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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

Form 10-K

|ý                                           | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|------------------------------------------- | ----------------------------------------------------------------------------------------
|FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007
|OR                                         
|o                                           | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|For the transition period
from             

Commission file number: 0-04041

ALLIED MOTION TECHNOLOGIES INC.(Exact name of registrant as specified in its charter)

|Colorado(State or other jurisdiction of incorporation or organization)                                      |  | 84-0518115(I.R.S. Employer Identification No.)
|----------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------
|23 Inverness Way East, Suite 150
Englewood, Colorado(Address of principal executive offices)                |  | 80112(Zip Code)                               
|Registrant's telephone number, including area code:(303) 799-8520                                          
|Securities registered pursuant to Section 12(b) of the Act:Common Stock, no par value Nasdaq Capital Market
|Securities registered pursuant to Section 12(g) of the Act:None                                            

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o    No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o    No ý

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes ý    No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.    o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

|Large accelerated filer o |  | Accelerated filer o |  | Non-accelerated filer o (Do not check if a smaller reporting company) |  | Smaller reporting company ý
|------------------------- |  | ------------------- |  | --------------------------------------------------------------------- |  | ---------------------------

Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes o    No ý

The aggregate market value of voting stock held by non-affiliates of the Registrant, computed by reference to the average bid and asked prices of such
stock as of the last business day of the Registrant's most recently completed second fiscal quarter was approximately $43,300,000.

Number
of shares of the only class of Common Stock outstanding: 7,289,824 as of March 13, 2008

DOCUMENTS INCORPORATED BY REFERENCE

Notice
and Proxy for 2008 Annual Meeting of Shareholders



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Table of Contents



|            |  |                                                                                                              |                                                         | Page
|----------- |  | ------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------- | ----
|PART I.     |  |                                                                                                             
|Item 1.     |  | Business                                                                                                     |                                                         | 1   
|Item 2.     |  | Properties                                                                                                   |                                                         | 4   
|Item 3.     |  | Legal Proceedings                                                                                            |                                                         | 5   
|PART II.    |  |                                                                                                             
|Item 5.     |  | Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |                                                         | 5   
|Item 6.     |  | Selected Financial Data                                                                                      |                                                         | 7   
|Item 7.     |  | Management's Discussion and Analysis of Financial Condition and Results of Operations                        |                                                         | 7   
|Item 7A.    |  | Quantitative and Qualitative Disclosures About Market Risk                                                   |                                                         | 12  
|Item 8.     |  | Financial Statements and Supplementary Data                                                                  |                                                         | 14  
|            |  |                                                                                                              | Report of Independent Registered Public Accounting Firm |     
|Item 9A(T). |  | Controls and Procedures                                                                                      |                                                         | 37  
|PART III.   |  |                                                                                                             
|Item 10.    |  | Directors, Executive Officers and Corporate Governance                                                       |                                                         | 37  
|Item 11.    |  | Executive Compensation                                                                                       |                                                         | 37  
|Item 12.    |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               |                                                         | 38  
|Item 13.    |  | Certain Relationships and Related Transactions, and Director Independence                                    |                                                         | 38  
|Item 14.    |  | Principal Accountant Fees and Services                                                                       |                                                         | 38  
|PART IV.    |  |                                                                                                             
|Item 15.    |  | Exhibits and Financial Statement Schedules                                                                   |                                                         | 38  
|            |  | Signatures                                                                                                   |                                                         | 41  
|            |  | Financial Statement Schedule                                                                                 |                                                         | 42  

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All statements contained herein that are not statements of historical fact constitute "forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance, or achievements, and
may contain the word "believe," "anticipate," "expect," "project," "intend," "will continue," "will likely result," "should" or words or phrases of similar meaning. Forward-looking statements involve
known and unknown risks and uncertainties that may cause actual results of the Company to differ materially from the forward-looking statements. The risks and uncertainties include international,
national and local general business and economic conditions in the Company's motion markets, introduction of new technologies, products and competitors, the ability to protect the Company's
intellectual property, the ability of the Company to sustain, manage or forecast its growth and product acceptance, success of new corporation strategies and implementation of defined critical issues
designed for growth and improvement in profits, the continued success of the Company's customers to allow the Company to realize revenues from its order backlog and to support the Company's expected
delivery schedules, the continued viability of the Company's customers and their ability to adapt to changing technology and product demand, the loss of significant customers or enforceability of the
Company's contracts in connection with a merger, acquisition, disposition, bankruptcy, or otherwise, the ability of the Company to meet the technical specifications of its customers, the continued
availability of parts and components, increased competition and changes in competitor responses to the Company's products and services, changes in government regulations, availability of financing,
the ability of the Company's lenders and financial institutions to provide additional funds if needed for operations or for making future acquisitions or the ability of the Company to obtain alternate
financing if present sources of financing are terminated, the ability to attract and retain qualified personnel who can design new applications and products for the motion industry, the ability of the
Company to identify and consummate favorable acquisitions to support external growth and new technology, the ability of the Company to establish low cost region manufacturing and component sourcing
capabilities, and the ability of the Company to control costs for the purpose of improving profitability. The Company's ability to compete in this market depends upon its capacity to anticipate the
need for new products, and to continue to design and market those products to meet customers' needs in a competitive world. Actual results, events and performance may differ materially. Readers are
cautioned not to place undue reliance on these forward-looking statements as a prediction of actual results. The Company has no obligation or intent to release publicly any revisions to any forward
looking statements, whether as a result of new information, future events, or otherwise.

New risk factors emerge from time to time and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk
factors on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. The
Company's expectations, beliefs and projections are expressed in good faith and are believed to have a reasonable basis; however, the Company makes no assurance that expectations, beliefs or
projections will be achieved.

PART I

Item 1.    Business.

Allied Motion Technologies Inc. (Allied Motion or the Company) was organized under the laws of Colorado in 1962 and operates primarily in the United States
and Europe. Allied Motion utilizes its underlying core "Electromagnetic Motion Technology/Know How" to provide compact, high performance products as solutions to a variety of motion applications. The
Company is engaged in the business of designing, manufacturing and selling motor, servo motion and optical encoder products to a broad spectrum of customers throughout the world. The Company's
products are manufactured at our facilities as well as contract manufacturing facilities in China and Eastern Europe.

Examples
of the end products using Allied Motion's technology in the medical and health care industries include wheel chairs, scooters, stair climbers, vehicle lifts, patient handling
tables, electric

1

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powered
surgical hand pieces, programmable pumps to meter and administer infusions associated with chemotherapy, pain control and antibiotics; nuclear imaging systems, automated pharmacy dispensing
equipment, kidney dialysis equipment, respiratory ventilators and heart pumps. In electronics, our products are used in the handling, inspection, and testing of components and in the automation and
verification of final products such as a PC, game equipment, cell phone etc. Our motors are used in the HVAC systems of trucks, buses, RV's, boats and off-road construction/farming
equipment. These motors operate a variety of actuation systems (e.g., lifts, slide-outs, covers etc.), they provide improved fuel efficiency while the vehicles are idling and are
used in drive by wire applications to electrically replace a variety of mechanical linkages. Our products are also utilized in high performance vehicles, vehicles using alternative fuel systems such
as LPG, fuel cell and hybrid vehicles. Our geared motor products are utilized in commercial grade floor cleaners, polishers and material handling devices for factories and commercial buildings.
Our products are also used in a variety of military/defense applications including inertia guided missiles, mid range munitions systems, weapons systems on armed personnel carriers and in security and
access control in camera systems, door access control and in airport screening and scanning devices. Other end products utilizing our technology include high definition printers; tunable lasers and
spectrum analyzers for the fiber optic industry; processing equipment for the semiconductor industry, as well as cash dispensing machines (ATM's).

Allied
Motion is organized into five subsidiaries: Emoteq Corporation (EmoteqTulsa, OK), Computer Optical Products, Inc. (COPIChatsworth, CA), Motor
Products Corporation (Motor ProductsOwosso, MI), Stature Electric, Inc. (StatureWatertown, NY) and Precision Motor Technology B.V.
(PremotecDordrecht, The Netherlands). To provide additional production support of its subsidiaries, Allied Motion also has production capabilities in Slovakia and China.

Emoteq
designs, manufactures and markets high performance brushless and brush DC motors, drives and control electronics with a growing emphasis on complete motion system solutions
tailored to meet the exact needs of its customers. Motor types include servo motors, frameless motors, torque motors and high speed (60,000 RPM+) brushless DC motors. Markets served include
semiconductor manufacturing, industrial automation, medical equipment, and military and aerospace.

COPI
manufactures optical encoders. They are used to measure rotational and linear movements of parts in diverse applications such as printers, sorting machinery, machine tools, robots,
medical equipment, tunable lasers and spectrum analyzers. The primary markets for the optical encoders are in the aerospace and defense, industrial, computer peripheral manufacturing, medical and
telecommunications sectors. COPI also designs, manufactures and markets fiber optic-based encoders with special characteristics, such as immunity to radio frequency interference and high temperature
tolerance, suited for industrial, aerospace and military environments. Applications include airborne navigational systems, anti-lock braking transducers, missile flight surface controls
and high temperature process control equipment.

Motor
Products has been a motor producer for more than sixty years and is a vertically integrated manufacturer of customized, highly engineered fractional horsepower permanent magnet DC
and brushless DC motors serving a wide range of original equipment applications. The motors are used in mobile HVAC systems, actuation systems, and specialty and general purpose pumps in a variety of
markets including trucks, buses, boats, RV's, off-road vehicles, health, fitness, medical and industrial equipment.

Stature
Electric manufactures fractional and integral horsepower gear motors, Permanent Magnet DC motors, Brushless DC motors and motor part sets. Stature's component products are sold
primarily to original equipment manufacturers (OEM'S) that use them in their end products. Stature Electric excels at engineering, designing, packaging and applying integrated gearing and motor
solutions for the commercial and industrial equipment, healthcare, recreation and non-automotive transportation markets.

2

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Premotec
has been manufacturing small precision electric motors for more than thirty years utilizing four different motor technologies: Brushless DC, Coreless DC, Iron Core DC, and
Permanent Magnet Stepper and Synchronous motors. Premotec also offers a range of reduction gearboxes tailored to a number of these motors. Premotec's products are sold to OEM customers in Europe, the
United States and Korea and through distributors to smaller OEM's in almost all countries of the European Union. The products are used in a wide variety of medical, professional and industrial
applications, such as dialysis equipment, industrial ink jet printers, cash dispensers, bar code readers, laser scanning equipment, fuel injection systems, HVAC actuators, waste water treatment,
dosing systems for the pharmaceutical industry, textile manufacturing, document handling equipment and studio television cameras.

Product Distribution

The Company maintains a direct sales force. In addition to its own marketing and sales force, the Company has independent sales representatives, agents and
distributors to sell its various product lines in certain markets.

Competition

The Company faces competition in all of its markets, although the number of competitors varies depending upon the product. The Company believes there are numerous
competitors in the motion control market. Competition involves primarily product performance and price, although service and warranty are also important.

Availability of Raw Materials

All parts and materials used by the Company are in adequate supply. No significant parts or materials are acquired from a single source or for which an alternate
source is not also available.

Patents, Trademarks, Licenses, Franchises and Concessions

The Company holds several patents and trademarks regarding components used by the various subsidiaries and has several patents pending on new products recently
developed, which are considered to be of major significance.

Working Capital Items

The Company currently maintains inventory levels adequate for its short-term needs based upon present levels of production. The Company considers the
component parts of its different product lines to be readily available and current suppliers to be reliable and capable of satisfying anticipated needs.

Sales to Large Customers

During years 2007 and 2006, no single customer accounted for more than 10% of total revenues.

Sales Backlog

The Company's backlog at December 31, 2007 consisted of sales orders totaling approximately $32,060,000 while backlog at December 31, 2006 was
$28,234,000. In our commercial motors markets, the Company continues to serve customers requesting shipments on a "pull system" whereby the Company agrees to maintain available inventory that the
customer "pulls" or takes delivery as they need the products. At the time the customer pulls the product, the Company records the sale. There can be no assurance that the Company's backlog will be
converted into revenue.

3

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Engineering and Development Activities

The Company's expenditures on engineering and development for the years ended December 31, 2007 and 2006 were $3,963,000 and $3,823,000, respectively. Of
these expenditures, no material amounts were charged directly to customers.

Environmental Issues

No significant pollution or other types of hazardous emission result from the Company's operations and it is not anticipated that the Company's operations will be
materially affected by Federal, State or local provisions concerning environmental controls. However, there can be no assurance that any future regulations will not affect the Company's operations.

Foreign Operations

The information required by this item is set forth in Note 8 of the Notes to Consolidated Financial Statements contained herein.

Employees

At December 31, 2007 the Company had approximately 505 full-time employees.

Available Information

The Company maintains a website at www.alliedmotion.com. The Company makes available, free of charge on or through its website, its annual reports on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports, as soon as reasonably practicable after
it electronically files or furnishes such materials to the SEC.

The
Company has adopted a Code of Ethics for its chief executive officer, president and senior financial officers regarding their obligations in the conduct of Company affairs. The
Company has also adopted a Code of Ethics and Business Conduct that is applicable to all directors, officers and employees. The Codes are available on the Company's website. The Company intends to
disclose on its website any amendment to, or waiver of, the Codes that would otherwise be required to be disclosed under the rules of the SEC and the Nasdaq Capital Market. A copy of both Codes is
also available in print to any stockholder upon written request addressed to Allied Motion Technologies Inc., 23 Inverness Way East, Suite 150, Englewood, CO
80112-5711, Attention: Secretary.

Item 2.    Properties.

As of December 31, 2007, the Company occupies facilities as follows:

|Description / Use                 |  | Location                   |  | Approximate Square Footage |  | Owned
Or Leased
|--------------------------------- |  | -------------------------- |  | -------------------------- |  | ---------------
|Corporate headquarters            |  | Englewood, Colorado        |  | 3,000                      |  | Leased         
|Office and manufacturing facility |  | Chatsworth, California     |  | 8,500                      |  | Leased         
|Office and manufacturing facility |  | Tulsa, Oklahoma            |  | 25,000                     |  | Leased         
|Office and manufacturing facility |  | Dordrecht, The Netherlands |  | 36,000                     |  | Leased         
|Office and manufacturing facility |  | Owosso, Michigan           |  | 85,000                     |  | Owned          
|Office and manufacturing facility |  | Watertown, New York        |  | 107,000                    |  | Owned          

The
Company's management believes the above-described facilities are adequate to meet the Company's current and foreseeable needs. All facilities described above are operating at less
than full capacity.

4

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Item 3.    Legal Proceedings.

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 affect on the Company's consolidated financial position or results of operations.

PART II

Item 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Allied Motion's common stock is traded on the Nasdaq Capital Market System and trades under the symbol AMOT. The number of holders of record as reported by the
Company's transfer agent of the Company's common stock as of the close of business on March 13, 2008 was 569. The Company did not pay or declare any dividends during years 2007 and 2006, and
the Company's long-term financing agreement prohibits the Company from doing so without prior approval.

The
following table sets forth, for the periods indicated, the high and low prices of the Company's common stock on the Nasdaq Capital Market System, as reported by Nasdaq.

Price RangeHigh

LowYEAR ENDED DECEMBER 31, 2006First Quarter

$
4.50

$
3.60Second Quarter


5.99


3.42Third Quarter


5.49


4.49Fourth Quarter


7.00


4.53YEAR ENDED DECEMBER 31, 2007First Quarter

$
7.94

$
5.02Second Quarter


7.44


5.75Third Quarter


7.89


4.01Fourth Quarter


5.07


4.25


Equity Compensation Plan Information

The following table shows the equity compensation plan information of the Company at December 31, 2007.

|Plan category                                          |  | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) |  | Weighted-average exercise price of outstanding options, warrants and rights |      | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
|------------------------------------------------------ |  | ----------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------- | ---- | -------------------------------------------------------------------------------------------------------------------------------------------
|Equity compensation plans approved by security holders |  | 843,200                                                                                         |  | $                                                                           | 3.75 |                                                                                                                                            

5

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PERFORMANCE GRAPH

The following performance graph reflects change in the Company's cumulative total stockholder return on Common Stock as compared with the cumulative total return
of the NASDAQ Stock Market Index and the NASDAQ Electrical and Industrial Apparatus Index for the period of five years ended December 31, 2007.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*  Among Allied Motion Technologies Inc., The NASDAQ Composite Index  And Electrical Industrial Apparatus

GRAPHIC

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*$100
invested on 12/31/02 in stock or indexincluding reinvestment of dividends.
Fiscal year ending December 31.

|                                |  | 12/02 |  | 12/03 |  | 12/04 |  | 12/05 |  | 12/06 |  | 12/07
|------------------------------- |  | ----- |  | ----- |  | ----- |  | ----- |  | ----- |  | -----
|ALLIED MOTION TECHNOLOGIES INC. |  | 100   |  | 222   |  | 408   |  | 236   |  | 388   |  | 263  
|NASDAQ STOCK MARKET (U.S.)      |  | 100   |  | 150   |  | 165   |  | 169   |  | 188   |  | 205  
|ELECTRICAL INDUSTRIAL APPARATUS |  | 100   |  | 171   |  | 166   |  | 157   |  | 194   |  | 214  

6

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Item 6.    Selected Financial Data.

The following tables summarize data from the Company's financial statements for the fiscal years 2003 through 2007; the Company's complete annual financial
statements and notes thereto for the current fiscal year appear in Item 8 herein.

|                               |  | For the year ended December 31,
|------------------------------ |  | -------------------------------
|
|
|Statements of Operations Data: |  |                                
|Revenues                       |  | $                              
|                               |  |                                
|Net income                     |  | $                              
|                               |  |                                
|Diluted income per share       |  | $                              
|                               |  |                                

Stature
and Premotec were acquired in 2004. The first full year of revenues for these divisions is 2005.

|                                 |  | December 31,
|-------------------------------- |  | ------------
|
|Balance Sheet Data:              |  |             
|Total assets                     |  | $           
|Total current and long-term debt |  | $           

Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations.

Overview

Allied Motion designs, manufactures and sells motion products to a broad spectrum of customers throughout the world primarily for the commercial motor, industrial
motion control, and aerospace and defense markets. Examples of the end products using Allied Motion's technology in the medical and health care industries include wheel chairs, scooters, stair
climbers, vehicle lifts, patient handling tables, electric powered surgical hand pieces, programmable pumps to meter and administer infusions associated with chemotherapy, pain control and
antibiotics; nuclear imaging systems, automated pharmacy dispensing equipment, kidney dialysis equipment, respiratory ventilators and heart pumps. In electronics, our products are used in the
handling, inspection, and testing of components and in the automation and verification of final products such as PC's, game equipment, cell phones, etc. Our motors are used in the HVAC systems of
trucks, buses, RV's, boats and off-road construction/farming equipment. These motors operate a variety of actuation systems (e.g., lifts, slide-outs, covers etc.), they
provide improved fuel efficiency while the vehicles are idling and are used in drive by wire applications to electrically replace a variety of mechanical linkages. Our products are also utilized in
high performance vehicles, vehicles using alternative fuel systems such as LPG, fuel cell and hybrid vehicles. Our geared motor products are utilized in commercial grade floor cleaners,
polishers and material handling devices for factories and commercial buildings. Our products are also used in a variety of military/defense applications including inertia guided missiles, mid range
munitions systems, weapons systems on armed personnel carriers and in security and access control in camera systems, door access control and in airport screening and scanning devices. Other end
products utilizing our technology include high definition printers; tunable lasers and spectrum analyzers for the fiber optic industry; processing equipment for the semiconductor industry, as well as
cash dispensing machines (ATM's).

Today,
five companies form the core of Allied Motion. The companies, Emoteq, Computer Optical Products, Motor Products, Stature Electric and Premotec offer a wide range of standard
motors, encoders and drives for original equipment manufacturers (OEM) and end user applications. A

7

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particular
strength of each company is its ability to design and manufacture custom motion control solutions to meet the needs of its customers.

The
Company has made considerable progress in implementing its new corporate strategy, with the driving force of "Applied Motion Technology/Know How". The Company's commitment to
Allied's Systematic Tools, or AST for short, is driving continuous improvement in quality, delivery, cost and growth. AST utilizes a tool kit to effect desired changes through well defined processes
such as Strategy Deployment, Target Marketing, Value Stream Mapping, Material Planning, Standard Work and Single Minute Exchange of Dies.

One
of the Company's major challenges is to maintain and improve price competitiveness. The Company's customers are continually being challenged by their markets and competitors to be
price competitive and they are requiring their suppliers to deliver the highest quality product at the lowest
price possible. Currently, the Company is producing some of its motor sub-assemblies and finished products at sub-contract manufacturing facilities in China and Slovakia. The
Company has increased efforts in 2007 to identify opportunities where production in low cost regions can improve profitability while delivering the same high quality products.

The
Company's products contain certain metals, and the Company has been experiencing significant fluctuations in the costs of these metals, particularly copper, steel and zinc, which are
all key materials in our products. The Company has reacted by aggressively sourcing material at lower cost from Asian markets and by passing on surcharges and price increases to our customers.

The
Company continues to pursue aggressive motor and drive development plans for new products that leverage the combined technology base of the Allied Motion companies. The Company
focuses on new product designs that design-out cost, provide higher level, value-added performance solutions and meet the needs of our served markets. Over the last few years, the Company
announced several new motor designs targeted at various markets. It normally takes twelve months to get new products designed into new customer applications. The Company is realizing improved results
from its new products and will continue to realize more improvements in the future.

Management
believes the strategy we have developed for the Company will accomplish our long term goals of increasing shareholder value through the continued strengthening of the
foundation necessary to achieve growth in sales and profitability.

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Operating Results

Year 2007 compared to 2006

|                                   |                                   | For the year ended December 31, |        | Increase (decrease) |  
|---------------------------------- | --------------------------------- | ------------------------------- | ------ | ------------------- | -
|
|
|Revenues                           |                                   | $                               | 84,559 |                     | $
|Cost of products sold              |                                   |                                 | 63,952 |                     |  
|                                   |                                   |                                 |        |                     |  
|Gross margin                       |                                   |                                 | 20,607 |                     |  
|                                   |                                   |                                 |        |                     |  
|Gross margin percentage            |                                   |                                 | 24     | %                   |  
|                                   |                                   |                                 |        |                     |  
|Operating costs and expenses:      |                                   |                                 |        |                     |  
|                                   | Selling                           |                                 |        | 3,611               |  
|                                   | General and administrative        |                                 |        | 7,776               |  
|                                   | Engineering and development       |                                 |        | 3,963               |  
|                                   | Amortization of intangible assets |                                 |        | 1,033               |  
|                                   |                                   |                                 |        |                     |  
|Total operating costs and expenses |                                   |                                 | 16,383 |                     |  
|                                   |                                   |                                 |        |                     |  
|Operating income                   |                                   |                                 | 4,224  |                     |  
|Interest expense                   |                                   |                                 | 699    |                     |  
|Other income                       |                                   |                                 | (58    | )                   |  
|                                   |                                   |                                 |        |                     |  
|Total other expenses, net          |                                   |                                 | 641    |                     |  
|                                   |                                   |                                 |        |                     |  
|Income before income taxes         |                                   |                                 | 3,583  |                     |  
|Provision for income taxes         |                                   |                                 | 1,187  |                     |  
|                                   |                                   |                                 |        |                     |  
|Net income                         |                                   | $                               | 2,396  |                     | $
|                                   |                                   |                                 |        |                     |  

NET
INCOME    The Company achieved net income of $2,396,000 or $.33 per diluted share for 2007 compared to $1,931,000 or $.28 per diluted share for 2006.

EBITDA    EBITDA
was $7,754,000 for 2007 compared to $7,166,000 for 2006. EBITDA is a non-GAAP measurement that consists of income before interest expense,
provision for
income taxes and depreciation and amortization. See information included in "Non-GAAP Measures" below for a reconciliation of net income to EBITDA.

REVENUES    Revenues
were $84,559,000 in 2007 compared to $82,768,000 in 2006. This 2% increase is primarily attributable to increased sales in industrial, electronics,
distribution and aerospace & defense markets, partially offset by decreases in the medical mobility and vehicle markets. The primary reasons for the decrease in sales to customers in the
medical mobility market were caused by program changes by one of our large customers and also the reduction in Medicare's payment for such products. The primary reasons for the decline in the motor
vehicle market are due to declines in the U.S. construction industry and increased price competition from other low cost region producers. We are placing an increased emphasis on our low cost region
operations to ensure we are globally competitive on a cost basis while maintaining the same high technical and commercial standards we have already established.

Sales
to U.S. customers accounted for 63% of our sales in 2007, with the balance to customers primarily in Europe and Canada. Sales to U.S. customers were down 5% for 2007 and sales to
customers outside the U.S. were up 18%. The weakness of the U.S. dollar against the Euro accounted for 2% of sales increase in 2007 over 2006.

9

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GROSS
MARGINS    Gross margin as a percentage of revenues was 24% for 2007 and 2006. This reflects the continued emphasis on sales of the Company's industrial and electronics
markets which provide a higher gross margin from their sales, the cost reductions realized from products being produced at the Company's contract manufacturing facility in China, and the continuous
improvement in efficiencies and productivity from implementation of the Company's AST tools mostly offset by increases in the material costs of the Company's products due to an increase in the cost of
copper and the weakness in the value of the U.S. dollar plus the under absorption of overhead costs in two of our divisions that experienced sales declines in 2007.

SELLING
EXPENSES    Selling expenses were $3,611,000 and $3,227,000 in 2007 and 2006, respectively. The 12% increase in selling expenses is primarily due to increased efforts
to strengthen our sales capabilities with more sales personnel and sales incentive programs for our sales personnel. Selling expense as a percentage of revenues increased to 4.3% in 2007 compared to
3.9% last year.

GENERAL
AND ADMINISTRATIVE EXPENSES    General and administrative expenses were $7,776,000 in 2007 compared to $7,782,000 in 2006. General and administrative expenses as a
percentage of revenues were 9.2% and 9.4% for years 2007 and 2006, respectively. Increases in salaries, benefits and incentive compensation were primarily offset by a reduction in
full-time employees.

ENGINEERING
AND DEVELOPMENT EXPENSES    Engineering and development expenses were $3,963,000 and $3,823,000 for 2007 and 2006, respectively. The 4% increase is attributable to
Company efforts on new product designs and new customer applications to meet the needs of its served markets.

AMORTIZATION
OF INTANGIBLE ASSETS    Amortization of intangible assets was $1,033,000 in 2007 and $1,012,000 in 2006.

INTEREST
EXPENSE    Interest expense was $699,000 and $983,000 for 2007 and 2006, respectively. The 29% decrease in interest is directly attributed to the decrease in
outstanding debt obligations and lower interest rates.

INCOME
TAXES    The provision for income taxes was $1,187,000 for year 2007 compared to $969,000 for 2006. The effective rate differs from the statutory amounts primarily due
to the impact of differences in state and foreign tax rates. The effective income tax rate as a percentage of income before income taxes was 33% in 2007 and 2006.

Non-GAAP Measures

EBITDA is provided for information purposes only and is not a measure of financial performance under generally accepted accounting principles. The Company
believes EBITDA is often a useful measure of a Company's operating performance and is a significant basis used by the Company's management to measure the operating performance of the Company's
business because EBITDA excludes charges for depreciation, amortization and interest expense that have resulted from our debt financings, as well as our provision for income tax expense. Accordingly,
the Company believes that EBITDA provides helpful information about the operating performance of its business, apart from the expenses associated with its physical assets or capital structure. EBITDA
is frequently used as one of the bases for comparing businesses in the Company's industry. EBITDA does not represent and should not be considered as an alternative to net income, operating income, net
cash provided by operating activities or any other measure for determining operating performance or liquidity that is calculated in accordance with generally accepted accounting principles.

10

---



The
Company's calculation of EBITDA for year ended December 31, 2007 and 2006 is as follows (in thousands):

For the year ended December 31,2007

2006Net income

$
2,396

$
1,931Interest expense


699


983Provision for income tax


1,187


969Depreciation and amortization


3,472


3,283Income before interest expense, provision for income taxes and depreciation and amortization (EBITDA)

$
7,754

$
7,166


Liquidity and Capital Resources

The Company's liquidity position as measured by cash and cash equivalents decreased $135,000 during 2007 to a balance of $534,000 at December 31, 2007. The
decrease compares to a $45,000 increase in 2006. During 2007, operations provided $5,856,000 in cash compared to $3,634,000 during 2006. This significant increase of $2,222,000 is primarily due to
improvements in receivables, inventories and accounts payable as a result of increased efforts to collect on sales in a more timely manner, continued implementation of lean accounting measures to
limit the amount of inventory that must be kept on hand, and increased business activity, partially offset by an increase in income tax payments.

Net
cash used in investing activities was $1,284,000 and $1,422,000 for 2007 and 2006, respectively, which all related to the purchase of property and equipment.

Net
cash used in financing activities was $4,738,000 compared to $2,174,000 for the years 2007 and 2006, respectively. This increased use of $2,564,000 is primarily the result of
$3,239,000 additional net payments on debt and capital lease obligations, net of refinancing costs partially offset by an increase of $675,000 of cash received from employee stock transactions.

At
December 31, 2007, the Company had $4,395,000 of debt obligations representing borrowings on the term loan and line-of-credit.

The
Company's working capital, capital expenditure and debt service requirements are expected to be funded from cash provided by operations and amounts available under the Company's
credit facilities. On May 7, 2007, the Company entered into a credit agreement with JPMorgan Chase Bank, N.A. and J.P. Morgan Europe Limited to provide term debt of $4 million and
revolving credit of up to $11 million and €3 million. The new facility was used to pay off the Company's existing domestic and European bank debt and will also provide
funds for working capital needs and to finance future growth for the Company. The debt is secured by substantially all the assets of the Company.

The
new credit facility described above has a five year term. The term debt is payable in twenty equal quarterly installments of $200,000 over the five year term. No principal payments
are required on the revolving credit facilities prior to maturity. The interest rates on the agreement are variable rates based on one or more interest rate indices. The interest rates in effect as of
December 31, 2007 were 6.24% on the term loan and 5.86% on the line-of-credit. As of December 31, 2007, the amount available under the
lines-of-credit was $14,623,000.

The
agreement contains certain financial covenants related to maximum leverage, minimum fixed charge coverage and minimum tangible net worth of the company. The Company was in compliance
with all covenants at December 31, 2007.

11

---



The
Company has a bank overdraft facility payable to a foreign bank with no monthly repayments required, interest due at the bank's base rate plus 1.5%, with a minimum of 4.75% (6.25% as
of December 31, 2007), and amounts borrowed are secured by Premotec's accounts receivable. The facility had no outstanding balance as of December 31, 2007. The amount available under the
overdraft facility was € 300,000 ($441,000 at December 31, 2007 exchange rate).

Price Levels and the Impact of Inflation

The effect of inflation on the Company's costs of production has been minimized through production efficiencies, lower costs of materials and surcharges passed on
to customers. The Company anticipates that these factors will continue to minimize the effects of any foreseeable inflation and other price pressures from the industries in which it operates. As the
Company's manufacturing activities mainly utilize semi-skilled labor, which is relatively plentiful in the areas surrounding the Company's production facilities, the Company does not
anticipate substantial inflation-related increases in the wages of the majority of its employees.

Recent Accounting Pronouncements

In February 2007 the Financial Accounting Standards Board ("FASB") issued SFAS 159, "The Fair Value Option for Financial Assets and Financial Liabilities
Including an Amendment of FASB Statement No. 115," which permits companies to choose, at specified election dates, to measure certain financial instruments and other eligible items at fair
value. Unrealized gains and losses on items for which the fair value option has been elected are subsequently reported in earnings. The decision to elect the fair value option is generally
irrevocable, is applied instrument by instrument and can only be applied to an entire instrument. The standard will be effective for the Company as of January 1, 2008 and is currently under
evaluation. At this time, the Company does not expect to elect the fair value option for any eligible items and did not early adopt the standard as permitted.

In
September 2006, the FASB issued SFAS No. 158, Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87,
88, 106, and 132(R) (SFAS 158). This statement requires recognition of the overfunded or underfunded status of defined benefit pension and other postretirement plans as an asset or liability in
the statement of financial position and changes in that funded status to be recognized in comprehensive income in the year in which the changes occur. The recognition provisions of SFAS 158
were adopted during the fourth quarter of the year ended December 31, 2006. See Note 7Pension and Postretirement Welfare Plans for the effect of the adoption of SFAS
No. 158. SFAS No. 158 also prescribes the measurement date of a plan to be the date of its year-end balance sheet effective for years ending after December 15, 2008.
The Company was not affected by adopting the latter component of the Standard.

In
July 2006, the Financial Accounting Standards Board issued FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes." The Interpretation requires that
realization of an uncertain income tax position must have a "more likely than not" probability of being sustained based on technical merits before it can be recognized in the financial statements,
assuming a review by tax authorities having all relevant information and applying current conventions. The Interpretation also clarifies the financial statement classification of
tax-related penalties and interest and sets forth new disclosures regarding unrecognized tax benefits. The Company adopted FIN 48 on January 1, 2007. Adoption of
FIN 48 did not have a material impact on our Consolidated Financial Statements.

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk.

Market risk represents the risk of loss that may impact the financial position, results of operations or cash flows of the Company due to adverse changes in
financial and commodity market prices and rates. The Company is exposed to market risk from changes in foreign currency exchange rates as

12

---



measured
against the United States dollar. These exposures are directly related to its normal operating and funding activities.

Foreign Currency Risk

Sales from Premotec are denominated in Euros, thereby creating exposures to changes in exchange rates. The changes in the Euro/U.S. exchange rate may positively
or negatively affect the Company's sales, gross margins, net income and retained earnings. A 10% change in the Euro vs. the U.S dollar could affect the Company's earnings by approximately $200,000,
and net assets by approximately $700,000. The Company does not believe that reasonably possible near-term changes in exchange rates will result in a material effect on future results or
cash flows of the Company.

13

---





Item 8.    Financial Statements and Supplementary Data.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The
Board of Directors and Stockholders
Allied Motion Technologies Inc.
Denver, Colorado

We
have audited the accompanying consolidated balance sheets of Allied Motion Technologies Inc. and subsidiaries (the "Company") as of December 31, 2007 and 2006, and the
related consolidated statements of operations, stockholders' investment and comprehensive income and cash flows for the years then ended. In connection with our audit of the consolidated financial
statements, we have also audited the consolidated financial statement Schedule IIValuation and Qualifying Accounts for the year ended December 31, 2007 and 2006. The
Company's management is responsible for these consolidated financial statements and financial statement schedule. Our responsibility is to express an opinion on these consolidated financial statements
and financial statement schedule based on our audits.

We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits of the
consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audits also included performing such other procedures as we considered necessary in
the circumstances. We believe that our audits provide a reasonable basis for our opinions.

In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Allied Motion Technologies Inc. and
subsidiaries as of December 31, 2007 and 2006, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in
the United States of America.



March 14,
2008
Denver, Colorado

14

---





ALLIED MOTION TECHNOLOGIES INC.        CONSOLIDATED BALANCE SHEETS        (In thousands, except per share data)

|                                               |                                                                                                                                                 | December 31, 2007 |        | December 31, 2006
|---------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------- | ----------------- | ------ | -----------------
|Assets                                         |                                                                                                                                                 |                   |        |                  
|Current Assets:                                |                                                                                                                                                 |                   |        |                  
|                                               | Cash and cash equivalents                                                                                                                       |                   | $      | 534              
|                                               | Trade receivables, net of allowance for doubtful accounts of $254 and $293 at December 31, 2007 and 2006, respectively                          |                   |        | 10,223           
|                                               | Inventories, net                                                                                                                                |                   |        | 11,000           
|                                               | Deferred income taxes                                                                                                                           |                   |        | 724              
|                                               | Prepaid expenses and other                                                                                                                      |                   |        | 1,171            
|                                               |                                                                                                                                                 |                   |        |                  
|Total Current Assets                           |                                                                                                                                                 |                   | 23,652 |                  
|Property, plant and equipment, net             |                                                                                                                                                 |                   | 11,133 |                  
|Goodwill and intangible assets, net            |                                                                                                                                                 |                   | 16,722 |                  
|                                               |                                                                                                                                                 |                   |        |                  
|Total Assets                                   |                                                                                                                                                 | $                 | 51,507 |                  
|                                               |                                                                                                                                                 |                   |        |                  
|Liabilities and Stockholders' Investment       |                                                                                                                                                 |                   |        |                  
|Current Liabilities:                           |                                                                                                                                                 |                   |        |                  
|                                               | Debt obligations                                                                                                                                |                   |        | 827              
|                                               | Accounts payable                                                                                                                                |                   |        | 5,197            
|                                               | Accrued liabilities and other                                                                                                                   |                   |        | 4,563            
|                                               | Income taxes payable                                                                                                                            |                   |        | 669              
|                                               |                                                                                                                                                 |                   |        |                  
|Total Current Liabilities                      |                                                                                                                                                 |                   | 11,256 |                  
|Debt obligations, net of current portion       |                                                                                                                                                 |                   | 3,595  |                  
|Deferred income taxes                          |                                                                                                                                                 |                   | 1,452  |                  
|Pension and post-retirement obligations        |                                                                                                                                                 |                   | 1,207  |                  
|                                               |                                                                                                                                                 |                   |        |                  
|Total Liabilities                              |                                                                                                                                                 |                   | 17,510 |                  
|Commitments and Contingencies                  |                                                                                                                                                 |                   |        |                  
|Stockholders' Investment:                      |                                                                                                                                                 |                   |        |                  
|                                               | Preferred stock, par value $1.00 per share, authorized 5,000 shares; no shares issued or outstanding                                            |                   |        |                 
|                                               | Common stock, no par value, authorized 50,000 shares; 6,942 and 6,533 shares issued and outstanding at December 31, 2007 and 2006, respectively |                   |        | 16,746           
|                                               | Retained earnings                                                                                                                               |                   |        | 15,297           
|                                               | Accumulated other comprehensive income                                                                                                          |                   |        | 1,954            
|                                               |                                                                                                                                                 |                   |        |                  
|Total Stockholders' Investment                 |                                                                                                                                                 |                   | 33,997 |                  
|                                               |                                                                                                                                                 |                   |        |                  
|Total Liabilities and Stockholders' Investment |                                                                                                                                                 | $                 | 51,507 |                  
|                                               |                                                                                                                                                 |                   |        |                  

See
accompanying notes to consolidated financial statements.

15

---



ALLIED MOTION TECHNOLOGIES INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

ALLIED MOTION TECHNOLOGIES INC.        CONSOLIDATED STATEMENTS OF OPERATIONS        (In thousands, except per share data)

|                                   |                                        | For the year ended
December 31,
2007 |        | For the year ended
December 31,
2006 |  
|---------------------------------- | -------------------------------------- | ------------------------------------ | ------ | ------------------------------------ | -
|Revenues                           |                                        | $                                    | 84,559 |                                      | $
|Cost of products sold              |                                        |                                      | 63,952 |                                      |  
|                                   |                                        |                                      |        |                                      |  
|Gross margin                       |                                        |                                      | 20,607 |                                      |  
|Operating costs and expenses:      |                                        |                                      |        |                                      |  
|                                   | Selling                                |                                      |        | 3,611                                |  
|                                   | General and administrative             |                                      |        | 7,776                                |  
|                                   | Engineering and development            |                                      |        | 3,963                                |  
|                                   | Amortization of intangible assets      |                                      |        | 1,033                                |  
|                                   |                                        |                                      |        |                                      |  
|Total operating costs and expenses |                                        |                                      | 16,383 |                                      |  
|                                   |                                        |                                      |        |                                      |  
|Operating income                   |                                        |                                      | 4,224  |                                      |  
|Other income (expense), net:       |                                        |                                      |        |                                      |  
|                                   | Interest expense                       |                                      |        | (699                                 | )
|                                   | Other income, net                      |                                      |        | 58                                   |  
|                                   |                                        |                                      |        |                                      |  
|Total other expense, net           |                                        |                                      | (641   | )                                    |  
|                                   |                                        |                                      |        |                                      |  
|Income before income taxes         |                                        |                                      | 3,583  |                                      |  
|Provision for income taxes         |                                        |                                      | 1,187  |                                      |  
|                                   |                                        |                                      |        |                                      |  
|Net income                         |                                        | $                                    | 2,396  |                                      | $
|                                   |                                        |                                      |        |                                      |  
|Basic net income per share:        |                                        |                                      |        |                                      |  
|                                   | Net income per share                   |                                      | $      | .36                                  |  
|                                   |                                        |                                      |        |                                      |  
|                                   | Basic weighted average common shares   |                                      |        | 6,695                                |  
|                                   |                                        |                                      |        |                                      |  
|Diluted net income per share:      |                                        |                                      |        |                                      |  
|                                   | Net income per share                   |                                      | $      | .33                                  |  
|                                   |                                        |                                      |        |                                      |  
|                                   | Diluted weighted average common shares |                                      |        | 7,247                                |  
|                                   |                                        |                                      |        |                                      |  

See
accompanying notes to consolidated financial statements.

16

---





ALLIED MOTION TECHNOLOGIES INC.        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT AND COMPREHENSIVE INCOME        (In thousands)

|                            |                                                                            | Common Stock |     |   |        |       |   |      |      |  
|--------------------------- | -------------------------------------------------------------------------- | ------------ | --- | - | ------ | ----- | - | ---- | ---- | -
|
|
|Balances, December 31, 2005 |                                                                            | 6,369        |     | $ | 15,110 |       | $ | (119 | )    | $
|                            | Stock transactions under employee benefit stock plans and option exercises |              | 125 |   |        | 371   |   |      |      |  
|                            | Issuance of restricted stock, net of forfeitures                           |              | 39  |   |        | 151   |   |      | (151 | )
|                            | Stock compensation expense                                                 |              |     |   |        | 14    |   |      | 93   |  
|                            | Eliminate additional minimum pension liability, net of tax                 |              |     |   |        |       |   |      |      |  
|                            | Amount recognized to initially apply SFAS No. 158, net of tax              |              |     |   |        |       |   |      |      |  
|                            | Foreign currency translation adjustment                                    |              |     |   |        |       |   |      |      |  
|                            | Net income                                                                 |              |     |   |        |       |   |      |      |  
|                            |                                                                            |              |     |   |        |       |   |      |      |  
|                            | Comprehensive income                                                       |              |     |   |        |       |   |      |      |  
|                            |                                                                            |              |     |   |        |       |   |      |      |  
|Balances, December 31, 2006 |                                                                            | 6,533        |     | $ | 15,646 |       | $ | (177 | )    | $
|                            | Stock transactions under employee benefit stock plans and option exercises |              | 333 |   |        | 1,079 |   |      |      |  
|                            | Issuance of restricted stock, net of forfeitures                           |              | 76  |   |        | 453   |   |      | (461 | )
|                            | Stock compensation expense                                                 |              |     |   |        |       |   |      | 206  |  
|                            | Amount recognized for SFAS 158, net of tax                                 |              |     |   |        |       |   |      |      |  
|                            | Foreign currency translation adjustment                                    |              |     |   |        |       |   |      |      |  
|                            | Net income                                                                 |              |     |   |        |       |   |      |      |  
|                            |                                                                            |              |     |   |        |       |   |      |      |  
|                            | Comprehensive income                                                       |              |     |   |        |       |   |      |      |  
|                            |                                                                            |              |     |   |        |       |   |      |      |  
|Balances, December 31, 2007 |                                                                            | 6,942        |     |   | 17,178 |       |   | (432 | )    |  
|                            |                                                                            |              |     |   |        |       |   |      |      |  

See
accompanying notes to consolidated financial statements.

17

---



ALLIED MOTION TECHNOLOGIES INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT AND COMPREHENSIVE INCOME (Continued)

(In thousands)

ALLIED MOTION TECHNOLOGIES INC.        CONSOLIDATED STATEMENTS OF CASH FLOWS        (In thousands)

|                                                                                            |                                                       | For the year ended
December 31,
2007      |        | For the year ended
December 31,
2006 |     
|------------------------------------------------------------------------------------------- | ----------------------------------------------------- | ----------------------------------------- | ------ | ------------------------------------ | ----
|Cash Flows From Operating Activities:                                                       |                                                       |                                           |        |                                      |     
|Net income                                                                                  |                                                       | $                                         | 2,396  |                                      | $   
|Adjustments to reconcile net income to net cash provided by (used in) operating activities: |                                                       |                                           |        |                                      |     
|                                                                                            | Depreciation and amortization                         |                                           |        | 3,472                                |     
|                                                                                            | Provision for doubtful accounts                       |                                           |        | 53                                   |     
|                                                                                            | Provision for obsolete inventory                      |                                           |        | 314                                  |     
|                                                                                            | Deferred income tax provision                         |                                           |        | 144                                  |     
|                                                                                            | Other                                                 |                                           |        | 381                                  |     
|                                                                                            | Changes in assets and liabilities:                    |                                           |        |                                      |     
|                                                                                            |                                                       | Decrease (increase) in trade receivables  |        |                                      | 184 
|                                                                                            |                                                       | Increase in inventories                   |        |                                      | (224
|                                                                                            |                                                       | Increase in prepaid expenses and other    |        |                                      | (402
|                                                                                            |                                                       | Increase (decrease) in accounts payable   |        |                                      | 211 
|                                                                                            |                                                       | Decrease in accrued liabilities and other |        |                                      | (122
|                                                                                            |                                                       | Decrease in income taxes payable          |        |                                      | (551
|                                                                                            |                                                       |                                           |        |                                      |     
|Net cash provided by operating activities                                                   |                                                       |                                           | 5,856  |                                      |     
|Cash Flows From Investing Activities:                                                       |                                                       |                                           |        |                                      |     
|                                                                                            | Purchase of property and equipment                    |                                           |        | (1,284                               | )   
|                                                                                            |                                                       |                                           |        |                                      |     
|Net cash used in investing activities                                                       |                                                       |                                           | (1,284 | )                                    |     
|Cash Flows From Financing Activities:                                                       |                                                       |                                           |        |                                      |     
|                                                                                            | Borrowings (repayments) on lines-of-credit, net       |                                           |        | (4,233                               | )   
|                                                                                            | Borrowings on term loans                              |                                           |        | 4,000                                |     
|                                                                                            | Repayments on term loans                              |                                           |        | (5,181                               | )   
|                                                                                            | Proceeds from capital leases                          |                                           |        |                                     |     
|                                                                                            | Repayments of capital lease obligations               |                                           |        | (109                                 | )   
|                                                                                            | Stock transactions under employee benefit stock plans |                                           |        | 936                                  |     
|                                                                                            | Debt issuance costs                                   |                                           |        | (151                                 | )   
|                                                                                            |                                                       |                                           |        |                                      |     
|Net cash (used in) provided by financing activities                                         |                                                       |                                           | (4,738 | )                                    |     
|Effect of foreign exchange rate changes on cash                                             |                                                       |                                           | 31     |                                      |     
|                                                                                            |                                                       |                                           |        |                                      |     
|Net increase (decrease) in cash and cash equivalents                                        |                                                       |                                           | (135   | )                                    |     
|Cash and cash equivalents at beginning of period                                            |                                                       |                                           | 669    |                                      |     
|                                                                                            |                                                       |                                           |        |                                      |     
|Cash and cash equivalents at end of period                                                  |                                                       | $                                         | 534    |                                      | $   
|                                                                                            |                                                       |                                           |        |                                      |     
|Supplemental disclosure of cash flow information:                                           |                                                       |                                           |        |                                      |     
|Net cash paid (received) during the period for:                                             |                                                       |                                           |        |                                      |     
|                                                                                            | Interest                                              |                                           | $      | 672                                  |     
|                                                                                            | Income taxes                                          |                                           |        | 1,575                                |     

See
accompanying notes to consolidated financial statements.

18

---



ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

Allied Motion Technologies Inc. (Allied Motion or the Company) is engaged in the business of designing, manufacturing and selling motion control products
to a broad spectrum of customers throughout the world primarily for the commercial motor, industrial motion control, and aerospace and defense markets.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant inter-company accounts
and transactions are eliminated in consolidation.

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 flows from foreign currency transactions are translated using an average rate.

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.

Inventories

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

December 31,
2007

December 31,
2006Parts and raw materials

$
8,326

$
8,864Work-in-process


2,002


1,745Finished goods


2,433


1,85412,761


12,463Less reserves


(1,761
)

(1,656
)$
11,000

$
10,807


19

---



ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1.    BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Property, Plant and Equipment

Property, plant and equipment is classified as follows (in thousands):

Useful lives

December 31, 2007

December 31, 2006Land



$
332

$
332Building and improvements

5-39 years


4,685


4,585Machinery, equipment, tools and dies

2-8 years


16,336


15,420Furniture, fixtures and other

3-10 years


2,349


1,98323,702


22,320Less accumulated depreciation




(12,569
)

(10,147
)$
11,133

$
12,173


Depreciation
expense is provided using the straight-line method over the estimated useful lives of the assets. Amortization of building improvements and leased equipment 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.
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 earnings.

Depreciation
expense was approximately $2,439,000 and $2,271,000 in 2007 and 2006, respectively.

Goodwill

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 required to be tested for impairment annually, or more frequently if events or changes in circumstances indicate that goodwill may be impaired. The Company completed its annual analysis of
the fair value of its goodwill at October 31, 2007, and determined there was no indicated impairment of its goodwill. There can be no assurance that future goodwill impairments will not occur.

Intangible Assets

Intangible assets, other than goodwill, are recorded at cost and are amortized over their estimated useful lives using the straight-line method.

Impairment of Long-Lived Assets

The Company reviews the carrying values of its long-lived assets whenever events or changes in circumstances indicate that such carrying values may
not be recoverable. Under SFAS No. 144, long-lived assets must be 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. However, 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 asset. No impairments of long-lived
assets were recorded in 2007 or 2006.

20

---



ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1.    BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Warranty

The Company offers warranty coverage for its products for periods ranging from 12 to 18 months after shipment, with the majority of its products for
12 months. 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 reevaluated 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 sale. Accrued warranty costs were $306,000 and
$276,000 as of December 31, 2007 and 2006, respectively.

Changes
in the Company's reserve for product warranty claims during 2007 and 2006, were as follows (in thousands):

December 31,
2007

December 31,
2006Warranty reserve at beginning of the year

$
276

$
307Warranty expenditures


(145
)

(115
)Provision


171


79Effect of foreign currency translation


4


5Warranty reserve at end of year

$
306

$
276


Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

December 31,
2007

December 31,
2006Compensation and fringe benefits

$
3,476

$
3,221Warranty reserve


306


276Other accrued expenses


781


729$
4,563

$
4,226


Foreign Currency Translation

In accordance with SFAS No. 52, "Foreign Currency Translation," the assets and liabilities of the Company's foreign subsidiaries are translated into U.S.
dollars using end of period exchange rates. Comprehensive income is recorded in the other comprehensive income foreign currency translation adjustment component of stockholders' investment in the
accompanying consolidated statement of stockholders' investment and comprehensive income. 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 are included in the results of operations as
incurred.

Engineering and Development Costs

Engineering and development costs are expensed as incurred.

21

---



ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1.    BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Revenue Recognition

The Company recognizes revenue when products are shipped or delivered (shipping terms may be either FOB shipping point or destination) and title has passed to the
customer, persuasive evidence of an arrangement exists, the selling price is fixed or determinable, and collectibility is reasonably assured.

Basic and Diluted Income per Share from Continuing Operations

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. The dilutive effect of outstanding options was 552,000 and 498,000 for the years 2007 and 2006, respectively. Stock options to purchase 55,000 and
213,000 shares of common stock, were excluded from the calculation of diluted income per share for years 2007 and 2006, respectively, since the results would have been anti-dilutive.

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

Stock-Based Compensation

Effective January 1, 2006, the Company implemented FASB Statement No. 123R (Statement 123R) Accounting for Share-Based Payment, an amendment
of FASB Statement No. 123, adopting the modified prospective method of implementation. Statement 123R requires recognition of the grant-date fair value of stock options and
other equity-based compensation issued to employees in the income statement. The cost of share based payments, using the fair value of the options at the grant date assuming the Black-Scholes
option-pricing model, is recognized on a straight-line basis over the vesting period. There were no options granted during 2007 or 2006.

Fair Values of Financial Instruments

The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, trade receivables, accounts payable and accrued liabilities
approximate fair value because of the immediate or short-term maturities of these financial instruments. The carrying amount of the line-of-credit and term loans
approximate their fair value because the underlying instrument is a variable rate note that reprices frequently.

Income Taxes

The Company accounts for income taxes in accordance with SFAS No. 109 ("FAS 109"), "Accounting for Income Taxes." Consistent with guidance in
FAS 109, 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

22

---



ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1.    BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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.

In
July 2006, the Financial Accounting Standards Board issued FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" ("FIN 48"). The interpretation
requires that realization of an uncertain income tax position must have a "more likely than not" probability of being sustained based on technical merits before it can be recognized in the financial
statements, assuming a review by tax authorities having all relevant information and applying current conventions. The Company adopted FIN 48 on January 1, 2007. Adoption of
FIN 48 did not have a material impact on our Consolidated Financial Statements. The Company does not have significant unrecognized tax benefits and does not anticipate a significant increase or
decrease in unrecognized tax benefits within the next twelve months. The Company recognizes income tax related interest and penalties as a component of the provision for income taxes.

Concentration of Credit Risk

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. No single customer makes up more than 10% of trade receivables.

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. Actual results could differ from those estimates.

23

---



ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.    GOODWILL AND INTANGIBLE ASSETS

Included in goodwill and intangible assets in the Company's consolidated balance sheets are the following intangible assets (in thousands):

December 31,
2007

December 31,
2006

Estimated
LifeGoodwill

$
12,343

$
12,072Amortizable intangible assets:Customer lists


4,589


4,473

8 yearsTrade names


1,340


1,340

10 yearsDesigns and technologies


2,713


2,597

8 yearsAccumulated amortization


(4,263
)

(3,141
)Total net intangible assets


4,379


5,269Total goodwill and net intangible assets

$
16,722

$
17,341


The
change in the carrying amount of goodwill for 2007 is as follows (in thousands):

December 31,
2007Balance at beginning of period

$
12,072Effect of foreign currency translation


271Balance at end of period

$
12,343


Total
amortization expense for intangible assets for the years 2007 and 2006 was $1,033,000 and $1,012,000 respectively. Estimated amortization expense for intangible assets is
$1,053,000 for the years ending December 31, 2008 and 2009, $952,000 for 2010, $811,000 for 2011, $426,000 for 2012 and $85,000 for 2013.

3.    DEBT OBLIGATIONS

Debt obligations consisted of the following (in thousands):

December 31, 2007

December 31, 2006Credit Agreement (at variable rates)Term Loan, 6.24% as of December 31, 2007

$
3,600

$
Revolving line-of-credit, 5.86% as of December 31, 2007


795


Previous debt agreementsDomestic revolving line-of-credit





4,925Term loans





4,773Capital lease obligations


27


131Total


4,422


9,829Less current maturities


(827
)

(9,066
)Long-term debt obligations

$
3,595

$
763


24

---



ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3.    DEBT OBLIGATIONS (Continued)

Effective
May 7, 2007, the Company entered into a credit agreement to provide term debt of $4 million and revolving credit of up to $11 million and
€3 million. The new facility was used to pay off the Company's existing domestic and foreign bank debt and will also provide funds for working capital needs and financing of
future growth of the Company. All borrowings are secured by substantially all the assets of the Company.

The
credit agreement has a five year term (maturity date of May 7, 2012). The term debt is payable in twenty equal quarterly installments of $200,000 over the five year term. No
principal payments are
required on the revolving credit facilities prior to maturity. The interest rates on the agreement are variable rates based on one or more interest rate indices.

The
credit agreement contains certain financial covenants related to maximum leverage, minimum fixed charge coverage and minimum tangible net worth of the company. The Company was in
compliance with all covenants at December 31, 2007.

At
December 31, 2007, approximately $14.6 million was available under the credit agreement and €300,000 was available under a bank overdraft facility.

Future
maturities of debt obligations under the credit agreement are as follows as of December 31, 2007:

2008

$
8002009


8002010


8002011


8002012


1,195$
4,395


4.    INCOME TAXES

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

For the year ended
December 31,
2007

For the year ended
December 31,
2006Domestic

$
945

$
1,030Foreign


2,638


1,870Income before income taxes

$
3,583

$
2,900


25

---



ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4.    INCOME TAXES (Continued)

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

For the year ended
December 31,
2007

For the year ended
December 31,
2006Current provision:Domestic

$
226

$
143Foreign


778


662Total current provision


1,004


805Deferred provision (benefit):Domestic


286


351Foreign


(103
)

(187
)Total deferred provision


183


164Provision for income taxes

$
1,187

$
969


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

For the year ended
December 31,
2007

For the year ended
December 31,
2006Tax provision, computed at statutory rate

$
1,218

$
986State tax, net of federal impact


177


112Nondeductible expenses


20


33Permanent tax deductions





(28
)Adjustments to prior year accruals(1)


(7
)

26Effect of foreign tax rate differences


(221
)

(82
)Effect of changes in enacted tax law





(78
)Expiration of tax credits


4


97Change in valuation allowance


(4
)

(97
)Provision for income taxes

$
1,187

$
969




26

---



ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4.    INCOME TAXES (Continued)



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

December 31, 2007

December 31, 2006Current Deferred tax assets:Allowances and other

$
503

$
394Tax credit carryforwards


132


136Net operating loss carryforwards


303


466Total deferred tax assets


938


996Valuation allowance


(214
)

(218
)Net current deferred tax assets

$
724

$
778Noncurrent:Deferred tax assets:Employee benefit plans


438


611Other


26


25Deferred tax liabilities:Property, plant and equipment


(970
)

(1,123
)Goodwill and intangibles


(925
)

(831
)Other


(21
)

Net noncurrent deferred tax liability

$
(1,452
)
$
(1,318
)


The
Company has a domestic net operating loss carryforward of $843,000 expiring in 2023 through 2025 and domestic tax credit carryforwards expiring in 2013.

Realization
of the Company's 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 has recorded a valuation allowance due to the
uncertainty related to the realization of certain deferred tax assets existing at December 31, 2007. The amount of deferred tax assets considered realizable is subject to adjustment in future
periods if estimates of future taxable income are changed. Management believes that it is more likely than not that the Company will realize the benefits of its deferred tax assets, net of valuation
allowances as of December 31, 2007.

The
Company files income tax returns in the U.S. federal, various states and The Netherlands 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 2003. The Company is no longer subject to tax examinations in The Netherlands for periods before 2002.

The
Company does not have any significant unrecognized tax benefits and does not anticipate a significant increase or decrease in unrecognized tax benefits within the next twelve months.
Amounts recognized for income tax related interest and penalties as a component of the provision for income taxes are immaterial for years ended December 31, 2007 and 2006.

27

---



ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5.    STOCK-BASED COMPENSATION PLANS

Allied Motion 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-employee directors of the Company.

As
of December 31, 2007, the Company had 336,951 shares of Common Stock available for grant under stock incentive plans.

Stock Options

Option activity during years 2006 and 2007 was as follows:

|                           |           | Number of
Shares |          | Weighted
Average
Exercise
Price |  | Aggregate
Intrinsic
Value
|-------------------------- | --------- | ---------------- | -------- | ------------------------------- |  | -------------------------
|Balance, December 31, 2005 |           | 1,448,650        |          | 3.62                            |  |                          
|                           | Granted   |                  |         |                                 |  |                          
|                           | Forfeited |                  | (44,000  | )                               |  |                          
|                           | Exercised |                  | (159,500 | )                               |  |                          
|                           |           |                  |          |                                 |  |                          
|Balance, December 31, 2006 |           | 1,245,150        |          | 3.68                            |  |                          
|                           | Granted   |                  |         |                                 |  |                          
|                           | Forfeited |                  | (71,250  | )                               |  |                          
|                           | Exercised |                  | (330,700 | )                               |  |                          
|                           |           |                  |          |                                 |  |                          
|Balance, December 31, 2007 |           | 843,200          |          | 3.75                            |  | $                        
|                           |           |                  |          |                                 |  |                          

Under
the terms of the plans, options may not be granted at less than 85% of fair value. All options granted to date have been granted at fair value as of the date of grant. The
aggregate intrinsic value is calculated based on the difference of the fair value of the stock and the option exercise price on the date of the exercise. As of December 31, 2007, all
outstanding options are exercisable. Cash received from the exercise of stock options for the years ended December 31, 2007 and 2006 was $792,000 and $185,000, respectively.

Exercise
prices for options outstanding at December 31, 2007 are as follows:

|                     |                                             | Range of Exercise Prices |   | Total    
|-------------------- | ------------------------------------------- | ------------------------ | - | ---------
|
|Options Outstanding: |                                             |                          |   |          
|                     | Number of options                           |                          |   | 295,000  
|                     | Weighted average exercise price             |                          | $ | 2.24     
|                     | Weighted average remaining contractual life |                          |   | 1.7 years

Restricted Stock

During 2007 and 2006, 79,100 and 42,000 shares of nonvested restricted stock were awarded with a weighted average value of $5.89 and $3.80 per share,
respectively. The value at the date of grant is amortized to compensation expense over the related vesting period of approximately three years.

28

---



ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5.    STOCK-BASED COMPENSATION PLANS (Continued)

Shares
of restricted stock are forfeited if an employee leaves the Company before the vesting date. Shares that are forfeited become available for future grant.

Nonvested
restricted stock activity during years 2006 and 2007 was as follows:

Number of
Nonvested
Restricted SharesBalance, December 31, 2005

44,000Granted

42,000Forfeited

(2,000
)Vested

(14,009
)Balance, December 31, 2006

69,991Granted

79,100Forfeited

(1,283
)Vested

(28,348
)Balance, December 31, 2007

119,460


Share-Based Compensation Expense

Stock Options

During the year ended December 31, 2006, the Company recognized $14,000 in compensation expense related to outstanding stock options. Total unrecognized
compensation cost related to unvested stock options awards as of December 31, 2007 and 2006 is zero.

Restricted Stock

During 2007 and 2006, compensation expense net of forfeitures, of $206,000 and $93,000 was recorded, respectively. As of December 31, 2007, there was
$438,000 of total unrecognized compensation expense related to restricted stock awards which is expected to be recognized over a weighted average period of 1.9 years.

Allied Motion Employee Stock Ownership Plan

The Company sponsors an Employee Stock Ownership Plan (ESOP) that covers all 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 2007 and 2006) or ii) the
annual interest payable on any loan outstanding to the Company. Company contributions to the Plan were $186,000, and $153,000 accrued for 2007 and 2006, respectively. Contributions are used to acquire
newly issued shares of the Company.

6.    COMMITMENTS AND CONTINGENCIES

Operating Leases

At December 31, 2007, the Company maintains leases for certain facilities and equipment. The Company has entered into facility agreements, some of which
contain provisions for future rent

29

---



ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6.    COMMITMENTS AND CONTINGENCIES (Continued)

increases.
The total amount of rental payments due over the lease term is being charged to rent expense on the straight-line method over the term of the lease. The difference between rent
expense recorded and the amount paid is credited or charged to "Deferred rent obligation," which is included in "Accrued liabilities and other" in the accompanying Balance Sheet. Minimum future rental
commitments under all non-cancelable operating leases are as follows (in thousands):

Year ending December 31,

Total2008

$
6622009


5592010


4482011


4112012


231Thereafter


177$
2,488


Rental
expense was $721,000 and $693,000 in 2007 and 2006, respectively.

Capital Leases

The Company leases certain machinery and equipment under agreements that are classified as capital leases. The cost of equipment under capital leases included in
the accompanying consolidated balance sheets as property, plant and equipment was $120,000 and $583,000 at December 31, 2007 and 2006, respectively. Accumulated amortization of the leased
equipment at December 31, 2007 and December 31, 2006 was $41,000 and $289,000, respectively. Amortization of assets under capital leases is included in depreciation expense.

The
future minimum lease payments required under capital leases is $27,000 for 2008. The difference between the net present value of the net minimum lease payments and the future minimum
lease payments is immaterial.

Severance Benefit Agreements

The Company has entered into annually renewable severance benefit agreements with six 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 amount of severance payments that could be required to be paid under
these contracts, if such events occur, totaled approximately $3,877,000 and $2,714,000, respectively as of December 31, 2007 and 2006. In addition, severance benefits include, for some
employees, a gross-up payment for excise taxes.

Litigation

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 affect on the Company's consolidated financial position or results of operations.

30

---



ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7.    PENSION AND POSTRETIREMENT WELFARE PLANS

Pension Plan

Motor Products has a defined benefit pension plan covering substantially all of its hourly union employees hired prior to April 10, 2002. The benefits are
based on years of service, the employee's compensation during the last three years of employment, and accumulated employee contributions.

The
following tables provide a reconciliation of the change in benefit obligation, the change in plan assets and the net amount recognized in the Consolidated Balance Sheet at
December 31, 2007 and December 31, 2006 (in thousands):

December 31, 2007

December 31, 2006Change in projected benefit obligation:Projected benefit obligation at beginning of period

$
4,065

$
4,096Service cost


118


128Employee contributions


12


13Interest cost


237


222Actuarial gain


(245
)

(205
)Benefits paid


(200
)

(189
)Projected benefit obligation at end of period

$
3,987

$
4,065Change in plan assets:Fair value of plan assets at beginning of period

$
3,568

$
3,219Actual return on plan assets


269


395Employee contributions


12


13Employer contributions


231


130Benefits and expenses paid


(200
)

(189
)Fair value of plan assets at end of period

$
3,880

$
3,568


|
|

December 31, 2007

December 31, 2006Excess of projected benefit obligation over fair value of plan assets

$
107

$
497Unrecognized gain


257


57Accrued pension cost

$
364

$
554Required incremental asset under SFAS No. 158


(257
)

(57
)Accrued pension cost at end of period

$
107

$
497


The
accumulated benefit obligation for the pension plan was $3,905,000 at December 31, 2007 and $3,976,000 at December 31, 2006.

31

---



ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7.    PENSION AND POSTRETIREMENT WELFARE PLANS (Continued)

Benefits
expected to be paid from the Plan during each of the next five fiscal years, and in aggregate for the five fiscal years thereafter are:

Year of payment

Amount of Benefit Payment2008

$
239,0002009


254,0002010


267,0002011


273,0002012


280,0002013-2017


1,547,000


Components
of net periodic pension expense included in the consolidated statements of operations for years 2007 and 2006 are as follows (in thousands):

For the year ended
December 31,
2007

For the year ended
December 31,
2006Service cost

$
118

$
128Interest cost on projected benefit obligation


237


222Expected return on assets


(312
)

(280
)Net periodic pension expense

$
43

$
70


The
weighted average assumptions used to determine benefit obligations were as follows:

December 31, 2007

December 31, 2006Discount rate

6.50
%
6.00
%Rate of compensation increases

5.00
%
5.00
%


The
weighted average assumptions used to determine net periodic benefit cost are as follows:

For the year ended December 31, 2007

For the year ended December 31, 2006Discount rate

6.00
%
5.50
%Expected long-term rate of return on plan assets

9.00
%
9.00
%Rate of compensation increases

5.00
%
5.00
%


The
Company expects to contribute approximately $85,000 to the pension plan during 2008.

32

---



ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7.    PENSION AND POSTRETIREMENT WELFARE PLANS (Continued)

The pension plan assets allocation at December 31, 2007 and 2006 were as follows:

December 31, 2007

December 31, 2006Cash equivalents

1
%
5
%Equity securities

70
%
70
%Fixed income securities

29
%
25
%Total

100
%
100
%


The
pension assets are managed by an outside investment manager. The Company's investment policy with respect to pension assets is to make investments solely in the interest of the
participants and beneficiaries of the plans and for the exclusive purpose of providing benefits accrued and defraying the reasonable expenses of administration. The Company strives to maintain
investment diversification to assist in minimizing the risk of large losses.

Postretirement Welfare Plan

Motor Products provides postretirement medical insurance and life insurance benefits to current and former employees hired before January 1, 1994 who
retire from Motor Products. Employees who retire after January 1, 2005 must have twenty or more years of continuous service in order to be eligible for retiree medical benefits. Partial
contributions from retirees are required for the medical insurance benefits. The Company's portion of the medical insurance premiums are funded from the general assets of the Company. The Company
recognizes the expected cost of providing such post-retirement benefits during employees' active service periods.

33

---



ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7.    PENSION AND POSTRETIREMENT WELFARE PLANS (Continued)

The
following tables provide a reconciliation of the change in the accumulated postretirement benefit obligation and the net amount recognized in the Consolidated Balance Sheet at
December 31, 2007 and December 31, 2006 (in thousands):

December 31,
2007

December 31,
2006Change in postretirement benefit obligation:Accumulated postretirement benefit obligation at beginning of period

$
1,215

$
2,515Service cost


24


26Interest cost


72


68Actuarial gain


(149
)

(1,330
)Benefits paid, net of participant contributions


(62
)

(64
)Accumulated postretirement benefit obligation at end of period

$
1,100

$
1,215Accrued postretirement benefit cost at the beginning of period

$
2,446

$
2,698Net periodic postretirement cost


11


(3
)Employer contributions


(62
)

(64
)Other





(185
)Accrued postretirement benefit cost

$
2,395

$
2,446Required incremental asset under SFAS No. 158


(1,295
)

(1,231
)Accrued postretirement benefit cost at end of period

$
1,100

$
1,215


Net
periodic postretirement benefit costs included in the consolidated statements of operations for years 2007 and 2006 are as follows (in thousands):

For the year ended December 31,2007

2006Service cost

$
24

$
26Interest cost


72


68Amortization of prior service cost


(12
)

(12
)Amortization of (gain)


(73
)

(85
)Total benefit cost (income)

$
11

$
(3
)


During
2006, certain assumptions, relating to the Company's obligation for contributing a portion of retiree medical premiums, were updated to more closely reflect the Company's
contractual obligation. This resulted in a cumulative reduction to previously recognized net periodic postretirement benefit costs of $115,000, net of tax. The cumulative reduction is reflected in the
consolidated statement of operations for 2006, but is not included in the net periodic postretirement benefit cost for 2006 as presented in the table above.

34

---



ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7.    PENSION AND POSTRETIREMENT WELFARE PLANS (Continued)

For
measurement purposes, future increases in the per capita cost of covered health care benefits are assumed. The Company's current contractual obligation requires a per capita fixed
Company contribution amount through August 2011. As of December 31, 2007, the Company assumed an increase in its contribution of 5% applied once every four years beginning in 2012.
Postretirement medical liabilities can be extremely sensitive to changes in the assumed rate of future medical increases, and, therefore the healthcare cost trend rate assumption has a significant
effect on the amounts reported.

The
weighted average discount rate used in determining the accumulated postretirement benefit obligation was 6.50% and 6.00% as of December 31, 2007 and 2006, respectively. The
weighted average discount rate used to determine the net periodic postretirement benefit cost was 6.0% for 2007 and 5.50% for 2006.

Benefits
expected to be paid from the Plan during each of the next five fiscal years, and in aggregate for the five fiscal years thereafter are:

Year of payment

Amount of Benefit Payment2008

$
69,0002009


69,0002010


73,0002011


72,0002012


73,0002013-2017


373,000


8.    SEGMENT INFORMATION

SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information" requires disclosure of operating segments, which as defined, are
components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in
assessing performance.

The
Company operates in one segment for the manufacture and marketing of motion control products for original equipment manufacturers and end user applications. In accordance with SFAS
No. 131, the Company's chief operating decision maker has been identified as the Office of the President and Chief Operating Officer, which reviews operating results to make decisions about
allocating resources and assessing performance for the entire Company. SFAS No. 131, 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. All material operating units qualify for aggregation under SFAS No. 131 due to their similar customer base and similarities in: economic characteristics; nature of products and
services; and procurement, manufacturing and distribution processes. Since the Company operates in one segment, all financial information required by SFAS No. 131 can be found in the
accompanying consolidated financial statements and within this note.

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ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8.    SEGMENT INFORMATION (Continued)

The
Company's wholly owned foreign subsidiary, Premotec, located in Dordrecht, The Netherlands, is included in the accompanying consolidated financial statements. Financial information
related to the foreign subsidiary is summarized below (in thousands):

For the year ended and as of December 31,2007

2006Revenues derived from foreign subsidiaries

$
21,586

$
18,685Identifiable assets


10,677


9,300


Sales
to customers outside of the United States were $31,170,000 and $26,405,000 in years 2007 and 2006, respectively.

During
years 2007 and 2006, no single customer accounted for more than 10% of total revenues.

9.    SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

Selected quarterly financial data for each of the four quarters in years 2007 and 2006 is as follows (in thousands, except per share data):

|Year 2007                |  | First Quarter |        | Second Quarter |   | Third Quarter |  | Fourth Quarter
|------------------------ |  | ------------- | ------ | -------------- | - | ------------- |  | --------------
|Revenues                 |  | $             | 21,986 |                | $ | 20,405        |  | $             
|Gross margin             |  |               | 5,361  |                |   | 4,498         |  |               
|Net income               |  |               | 715    |                |   | 347           |  |               
|Basic income per share   |  |               | .11    |                |   | .05           |  |               
|Diluted income per share |  |               | .10    |                |   | .05           |  |               

|
|

|Year 2006                |  | First Quarter |        | Second Quarter |   | Third Quarter |  | Fourth Quarter
|------------------------ |  | ------------- | ------ | -------------- | - | ------------- |  | --------------
|Revenues                 |  | $             | 21,199 |                | $ | 22,155        |  | $             
|Gross margin             |  |               | 4,740  |                |   | 5,262         |  |               
|Net income               |  |               | 348    |                |   | 578           |  |               
|Basic income per share   |  |               | .05    |                |   | .09           |  |               
|Diluted income per share |  |               | .05    |                |   | .08           |  |               

36

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Item 9A(T).    Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

The Company's controls and procedures include those designed to ensure that material information is accumulated and communicated to the Company's management as
appropriate to allow timely decisions regarding required disclosure. Under the supervision and with the participation of management, the Company's chief executive officer and chief financial officer
evaluated the effectiveness of the Company's disclosure controls and procedures designed to ensure that information is recorded, processed, summarized and reported in a timely manner as required by
Exchange Act reports such as this Form 10-K. Based on this evaluation, the chief executive officer and chief financial officer concluded that they are effective as of
December 31, 2007.

Management's Report on Internal Control Over Financial Reporting

Under Section 404 of the Sarbanes Oxley Act of 2002, management is responsible for establishing and maintaining adequate internal control over financial
reporting as of the end of each fiscal year and report, based on that assessment, whether the Company's internal control over financial reporting is effective.

Management
is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is designed to provide reasonable
assurance as to the reliability of the Company's financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles.

Management
has conducted an evaluation of the effectiveness of the Company's internal control over financial reporting based on the framework in "Internal ControlIntegrated
Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the evaluation under this framework, management concluded that the Company's internal control over
financial reporting was effective as of December 31, 2007.

There
has not been any change in the Company's internal controls over financial reporting during the quarter ended December 31, 2007 that has materially affected or is reasonably
likely to materially affect, the Company's internal control over financial reporting.

This
annual report does not include an attestation report of the company's registered public accounting firm regarding internal control over financial reporting. Management's report was
not subject to attestation by the company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management's
report in this annual report.

PART III

Item 10.    Directors, Executive Officers and Corporate Governance.

The Company's definitive proxy statement which will be filed with the SEC pursuant to Registration 14A within 120 days of the end of the Company's fiscal
year is incorporated herein by reference.

Item 11.    Executive Compensation.

The Company's definitive proxy statement which will be filed with the SEC pursuant to Registration 14A within 120 days of the end of the Company's fiscal
year is incorporated herein by reference.

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Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The Company's definitive proxy statement which will be filed with the SEC pursuant to Registration 14A within 120 days of the end of the Company's fiscal
year is incorporated herein by reference. Also incorporated by reference is the information in the table under the heading "Equity Compensation Plan Information" included in Item 5 of the
Form 10-K.

Item 13.    Certain Relationships and Related Transactions, and Director Independence.

The Company's definitive proxy statement which will be filed with the SEC pursuant to Registration 14A within 120 days of the end of the Company's fiscal
year is incorporated herein by reference.

Item 14.    Principal Accountant Fees and Services.

The Company's definitive proxy statement which will be filed with the SEC pursuant to Registration 14A within 120 days of the end of the Company's fiscal
year is incorporated herein by reference.

PART IV

Item 15.    Exhibits and Financial Statement Schedules.

Exhibit No.

Subject3.1

Amended and Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company's Form 8-K files May 3, 2006.)3.2

Amended and restated Bylaws of the Company (attached herein)10.0*

The Amended 1991 Incentive and Nonstatutory Stock Option Plan dated August 1, 1998. (Incorporated by reference to Exhibit 10.19 to the Company's Form 10-K for the fiscal year ended June 30, 1998.)10.1*

Year 2000 Stock Incentive Plan. (Incorporated by reference to Exhibit A to the Company's Proxy Statement dated September 21, 2000.)


38

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10.2*

Amendment No. 1 to the Year 2000 Stock Incentive Plan. (Incorporated by reference to Exhibit B to the Company's Proxy Statement dated September 30, 2002.)10.3*

Amendment No. 2 to the Year 2000 Stock Incentive Plan. (Incorporated by reference to Exhibit B to the Company's Proxy Statement dated March 29, 2004.)10.4*

Employment Agreement between Allied Motion Technologies Inc. and Richard D. Smith, effective August 1, 2003. (Incorporated by reference to Exhibit 10.11 to the Company's Form 10-K for the year ended December 31,
2003.)10.5*

Change of Control Agreement between Allied Motion Technologies Inc. and Richard D. Smith, effective July 24, 2003. (Incorporated by reference to Exhibit 10.12 to the Company's Form 10-K for the year ended December 31,
2003.)10.6*

Employment Agreement between Allied Motion Technologies Inc. and Richard S. Warzala, effective March 1, 2003. (Incorporated by reference to Exhibit 10.13 to the Company's Form 10-K for the year ended December 31,
2003.)10.7*

Change of Control Agreement between Hathaway Corporation and Richard S. Warzala, effective May 1, 2002. (Incorporated by reference to Exhibit 10.14 to the Company's Form 10-K for the year ended December 31, 2003.)10.8*

Deferred Compensation Plan effective January, 1 2006 (Incorporated by reference to Exhibit 10.18 to the Company's Form 10-K for the year ended December 31, 2006.)10.9*

First Amendment to the Allied Motion Technologies Inc. Deferred Compensation Plan adopted August 2, 2006 (Incorporated by reference to Exhibit 10.16 to the Company's Form 10-K for the year ended December 31, 2006.)10.10

Credit Agreement dated as of May 7, 2007 among Allied Motion Technologies Inc., as US Borrower, Precision Motor Technology B.V., as EUR Borrower, JPMorgan Chase Bank, N.A., as Administrative Agent, J.P. Morgan Europe Limited, as EUR
Agent, and the Lenders party hereto (incorporated by reference to Exhibit 10 to the Company's Form 8-K/A dated August 8, 2007.)


39

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10.11

2007 Stock Incentive Plan (incorporated by reference to Exhibit A to the Company's Proxy Statement dated March 20, 2007)14.1

Code of Ethics for chief executive officer, president and senior financial officers adopted October 23, 2003. (Incorporated by reference to Exhibit 14.1 to the Company's Form 10-K for the year ended December 31, 2003.)21

List of Subsidiaries (attached herein)23

Consent of Ehrhardt Keefe Steiner & Hottman PC (filed herewith)31

Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a - 14(a) or 15d - 14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32

Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.




40

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

| |  | ALLIED MOTION TECHNOLOGIES INC.
| |  | -------------------------------
| |  | By:                            
| |  | Date: March 14, 2008           

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the
dates indicated.

|Signatures                                      |  | Title                                                         |  | Date          
|----------------------------------------------- |  | ------------------------------------------------------------- |  | --------------
|                                                |  |                                                               |  |               
|/s/RICHARD D. SMITHRichard D. Smith             |  | Chief Executive Officer, Chief Financial Officer and Director |  | March 14, 2008
|/s/RICHARD S. WARZALARichard S. Warzala         |  | President, Chief Operating Officer and Director               |  | March 14, 2008
|/s/DELWIN D. HOCKDelwin D. Hock                 |  | Chairman of the Board of Directors                            |  | March 14, 2008
|/s/S.R. ROLLIE HEATH, JR.S.R. Rollie Heath, Jr. |  | Director                                                      |  | March 14, 2008
|/s/GEORGE J. PILMANISGeorge J. Pilmanis         |  | Director                                                      |  | March 14, 2008
|/s/GRAYDON D. HUBBARDGraydon D. Hubbard         |  | Director                                                      |  | March 14, 2008
|/s/MICHEL M. ROBERTMichel M. Robert             |  | Director                                                      |  | March 14, 2008

41

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ALLIED MOTION TECHNOLOGIES INC.        SCHEDULE IIVALUATION AND QUALIFYING ACCOUNTS        (In thousands)

|                              |                                             | Balance at Beginning of Period |   | Charged to Costs and Expenses |  | Deductions from Reserves |     | Other |   | Balance at End of Period
|----------------------------- | ------------------------------------------- | ------------------------------ | - | ----------------------------- |  | ------------------------ | --- | ----- | - | ------------------------
|Year Ended December 31, 2007: |                                             |                                |   |                               |  |                          |     |       |   |                         
|                              | Reserve for bad debts                       |                                | $ | 293                           |  | $                        | 53  |       | $ | (95                     
|                              | Valuation allowance for deferred tax assets |                                | $ | 218                           |  | $                        |    |       | $ | (4                      
|Year Ended December 31, 2006: |                                             |                                |   |                               |  |                          |     |       |   |                         
|                              | Reserve for bad debts                       |                                | $ | 281                           |  | $                        | 250 |       | $ | (243                    
|                              | Valuation allowance for deferred tax assets |                                | $ | 315                           |  | $                        |    |       | $ | (97                     

42

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