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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)

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 Global 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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o    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):

         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 $12,468,000 .$27,372,000.

         Number of shares of the only class of Common Stock outstanding: 7,739,7828,417,636 as of March 17, 201018, 2011

DOCUMENTS INCORPORATED BY REFERENCE

         Notice andPortions of the Registrant's Proxy Statement for 2010the 2011 Annual Meeting of Shareholders are incorporated into Part III.

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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 those associated with the present economic circumstances in the United States and throughout Europe, 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 successfully integrate an acquired business into the Company's business model without substantial costs, delays, or problems, the ability of the Company to establish low cost region manufacturing and component sourcing capabilities, and the ability of the Company to control costs, including relocation 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.

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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, Europe and Europe.Asia. Allied Motion utilizes its underlying core "electro-magnetic, mechanical and electronic motion technology/know how" to provide compact, high performance products as solutions toin a varietywide range of motion applications. The Company is engaged in the business of designing, manufacturingdesigns, manufactures and selling motor, servosells motors, electronic motion controls, gearing and optical encoder products to a broad spectrum of customers throughout the world. The Company'sCompany sells its products through its own direct sales force and manufacturers reps and distributors. The products are manufactured at ourits own facilities as well asand at contract manufacturing facilities in China and Eastern Europe.Europe, where the company owns all the capital equipment and tooling and has designed and set-up the manufacturing processes in each facility.

        Examples of the end products using Allied Motion's technology in the medical and health care industries include wheel chairs, scooters, stair lifts, patient lifts, patient handling tables and beds,surgical robots, prosthetics, 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.pumps, wheel chairs, scooters, stair lifts, patient lifts, patient handling tables and beds. 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 and cell phones. 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 or power-assist 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 automated material handling vehicles/robots, commercial grade floor cleaners, polishers and material handling devices for factories and commercial buildings. Ourbuilding equipment such as welders, cable pullers, assembly tool, etc. Several products are also used in a variety of military/defense applications including inertial guided missiles, mid range munitions systems, weapons systems on armed personnel carriers, unmanned vehicles 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 ticket and cash dispensing machines (ATM's).

        Allied Motion is organized into four subsidiaries:six Technology Units ("TUs"): Emoteq Corporation (Emoteq—Tulsa, OK), Motor Products Corporation (Motor Products—Owosso, MI), Stature Electric, Inc. (Stature—Watertown, NY), Allied Motion Controls (Amherst, NY and Waterloo, Ontario, Canada , acquired on June 3, 2010, and formerly known as Agile Systems Inc.), Precision Motor Technology B.V. (Premotec—Dordrecht, The Netherlands). To provide additional production support of its subsidiaries,, and Östergrens Elmotor AB (Östergrens), which was acquired on December 30, 2010. Allied Motion also has contract 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. As part of the Company's reorganization efforts in 2009, Computer Optical Products, Inc. ("COPI") was relocated from Chatsworth, CA to Tulsa, OK and Emoteq now also manufactures COPI high resolution encoders, precision high resolution servo motors and integrated motor/encoder assemblies. Emoteq's primary

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encoder markets are in aerospace and defense as well as telecommunications, semiconductor and scanning equipment manufacturing. Applications include missile seeker heads, flight surface controls, tunable lasers, spectrum analyzers, wavemeters, programmable attenuators and 3D scanners.

        Motor Products has been a motor producer for more than eighty years and is a designer and 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

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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 designs and manufactures fractional and integral horsepower geared motion solutions utilizing permanent magnet DC and brushless DC motor technology. 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.

        Allied Motion Controls designs and develops advanced motion control technology including integrated power electronics, digital controls and network communications for motor control and power conversion. Allied Motion Controls has established customers in a wide range of industries.

Premotec has been manufacturing small precision electric motors for more than thirty years utilizing fourmainly two different motor technologies: brushless DC and coreless DC, iron core DC, and permanent magnet stepper and synchronous motors.DC. 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 Asia 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.

        Östergrens has expertise in designing drive electronics, software and mechanical processes. The products are manufactured at Östergrens' facilities in Sweden and China. Östergrens' current products integrate electronics expertise with other motion control products such as motors and gears. Östergrens'products are sold to OEM customers throughout Europe and are used in a wide variety of industrial, commercial and medical applications, including emerging "Green Technology" alternative energy and electric vehicle applications, leading-edge medical instrumentation and test equipment applications and other industrial and commercial applications in which Östergrens' products improve the efficiency/performance of the OEM's products.

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.

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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 20092010 and 2008,2009, no single customer accounted for more than 10% of total revenues.

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Sales Backlog

        The Company's backlog at December 31, 20092010, which includes acquired backlog from Östergrens of $4,785,000, consisted of sales orders totaling approximately $20,977,000$37,856,000 while backlog at December 31, 20082009 was $23,570,000.$20,977,000. 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.

Engineering and Development Activities

        The Company's expenditures on engineering and development for the years ended December 31, 2010 and 2009 were $4,044,000 and 2008 were $3,922,000, and $4,009,000, 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. The Company's costs of complying with environmental, health and safety requirements have not been material.

        The Company does not believe that existing or pending climate change legislation, regulation, or international treaties or accords are reasonably likely to have a material effect in the foreseeable future on the Company's business or markets that it serves, nor on the Company's results of operations, capital expenditures or financial position. The Company will continue to monitor emerging developments in this area.

Foreign Operations

        The information required by this item is set forth in Note 9 of the Notes to Consolidated Financial Statements contained herein.

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Employees

        At December 31, 20092010 the Company had approximately 351456 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 Global 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.

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Item 2.    Properties.

        As of December 31, 2009,2010, 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 manufacturing 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 affecteffect 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 Global 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 16, 201015, 2011 was 586.548. The Company did not pay or declare any dividends during years 20092010 and 2008,2009, 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 as reported by Nasdaq.

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Equity Compensation Plan Information

        The following table shows the equity compensation plan information of the Company at December 31, 2009.2010.

Item 6.    Selected Financial Data.

        The following tables summarize data from the Company's financial statements for the fiscal years 20052006 through 2009;2010; the Company's complete annual financial statements and notes thereto for the current fiscal year appear in Item 8 herein.

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

Overview

        Allied Motion's sole focus is in the motion control industry and has developed a long term corporate strategy, with a defined driving force of "electro-magnetic, mechanical and electronic motion technology/know how" to ensure it meets the goals and objectives of the Company. Through its Sales force and its Technology Units, 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 lifts, patient lifts, patient handling tables and beds, 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 and cell phones. 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 and covers), they provide improved fuel efficiency while the vehicles are idling and are used in drive-by-wire applications to electrically replace or power-assist 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

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material handling devices for factories and commercial buildings. Our products are also used in a variety of military/defense applications including inertial 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 ticket and cash dispensing machines (ATM's).

        Today, four companies form the core of Allied Motion. The companies, Emoteq, 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.

        The Company has made considerable progress in implementing its corporate strategy, with the driving force of "electro-magnetic, mechanical and electronic motion technology/know how".world. The Company's commitment to its own lean manufacturing tool kit, known as Allied's Systematic Tools, or AST for short, is drivingdrives continuous improvement in quality, delivery, cost, growth 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.innovation throughout the company.

Outlook

        Despite the challenges Allied Motionthe Company faced in 2009 as a result of the economic downturn, the Company returned to profitability in the thirdsecond half of 2009 and fourth quarter.continued to improve profitability in 2010. Conditions have improved since the second quartercontinued to improve and management continues its efforts to foster additional growth in revenues and profitability. 2010 bookings were over $92 million, which is about $34 million higher than 2009 bookings. Backlog at December 31, 2010 was $37.9 million, reflecting an 80% increase over the backlog at the end of 2009. Approximately $4.8 million of the backlog is due to the acquired backlog from Östergrens. The increased backlog levels reflect the economic recovery experienced during the last 12 months in the Company's served markets and we believe that the increase provides a good indication that these markets are recognizing the value of the Company's motion solutions.

        As announced in the fourth quarter of 2009, the Company relocated its COPI encoder production capabilitiesbusiness from Chatsworth, California to the EMOTEQ facilityEmoteq facilities in Tulsa, Oklahoma. This move was completedThe Company believes that the combined entity, supporting both the motor and encoder technologies in a cohesive systems approach within the fourth quarter and management continues to work with customers to provide a smooth transition. This decisionsame facility, will provide the best opportunity for long term sustainable growth in sales and profitability in the future.

        On June 3, 2010, the Company acquired the shares of Agile Systems Inc. Agile designs and develops advanced motion control technology including integrated power electronics, digital controls and network communications for motor control and power conversion. Agile, based in Waterloo, Ontario, Canada, has established customers in a wide range of industries. Agile is now known as Allied Motion Canada.

        On December 30, 2010, the Company acquired the shares of Östergrens-Elmotor AB. Östergrens has expertise in designing drive electronics, software and mechanical processes. The products are manufactured at Östergrens' facilities in Sweden and China. Östergrens' current products integrate their electronics expertise with other motion control products such as motors and gears. Their products are sold to OEM customers throughout Europe and are used in a wide variety of industrial, commercial and medical applications, including emerging "Green Technology" alternative energy and electric vehicle applications, leading-edge medical instrumentation and test equipment applications and other industrial and commercial applications in which Östergrens' products improve the efficiency/performance of the OEM's products. In addition, Östergrens' China facility further facilitates low cost region sourcing capabilities and provides the Company with a base to expand operations in the ability to meet customers' needs by providingAsian market.

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        The acquisitions made in 2010 were made primarily with cash on hand, and management believes these acquisitions will expand the Company's customer base, increase the various markets into which we sell, augment the Company's engineering knowledge, and provide all of our customers more integrated motion system solutions. Management will continue to monitor market conditions and allocate resources appropriately to meet current needs and prepare for growth.

        The Company has a strong balance sheet and has improved liquidity when compared with the previous year, ayear. The Company made two acquisitions in 2010,using approximately $7.7 million, and the Company's cash position, net of outstanding debt, thatdecreased by approximately $1.1 million during 2010.. Excluding cash used for acquisitions, the Company's cash position, net of outstanding debt, increased by approximately $2.5$6.8 million. Operating cash flows for 2010 were up $4.3 million inover 2009. The Company also maintained theircontinues its position throughout 2009 of not cuttingmaintaining resources in electro-magnetic, mechanical and electronic design capabilities as its primary goal is to provide solutionsproducts that "raise the bar" with customers and provide important differentiating factorssolutions against competition. The Company's broad market diversification provides an opportunity to grow some markets even while some are flat or experiencing decline. As certain markets are more recession proof than others, managementManagement will continue to make investments in the markets believed to be less affected in a recession than others.provide the most opportunity for continued growth and profitability of the Company.

        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. With the acquisition of Östergrens, the Company now owns a manufacturing facility in China as well. The Company will continuehas increased efforts 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 at certain times the Company experiences significant fluctuations in the costs of these metals, particularly copper, steel and zinc, which are all key materials in itsour products. The Company has reacted by aggressively sourcing materialmaterials at lower costs from Asian markets and by passing on surcharges and price increases to our customers.

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        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 that meet the needs of its 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 continues its focus on a ONE TEAM sales force to more effectively leverage resources utilizing a company wide sales organization. With the ONE TEAM sales force selling all the Company's products, management's expectation is that this capability provides opportunities to increase sales from existing customers and secure new business opportunities.

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

Operating Results

Year 2009 compared to 2008

        NET (LOSS) INCOME    The Company reported a net loss of $12,449,000 or $1.65 loss per diluted share for 2009, compared to net income of $2,909,000 or $.39 per diluted share for 2008. The loss includes a pretax asset impairment charge of $15,986,000 ($11,105,000 after tax) and inventory

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Operating Results

Year 2010 compared to 2009

        NET INCOME (LOSS)    The Company achieved record net income for the year ended December 31, 2010 of $3,585,000 or $.45 per diluted share compared to a net loss of $12,449,000 or $1.65 per diluted share for 2009. Excluding the non-recurring expenses incurred in 2010 and 2009, net income for 2010 was $3,621,000, or $.45 per fully diluted share, and for 2009, the net loss was $742,000, or $.10 per share. The non-recurring expenses included in the 2010 operating results totaled a net after tax charge of $36,000 which included a gain of $685,000 ($436,000 after tax) for the final business interruption settlement with the insurance company for the October 2008 fire at Allied's former encoder operation in Chatsworth, California, net transaction costs of $447,000 ($331,000 after tax) incurred in the 2010 acquisitions of Agile Systems and Östergrens and non-recurring expenses of $232,000 ($141,000 after tax) that were incurred to integrate the encoder operation into Allied's Emoteq operation in Tulsa, Oklahoma. The 2009 operating results included total non-recurring charges of $16,865,000 ($11,707,000 after tax) including a pretax asset impairment charge of $15,986,000, inventory adjustments of $600,000 ($417,000 after tax) primarily for excess and obsolete inventories recorded in the second quarter of 2009, and thea restructuring charge of $710,000 ($469,000 after tax) pluspartially offset by net insurance recoveries of $431,000 ($284,000 after tax) recordedfor the fire at our Chatsworth encoder facility in the fourth quarter of 2009. The net insurance recoveries included in the fourth quarter of 2008 were $157,000. Excluding these nonrecurring items, the net loss for 2009 would be $742,000 compared to net income of $2,805,000 last year.2008.

        EBITDA and EBITDA BEFORE NONRECURRING ITEMS    EBITDA was $6,984,000 and ($15,230,000) for 2010 and 2009, respectively. EBITDA before nonrecurring items was $6,978,000 for 2010 compared to $1,635,000 for 2009 compared to $7,849,000 for 2008.2009. EBITDA and EBITDA before nonrecurring items is aare non-GAAP measurement thatmeasurements. EBITDA consists of income before interest expense, provision for income

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taxes, depreciation and amortization,amortization. EBITDA before nonrecurring items is EBITDA before transaction costs, inefficiencies from the relocation of the encoder operations, impairment charges, restructuring charges, inventory adjustments recorded in the second quarter of 2009, and net insurance recoveries. See information included in "Non-GAAP Measures" below for a reconciliation of net income to EBITDA and EBITDA before nonrecurring items.

        REVENUES    Revenues were $80,591,000 in 2010 compared to $61,240,000 in 2009 compared to $85,967,000 in 2008.2009. The 29% decrease32% increase in revenues reflects the effects of the worldwide economic recession, which adversely affectedincreased sales into nearly all markets, to which we sell our products, though some were adversely affected more than others. Our vehicle,with the industrial and electronics markets were most affected, accounting for 25% of the 29% decrease in revenues. Other markets, such as medical, distribution and aerospace and defense markets were least affected, with the distribution and aerospace and defensevehicle markets accounting for the remaininglargest portion of increased sales over the same period of last year, offset by a slight decrease in revenues. We continue to utilize our low cost region operations to ensure we are globally competitive on a cost basis while maintaining the same high technicalaerospace and commercial standards we have already established.defense markets.

        Sales to U.S. customers accounted for 59% of our sales in 2010 and 56% of our sales in 2009, and 2008, with the balance of sales to customers primarily in Europe, Canada and Asia. Sales to U.S. customers and customers outsidevolumes for 2010 increased by 34% from 2009, partially offset by the U.S. were down 29%. The strengthening of the U.S.U.S dollar against the Euro, which accounted for approximately 1% ofa 2% decrease in the 29% sales decrease when comparing 2009 sales to 2008Company's sales.

        BACKLOG    The Company's backlog at December 31, 20092010, which includes acquired backlog from Östergrens of $4,785,000, consisted of sales orders totaling approximately $20,977,000$37,856,000 while backlog at December 31, 20082009 was $23,570,000$20,977,000 reflecting an 11% decrease80% increase from the same time last year. Backlog is down from the same time last year due to the worldwide economic recession, which has had a broad impact on the markets to which we sell, and also due to the timingend of the placement of certain longer-term blanket orders by our customers.2009.

        GROSS MARGIN    Gross margin as a percentage of revenues was 28% and 21% for 2010 and 26% for 2009, and 2008, respectively. The decrease7% increase in gross margin is primarily a result of declining sales that has impacted our ability to absorb manufacturingselling more higher margin products and achieving improvements in material and variable overhead costs despite our successas well as improvements in reducing fixed overhead costs for the year by 14%.as a percentage of sales. In addition, declining inventory usage as a result of declining sales caused the Company to record a nonrecurring inventory adjustmentadjustments that occurred in the second quarter that impacted our2009 reduced gross margins by 1% for 2009.the year ended 2009, while there was no impact on gross margin for inventory adjustments in the same period for 2010.

        SELLING EXPENSES    Selling expenses were $3,872,000 and $3,303,000 in 2010 and $4,256,000 in 2009, and 2008, respectively. The 22% decrease17% increase is primarily due to lower commissions andthe Company increasing its Sales team, as well as higher sales incentivesincentive compensation as a result of lowerincreased sales. Selling expense as a percentage of revenues was 5.0% in 2009 and 2008.

        GENERAL AND ADMINISTRATIVE EXPENSES    General and administrative expenses were $9,938,000 in 2010 and $6,780,000 in 2009 and $8,543,000 for 2008.2009. The 21% decrease47% increase is primarily a result of reductions in discretionary expenditures andincreased compensation expense, which includes incentive bonuses.bonuses and stock compensation expense, and net transaction costs of $447,000 incurred to acquire Agile and Östergrens.

        ENGINEERING AND DEVELOPMENT EXPENSES    Engineering and development expenses were $4,044,000 and $3,922,000 for 2010 and $4,009,000 for 2009, and 2008, respectively. We continue to maintain strongIn 2010, we expanded engineering resources and capabilities to meetcontinue meeting our customers' needs and to expand our product base for future opportunities.

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        IMPAIRMENT CHARGES    During the second quarter, the downturn in the global economy continued to adversely affect the overall results of the Company. The Company experienced a 41% drop in sales during the second quarter over the second quarter of 2008,opportunities, which includes incremental engineering costs for Agile, which was the result of continued sales declines in all industry sectors. The Company is required for accounting purposes to assess the carrying value of long-lived amortizing assets and goodwill whenever circumstances indicate a decline in value may have occurred. Due to the severe effects the economic downturn had onacquired by the Company in the second quarter of 2009, the Company determined that goodwill and certain fixed and intangible assets were impaired and the Company recorded a pretax impairment charge of $15,986,000. The write down of the fixed and intangible assets will reduce depreciation and amortization by approximately $1 million for one year from the time the impairment was recorded.

        FIRE RELATED LOSSES & INSURANCE RECOVERIES    The Company is still in the process of settling the insurance claim from the fire that occurred at one of the operating facilities in October 2008. In 2009, the Company has recorded $200,000 of fire related losses and $631,000 of property insurance recoveries and partial business interruption recoveries.2010.

        AMORTIZATION OF INTANGIBLE ASSETS    Amortization of intangible assets expense was $551,000 and $851,000 in 2010 and $1,052,000 in 2009, and 2008, respectively. The 19%35% decrease is primarily a result of the writeoff of intangible assets as part of the impairment that was recognized on certain intangible assets of the Company in the second quarter of 2009 and certain intangible assets becoming fully amortized in 2009.2010.

        INTEREST EXPENSE    Interest expenseNET INSURANCE RECOVERIES    Net insurance recoveries were $685,000 and $431,000 for 2010 and 2009, respectively. The recoveries in 2009 was $55,000 compared to $177,000 in 2008. The decrease in interest is primarily attributable to2010 represent the decrease in outstanding debt obligations.

        WRITEOFF OF DEFERRED FINANCE COSTS    As a result offinal settlement for the amendment ofbusiness interruption insurance claim which resulted from the fire at the Company's Credit Agreement that occurredCOPI facility in 2009, the Company wrote off the deferred finance costsfourth quarter of $86,000. These costs remained to be amortized from the Credit Agreement entered into in May 2007.2008.

        INCOME TAXES    BenefitProvision for income taxes was $5,754,000$1,581,000 for 2009, compared2010, as opposed to a provisionbenefit for income taxes of $1,407,000$5,754,000 for 2008.the same period last year. The tax benefit in 2009 iswas primarily driven by the impairment charges that were recorded in the second quarter of 2009. In domestic

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jurisdictions, the impaired items are being deducted over the appropriate period for income tax purposes, which includes future periods, thus giving rise to a deferred tax asset on the balance sheet. The Company believes it is more likely than not that the benefitdeferred tax asset will be realized in current and future years when the Company returns to profitability, and as such, has not recorded an additional valuation allowance against the deferred tax asset.periods.

        The effective income tax rate as a percentage of income (loss) income before income taxes was 31% and 32% in 2010 and 33%2009, respectively. In 2010, the effective tax rate differs from the statutory rate primarily due to lower tax rates in 2009 and 2008, respectively.foreign jurisdictions. In 2009, the effective tax rate differs from the statutory rate primarily due to the nondeductible goodwill impairment charge in a foreign jurisdiction partially offset by the impact of differences in state and foreign tax rates. In 2008, the effective rate differs from the statutory rate primarily due to the impact of differences in state and foreign tax rates.

Non-GAAP Measures

        EBITDA isand EBITDA before nonrecurring items are provided for information purposes only and isare not a measuremeasures 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. For 2009, EBITDA also excludes impairment charges of $15,986,000, restructuring charges of $710,000, inventory adjustments recorded in the second quarter of $600,000, and net insurance recoveries of $431,000. Net insurance recoveries in 2008 were $157,000, and are excluded from the 2008 EBITDA before nonrecurring items. Accordingly,

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the Company believes that EBITDA, before these nonrecurring items, provides helpful information about the operating performance of its business, apart from the expenses associated with its physical assets and capital structure. EBITDA is frequently used as one of the bases for comparing businesses in the Company's industry.

        The Company also believes that EBITDA doesbefore nonrecurring items provides helpful information about the operating performance of its business. Non-recurring items are either income or expenses which do not occur regularly as part of the normal activities of the company. They are presented separately because they are important for evaluating the underlying sustainable performance of the Company. The Company considers these items to be of significance in nature and/or size, and accordingly, has excluded these items from EBITDA before nonrecurring items. EBITDA before nonrecurring items excludes net transaction costs of $447,000, inefficiencies from the relocation of the encoder operation of $232,000, net insurance recoveries of $685,000 and $431,000, for 2010 and 2009, respectively. For 2009, EBITDA before nonrecurring items also excludes restructuring charges of $710,000, inventory adjustments recorded in the second quarter of $600,000, and impairment charges of $15,986,000.

        EBITDA and EBITDA before nonrecurring items do not represent and should not be considered as an alternativealternatives 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.

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        The Company's calculation of EBITDA and EBITDA before nonrecurring items for the years ended December 31, 2010 and 2009 and 2008 isare as follows (in thousands):

Liquidity and Capital Resources

        The Company's liquidity position as measured by cash and cash equivalents increased $274,000decreased $917,000 during 20092010 to a balance of $4,470,000$3,553,000 at December 31, 2009.2010. This decrease is primarily a result of the two acquisitions completed by the Company in 2010, which were accomplished primarily with cash on hand. The Company also paid down debtdecrease in 2009 by $2,200,000, which represents a $2,474,000 improvementcash in our cash and debt positions for2010 compares to an increase of $274,000 in 2009.

        During 2009,2010, operations provided $2,819,000$7,168,000 in cash compared to $6,252,000 in 2008.$2,819,000 provided for 2009. The decreaseincrease in cash provided from operations of $3,433,000$4,349,000 is primarily due to lowerhigher net income offset by the noncash impairment charges, changes in deferred taxes, the inventory adjustments recorded in the second quarter, along with reductions inincome. In addition, cash was provided from operations for working capital components as a result of improved economic conditions when compared to 2009. In addition, payments related to employee incentive bonus programs earned in the currentprevious year were approximately $1,400,000 lower in 2010 compared to 2009 as a result of the economic downturn.downturn in 2009 and its impact on the Company.

        Net cash used in investing activities was $8,317,000 and $678,000 for 2010 and $1,690,000 for 2009, and 2008, respectively, which is relatedprimarily due to the purchaseacquisition of Östergrens, which was completed on December 30, 2010. Cash paid for the acquisitions of Agile Systems Inc., now known as Allied Motion Canada, and Östergrens, net of cash acquired, was $7,104,000. Purchases of property and equipment net of property insurance proceeds from the fire loss that occurredwere $1,213,000 and $865,000 in 2008.2010 and 2009, respectively.

        Net cash provided from financing activities for 2010 was $513,000, as opposed to cash used in financing activities wasof $1,955,000 for 2009 compared to $824,000 for the same period last year. The increase2009. Cash provided in cash used2010 is primarily due to debt paydowns in 2009 that exceeded debt paydowns in 2008,the exercise of stock options, as well as borrowing on the Company's line of credit to complete the Östergrens acquisition, whereas cash used in 2009 was primarily a larger amountresult of stock transactions under employee benefit stock plans that occurred in 2008.the payoff of term debt of $2,800,000.

        At December 31, 2009,2010, the Company had $600,000$795,000 of debt obligations representing borrowings on the bank line-of-credit.

line-of-credit made to complete the acquisition of Östergrens in December. As of June 30, 2009,December 31, 2010, the Company violated the fixed charge coverage ratioamount available under the Credit Agreement. As a result of the covenant violation, thelines-of-credit was approximately $7.2 million.

        The Company obtained a waiver from the bank and amended the credit agreement on August 3, 2009. The Amendedits Credit Agreement which matures on July 31, 2010,October 26, 2010. The amended Credit Agreement extends the agreement to October 26, 2012. The amended Credit Agreement provides revolving credit up to $8 million and €2 million. Borrowings under the revolver

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revolving credit up to $4 million and €3 million. Borrowings under the revolver incur interest of LIBOR plus 2.5%2.0%. Overnight borrowings incur interest at PRIME plus 1.00%. The unused portion of the revolver is charged a commitment fee of .75%.375% per annum.

        Changes The amended Credit Agreement contains certain financial covenants related to the covenants were made as part of the amendment requiring the Company to maintain amaximum leverage, minimum EBITDA,fixed charge coverage and minimum tangible net worth and limitations onof the amount of capital expenditures that can occur, and eliminated the minimum fixed charge coverage ratio and leverage ratio previously required.

company. The Company's working capital, capital expenditure and debt service requirements are expected to be funded from cash on hand, cash provided fromby operations and amounts available under the Company's credit facilities. Restructuring charges related to the relocation of the Company's COPI operation to its Emoteq facility have been funded, and are expected to be funded from cash on hand and cash provided from operations.

        The Company has a bank overdraft facility payable to afacilities with foreign bank with no monthly repayments required.banks in Europe. The facilityfacilities had no outstanding balance as of December 31, 2009.2010. The amount available under the overdraft facilityfacilities was € 300,000 ($430,000 at the December 31, 2009 exchange rate).approximately $700,000.

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

        On September 30, 2009, the Company adopted changes issued by the Financial Accounting Standards Board (FASB) to the authoritative hierarchy of GAAP. These changes establish the FASB Accounting Standards Codification^TM ("ASC") as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP. Rules and interpretive releases of the Securities and Exchange Commission ("SEC") under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The FASB will no longer issue new standards in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts; instead the FASB will issue Accounting Standards Updates. Accounting Standards Updates will not be authoritative in their own right as they will only serve to update the Codification. These changes and the Codification itself do not change GAAP. Other than the manner in which new accounting guidance is referenced in the footnotes, the adoption of these changes had no impact on the Company's financial statements.

        Effective June 30, 2009, the Company adopted changes issued by the FASB to accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued, otherwise known as "subsequent events." Specifically, these changes set forth the period after the balance sheet date during which management should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. The adoption of these changes did not have a significant impact on the Company's financial statements.

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        Effective for the Company's fiscal year ending December 31, 2009, accounting guidance requires disclosure of how pension plan investment allocation decisions are made, including the factors that are pertinent to an understanding of investment policies and strategies, the major categories of plan assets, significant concentrations of risk within plan assets, inputs and valuation techniques to measure fair value and the effect of significant unobservable inputs on changes in plan assets for the period. The Company has evaluated the guidance and made appropriate footnote disclosures where required.

        In September 2006,January 2010, the FASB issued authoritative guidance which definesASU 2010-06, "Improving Disclosures About Fair Value Measurements." ASU 2010-06 requires the separate disclosure of significant transfers into and out of the Level 1 and Level 2 categories; requires fair value establishes a frameworkmeasurement disclosures for measuring fair valueeach class of assets and expands disclosureliabilities; and requires disclosures about valuation techniques and inputs used in Level 2 and Level 3 fair value measurements. Effective January 1, 2008,These disclosure requirements became effective at the Company adopted the authoritative guidance that applies to all financial assets and liabilities required to be measured and reportedbeginning of 2010. In addition, effective in fiscal years beginning after December 15, 2010, ASU 2010-06 also requires Level 3 disclosures of activity on a fair valuegross rather than a net basis. Beginning January 1, 2009,We do not anticipate that the Company also applied the guidance to non-financial assets and liabilities measured at fair value on a nonrecurring basis, including long-lived assets and goodwill. The adoption of the authoritative guidance did notremaining disclosures under ASU 2010-06 will have a material impact on eitherour Consolidated Financial Statements.

        In December 2010, the Company's consolidated results from operationsFASB issued ASU 2010-28, "When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or its financial position.Negative Carrying Amounts." ASU 2010-28 modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, Step 2 of the goodwill impairment test is required if it is more likely than not that a goodwill impairment exists, after considering whether there are any adverse qualitative factors indicating that an impairment may exist. ASU 2010-28 is effective prospectively for fiscal years and interim periods beginning after December 15, 2011. We do not anticipate the adoption of ASU 2010-28 will 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 measured against the United States dollar. These exposures are directly related to its normal operating and funding activities.

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Foreign Currency Risk

        Sales from PremotecThe Company has international subsidiaries whose sales are denominated in Euros,currencies other than the U.S. dollar, thereby creating exposures to changes in exchange rates. The changes in these exchange rates against the Euro/U.S. exchange ratedollar may positively or negatively affect the Company's sales, gross margins, net income and retained earnings. A 10% change in the Eurothese foreign currencies vs. the U.S dollar could affect the Company's pretax earnings by approximately $100,000, and net assets by approximately $800,000.$500,000. 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.

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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, 20092010 and 2008,2009, and the related consolidated statements of operations, stockholders' investment and comprehensive income and cash flows for the years then ended. The Company's management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements 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 includedAudits include 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, andas well as 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 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, 20092010 and 2008,2009, 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.

/s/ Ehrhardt Keefe Steiner & Hottman PC

March 17, 201018, 2011
Denver, Colorado

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ALLIED MOTION TECHNOLOGIES INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

See accompanying notes to consolidated financial statements.

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ALLIED MOTION TECHNOLOGIES INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

See accompanying notes to consolidated financial statements.

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ALLIED MOTION TECHNOLOGIES INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
AND COMPREHENSIVE INCOME

(In thousands)

See accompanying notes to consolidated financial statements.

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ALLIED MOTION TECHNOLOGIES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

See accompanying notes to consolidated financial statements.

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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, medical, 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.

        Activity in the allowance for doubtful accounts for 20092010 and 20082009 was as follows (in thousands):

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ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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):

        The Company recorded provisions for excess and obsolete inventories of approximately $201,000 and $1,022,000, for 2010 and $208,000, for 2009, and 2008, respectively. The 2009 amount includes an adjustmentinventory adjustments of $600,000 recorded in the second quarter.quarter primarily for excess and obsolete inventories.

Property, Plant and Equipment

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

        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 $1,264,000 and $2,067,000 in 2010 and $2,461,000 in 2009, and 2008, respectively.

Intangible Assets

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

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ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Impairment of Long-Lived Assets

        The Company reviews the carrying values of its long-lived assets, including property, plant and equipment and intangible assets, whenever events or changes in circumstances indicate that such carrying values may not be recoverable. Long-lived assets are carried at historical cost if the projected cash flows from their use will recover their carrying amounts on an undiscounted basis and without considering interest. If projected cash flows are less than their carrying value, the long-lived assets must be reduced to their estimated fair value. Considerable judgment is required to project such cash flows and, if required, estimate the fair value of the impaired long-lived asset.

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 tested for impairment annually, or more frequently, if events or changes in circumstances indicate that the carrying value of the asset might be impaired.

        The Company estimates the fair value of the goodwill based on a discounted cash flow model using business plans and projections as the basis for expected future cash flows. The fair value estimate is based upon level three inputs from ASC Topic "Fair Value Measurements and Disclosures", as unobservable inputs in which there is little or no market data, which required the Company to develop its own assumptions.

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 $300,000$341,000 and $284,000$300,000 as of December 31, 20092010 and 2008,2009, respectively.

        Changes in the Company's reserve for product warranty claims during 20092010 and 2008,2009, were as follows (in thousands):