENUE RECOGNITION

1 unchanged sentence

Performance Obligations Satisfied at a Point in Time

The Company considers control of most products to transfer at

a single point in time when control is transferred to the customer, generally when the products are shipped in accordance with

an agreement and/or purchase order.

Control is defined as the ability to direct the use of and obtain substantially all of the

remaining benefits of the product.

The Company satisfies its performance obligations under a contract

with a customer by transferring goods and services in exchange for generally monetary consideration from the customer.

considers the customer’s purchase order, and the Company’s corresponding sales order acknowledgment as the contract

with the customer.

For some customers, control, and a sale, is transferred at a point in time when the product is delivered to

Sales, value add, and other taxes the Company collects concurrent

with revenue-producing activities are excluded from revenue.

MOTION TECHNOLOGIES INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

thousands, except share and per share data)

The Company considers control of most products to transfer at a single point in time when control is transferred to the customer, generally when the products are shipped in accordance with an agreement and/or purchase order.

Control is defined as the ability to direct the use of and obtain substantially all of the remaining benefits of the product.

The Company satisfies its performance obligations under a contract with a customer by transferring goods and services in exchange for generally monetary consideration from the customer.

The Company considers the customer’s purchase order, and the Company’s corresponding sales order acknowledgment as the contract with the customer.

For some customers, control, and a sale, is transferred at a point in time when the product is delivered to a customer.

Sales, value add, and other taxes the Company collects concurrent with revenue-producing activities are excluded from revenue.

Nature of Goods and Services

The Company sells component and integrated controlled motion

solutions to end customers and original equipment manufacturers (“OEM’s”) through the Company’s own direct

sales force and authorized manufacturers’

representatives and distributors.

The Company’s products include brush

and brushless DC motors, brushless servo and torque motors, coreless DC motors, integrated brushless motor-drives, gearmotors,

gearing, modular digital servo drives, motion controllers, incremental and absolute optical encoders, active and passive filters

for power quality and harmonic issues, and other controlled motion-related products.

The Company’s target markets include

Vehicle, Medical, Aerospace & Defense and Industrial.

The Company sells component and integrated controlled motion solutions to end customers and original equipment manufacturers (“OEM’s”) through the Company’s own direct sales force and authorized manufacturers’ representatives and distributors.

The Company’s products include brushed and brushless DC motors, brushless servo and torque motors, coreless DC motors, integrated brushless motor-drives, gearmotors, gearing, modular digital servo drives, motion controllers, incremental and absolute optical encoders, active and passive filters for power quality and harmonic issues, and other controlled motion-related products.

The Company’s target markets include Vehicle, Medical, Aerospace & Defense and Industrial.

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Determining the Transaction Price

The majority of the Company’s contracts have an original

duration of less than one year.

For these contracts, the Company applies the practical expedient and therefore does not consider

the effects of the time value of money.

For multiyear contracts, the Company uses judgment to determine whether there is a significant

financing component.

The majority of the Company’s contracts have an original duration of less than one year.

For these contracts, the Company applies the practical expedient and therefore does not consider the effects of the time value of money.

For multiyear contracts, the Company uses judgment to determine whether there is a significant financing component.

These contracts are generally those in which the customer has made an up-front payment.

Contracts that management

determines to include a significant financing component are discounted at the Company’s incremental borrowing rate.

incurs interest expense and accrues a contract liability.

As the Company satisfies performance obligations and recognizes revenue

from these contracts, interest expense is recognized simultaneously.

Management does not have any contracts that include a significant

financing component as of December 31, 2019.

Contracts that management determines to include a significant financing component are discounted at the Company’s incremental borrowing rate.

The Company incurs interest expense and accrues a contract liability.

As the Company satisfies performance obligations and recognizes revenue from these contracts, interest expense is recognized simultaneously.

Management does not have any contracts that include a significant financing component as of December 31, 2020.

Disaggregation of Revenue

The Company disaggregates revenue from contracts with customers

into geographical regions and target markets.

The Company determines that disaggregating revenue into these categories achieves

the disclosure objective to depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic

As noted in Note 13, Segment Information , the Company’s business consists of one reportable segment.

revenues by geography in the table below are revenues derived from the Company’s foreign subsidiaries as provided in Note

The Company disaggregates revenue from contracts with customers into geographical regions and target markets.

The Company determines that disaggregating revenue into these categories achieves the disclosure objective to depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors.

As noted in Note 13, Segment Information , the Company’s business consists of one reportable segment.

The revenues by geography in the table below are revenues derived from the Company’s foreign subsidiaries as provided in Note 13.

A reconciliation of disaggregated revenue to segment revenue as well as revenue by geographical regions is provided in Note 13.

The Company’s disaggregated revenues are as follows (in thousands):

Year ended December 31,

3 unchanged sentences

United States

MOTION TECHNOLOGIES INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

thousands, except share and per share data)

Contract Balances

When the timing of the Company’s delivery of product is

different from the timing of the payments made by customers, the Company recognizes either a contract asset (performance precedes

customer payment) or a contract liability (customer payment precedes performance).

Typically, contracts are paid in arrears and

are recognized as receivables after the Company considers whether a significant financing component exists.

The opening and closing balances of the Company’s receivables,

contract asset, and contract liability are as follows (in thousands):

December 31, 2019

Contract Asset

Opening balance

Closing balance

The difference between the opening and closing balances of the

Company’s contract assets and contract liabilities primarily results from the timing difference between the Company’s

performance and the customer’s payment.

Nearly all of the opening balance of the contract liability was recognized as revenue

When the timing of the Company’s delivery of product is different from the timing of the payments made by customers, the Company recognizes either a contract asset (performance precedes customer payment) or a contract liability (customer payment precedes performance).

Typically, contracts are paid in arrears and are recognized as receivables after the Company considers whether a significant financing component exists.

The opening and closing balances of the Company’s contract liability are as follows (in thousands):

Contract liabilities in accrued liabilities

Contract liabilities in other long-term liabilities

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

The difference between the opening and closing balances of the Company’s contract liabilities primarily results from the timing difference between the Company’s performance and the customer’s payment.

Significant Payment Terms

The Company’s contracts with its customers state the final

terms of the sale, including the description, quantity, and price of each product or service purchased.

Payments are typically

due in full within 30-60 days of delivery.

Since the customer agrees to a stated rate and price in the contract that do not vary

over the contract, the majority of contracts do not contain variable consideration.

The Company’s contracts with its customers state the final terms of the sale, including the description, quantity, and price of each product or service purchased.

Payments are typically due in full within 30-60 days of delivery.

Since the customer agrees to a stated rate and price in the contract that do not vary over the contract, the majority of contracts do not contain variable consideration.

Returns, Refunds, and Warranties

In the normal course of business, the Company does not accept

product returns unless the item is defective as manufactured.

In the normal course of business, the Company does not accept product returns unless the item is defective as manufactured.

The Company establishes provisions for estimated returns and warranties.

1 unchanged sentence

Practical Expedients

Incremental costs of obtaining a contract - the Company

elected to expense the incremental costs of obtaining a contract when the amortization period for such contracts would have been

one year or less.

Remaining performance obligations - the Company elected

not to disclose the aggregate amount of the transaction price allocated to remaining performance obligations for its contracts

that are one year or less, as the revenue is expected to be recognized within the next year.

The time value of money - the Company elected not to

adjust the promised amount of consideration for the effects of the time value of money for contracts in which the anticipated period

between when the Company transfers the goods or services to the customer and when the customer pays is equal to one year or less.

MOTION TECHNOLOGIES INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

thousands, except share and per share data)

The change in the carrying amount of goodwill for 2019 and

2018 is as follows (in thousands):

Incremental costs of obtaining a contract - the Company elected to expense the incremental costs of obtaining a contract when the amortization period for such contracts would have been one year or less .

Remaining performance obligations - the Company elected not to disclose the aggregate amount of the transaction price allocated to remaining performance obligations for its contracts that are one year or less , as the revenue is expected to be recognized within the next year.

Time value of money - the Company elected not to adjust the promised amount of consideration for the effects of the time value of money for contracts in which the anticipated period between when the Company transfers the goods or services to the customer and when the customer pays is equal to one year or less .

The change in the carrying amount of goodwill for 2020 and 2019 is as follows (in thousands):

Beginning balance

2 unchanged sentences

Ending balance

The purchase price allocation was finalized for the TCI acquisition

during the fourth quarter 2019.

The purchase price allocation was finalized for the Dynamic Controls acquisition during the fourth quarter of 2020.

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

INTANGIBLE ASSETS

Intangible assets on the Company’s consolidated balance

sheets consist of the following (in thousands):

Intangible assets on the Company’s consolidated balance sheets consist of the following (in thousands):

December 31, 2020

December 31, 2019

Customer lists

2 unchanged sentences

10 - 15 years

Intangible assets resulting from the acquisition of TCI were

approximately $36,400 (Note 2).

The intangible assets acquired consist of customer lists, a trade name and technology.

Intangible assets resulting from the acquisition of the Maval

OE Steering business were approximately $3,870 (Note 2).

The intangible assets acquired consist of customer lists.

Total amortization expense for intangible assets for the years

2019, 2018 and 2017 was $5,718, $3,655 and $3,219, respectively.

Estimated amortization expense for intangible assets is as follows

(in thousands):

Year ending December 31,

MOTION TECHNOLOGIES INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

thousands, except share and per share data)

Intangible assets resulting from the acquisition of Dynamic Controls were approximately $ 7,800 (Note 2).

The intangible assets acquired consist of customer lists, technology, and a trade name.

Total amortization expense for intangible assets for the years 2020, 2019 and 2018 was $ 5,928 , $ 5,718 and $ 3,655 , respectively.

Estimated amortization expense for intangible assets is as follows (in thousands):

Amortization Expense

Total estimated amortization expense

STOCK-BASED COMPENSATION PLANS

Stock Incentive Plans

The Company’s Stock Incentive Plans provide for the granting

of stock awards, including stock options, stock appreciation rights, and restricted stock, to employees and non-employees, including

directors of the Company.

As of December 31, 2019, the Company had 911,178

shares of common stock available for grant under stock incentive plans.

Restricted Stock

The following is a summary of restricted stock grants, fair

value and performance based awards:

For the year ended December 31,

The Company’s Stock Incentive Plans provide for the granting of stock awards, including stock options, stock appreciation rights, and restricted stock, to employees and non-employees, including directors of the Company.

As of December 31, 2020, the Company had 753,187 shares of common stock available for grant under stock incentive plans.

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Restricted Stock

The following is a summary of restricted stock grants, fair value and performance based awards:

Weighted average

restricted stock

grant date fair

performance vesting

The value at the date of award is amortized to compensation

expense over the related service period, which is generally three years for time vested grants.

Short-term performance based

grants can be achieved over a period of one year, and long-term performance grants can be earned through December 31, 2022.

For the year ended December 31,

The value at the date of award is amortized to compensation expense over the related service period, which is generally three years for time vested grants.

Short-term performance based grants can be achieved over a period of one year, and long-term performance grants can be earned through December 31, 2022.

Earned grants are then subject to either a 3 year or 5 year service period.

Shares of non-vested restricted stock are forfeited

if a recipient leaves the Company before the vesting date.

Shares of non-vested restricted stock are forfeited if a recipient leaves the Company before the vesting date.

Shares that are forfeited become available for future awards.

For performance-based awards, the Company assesses the probability of the achievement of the awards during the year and recognizes

expense accordingly.

The following is a summary of restricted stock activity during

years 2019, 2018 and 2017:

For performance-based awards, the Company assesses the probability of the achievement of the awards during the year and recognizes expense accordingly.

The following is a summary of restricted stock activity during years 2020, 2019 and 2018:

Balance, December 31, 2017

4 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share

The following is a summary of performance based restricted stock

activity during years 2019, 2018 and 2017:

performance grants

(In thousands, except share and per share data)

The following is a summary of performance based restricted stock activity during years 2020, 2019 and 2018:

Total performance

Outstanding, December 31, 2017

5 unchanged sentences

Outstanding, December 31, 2020

The performance criteria and forfeitures in the above table

did not occur until the Board of Directors approved them during the February 2020, 2019 and 2018 meetings.

The performance criteria and forfeitures in the above table did not occur until the Board of Directors approved them during the March 2021, and February 2020 and 2019 meetings.

Share-Based Compensation Expense

Restricted Stock

During 2019, 2018 and 2017 compensation expense net of forfeitures

of $3,203, $2,643 and $2,026 was recorded, respectively.

As of December 31, 2019, there was $4,151 of total unrecognized

compensation expense related to restricted stock awards, of which approximately $2,302 is expected to be recognized in 2020.

During 2020, 2019 and 2018 compensation expense net of forfeitures of $ 3,550 , $ 3,203 and $ 2,643 was recorded, respectively.

As of December 31, 2020, there was $ 4,100 of total unrecognized compensation expense related to restricted stock awards, of which approximately $ 2,236 is expected to be recognized in 2021.

Employee Stock Ownership Plan

The Company sponsors an Employee Stock Ownership Plan (“ESOP”)

that covers all non-union U.S.

The Company sponsors an Employee Stock Ownership Plan (“ESOP”) that covers all non-union U.S.

employees who work over 1,000 hours per year.

The terms of the ESOP require the Company

to make an annual contribution equal to the greater of i) the Board established percentage of pretax income before the contribution

(5% in 2019, 2018 and 2017) or ii) the annual interest payable on any loan outstanding to the Company from the ESOP.

Company contributions to the Plan accrued for 2019, 2018 and 2017, respectively, were $1,189, $1,090 and $849.

These amounts

are included in general and administrative costs in the consolidated statements of income and comprehensive income.

The terms of the ESOP require the Company to make an annual contribution equal to the greater of i) the Board established percentage of pretax income before the contribution ( 5 % in 2020, 2019 and 2018) or ii) the annual interest payable on any loan outstanding to the Company from the ESOP.

Company contributions to the Plan accrued for 2020, 2019 and 2018, were $ 988 , $ 1,189 and $ 1,090 , respectively.

These amounts are included in general and administrative costs in the consolidated statements of income and comprehensive income.

Defined Contribution Plan

The Company sponsors the Allied Motion 401(k) Tax Advantaged

Investment Plan (“401(k)”) which covers substantially all its U.S.

The Company sponsors the Allied Motion 401(k) Tax Advantaged Investment Plan (“401(k)”) which covers substantially all its U.S.

based employees.

The plan provides for the

deferral of employee compensation under Section 401(k) and a discretionary Company match.

In 2019, 2018 and 2017

this match was 100% per dollar of the first 3% of participant deferral and 50% per dollar of the next 2% contribution, up to 4%

of a total 5% participant deferral.

Net costs related to this defined contribution plan were $1,362, $1,182 and $1,090 in

2019, 2018 and 2017, respectively.

For the year ended December 31, 2019, a total of $0.12

per share on all outstanding shares was declared and paid.

For the years ended December 31, 2018 and 2017 a total of $0.115

and $0.10 per share on all outstanding shares was declared and paid, respectively.

Total dividends paid for the years ended

December 31, 2019, 2018 and 2017 were $1,170, $1,079 and $959, respectively.

Based on the terms of the Company’s Credit

Agreement, dividends paid to shareholders are acceptable, subject to the Company’s compliance with the covenants under the

Credit Agreement.

The plan provides for the deferral of employee compensation under Section 401(k) and a discretionary Company match.

In 2020, 2019 and 2018 this match was 100 % per dollar of the first 3 % of participant deferral and 50 % per dollar of the next 2 % contribution, up to 4 % of a total 5 % participant deferral.

Net costs related to this defined contribution plan were $ 1,774 , $ 1,362 and $ 1,182 in 2020, 2019 and 2018, respectively.

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share

(In thousands, except share and per share data)

For each of the years ended December 31, 2020 and 2019 a total of $ 0.12 per share on all outstanding shares was declared and paid, respectively.

For the year ended December 31, 2018 a total of $ 0.115 per share on all outstanding shares was declared and paid.

Total dividends paid for the years ended December 31, 2020, 2019 and 2018 were $ 1,160 , $ 1,170 and $ 1,079 , respectively.

Based on the terms of the Company’s Credit Agreement, dividends paid to shareholders are acceptable, subject to the Company’s compliance with the covenants under the Credit Agreement.

DEBT OBLIGATIONS

On February 12, 2020, the Company entered into a First

Amended and Restated Credit Agreement (the “Amended Credit Agreement”) for a $225 million revolving credit facility

(the “Amended Revolving Facility”).

Refer to Note 14.

Subsequent Event for information.

Debt obligations consisted of the following (in thousands):

3 unchanged sentences

Long-term debt

The effective rate of the Revolving Credit Facility is 3.4% at December 31, 2019 including the impact of the Company's

interest rate swaps.

Prior Credit Agreement

On October 28, 2016, the Company entered into a Credit

Agreement (the “Credit Agreement”) for a $125,000 revolving credit facility (the “Revolving Facility”).

The Revolving Facility includes a $50,000 accordion amount and has an initial term of five years.

HSBC Bank USA, National

Association is the administrative agent, HSBC Securities (USA) Inc.

is the sole lead arranger and sole book runner, and Keybank

National Association and Wells Fargo Bank, National Association are co-syndication agents.

On December 6, 2018, the Company and certain of its subsidiaries

entered into a Second Amendment to the Credit Agreement to exercise the $50 million accordion feature of the Revolving Facility

add TCI as an additional guarantor.

The Company’s credit facility, which matures in October 2021, increased capacity

from $125 million to $175 million with the additional borrowing capacity being provided by the existing lenders.

Other terms and

conditions under the credit facility remain unchanged.

Borrowings under the Revolving Facility bear interest at the

LIBOR Rate (as defined in the Credit Agreement) plus a margin of 1.00% to 2.25% or the Prime Rate (as defined in the Credit Agreement)

plus a margin of 0% to 1.25%, in each case depending on the Company’s ratio of total funded indebtedness (as defined in the

Credit Agreement) to Consolidated trailing twelve-month EBITDA (the “Total Leverage Ratio”).

At December 31,

2019, the applicable margin for LIBOR Rate borrowings was 1.75% and the applicable margin for Prime Rate borrowings was 0.75%.

In addition, the Company is required to pay a commitment fee of between 0.10% and 0.25% quarterly (currently 0.175%) on the unused

portion of the Revolving Facility, also based on the Company’s Total Leverage Ratio.

The Revolving Facility is secured

by substantially all of the Company’s non-realty assets and is fully and unconditionally guaranteed by certain of the Company’s

subsidiaries.

Financial covenants under the Credit Agreement require the Company

to maintain a minimum interest coverage ratio (based on trailing twelve-month EBITDA) of at least 3.0:1.0 at the end of each fiscal

As provided under the Credit Agreement, the Company elected to temporarily increase the Total Leverage Ratio by

0.5x over the otherwise maximum during the twelve-month period following the TCI acquisition.

In addition to the minimum

interest coverage ratio, the Company’s Total Leverage Ratio at the end of any fiscal quarter shall not be greater than 3.5:1.0

through December 31, 2019, 3.25:1.0 through June 30, 2020 and 3.0:1.0 thereafter.

The Credit Agreement also includes

covenants and restrictions that limit the Company’s ability to incur additional indebtedness, merge, consolidate or sell

all or substantially all its assets and enter into transactions with an affiliate of the Company on other than an arms’

These covenants, which are described more fully in the Credit Agreement, to which reference is made for a complete

statement of the covenants, are subject to certain exceptions.

(1) The effective rate of the Revolving Credit Facility is 2.5 % at December 31, 2020 including the impact of the Company's interest rate swaps.

Amended Revolving Credit Facility

On February 12, 2020, the Company entered into a First Amended and Restated Credit Agreement (the “Amended Credit Agreement”) for a $ 225 million revolving credit facility (the “Amended Revolving Facility”).

The significant changes made to the Company’s prior credit facility by the Amended Credit Agreement include (i) increasing the maximum principal amount from $ 175 million to $ 225 million, (ii) providing for a $ 75 million accordion amount, (iii) decreasing certain interest-rate margins and fees, and (iv) extending the term to February 2025 from the original term of October 2021.

HSBC Bank USA, National Association is the administrative agent, and HSBC Securities (USA) Inc., KeyBank N.A, Wells Fargo Bank, N.A and Citizens Bank, N.A.

are joint lead arrangers.

Borrowings under the Amended Revolving Facility bear interest at the LIBOR Rate (as defined in the Amended Credit Agreement) plus a margin of 1.00 % to 1.75 % or the Prime Rate (as defined in the Amended Credit Agreement) plus a margin of 0 % to 0.75 %, in each case depending on the Company’s ratio of total funded indebtedness (as defined in the Amended Credit Agreement) to Consolidated trailing twelve-month EBITDA (the “Total Leverage Ratio”).

At December 31, 2020, the applicable margin for LIBOR Rate borrowings was 1.625 % and the applicable margin for Prime Rate borrowings was 0.625 %.

In addition, the Company is required to pay a commitment fee of between 0.10 % and 0.225 % quarterly ( 0.20 % at December 31, 2020) on the unused portion of the Amended Revolving Facility, also based on the Company’s Total Leverage Ratio.

The Amended Revolving Facility is secured by substantially all of the Company’s non-realty assets and is fully and unconditionally guaranteed by certain of the Company’s subsidiaries.

The Amended Credit Agreement contains certain financial covenants related to minimum interest coverage and total leverage ratio at the end of each quarter.

The Amended Credit Agreement also includes other covenants and restrictions, including limits on the amount of additional indebtedness, and restrictions on the Company’s ability to merge or sell all, or substantially all, of its assets.

The Company was in compliance with all covenants at December 31, 2020.

The Credit Agreement also includes customary events of default,

including failure to pay principal, interest or fees when due, failure to comply with covenants, if any representation or warranty

made by the Company is false or misleading in any material respect, default under certain other indebtedness, certain insolvency

or receivership events affecting the Company and its subsidiaries, the occurrence of certain material judgments, the occurrence

of certain ERISA events, the invalidity of the loan documents or a change in control of the Company.

The amounts outstanding

under the Revolving Facility may be accelerated upon certain events of default .

As of December 31, 2020, the unused Amended Revolving Facility was $ 104,344 .

The amount available to borrow may be reduced based upon our debt and EBITDA levels, which impacts our covenant calculations.

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share

The China Facility provides credit of approximately $1,435 (Chinese

Renminbi (“RMB”) 10,000).

The China Facility is used for working capital and capital equipment needs at the Company’s

China operations, and the lender may demand payment at any time.

The average balance for 2019 was $0 (RMB 0).

At December 31,

2019, there was approximately $1,435 (RMB 10,000) available under the facility.

(In thousands, except share and per share data)

The China Credit Facility provides credit of $ 1,467 (Chinese Renminbi 10,000 ) (“the China Facility”).

The China Facility is a demand revolving facility used for working capital and capital equipment needs at the Company’s China operations.

The term is annual and may be cancelled at the bank’s discretion.

The interest rate shall be agreed upon by the Lender and the Borrower before the Utilization Date (as defined in the China Facility) and shall be specified in the Utilization Request (as defined in the China Facility).

Collateral for the facility is a guarantee issued by the Company.

There were no borrowings under the China Facility during 2020 or 2019.

Deferred Financing Fees

Deferred financing costs net of accumulated

amortization were $320 as of December 31, 2019.

These costs will be amortized over the 5 year term of the Amended Credit Facility

as defined in Note 14, Subsequent Events.

Deferred financing costs net of accumulated amortization were $ 577 as of December 31, 2020.

These costs will be amortized over the term of the Amended Credit Facility.

DERIVATIVE FINANCIAL INSTRUMENTS

The Company is exposed to certain risks arising from both its

business operations and economic conditions.

The Company principally manages its exposures to a wide variety of business and operational

risks through management of its core business activities.

The Company manages economic risks, including interest rate, and foreign

exchange risk primarily through the use of derivative financial instruments.

Specifically, the Company enters into derivative financial

instruments to manage exposures that arise from business activities that result in the payment of future known and uncertain cash

amounts, the value of which are determined by interest rates.

The Company’s derivative financial instruments are used to

manage differences in the amount, timing and duration of the Company’s known or expected cash payments principally related

to the Company’s borrowings.

The Company’s objectives in using interest rate derivatives

are to add stability to interest expense and to manage its exposure to interest rate movements.

To accomplish this objective, the

Company primarily uses interest rate swaps as part of its interest rate risk management strategy.

Interest rate swaps designated

as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments

over the life of the agreements without exchange of the underlying notional amount.

In February 2017, the Company entered

into three interest rate swaps with a combined notional of $40,000 that mature in February 2022.

The changes in the fair value of derivatives designated and

that qualify as cash flow hedges is recorded in Accumulated Other Comprehensive Income (Loss) and is subsequently reclassified

into earnings in the period that the hedged forecasted transaction affects earnings.

During 2019 and 2018, such derivatives were

used to hedge the variable cash flows associated with existing variable-rate debt.

The Company estimates that an additional $149 will be reclassified

as an increase to interest expense over the next twelve months.

Additionally, the Company does not use derivatives for trading

or speculative purposes and currently does not have any derivatives that are not designated as hedges.

The table below presents the fair value of the Company’s

derivative financial instruments as well as their classification on the consolidated balance sheets as of December 31, 2019,

and 2018 (in thousands):

designated as

The Company is exposed to certain risks arising from both its business operations and economic conditions.

The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities.

The Company manages economic risks, including interest rate, and foreign exchange risk primarily through the use of derivative financial instruments.

Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the payment of future known and uncertain cash amounts, the value of which are determined by interest rates.

The Company’s derivative financial instruments are used to manage differences in the amount, timing and duration of the Company’s known or expected cash payments principally related to the Company’s borrowings.

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements.

To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy.

Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

In February 2017, the Company entered into three interest rate swaps with a combined notional of $ 40,000 that mature in February 2022.

In March 2020, the Company entered into two additional interest rate swaps with a combined notional amount of $ 20,000 that increases to $ 60,000 in March 2022 and matures in December 2024.

The changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income (loss) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.

During 2020 and 2019, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt.

The Company estimates that an additional $ 904 will be reclassified as an increase to interest expense over the next twelve months.

Additionally, the Company does not use derivatives for trading or speculative purposes and currently does not have any derivatives that are not designated as hedges.

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of December 31, 2020, and 2019 (in thousands):

Liability Derivatives

Fair value as of:

Derivatives designated as

Balance Sheet

hedging instruments

Interest rate products

Other long-term assets

Other long-term liabilities

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share

The table below presents the effect of cash flow hedge accounting

on other comprehensive income (loss) (OCI) for the years ended December 31, 2019, 2018 and 2017 (in thousands):

of gain (loss) recognized in OCI

in cash flow hedging

relationships

ended December 31,

The table below presents the effect of cash flow hedge accounting on other comprehensive income (loss) (OCI) for the years ended December 31, 2020, 2019 and 2018 (in thousands):

Amount of pre-tax loss recognized in OCI

on derivatives

Derivatives in cash flow hedging relationships

Year ended December 31,

Interest rate products

of (gain) loss reclassified

accumulated OCI into

of (gain) loss reclassified from accumulated OCI into income

ended December 31,

Location of (loss) gain reclassified

Amount of pre-tax (loss) gain reclassified from accumulated OCI into income

from accumulated OCI into income

Year ended December 31,

Interest expense

The tables below presents the effect of the Company’s

derivative financial instruments on the consolidated statements of income and comprehensive income for the years ended December 31,

2019, 2018 and 2017 (in thousands):

amounts of income and expense line items presented that reflect the

designated as

of cash flow hedges recorded

Statement Location

ended December 31,

The table below presents the effect of the Company’s derivative financial instruments on the consolidated statements of income and comprehensive income for the years ended December 31, 2020, 2019 and 2018 (in thousands):

Total amounts of income and expense line items presented

that reflect the effects of cash flow hedges recorded

Year ended December 31,

Derivatives designated as hedging instruments

Income Statement Location

Interest rate products

Interest Expense

The tables below present a gross presentation, the effects of

offsetting, and a net presentation of the Company’s derivatives as of December 31, 2019 and 2018.

The net amounts of

derivative assets or liabilities can be reconciled to the tabular disclosure of fair value.

The tabular disclosure of fair value

provides the location that derivative assets and liabilities are presented on the consolidated balance sheets (in thousands).

amounts not offset in the consolidated

liabilities presented

the consolidated

The tables below present a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives as of December 31, 2020 and 2019.

The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value.

The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented on the consolidated balance sheets (in thousands).

Gross amounts

Net amounts of assets

Net amounts of liabilities

Gross amounts not offset in the consolidated

4 unchanged sentences

of recognized

consolidated balance

Cash collateral

balance sheets

The Company has agreements with each of

its derivative counterparties that contain a provision where if the Company either defaults or is capable of being declared in

default on any of its indebtedness, then the Company could also be declared in default on its derivative obligations.

balance sheets

Gross amounts

Net amounts of liabilities

Gross amounts not offset in the consolidated

Gross amounts

offset in the

presented in the

balance sheets

of recognized

Cash collateral

balance sheets

The Company has agreements with each of its derivative counterparties that contain a provision where if the Company either defaults or is capable of being declared in default on any of its indebtedness, then the Company could also be declared in default on its derivative obligations.

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share

The provision for income taxes is based on income before income

taxes as follows (in thousands):

(In thousands, except share and per share data)

The provision for income taxes is based on income before income taxes as follows (in thousands):

For the year ended

Income before income taxes

Components of the total provision for income taxes are as follows

(in thousands):

the year ended

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Components of the total provision for income taxes are as follows (in thousands):

For the year ended

Current provision

3 unchanged sentences

Provision for income taxes

The provision for income taxes differs from the amount determined

by applying the federal statutory rate as follows:

the year ended

The provision for income taxes differs from the amount determined by applying the federal statutory rate as follows:

For the year ended

Tax provision, computed at statutory rate

6 unchanged sentences

Effect of Tax Cuts and Jobs Act

Subpart F income

Tax examinations

Provision for income taxes

The Tax Cuts and Jobs Act was enacted on December 22, 2017.

The provisions of the Act significantly revised the U.S.

corporate income tax rules and, among other things, required companies

to record a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and reduced the

US federal corporate tax rate from 35% to 21%, resulting in a remeasurement of deferred tax assets and liabilities.

In 2017, the Company recorded provisional amounts for certain

enactment date effects of the Act by applying the guidance of SEC Staff Accounting Bulletin No.

118 (“SAB 118”)

because the enactment date accounting for these effects had not been completed.

In 2018, the Company completed its accounting for

these provisions and recorded an income tax benefit related to the enactment date effect of the Act.

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

thousands, except share and per share data)

In 2017 the Company recognized a provisional amount of $3,133

for the effects of the one-time transition tax and of the rate reduction on its exiting deferred tax balances.

This amount was

included as a component of the provision for income taxes.

In 2018, the amount was adjusted to $2,898, resulting in a reduction

to the 2018 provision for income taxes by $235.

The adjustments made to enactment date provisional amounts decreased the effective

tax rate in 2018 by 1.1%.

The one-time transition tax was based on total post-1986 earnings

and profits (“E&P”) which had been previously deferred from US income taxes.

In 2017, the Company recorded a provisional

amount for the one-time transition tax liability resulting in a transition tax liability of $3,140 at December 31, 2017.

further analyses of the Act and notices and regulations issued and proposed by the US Department of Treasury and the Internal Revenue

Service (“IRS”), the Company finalized its calculation of the transition tax liability during 2018.

As a result, the

amount decreased by $17, which is included as a component of the provision for income taxes.

The Company has elected to pay its

transition tax liability over the eight-year period provided in the Act.

The Company had tax return overpayments that the IRS has

indicated will first be applied to the transition tax liability.

As of December 31, 2019, the remaining balance of our transition

tax obligation is $1,858 which will be paid over the next several years.

This amount is included in Other long term liabilities

on the consolidated balance sheet.

As of December 31, 2017, the Company remeasured certain

deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally

The provisional amount recorded related to the remeasurement of deferred tax balances was $(7).

Upon further analysis of certain

aspects of the Act and refinement of the Company’s calculations during 2018, the Company decreased this provision amount

by $218, which was included as a component of the provision for income taxes.

The tax effects of significant temporary differences and credit

and operating loss carryforwards that give rise to the net deferred tax assets and tax liabilities are as follows (in thousands):

(In thousands, except share and per share data)

The tax effects of significant temporary differences and credit and operating loss carryforwards that give rise to the net deferred tax assets and tax liabilities are as follows (in thousands):

Noncurrent deferred tax assets:

1 unchanged sentence

Net operating loss and tax credit carryforwards

Allowances and other

Accrued expenses and reserves

Total noncurrent deferred tax assets

4 unchanged sentences

Goodwill and intangibles

Total deferred tax liabilities

Total noncurrent deferred tax liabilities

Net deferred tax asset/(deferred tax liability)

Realization of the Company’s recorded deferred tax assets

is dependent upon the Company generating sufficient taxable income in the appropriate tax jurisdictions in future years to obtain

benefit from the reversal of net deductible temporary differences and from utilization of net operating losses and tax credit carryforwards.

The Company generated excess foreign tax credits in 2017 due to the one-time transition tax required by enactment of the Tax Cuts

and Jobs Act in the amount of $0.9 million.

The Company determined it is more likely than not that it will not realize a tax benefit

from these credits.

Additionally, the Company has incurred net operating losses in certain states that it is more likely than not

will not be realized.

Presented as follows:

Noncurrent deferred income tax assets

Noncurrent deferred income tax liabilities

Net deferred tax liability

As of December 31, 2020, the Company has the following gross carryforwards available:

Tax Attribute

(in thousands)

Begin to expire

Net Operating Losses (1)

International

Net Operating Losses (1)

International

Net Operating Losses - Unlimited Carryforward (1)

No expiration

Foreign Tax Credits

International

R&D Tax Credits

(1) Net operating losses (NOL’s) are presented as pre-tax amounts.

Realization of the Company’s recorded deferred tax assets is dependent upon the Company generating sufficient taxable income in the appropriate tax jurisdictions in future years to obtain benefit from the reversal of net deductible temporary differences and from utilization of net operating losses and tax credit carryforwards.

The Company generated excess foreign tax credits in 2017 due to the one-time transition tax required by enactment of the Tax Cuts and Jobs Act in the amount of $ 0.9 million.

The Company determined it is more likely than not that it will not realize a tax benefit from these credits.

Additionally, the Company has incurred net operating losses in certain states that it is more likely than not will not be realized.

The tax effect of these losses is $ 0.2 million.

Therefore, the Company recognized a full valuation allowance

related to these foreign tax credits and state net operating losses.

The Company has foreign operating losses that relate to a foreign

subsidiary acquired in 2010.

At the time of the acquisition, the Company could not conclude, on a more likely than not basis, that

it would ultimately realize tax benefits from these losses and credits, and therefore valued the deferred benefit at zero.

the Company believed it is more likely than not it will realize the benefits of its deferred tax assets and recorded a full reversal

of the valuation allowance related to the foreign operating losses.

MOTION TECHNOLOGIES INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per

The amount of deferred tax assets considered realizable is subject

to adjustment in future periods if estimates of future taxable income are changed.

The Company believes that it is more likely

than not that it will realize the benefits of its deferred tax assets, net of valuation allowances as of December 31, 2019.

Therefore, the Company recognized a full valuation allowance related to these foreign tax credits and state net operating losses.

The amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income are changed.

The Company believes that it is more likely than not that it will realize the benefits of its deferred tax assets, net of valuation allowances as of December 31, 2020.

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

The Company files income tax returns in various U.S.

taxing jurisdictions.

and foreign taxing jurisdictions.

With few exceptions, the Company is no longer subject to U.S.

federal and state tax examinations in its major

tax jurisdictions for periods before 2016.

With few exceptions, the Company is no longer subject to tax examinations in the foreign

jurisdictions for periods prior to 2015.

In general, it is the practice and intention of the Company

to reinvest the earnings of its non-domestic subsidiaries in activities outside the United States.

Exceptions may be made on a

year-by-year basis to repatriate earnings of certain foreign subsidiaries based on cash needs in the United States.

Accounting Standards Update ASU No.

2016-02, Leases

(Topic 842) , requires the Company to recognize a right of use (“ROU”) asset and a lease liability for all leases

with terms greater than 12 months.

Refer to Note 1, Business and Summary of Significant Accounting Policies, for discussion

of the adoption of Topic 842.

The Company has operating leases for office space, manufacturing

equipment, computer equipment and automobiles.

Many leases include one or more options to renew, some of which include options

to extend the leases for a long-term period, and some leases include options to terminate the leases within 30 days.

of the Company’s lease agreements, the rental payments are adjusted periodically to reflect actual charges incurred for capital

area maintenance, utilities, inflation and/or changes in other indexes.

For the year ended December 31, 2019, the components of

operating lease expense were as follows (in thousands):

December 31, 2019

federal and state tax examinations in its major tax jurisdictions for periods before 2017.

With few exceptions, the Company is no longer subject to tax examinations in the foreign jurisdictions for periods prior to 2017.

The Company completed an IRS tax audit for tax year 2017 with no adjustments made to taxable income.

In general, it is the practice and intention of the Company to reinvest the earnings of its non-domestic subsidiaries in activities outside the United States.

Exceptions may be made on a year-by-year basis to repatriate earnings of certain foreign subsidiaries based on cash needs in the United States.

The Company intends to distribute a portion of these foreign earnings which have been previously taxed in the United States.

As of December 31, 2020, foreign withholding taxes of $ 275 have been provided for unremitted earnings of foreign subsidiaries based on the amounts of anticipated distributions.

The Company does not intend to distribute the remaining previously taxed earnings resulting from the one-time transition tax under the Tax Cuts and Jobs Act, and has not recorded any deferred taxes related to such amounts.

The remaining excess of the amount for financial reporting over the tax basis of investments in foreign subsidiaries is permanently reinvested, and the determination of any deferred tax liability on this amount is not practicable.

It is the Company’s policy to include interest and penalties related to income tax liabilities in income tax expense on the consolidated statements of income and comprehensive income.

In addition, the Company records uncertain tax positions in accordance with ASC 740.

ASC 740 provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the financial statements.

The were no uncertain tax benefits for the years ended December 31, 2020, 2019 and 2018 and no amounts were recorded for interest and penalties related to unrecognized tax positions for the years ended December 31, 2020, 2019, and 2018.

The Company has operating leases for office space, manufacturing equipment, computer equipment and automobiles.

The Company did not have any finance leases in 2020 or 2019.

Many leases include one or more options to renew, some of which include options to extend the leases for a long-term period, and some leases include options to terminate the leases within 30 days .

In certain of the Company's lease agreements, the rental payments are adjusted periodically to reflect actual charges incurred for capital area maintenance, utilities, inflation and/or changes in other indexes.

For the years ended December 31, 2020 and 2019, the components of operating lease expense were as follows (in thousands):

Fixed operating lease expense

Variable operating lease expense

Supplemental cash flow information related to the Company’s

operating leases for the year ended December 31, 2019 was as follows (in thousands):

Short-term lease expense

Supplemental cash flow information related to the Company’s operating leases for the years ended December 31, 2020 and 2019 are as follows (in thousands):

Cash paid for amounts included in the measurement of operating leases

ROU assets obtained in exchange for operating lease obligations

MOTION TECHNOLOGIES INC.

Right of use ("ROU") assets obtained in exchange for operating lease obligations

ROU assets recorded upon adoption of ASC 842, Leases

ROU assets obtained in acquisitions (Note 2)

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

The following table presents the lease balances within the consolidated

balance sheet, weighted average remaining lease term, and weighted average discount rates related to the Company’s operating

leases as of December 31, 2019 (in thousands except for the weighted average remaining lease term and weighted average discount

Lease assets and liabilities

Classification

Right of use asset

Other long-term assets

Right of use liability, current

Accrued liabilities

Right of use liability, long-term

Other long-term liabilities

Total ROU lease liabilities

Weighted average remaining lease term

The following table presents weighted average remaining lease term and discount rates related to the Company’s operating leases as of December 31, 2020 and 2019:

Weighted average remaining lease term (in years)

Weighted average discount rate

The following table presents the maturity of the Company’s

operating lease liabilities as of December 31, 2019 (in thousands):

The following table presents the maturity of the Company’s operating lease liabilities as of December 31, 2020 (in thousands):

Total undiscounted cash flows

1 unchanged sentence

Total lease liabilities

As of December 31, 2019, the Company had no additional

significant operating or finance leases that had not yet commenced.

As of December 31, 2020, the Company had no additional significant operating or finance leases that had not yet commenced.

COMMITMENTS AND CONTINGENCIES

Severance Benefit Agreements

As of December 31, 2019, the Company has annually renewable

severance benefit agreements with key employees which, among other things, provide inducement to the employees to continue to work

for the Company during and after any period of a potential change in control of the Company.

The agreements provide the employees

with specified benefits upon the subsequent severance of employment in the event of change in control of the Company and are effective

for 24 months thereafter.

The Company is involved in certain actions that have arisen

out of the ordinary course of business.

Management believes that resolution of the actions will not have a significant adverse

effect on the Company’s consolidated financial statements.

MOTION TECHNOLOGIES INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

thousands, except share and per share data)

As of December 31, 2020, the Company has annually renewable severance benefit agreements with key employees which, among other things, provide inducement to the employees to continue to work for the Company during and after any period of a potential change in control of the Company.

The agreements provide the employees with specified benefits upon the subsequent severance of employment in the event of change in control of the Company and are effective for 24 months thereafter.

The Company is involved in certain actions that have arisen out of the ordinary course of business.

Management believes that resolution of the actions will not have a significant adverse effect on the Company’s consolidated financial statements.

DEFERRED COMPENSATION ARRANGEMENTS

The Company has deferred compensation arrangements with certain

key members of management.

These arrangements provide the Board and its committees with another mechanism to provide pay

for performance based incentive compensation to certain executive participants.

It also allows for the participants to make

certain deferrals into the plan.

The Company has deferred compensation arrangements with certain key members of management.

These arrangements provide the Board and its committees with another mechanism to provide pay for performance based incentive compensation to certain executive participants.

It also allows for the participants to make certain deferrals into the plan.

The amount of the liability is comprised of liabilities from previous contributions.

Amounts accrued relating to previous periods are $4,695 and $3,967 as of December 31, 2019 and 2018, respectively, and are

included in other long-term liabilities in the consolidated balance sheets.

Amounts accrued relating to previous periods are $ 5,386 and $ 4,695 as of December 31, 2020 and 2019, respectively, of which $ 4,329 and $ 4,695 are included in other long-term liabilities in the consolidated balance sheets at December 31, 2020 and 2019 and $ 1,057 is included within accrued liabilities as of December 31, 2020, relating to the amounts to be paid in 2021.

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

SEGMENT INFORMATION

The Company operates in one segment for the manufacture and

marketing of controlled motion products for OEM and end user applications.

The Company’s chief operating decision maker

has been identified as the Chief Executive Officer and President, who reviews operating results to make decisions about allocating

resources and assessing performance for the entire Company.

Existing guidance, which is based on a management approach to

segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide

disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports

Financial information related to the foreign subsidiaries is

summarized below (in thousands):

The Company operates in one segment for the manufacture and marketing of controlled motion products for OEM and end user applications.

The Company’s chief operating decision maker has been identified as the Chief Executive Officer and President, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company.

Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue.

Financial information related to the foreign subsidiaries is summarized below (in thousands):

For the year ended December 31,

Revenues derived from foreign subsidiaries

Identifiable assets outside of the United States are $95,777

and $88,400 as of December 31, 2019 and 2018, respectively.

Revenues derived from foreign subsidiaries and identifiable

assets outside of the United States are primarily attributable to Europe.

Sales to customers outside of the United States by all subsidiaries

were $159,365, $146,835 and $119,212 during 2019, 2018 and 2017, respectively.

For 2019, 2018 and 2017 one customer accounted for 16%, 19%

and 18% of revenues, respectively, and as of December 31, 2019 and 2018 for 17% and 13% of trade receivables, respectively.

SUBSEQUENT EVENTS

Credit Agreement amendment

On February 12, 2020, Allied Motion Technologies Inc.

“Company”) entered into a First Amended and Restated Credit Agreement (the “Amended Credit Agreement”)

for a $225 million revolving credit facility (the “Amended Revolving Facility”).

The significant changes made to the

Company’s existing credit facility by the Amended Credit Agreement include (i) increasing the maximum principal amount

from $175 million to $225 million, (ii) providing for a $75 million accordion amount, (iii) decreasing certain interest-rate

margins and fees, and (iv) extending the term to February 2025.

HSBC Bank USA, National Association is the administrative

agent, and HSBC Securities (USA) Inc., KeyBank National Association, Wells Fargo Bank, National Association and Citizens Bank,

are joint lead arrangers.

Borrowings under the Amended Revolving Facility will bear interest

at the LIBOR Rate (as defined in the Amended Credit Agreement) plus a margin of 1.00% to 1.75% or the Alternative Base Rate (as

defined in the Amended Credit Agreement) plus a margin of 0% to 0.75%, in each case depending on the Company’s ratio of Funded

Indebtedness (as defined in the Amended Credit Agreement) to Consolidated EBITDA (the “Leverage Ratio”).

under the Amended Revolving Facility will bear interest at a weighted average rate of 3.05% at February 12, 2020 (compared

to 3.30% prior to the Amended Revolving Facility).

In addition, the Company is required to pay a commitment fee of between 0.10%

and 0.225% quarterly (currently 0.175%) on the unused portion of the Amended Revolving Facility, also based on the Company’s

Leverage Ratio.

The Amended Revolving Facility is secured by substantially all of the Company’s non-realty assets and is

fully and unconditionally guaranteed by certain of the Company’s subsidiaries.

MOTION TECHNOLOGIES INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

thousands, except share and per share data)

Financial covenants under the Amended Credit Agreement require

the Company to maintain a minimum interest coverage ratio of at least 3.0:1.0 at the end of each fiscal quarter.

In addition, the

Company’s Leverage Ratio at the end of any fiscal quarter shall not be greater than 3.5:1.0;

provided that the Company may

elect to temporarily increase the Leverage Ratio to 4.0:1.0 during the twelve-month period following a material acquisition under

the Amended Credit Agreement.

The Amended Credit Agreement also includes covenants and restrictions that limit the Company’s

ability to incur additional indebtedness, merge, consolidate or sell all or substantially all of its assets and enter into transactions

with an affiliate of the Company on other than an arms’

length transaction.

These covenants, which are described more fully

in the Amended Credit Agreement, to which reference is made for a complete statement of the covenants, are subject to certain exceptions.

The Amended Credit Agreement also includes customary events

of default, including failure to pay principal, interest or fees when due, failure to comply with covenants, if any representation

or warranty made by the Company is false or misleading in any material respect, default under certain other indebtedness, certain

insolvency or receivership events affecting the Company and its subsidiaries, the occurrence of certain material judgments, the

occurrence of certain ERISA events, the invalidity of the loan documents or a change in control of the Company.

The amounts outstanding

under the Amended Revolving Facility may be accelerated upon certain events of default.

On March 7, 2020, the Company acquired Dynamic Controls

Group (“Dynamic Controls”), a wholly owned subsidiary of Invacare Corporation, a market-leading designer and manufacturer

of equipment for the medical mobility and rehabilitation markets.

Dynamic Controls brings strong leadership and a very experienced

electronics and software engineering design team that provides market leading electronic control solutions for the medical mobility

and rehabilitation markets.

Dynamic’s product suite and solutions will further strengthen the Company’s medical market

position around patient mobility and rehabilitation, as well as enable it to further develop higher level solutions with embedded

electronics across our other major served markets.

The Company paid $15,000 plus cash acquired at closing.

The Company expects

to determine the preliminary purchase price allocation prior to the end of the first quarter of 2019.

Identifiable assets outside of the United States are $ 133,466 and $ 95,777 as of December 31, 2020 and 2019, respectively.

Revenues derived from foreign subsidiaries and identifiable assets outside of the United States are primarily attributable to Europe, China and New Zealand.

Sales to customers outside of the United States by all subsidiaries were $ 171,847 , $ 159,365 and $ 146,835 during 2020, 2019 and 2018, respectively.

For 2020, 2019 and 2018 one customer accounted for 15 %, 16 % and 19 % of revenues, respectively, and as of December 31, 2020 and 2019 for 22 % and 17 % of trade receivables, respectively.

SUBSEQUENT EVENT

On March 10, 2021, the Board of Directors approved a 3 -for-2 common stock split to be paid in the form of a stock dividend to holders of record on April 16, 2021.

The additional shares are expected to be issued on April 30, 2021.

In lieu of fractional shares, shareholders will receive a cash payment based on the closing share price of the common stock on the record date.

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

thousands, except share and per share data)

(In thousands, except share and per share data)

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

Selected quarterly financial data for each of the four quarters

in years 2019 and 2018 is as follows (in thousands, except per share data):

Selected quarterly financial data for each of the four quarters in years 2020 and 2019 is as follows (in thousands, except per share data):

Basic earnings per share

2 unchanged sentences

Diluted earnings per share

sum of the quarterly net income per share (basic and diluted) may differ from the annual net income per share (basic and diluted)

because of differences in the weighted average number of common shares outstanding and the common shares used in the quarterly

and annual computations as well as differences in rounding.

Changes in and Disagreements with Accountants on

Accounting and Financial Disclosure.

The sum of the quarterly net income per share (basic and diluted) may differ from the annual net income per share (basic and diluted) because of differences in the weighted average number of common shares outstanding and the common shares used in the quarterly and annual computations as well as differences in rounding.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Not applicable.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data