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

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

Overview

Allied Motion, a member of the Russell Microcap Index, designs, manufactures and sells motion products to a broad spectrum of customers throughout the world primarily for the commercial motor, industrial motion control, and aerospace and defense markets. Examples of the end products using Allied Motion's technology in the medical and health care industries include wheel chairs, scooters, stair climbers, vehicle

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

Today, five companies or technology units, 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 high quality 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 "Applied Motion Technology/Know How". The Company's commitment to Allied's Systematic Tools, or AST for short, is driving continuous improvement in quality, delivery, cost and growth. AST utilizes a tool kit to effect desired changes through well defined processes such as Strategy Deployment, Target Marketing, Value Stream Mapping, Material Planning, Standard Work and Single Minute Exchange of Dies.

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

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

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

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

Operating Results



Quarter Ended September 30, 2008 compared to Quarter Ended September 30, 2007



                                             For the three months ended
                                                   September 30,                 Increase (decrease)
(in thousands)                                 2008              2007              $              %

Revenues                                  $       21,538    $       20,901    $       637             3 %
Cost of products sold                             16,034            15,613            421             3 %
Gross margin                                       5,504             5,288            216             4 %
Gross margin percentage                               26 %              25 %            -             -

Operating costs and expenses:
Selling                                            1,134               959            175            18 %
General and administrative                         2,097             1,860            237            13 %
Engineering and development                        1,041               999             42             4 %
Amortization of intangible assets                    264               259             10             2 %
Total operating costs and expenses                 4,536             4,077            459            11 %
Operating income                                     968             1,211           (243 )         (20 )%
Interest expense                                      33               153           (120 )         (78 )%
Other income (expense), net                          115                (3 )          118          3933 %
Income before income taxes                         1,050              1055             (5 )           0 %
Provision for income taxes                           346               369            (23 )          (6 )%
Net income                                $          704    $          686    $        18             3 %

NET INCOME The Company had net income of $704,000 or $.09 per diluted share for the third quarter of 2008 compared to net income of $686,000 or $.10 per diluted share for the same quarter last year, a 3% increase in net income and a 10% decrease in diluted EPS.

EBITDA EBITDA was $1,962,000 for the third quarter of 2008 compared to $2,106,000 for the same quarter last year. EBITDA is a non-GAAP measurement that consists of income before interest expense, provision for income taxes and depreciation and amortization. See information included in "Non - GAAP Measures" below for a reconciliation of net income to EBITDA.

REVENUES Revenues were $21,538,000 in the quarter ended September 30, 2008 compared to $20,901,000 for the quarter ended September 30, 2007. The 3% increase in revenues achieved in the third quarter of 2008 reflects a significant change in sales mix from last year. Our 3% increase in revenues are primarily due to an 18% increase in sales into our aerospace and defense, medical, distribution and certain markets in our industrial and electronics market segments such as pumps and industrial automation, partially offset by a 15% downturn in construction related markets such as industrial and machine tools, material handling and recreation related markets such as RVs and marine markets. The downturn in these markets reflects both the adverse effects of the economy and the effects of the competitive pressure of LCR competitors which are primarily Chinese competitors.

Sales to U.S. customers accounted for 55% of our sales for the quarter, with the balance of our sales to customers primarily in Europe, Canada and Asia. Sales to our U.S. customers were down 10% for the quarter ended September 30, 2008 compared to the same quarter last year, while sales to customers outside of the U.S. are up 26% for the quarter ended September 30, 2008 compared to the same quarter last year. 2.8% of the 3% increase in sales was due to the weakness of the U.S. dollar against the Euro.

ORDER BACKLOG At September 30, 2008, order backlog was $27,846,000 which is down 7% from the same time last year and down 13% from the backlog at December 31, 2007. This decrease in backlog is being driven by the worsening global economic conditions.

GROSS MARGINS Gross margin as a percentage of revenues was 26% and 25% for the quarters ended September 30, 2008 and 2007, respectively. The margin improvement was driven by higher margins from most markets that experienced increased sales and by sales decreases in markets where we achieve lower margins, continuous improvement in efficiencies and reduction of costs, and higher quantity of production from our Asian contract manufacturing facility.

SELLING EXPENSES Selling expenses in the third quarter were $1,134,000 compared to $959,000 for the third quarter last year. The 18% increase is primarily due to strengthening our sales capabilities with more sales personnel and sales incentive programs for our sales personnel.

GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses were $2,097,000 in the quarter ended September 30, 2008 compared to $1,860,000 in the quarter ended September 30, 2007. The 13% increase is primarily due to hiring of additional key personnel, salary increases to existing personnel, incentive bonus programs for company employees that are based on the performance of the Company and each operating unit and additional expense recorded for the issuance of restricted stock that is amortized over the vesting period (generally three years).

ENGINEERING AND DEVELOPMENT EXPENSES Engineering and development expenses were $1,041,000 in the third quarter of 2008 and $999,000 in the same quarter last year, a 4% increase. This 4% increase is primarily due to strengthening of our engineering capabilities to develop new products and new customer applications to meet the needs of our served markets.

AMORTIZATION OF INTANGIBLE ASSETS Amortization of intangible assets expense was $264,000 in the quarter ended September 30, 2008 and $259,000 in the same quarter last year. These costs relate to the amortizable intangible assets acquired in the Motor Products, Stature and Premotec acquisitions.

INTEREST EXPENSE Interest expense for the quarter ended September 30, 2008 was $33,000 compared to $153,000 in the quarter ended September 30, 2007. The 78% decrease in interest is directly attributable to the decrease in outstanding debt obligations and lower interest rates.

OTHER INCOME (EXPENSE) Other Income for the quarter ended September 30, 2008 was $115,000 as opposed to an expense of $3,000 for the same quarter last year. This change was primarily due to proceeds received during the third quarter from a class action lawsuit in which the Company was involved.

INCOME TAXES Provision for income taxes was $346,000 for the third quarter this year compared to $369,000 in the third quarter last year. The effective rate used to record income taxes is based on projected income for the fiscal year. The effective income tax rate as a percentage of income before income taxes was 33% and 35% in the quarters ended September 30, 2008 and 2007, respectively. The lower effective tax rate for the current year is primarily because a greater portion of the Company's income was derived from a foreign jurisdiction with a lower tax rate than domestic jurisdictions.

Nine Months Ended September 30, 2008 compared to Nine Months Ended September 30, 2007

                                       For the nine months ended
                                             September 30,               Increase (decrease)
(in thousands)                           2008             2007              $              %

Revenues                             $      68,399    $      63,292   $       5,107            8 %
Cost of products sold                       50,329           48,145           2,184            5 %
Gross margin                                18,070           15,147           2,923           19 %
Gross margin percentage                         26 %             24 %             -            -

Operating costs and expenses:
Selling                                      3,288            2,783             505           18 %
General and administrative                   6,941            5,477           1,464           27 %
Engineering and development                  3,043            2,961              82            3 %
Amortization of intangible assets              797              773              24            3 %
Total operating costs and expenses          14,069           11,994           2,075           17 %
Operating income                             4,001            3,153             848           27 %
Interest expense                               132              556            (424 )        (76 )%
Other income (expense), net                     42               55             (13 )        (24 )%
Income before income taxes                   3,911            2,652           1,259           47 %
Provision for income taxes                   1,282              904             378           50 %
Net income                           $       2,629    $       1,748   $         881           50 %

NET INCOME The Company had net income of $2,629,000 or $.35 per diluted share for the first nine months of 2008 compared to net income of $1,748,000 or $.24 per diluted share for the same nine months last year.

EBITDA EBITDA was $6,691,000 for the nine months ended September 30, 2008 compared to $5,815,000 for the nine months ended September 30, 2007. EBITDA is a non-GAAP measurement that consists of income before interest expense, provision for income taxes and depreciation and amortization. See information included in "Non - GAAP Measures" below for a reconciliation of net income to EBITDA.

REVENUES Revenues were $68,399,000 for the nine months ended September 30, 2008 compared to $63,292,000 for the nine months ended September 30, 2007. The 8% increase in revenues achieved for the nine months ended September 2008 reflects a significant change in sales mix from last year. Our 8% increase in revenues are primarily due to a 17% increase in sales into various markets, including aerospace and defense, medical, distribution and certain markets in our industrial and electronics market segments such as pumps and industrial automation. These increases were partially offset by a 9% downturn in various markets, including construction related markets such as industrial and machine tools, material handling and recreation related markets such as RVs and marine markets. The downturn in these markets reflects both the adverse effects of the economy and the effects of the competitive pressure of LCR competitors which are primarily Chinese competitors.

Sales to U.S. customers accounted for 56% of our sales for the nine months ended September 30, 2008, with the balance of our sales to customers primarily in Europe, Canada and Asia. Sales to our U.S.

customers were down 6% for the nine months ended September 30, 2008 compared to the same nine months last year, while sales to customers outside of the U.S. are up 34% for the nine months ended September 30, 2008 compared to the same nine months last year. For the first nine months of 2008 compared to the same period of 2007, 4% of the 8% increase in sales was due to the weakness of the U.S. dollar against the Euro.

GROSS MARGINS Gross margin as a percentage of revenues for the nine months ended September 30, 2008 increased to 26% compared to 24% for the same period last year. The margin improvement was driven by higher margins from most markets that experienced increased sales and by sales decreases in markets where we achieve lower margins, continuous improvement in efficiencies and reduction of costs, and higher quantity of production from our Asian contract manufacturing facility.

SELLING EXPENSES Selling expenses for the nine months ended September 30 were $3,288,000 compared to $2,783,000 for 2008 and 2007, respectively. This 18% increase is primarily due to strengthening our sales capabilities with more sales personnel and sales incentive programs for our sales personnel.

GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses were $6,941,000 for the nine months ended September 30, 2008 compared to $5,477,000 for the nine months ended September 30, 2007. The 27% increase is primarily due to hiring of additional key personnel, salary increases to existing personnel, incentive bonus programs for company employees that are based on the performance of the Company and each operating unit, as well as additional expense recorded for the issuance of restricted stock that is amortized over the vesting period (generally three years).

ENGINEERING AND DEVELOPMENT EXPENSES Engineering and development expenses were $3,043,000 for the nine months ended September 30, 2008 compared to $2,961,000 for the same nine months last year. This 3% increase is primarily due to strengthening of our engineering capabilities to develop new products and new customer applications to meet the needs of our served markets.

AMORTIZATION Amortization expense was $797,000 in the nine months ended September 30, 2008 and $773,000 for the same nine months last year. These costs relate to the amortizable intangible assets acquired in the Motor Products, Stature and Premotec acquisitions.

INTEREST EXPENSE Interest expense for the nine months ended September 30, 2008 was $132,000 compared to $556,000 for the nine months ended September 30, 2007. The 76% decrease in interest is directly attributed to the lower interest rates under the Company's new credit agreement, as well as a decrease in outstanding debt obligations.

INCOME TAXES Provision for income taxes was $1,282,000 for the first nine months this year compared to $904,000 for the same nine months last year. The effective rate used to record income taxes is based on projected income for the fiscal year. The effective income tax rate as a percentage of income before income taxes was 33% and 34% in the nine months ended September 30, 2008 and 2007, respectively. The lower effective tax rate for the current year is primarily because a greater portion of the Company's income was derived from a foreign jurisdiction with a lower tax rate than domestic jurisdictions.

Non-GAAP Measures

EBITDA is provided for information purposes only and is not a measure of financial performance under generally accepted accounting principles. The Company believes EBITDA is often a useful measure of a Company's operating performance and is a significant basis used by the Company's management to measure the operating performance of the Company's business because EBITDA excludes charges for depreciation, amortization and interest expense that have resulted from our debt financings, as well as our provision for income tax expense. Accordingly, the Company believes that EBITDA provides helpful information about the operating performance of its business, apart from the expenses associated with its

physical assets or capital structure. EBITDA is frequently used as one of the bases for comparing businesses in the Company's industry. EBITDA does not represent and should not be considered as an alternative to net income, operating income, net cash provided by operating activities or any other measure for determining operating performance or liquidity that is calculated in accordance with generally accepted accounting principles.

The Company's calculation of EBITDA for the three and nine months ended September 30, 2008 and 2007 is as follows (in thousands):

                                              For the three months          For the nine months
                                              ended September 30,           ended September 30,
                                              2008           2007           2008           2007

Net income                                 $       704    $       686    $     2,629    $    1,748
Interest expense                                    33            153            132           556
Provision for income tax                           346            369          1,282           904
Depreciation and amortization                      879            898          2,648         2,607
Income before interest expense,
provision for income taxes and
depreciation and amortization (EBITDA)     $     1,962    $     2,106    $     6,691    $    5,815

Liquidity and Capital Resources

The Company's liquidity position as measured by cash and cash equivalents increased $2,964,000 during the first nine months of 2008 to a balance of $3,498,000 at September 30, 2008. This increase compares to a decrease of $165,000 for the same period last year. During the first nine months of 2008, operations provided $4,784,000 in cash compared to $2,468,000 during the first nine months of 2007. The increase in cash provided from operations of $2,316,000 is primarily due to higher net income as a result of higher sales and improved margins, higher accounts receivable turnover in the current year due to improved collections on sales, smaller increases in the inventory balances due to timing differences of inventory receipts as well as lower backlog of orders due to the recent softening of the economy.

Net cash used in investing activities was $1,121,000 and $977,000 for the first nine months of 2008 and 2007, respectively, which is all related to the purchase of property and equipment.

Net cash used in financing activities was $640,000 for the nine months ended September 30, 2008 compared to cash used of $1,684,000 for the same period last year. The change is primarily due to higher paydown of debt in 2008, higher proceeds from stock transactions under employee benefit stock plans in 2008, and debt issuance costs that were paid in 2007 as part of the debt refinancing in the second quarter of 2007.

At September 30, 2008, the Company had $3,000,000 of debt obligations representing borrowings on the bank term loan.

The Company's working capital, capital expenditure and debt service requirements are expected to be funded from cash provided by operations and amounts available under the Company's credit facilities.

The interest rates on the Company's credit facilities are variable rates based on one or more interest rate indices. The interest rates in effect as of September 30, 2008 were 3.24% on the term loan. Under the Company's credit agreement, the interest rate on the Company's outstanding debt can be fixed for terms of one, three, or six months at specified amounts not to exceed the total . . .