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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

Commission file number: 0-04041

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

Securities registered pursuant to Section 12(g) of the Act: Common Stock, no par value

        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 an accelerated filer (as defined in Rule 12b-2 of the 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 $21,300,000.00.

        Number of shares of the only class of Common Stock outstanding: 6,092,007 as of March 15, 2005

Table of Contents

        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 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, 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.

        Because of the risks and uncertainties, investors should not place undue reliance on 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.

PART I

Item 1. Business.

        Allied Motion Technologies Inc. (Allied Motion or the Company) was organized under the laws of Colorado in 1962. The Company is engaged in the business of designing, manufacturing and selling motor and servo motion products primarily to the Commercial Motor, Industrial Motion Control and Aerospace and Defense markets. Prior to July 29, 2002, the Company was also engaged in designing, manufacturing and selling advanced systems and instrumentation to the worldwide power and process industries. As discussed more fully in Note 14 of the Notes to Consolidated Financial Statements, on July 29, 2002, the Company sold substantially all of its Power and Process Business, and in March 2003

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finalized the sale of the Calibrator Business. This completed the sale of all of the Company's Power and Process Business, therefore transforming the Company and focusing all of its resources in the motor and motion products markets (Motion Strategy). Prior to the sale of its Power and Process Business, the Company also had joint venture investments in China. Prior to October 2002, the Company was known as Hathaway Corporation. In connection with the sale of its Power and Process Business, the Hathaway name became the property of the buyers. At the October 2002 Annual Meeting of Stockholders, a proposal was approved to amend the Articles of Incorporation to change the Company's name to Allied Motion Technologies Inc. The Company now operates primarily in the United States and Europe.

        Allied Motion utilizes its underlying core "Electromagnetic Motion Know How" to provide compact, high performance products as solutions to a variety of motion applications. The served markets include medical, truck, bus and off road equipment, industrial automotion, pumps, semi-conductor equipment, packaging, medical, actuation, military, commercial aviation and industrial automation, and fiber-optic based telecommunications. End products using Allied Motion technology include HVAC systems for trucks, buses and off-road vehicles, medical equipment, processing equipment for the semiconductor industry, missile and munitions control systems for the military, anti-lock brake and fuel cell applications for the specialty automotive market, satellite tracking systems, MRI scanners, high definition printers and tunable lasers, wavelength meters and spectrum analyzers for the fiber optic industry as well as various applications in the medical market.

        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).

        Emoteq designs, manufactures and markets direct current brushless motors, related components, and drive and control electronics as well as a family of static frequency converters for military and aerospace applications and has extensive experience in power electronics design and software development required for the application of specialized drive electronics technology. Markets served include semiconductor manufacturing, industrial automation, medical equipment, and military and aerospace. Emoteq also manufactures precision direct current fractional horsepower motors and certain motor components and spare parts and replacement equipment for general-purpose instrumentation products. Industrial equipment and military products are the major application for the motors.

        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 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 sub-fractional horsepower permanent magnet DC and brushless DC motors serving a wide range of original equipment applications. The motors are used in HVAC and actuation systems in a variety of markets including trucks, buses, RV's, off-road vehicles, health, fitness, medical and industrial equipment.

        Stature Electric manufactures fractional and integral horsepower motors, gear motors, and motor part sets. Stature's component products are sold throughout North America and in Europe, primarily to original equipment manufacturers (OEM's) that use them in their end products. Stature Electric provides engineering, designing, packaging and applying integrated gearing and motor solutions for the

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commercial and industrial equipment, healthcare, recreation and non-automotive transportation markets.

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

Fiscal Year End Change

        The Company changed its fiscal year end from June 30 to December 31 effective December 31, 2002; therefore, the Company reported a six-month transition period ending December 31, 2002. The following table describes the periods presented in this Form 10-K.

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.

Financial Information about Operating Segments

        The information required by this item is set forth in Note 13 of the Notes to Consolidated Financial Statements contained herein.

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.

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Patents, Trademarks, Licenses, Franchises and Concessions

        The Company holds several patents and trademarks regarding components used by the various subsidiaries; however, none of these patents and trademarks are considered to be of major significance.

Seasonality of the Business

        The Company's business is not of a seasonal nature; however, revenues may be influenced by customers' fiscal year ends and holiday seasons.

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 2004 and 2003, the Transition Period and Fiscal Year 2002, no single customer accounted for more than 10% of total revenues.

Sales Backlog

        The Company's backlog at December 31, 2004 consisted of sales orders totaling approximately $21,500,000 while backlog at December 31, 2003 was $13,383,000. In our commercial motors markets, the Company continues to experience an increased number of 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 order and sale. At our largest division, over 50% of our shipments result from a pull- system. Accordingly, this will reduce the amount of backlog since the customers are no longer giving the Company long-term orders that it delivers against over time. Therefore, the amount of backlog is not necessarily an accurate indication of the future sales of the Company.

        There can be no assurance that the Company's backlog will be converted into revenue.

Government Sales

        Approximately $918,000 of the Company's backlog as of December 31, 2004 consisted of contracts with the United States Government compared to $86,000 in 2003. The Company's contracts with the government contain a provision generally found in government contracts that permits the government to terminate the contract at its option. When the termination is attributable to no fault of the Company, the government would, in general, have to pay the Company certain allowable costs up to the time of termination, but there is no compensation for loss of profits.

Engineering and Development Activities

        The Company's expenditures on engineering and development for Year 2004 were $2,880,000. For the Year 2003, Transition Period, and Fiscal Year 2002 engineering and development from continuing operations were $1,853,000, $754,000, and $846,000, 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

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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.

        See Note 10 of the Notes to Consolidated Financial Statements contained herein for additional information required by this item.

Foreign Operations

        The information required by this item is set forth in Note 13 of the Notes to Consolidated Financial Statements contained herein.

Employees

        At December 31, 2004 the Company had approximately 495 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 Business Conduct that is applicable to all directors, officers and employees. The Codes are available on the Company's website. Waivers under the Codes, if any, will be disclosed under the rules of the SEC and the Nasdaq Small Cap Market. A copy of the Codes are 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, 2004, the Company occupies facilities as follows:

        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.

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.

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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 Small Cap 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 15, 2005 was 650. The Company did not pay or declare any dividends during years 2004, 2003, or during the Transition Period and Fiscal Year 2002 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 Small Cap Market System, as reported by Nasdaq.

Equity Compensation Plan Information

        The following table shows the equity compensation plan information of the Company at December 31, 2004.

Stock Repurchase Program Information

        Under an employee stock repurchase program first approved by the Board of Directors in fiscal year 1994, the Company may repurchase its common stock from its employees at the current market value. The Company's Agreement with its lenders limits employee stock repurchases to $125,000 per fiscal year.

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        The following table shows the purchases of stock under this program during the fourth quarter of 2004.

Item 6. Selected Financial Data.

        The following tables summarize data from the Company's financial statements for the fiscal years 2000 through 2004 and the Transition and Comparative Periods and notes thereto; the Company's complete annual financial statements and notes thereto for the current fiscal year appear in Item 8 herein. See Management's Discussion and Analysis of Financial Condition and Results of Operation for discussion of non-recurring items that affect the comparability of results between periods.

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

Overview

Business

        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. The Company's products are used in demanding applications in medical equipment, HVAC systems for trucks, busses and off-road vehicles, the specialty automotive market, industrial automation, pumps, health-fitness, defense, aerospace, semiconductor manufacturing, fiber optic-based telecommunications, printing, and graphic imaging market sectors, to name a few.

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

        During 2002, management significantly changed the structure and strategy of the Company. The Company had historically operated in two business segments under the name Hathaway Corporation: Motion Control and Power and Process. During 2002, the Company sold substantially all of its power and process business segment and transformed the Company to a focused motion company under the name Allied Motion Technologies Inc.

        The Company has made considerable progress in implementing its new corporate strategy, the driving force of which is "Applied Motion Technology/Know How", and in the transformation of Allied Motion into a growth oriented motion company. 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.

        The acquisitions of Stature Electric and Premotec in 2004 have significantly aided the Company's expansion into the motion industry, not only with the addition of complementary products, but also by establishing a presence in the European market.

        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. In 2004, the Company began production of motor sub-assemblies at a sub-contract manufacturing facility in China that will improve margins for some of our existing business and will open up opportunities for new business.

        The Company has begun an aggressive motor development plan that is expected to result in the release of several new products in 2005 that should start generating sales late in 2005 and into 2006. All product development efforts are focused in adding value for our customers in our served market segments.

        Management believes the continued execution of the Company's long-term strategy will result in the constant improvement in operations and the continued strengthening of the foundation necessary to achieve long-term goals for growth in sales and profitability.

Fiscal Year End Change

        The Company changed its fiscal year end from June 30 to December 31 effective December 31, 2002; and, therefore, the Company reported a six-month Transition Period ended December 31, 2002.

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The following table describes the periods presented in the Management's Discussion and Analysis of Financial Condition and Results of Operations and in the condensed consolidated financial statements and related notes thereto:

Operating Results

Year 2004 compared to 2003

        NET INCOME—The Company achieved net income of $2,250,000 or $.36 per diluted share for 2004 compared to $948,000 or $.19 per diluted share for 2003. Included in the results for last year was a tax credit of $298,000 related to the realization of a prior year state income tax refund. Included in net income for the year 2004 are results related to Stature Electric and Premotec from the dates of acquisition on May 10, 2004 and August 23, 2004, respectively.

        During 2003, the Company sold its Calibrator Business. In accordance with SFAS No. 144, the business is presented as a discontinued operation; however results of operations for the discontinued business were zero and no gain or loss from the sale was recorded due to the previous writedown of the carrying value of the business to its estimated fair value.

        REVENUES—Revenues were $62,738,000 in 2004 compared to $39,434,000 in 2003 or a 59% increase. Of this 59% increase in revenues from existing businesses, 17% came from the Company's existing businesses and the remaining 42% came from incremental revenues provided by Stature and Premotec, the companies acquired during 2004.

        GROSS MARGINS—Gross margin as a percentage of revenues was 26% for 2004 and 2003. This reflects improved margins of 2% from existing businesses offset by lower weighted average margins of the two acquisitions.

        SELLING EXPENSES—Selling expenses were $2,557,000 and $2,022,000 in 2004 and 2003, respectively. This increase was primarily due to the acquisitions of Stature and Premotec.

        GENERAL AND ADMINISTRATIVE EXPENSES—General and administrative expenses were $6,226,000 in 2004 compared to $4,596,000 in 2003. The increased administration costs related to the acquisitions of Stature and Premotec made up approximately $1,000,000 of this increase. The remainder of the increase of $630,000 relates to additional incentive bonuses earned and to the increase in the contribution to the Employee Stock Ownership Plan.

        ENGINEERING AND DEVELOPMENT EXPENSES—Engineering and development expenses were $2,896,000 and $1,853,000 for 2004 and 2003, respectively. Of the $1,043,000 increase in engineering and development expenses, $667,000 was due to the acquisitions of Stature and Premotec and the remaining $376,000 was due to additional expenditures associated with new product development.

        AMORTIZATION AND OTHER—Amortization and other expense was $647,000 in 2004 and $315,000 in 2003. This increase was due to the amortization costs related to the amortizable intangible assets acquired in the Stature and Premotec acquisitions.

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        RESTRUCTURING CHARGE—Restructuring charges were $10,000 and $211,000 in 2004 and 2003, respectively. The charges relate primarily to severance costs arising from workforce reductions from consolidation of the Company's manufacturing facilities.

        INTEREST EXPENSE—Interest expense for 2004 was $687,000 and for 2003 was $226,000. The increase in interest was directly attributed to the increased outstanding balance on the borrowings related to the financing of the acquisitions of Stature and Premotec.

        INCOME TAXES—The provision for income taxes for year 2004 was $1,159,000 compared to $19,000 for 2003. The effective income tax rate as a percentage of income before income taxes from continuing operations was 34% in 2004 and 2% in year 2003. The difference in the effective tax rate between periods was primarily due to a $442,000 tax benefit realized in 2003 related to the realization of a prior year state income tax refund and resolution of certain income tax related issues.

Year 2003 compared to Twelve Month Comparative Period

        Effective July 29, 2002, the Company sold substantially all of its Power and Process Business and effective March 6, 2003, the Company sold its Calibrator Business, completing the sale of the Power and Process Business. Together, these two businesses comprised the Company's Power and Process segment as historically reported. See Note 12 to the accompanying consolidated financial statements for more information regarding these events. In accordance with SFAS No. 144, these businesses have been presented as discontinued operations in the accompanying consolidated financial statements. As such, the operating results from continuing operations of the Company now only include results from the Company's Motion Business. All activities related to the Power and Process segment are excluded from continuing operating results and are included in the results from discontinued operations.

        NET INCOME—The Company achieved net income of $948,000 or $.19 per diluted share for the year 2003 compared to $225,000 or $.05 per diluted share for the Twelve Month Comparative Period. The improvement is due to the sale of the Power and Process Business, the addition of Motor Products, improved gross margins through the successful implementation of lean manufacturing initiatives, including modifying manufacturing processes to reduce costs, and a $442,000 tax benefit related to the realization of a prior year state income tax refund and resolution of certain income tax related issues.

        INCOME FROM CONTINUING OPERATIONS—The Company achieved income from continuing operations of $948,000 or $.19 per diluted share for the year 2003 compared to a net loss of $59,000 or $.01 per diluted share for the Twelve Month Comparative Period. The improvement is due to the addition of Motor Products, the successful implementation of lean manufacturing initiatives, including modifying manufacturing processes to reduce costs, and a $442,000 tax benefit related to the realization of a prior year state income tax refund and resolution of certain income tax related issues.

        REVENUES—Revenues were $39,434,000 in year 2003 compared to $25,046,000 for the Twelve Month Comparative Period. Included in revenues for all of year 2003 and five months of the Twelve Month Comparative Period are revenues related to Motor Products, which was acquired on July 30, 2002. Exclusive of revenues from Motor Products, revenues increased 7% in year 2003 over the Twelve Month Comparative Period due to our success in expanding into new industry sectors including military and automotive applications.

        GROSS MARGINS—Gross margin as a percentage of revenues decreased to 26% for year 2003 from 27% for the Twelve Month Comparative Period. The primary reason for this decline is due to the impact of the Motor Products acquisition. Motor Products has not historically achieved as high a gross margin percentage from the industry sectors to which it sells as is achieved from other industry sectors to which the Company sells its products. Gross margin of 26% in 2003 compares to 22% for the twelve months ended December 31, 2002 on a pro forma basis, including Motor Products for the full period.

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This improvement from the pro forma basis is primarily due to cost reductions and improved efficiency resulting from the implementation of lean manufacturing initiatives, savings in material costs from purchasing material from off-shore sources and from the restructuring of the operations.

        SELLING EXPENSES—Selling expenses were $2,022,000 and $1,183,000 in year 2003 and the Twelve Month Comparative Period, respectively. This increase is primarily due to the impact of Motor Products, increased selling expenses and commissions related to the increase in revenues, and increased expenses related to the development of a focused marketing strategy including website development.

        GENERAL AND ADMINISTRATIVE EXPENSES—General and administrative expenses were $4,596,000 in year 2003 compared to $4,311,000 in the Twelve Month Comparative Period. This increase was due to the impact of acquiring Motor Products, increased salary cost associated with the Company's new president and chief operating officer and additional incentive bonus charges.

        ENGINEERING AND DEVELOPMENT EXPENSES—Engineering and development expenses were $1,853,000 and $1,178,000 for year 2003 and the Twelve Month Comparative Periods, respectively. This increase was primarily due to the impact of acquiring Motor Products and additional expenditures associated with engineering product development.

        AMORTIZATION AND OTHER—Amortization and other expense was $315,000 in year 2003 and $132,000 in the Twelve Month Comparative Period. This increase is due to the amortization costs related to the amortizable intangible assets acquired in the Motor Products acquisition.

        RESTRUCTURING CHARGE—Restructuring charges were $211,000 and zero for year 2003 and the Twelve Month Comparative Period, respectively. The restructuring expense relates to moving expenses and severance costs arising from workforce reductions from consolidation of the Company's manufacturing facilities.

        INTEREST EXPENSE—Interest expense for year 2003 was $226,000 and for the Twelve Month Comparative Period was $130,000. This increase is due to the additional borrowings related to the financing of the acquisition of Motor Products.

        INCOME TAXES—The provision for income taxes for year 2003 was $19,000 compared to a $17,000 benefit for the Twelve Month Comparative Period. The effective income tax rate as a percentage of income before income taxes from continuing operations was 2% in year 2003 and 47% in the Six Month Comparative Period. The difference in the effective tax rate between periods is primarily due to a $442,000 tax benefit related to the realization of a prior year state income tax refund and resolution of certain income tax related issues.

        DISCONTINUED OPERATIONS—Income from discontinued operations was zero in year 2003 compared to $284,000 in the Twelve Month Comparative Period. Included in the results for the Twelve Month Comparative Period is a pretax gain on the sale of the Power and Process Business of $1,699,000 which closed on July 29, 2002 and a writedown to the carrying value of the Calibrator Business of $259,000. Also included in the Twelve Month Comparative Period is operating income from discontinued operations of $292,000 and a pretax charge for litigation settlement and legal fees of $1,429,000 to settle an environmental contamination lawsuit filed in 2001 pursuant to which the Company was named as a defendant. The lawsuit related to property that was occupied by the Company's Power Business over 37 years ago. While the Company believed the suit against the Company was without merit, it agreed to the settlement to eliminate future costs of defending itself and the risks associated with litigation.

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Transition Period compared to Six Month Comparative Period

        NET INCOME—The Company achieved net income of $328,000 or $.07 per diluted share for the Transition Period compared to a net loss of $163,000 or $.04 per diluted share for the Six Month Comparative Period.

        INCOME FROM CONTINUING OPERATIONS—The Company achieved income from continuing operations of $45,000 or $.01 per diluted share for the Transition Period compared to $60,000 or $.01 per diluted share for the Six Month Comparative Period.

        REVENUES—Revenues were $17,191,000 in the Transition Period compared to $7,868,000 for the Six Month Comparative Period. Included in revenues for the Transition Period are revenues related to Motor Products, which was acquired on July 30, 2002. Exclusive of revenues from Motor Products, revenues increased 3% in the Transition Period over the Six Month Comparative Period due to our success in expanding into new industry sectors including military and automotive applications.

        GROSS MARGINS—Gross margin as a percentage of revenues decreased to 23% for the Transition Period from 30% for the Six Month Comparative Period. The primary reason for this decline is due to the impact of the Motor Products acquisition. Motor Products margin for the Transition Period was negatively impacted due to the costs associated with the integration of Ohio's manufacturing lines into the Michigan plant, including the hiring and training of more than 50 new employees. However, with the implementation of lean manufacturing and off-shore purchasing initiatives, the Company anticipates Motor Products gross margins to improve to align with the Company's legacy business and for margins to increase company wide.

        SELLING EXPENSES—Selling expenses were $726,000 and $444,000 in the Transition Period and Six Month Comparative Period, respectively. This increase is primarily due to the impact of Motor Products.

        GENERAL AND ADMINISTRATIVE EXPENSES—General and administrative expenses were $2,217,000 in the Transition Period compared to $1,403,000 in the Six Month Comparative Period. This increase was primarily due to the additional $290,000 expense from the acquisition of Motor Products and increased salary costs and expenses of $233,000 as a result of hiring additional personnel including the president and chief operating officer of the Company. Additionally the increase was due to $154,000 in business development expenses primarily related to the Company's new strategic development and lean manufacturing initiatives.

        ENGINEERING AND DEVELOPMENT EXPENSES—Engineering and development expenses were $754,000 and $422,000 for the Transition and Six Month Comparative Periods, respectively. This increase was primarily due to the impact of Motor Products.

        AMORTIZATION AND OTHER—Amortization and other expense was $131,000 in the Transition Period and $4,000 in the Six Month Comparative Period. This increase is due to the amortization costs related to the amortizable intangible assets acquired in the Motor Products acquisition.

        INTEREST EXPENSE—Interest expense for the Transition Period was $130,000 and for the Six Month Comparative Period was $10,000. This increase is due to the additional borrowings related to the financing of the acquisition of Motor Products.

        PROVISION FOR INCOME TAXES—The provision for income taxes for the Transition Period was $40,000 and for the Six Month Comparative Period was $26,000. The effective income tax rate as a percentage of income before income taxes from continuing operations was 47% in the Transition Period and 31% in the Six Month Comparative Period. The difference in the effective tax rate between periods is primarily due to the impact of foreign taxes.

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        DISCONTINUED OPERATIONS—Income from discontinued operations was $283,000 in the Transition Period compared to a loss from discontinued operations of $223,000 for the Six Month Comparative Period. Included in the results for the Transition Period is a pre-tax gain on the sale of the Power and Process Business of $1,699,000 which closed on July 29, 2002 and a pretax write down to the carrying value of the Calibrator Business of $259,000. Included in the results for the Six Month Comparative Period is a pretax gain on the sale of Si Fang of $674,000, net of selling costs. Operating loss in the Transition Period increased from the Six Month Comparative Period primarily because the sale of the Power and Process Business closed on July 29, 2002 and only one month's activity is included in the results of the Transition Period compared to six months results included in the Six Month Comparative Period. The month of July has historically been the least profitable month of each fiscal year.

Liquidity and Capital Resources

        The Company's liquidity position as measured by cash and cash equivalents decreased $1,504,000 during 2004 to a balance of $456,000 at December 31, 2004. During 2004, operations provided $3,273,000 in cash. Cash provided by operations included net income of $2,250,000 plus non-cash charges for depreciation and amortization of $2,328,000, provisions for deferred income taxes, doubtful accounts and obsolete inventory totaling $1,084,000 and other non-cash changes of $200,000. Cash was used to increase inventories by $2,076,000 in support of increased sales volume. Cash used in operations also included an increase in trade receivables of $618,000 reflecting increased sales levels and decreases in accounts payable of $203,000 and in accrued liabilities and other of $329,000. Offsetting these uses was a decrease in prepaid and other current assets of $637,000.

        Cash of $17,719,000 was used in investing activities during 2004. The Company used $16,816,000 for the acquisitions of Owosso Corporation and Premotec and $953,000 for purchases of property and equipment, offset by the final $50,000 of proceeds received during the year from the previous sale of the Power and Process Business.

        During 2004 financing activities provided $12,937,000 in cash. Borrowings on term loans for acquisitions was $10,314,000 and on lines-of-credit, net of repayments, was $3,736,000. In addition, $1,000,000 of cash was provided by proceeds from issuing 198,177 shares of unregistered restricted common stock under the terms of a Stock Purchase Agreement. The purchasers of these shares were certain trusts and pension plans, the beneficiaries of which are Michel Robert, a consultant to the Company, and members of his immediate family. The aggregate purchase price for the shares represented the fair value of the stock at the time the Company received the purchase price. Cash was also provided from stock transactions under various employee benefit stock plans of $123,000 and repayment on a loan to the Company's Employee Stock Ownership plan of $45,000. The cash provided was offset by repayments on term loans of $2,132,000 and on capital leases of $149,000.

        At December 31, 2004, the Company had $13,983,000 of debt obligations representing borrowings on lines-of-credit, term loans and an overdraft facility.

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        Under the domestic revolving line-of-credit agreement (Agreement), the Company has available the lesser of (a)$10,500,000 or (b) the sum of 80% of eligible trade accounts receivable (excluding Premotec) and 50% of eligible inventory, as defined in the Agreement. The line-of-credit expires in May 2007, unless extended. Under the Agreement, the Company utilizes lock-box arrangements whereby remittances from customers reduce the outstanding debt, therefore the line-of-credit balance has been classified as a current liability. Borrowings under the line-of-credit bear interest at a rate equal to the banks prime rates plus 1% (6.25% as of December 31, 2004).

        Under the foreign line-of-credit agreement (Foreign Agreement), the Company has available the lesser of (a) EUR 1.25 million, or (b) 80% of eligible trade accounts receivable of Premotec as defined in the Foreign Agreement. The line-of-credit expires in August 2006, unless extended. Borrowings under the line-of-credit bear interest at a rate equal to the bank's base rate plus 1.75%, with a minimum of 4.75% (4.75% at December 31, 2004). Under the Foreign Agreement, remittances from customers reduce the outstanding debt, therefore the balance has been classified as a current liability.

        The EUR 200,000 bank overdraft facility bears an interest rate equal to the bank's base rate plus 2%, with a minimum of 4.75% (4.75% at December 31, 2004). The facility has no expiration date.

        The Company also had various term loans obtained in connection with its acquisitions. All borrowings are collateralized by substantially all assets of the Company. The loan agreements prohibit the Company from paying dividends and require that the Company maintain compliance with certain covenants related to tangible net worth and profitability. As of December 31, 2004, the Company was in compliance with such covenants. As of December 31, 2004, the amount available under the lines-of-credit was $3,972,000.

        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 line-of-credit facilities. The Company believes the capital currently available to it is sufficient for its currently anticipated needs for the next twelve months. If additional capital is needed in the future, the Company would pursue additional capital via debt or equity financings. A key component of the Company's liquidity relates to the availability of amounts under its lines-of-credit. Any lack of availability of these facilities could have a material adverse impact on the Company's liquidity position.

Price Levels and the Impact of Inflation

        Prices of the Company's products have not increased significantly as a result of inflation during the past several years, primarily due to competition. 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.

Critical Accounting Policies

        The Company has prepared its financial statements in conformity with accounting principles generally accepted in the United States, and these statements necessarily include some amounts that are based on informed judgments and estimates of management. The Company's significant accounting policies are discussed in Note 1 to the consolidated financial statements. The policies are reviewed on a regular basis. The Company's critical accounting policies are subject to judgments and uncertainties which affect the application of such policies. The Company uses historical experience and all available information to make these judgments and estimates. As discussed below the Company's financial position or results of operations may be materially different when reported under different conditions

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or when using different assumptions in the application of such policies. In the event estimates or assumptions prove to be different from actual amounts, adjustments are made in subsequent periods to reflect more current information. The Company's critical accounting policies include:

        The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The allowance is based on historical experience and judgments based on current economic and customer specific factors. Significant judgments are made by management in connection with establishing the Company's customers' ability to pay at the time of shipment. Despite this assessment, from time to time, the Company's customers are unable to meet their payment obligations. The Company continues to monitor customers' credit worthiness, and use judgment in establishing the estimated amounts of customer receivables which may not be collected. A significant change in the liquidity or financial position of the Company's customers could have a material adverse impact on the collectibility of accounts receivable and future operating results.

        Inventory is valued at the lower of cost or market. The Company monitors and forecasts expected inventory needs based on sales forecasts. Inventory is written down or written off when it becomes obsolete or when it is deemed excess. These determinations involve the exercise of significant judgment by management. If actual market conditions are significantly different from those projected by management the recorded reserve may be adjusted, and such adjustments may have a significant impact on the Company's results of operations. Demand for the Company's products can fluctuate significantly, and in the past the Company has recorded substantial charges for inventory obsolescence.

        The Company records deferred tax assets and liabilities for the estimated future tax effects of temporary differences between the tax basis of assets and liabilities and amounts recorded in the consolidated financial statements, and for operating loss and tax credit carryforwards. Realization of the recorded deferred tax assets is dependent upon the Company generating sufficient taxable income in the appropriate tax jurisdiction in future years to obtain benefit from the reversal of net deductible temporary differences and from tax credit and operating loss carryforwards. A valuation allowance is provided to the extent that management deems it more likely than not that the net deferred tax assets will not be realized. The amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income are changed.

        The Company reviews the carrying values of its long-lived assets, including goodwill and identifiable intangibles, whenever events or changes in circumstances indicate that such carrying values may not be fully recoverable. Under previous standards, the assets had to be carried at historical cost if the projected cash flows from their use would recover their carrying amounts on an undiscounted basis and without considering interest. However, if projected cash flows were less than their carrying value, the long-lived assets had to be reduced to their estimated fair value. Considerable judgment was and is required to project such cash flows and, if required, estimate the fair value of the impaired long-lived asset. Effective July 1, 2002, the Company adopted SFAS No. 142. SFAS No. 142 provides a more restrictive fair value test to evaluate goodwill and long-lived asset impairment. Depending upon future assessments of fair value, there could be impairment recorded related to goodwill and other long-lived assets.

Recent Accounting Pronouncements

        In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123 (revised 2004), "Share-Based Payment". SFAS 123R is a revision of FASB Statement No. 123 "Accounting for Stock-Based Compensation" and supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees", and amends SFAS No. 95, "Statement of Cash Flows". SFAS No. 123R requires all share-based payments to employees, including grants of employee stock options to be recognized in the income statement based on their fair values. The amount of compensation cost will be measured based on the grant-date fair value of the equity or liability instruments issued. Compensation cost will

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be recognized over the period that an employee provides service in exchange for the award. Pro forma disclosure is no longer an alternative. The provisions of this statement will become effective in our third quarter commencing on July 1, 2005.

        SFAS 123R permits public companies to adopt its requirements using one of two methods:

1.

A "modified prospective" method in which compensation cost is recognized beginning with the effective date (a) based on the requirements of SFAS 123R for all share-based payments granted after the effective date and (b) based on the requirements of SFAS 123 for all awards granted to employees prior to the effective date of SFAS 123R that remain unvested on the effective date.



2.

A "modified retrospective" method which includes the requirements of the modified prospective method described above, but also permits entities to restate based on the amounts previously recognized under SFAS 123 for purposes of pro forma disclosures either (a) all prior periods presented or (b) prior interim periods of the year of adoption.

        We have not determined the method we will use when we adopt SFAS 123R.

        As permitted by SFAS 123, we currently account for share-based payments to employees using Opinion 25's intrinsic value method and, as such, generally recognize no compensation cost for employee stock options. Accordingly, the adoption of SFAS 123R's fair value method may have a significant impact on our results of operations, although it will have no impact on our overall financial position or cash flows. The impact of the adoption of SFAS 123R cannot be predicted with certainty at this time because it will depend on levels of share-based payments granted in the future. SFAS 123R also requires the benefits of tax deductions in excess of recognized compensation cost be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. This requirement will reduce net operating cash flows and increase net financing cash flows in periods after adoption and we have not assessed the impact of this provision in the context of our net operating loss carryforwards.

Contractual Commitments

        For more information on the Company's contractual obligations on operating leases and contractual commitments, see Notes 6 and 10 to the consolidated financial statements. At December 31, 2004, the Company's commitments under these obligations were as follows (in thousands):

(1)

The capital lease commitments include amounts representing interest.

(2)

The domestic and foreign lines-of-credit mature in May 2007 and August 2006, respectively but can be extended.

(3)

Maturities for the term loans are discussed more thoroughly in Note 6.

(4)

The interest rates used are the rates in effect at December 31, 2004.

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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 in the areas of changes in interest rates and changes in foreign currency exchange rates as measured against the United States dollar. These exposures are directly related to its normal operating and funding activities.

Interest Rate Risk

        The interest payable on the Company's domestic and foreign lines-of-credit and its foreign term loan are variable based on the prime rate and Euribor, and are effected by changes in market interest rates. The Company does not believe that reasonably possible near-term changes in interest rates will result in a material effect on future earnings, fair values or cash flows of the Company. A change in the interest rate of 1% on the Company's variable rate debt would have the impact of changing interest expense by approximately $92,000 annually.

Foreign Currency Risk

        On August 23, 2004, the Company completed the acquisition of Premotec, located in The Netherlands. Sales from this operation 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. The Company does not believe that reasonably possible near-term changes in exchange rates will result in a material effect on future earnings, fair values or cash flows of the Company.

Item 8. Financial Statements and Supplementary Data.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of Allied Motion Technologies Inc.:

        We have audited the accompanying consolidated balance sheets of Allied Motion Technologies Inc. and subsidiaries as of December 31, 2004 and 2003, and the related consolidated statements of operations, stockholders' investment and comprehensive income, and cash flows for the years ended December 31, 2004 and 2003, the six-month period ended December 31, 2002, and for the year ended June 30, 2002. In connection with our audits of the consolidated financial statements, we have also audited the consolidated financial statement Schedule II—Valuation and Qualifying Accounts for the years ended December 31, 2004 and 2003, the six-month period ended December 31, 2002, and for the year ended June 30, 2002. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. 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 auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        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, 2004 and 2003, and the results of their operations and their cash flows for the years ended December 31, 2004 and 2003, the six-month period ended December 31, 2002 and for the year ended June 30, 2002, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

        As discussed in Note 1 to the consolidated financial statements, Allied Motion Technologies Inc. and subsidiaries adopted the provisions of Statements of Financial Accounting Standards No. 141, "Business Combinations" and No. 142, "Goodwill and Other Intangible Assets", effective July 1, 2002.

KPMG LLP

Denver, Colorado
March 21, 2005

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ALLIED MOTION TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)

See accompanying notes to consolidated financial statements.

20

ALLIED MOTION TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

See accompanying notes to consolidated financial statements.

21

ALLIED MOTION TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT AND COMPREHENSIVE INCOME
(In thousands)

See accompanying notes to consolidated financial statements.

22

ALLIED MOTION TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)