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 recession 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 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 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 and cell phones. Our motors are used in the HVAC systems of trucks, buses, RV's, boats and off-road construction and farming equipment. These motors operate a variety of actuation systems (e.g., lifts, slide-outs, covers etc.), provide improved fuel efficiency while the vehicles are idling and are used in drive by wire applications to electrically replace a variety of mechanical linkages. Our products are also utilized in high performance vehicles, vehicles using alternative fuel systems such as LPG, fuel cell and hybrid vehicles. Our geared motor products are utilized in commercial grade floor cleaners, polishers and material handling devices for factories and commercial buildings. Our products are also used in a variety of military/defense applications including inertia guided missiles, mid range munitions systems, weapons systems on armed personnel carriers and in security and access control in camera systems, door access control and in airport screening and scanning devices. Other end products utilizing our technology include high definition printers; tunable lasers and spectrum analyzers for the fiber optic industry; processing equipment for the semiconductor industry, as well as cash dispensing machines (ATM's).

Allied Motion is organized into five companies or technology units (TUs): Emoteq Corporation, Computer Optical Products, Inc. (COPI), Motor Products Corporation, Stature Electric, Inc., and Precision Motor Technology B.V.

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

One of the Company's major challenges is to maintain and improve price competitiveness. The Company's customers are continually being challenged by their markets and competitors to be price competitive and they are requiring their suppliers to deliver the highest quality product at the lowest price possible. Currently, the Company is producing some of its motor sub-assemblies and finished products at sub-contract manufacturing facilities in China and Slovakia. The Company has increased efforts 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 TUs. The Company focuses on new product designs that design-out cost, provide higher level, value-added performance solutions and meet the needs of our served markets. Over the last few years, the Company announced several new motor designs targeted at various markets. It normally takes twelve months to get new products designed into new customer applications. We continue to invest in engineering new products that we believe will raise the bar and provide better solutions for our customers. The Company is realizing improved results from its new products and will continue to realize more improvements in the future.

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

Impairment Charges

The global recession has had a more significant impact on the Company's operations than initially anticipated and it appears the recovery will also be slower than previously anticipated. During the second quarter of 2009, the Company identified certain assets with deteriorating cash flows and projected cash flow losses. Also, due to a further downturn in our business during the second quarter resulting from the global economic downturn and the slower than originally expected recovery, the Company determined indicators of potential goodwill impairment were present. As a result of these conditions, the Company performed an impairment analysis of its long-lived assets and goodwill. Based on the results of the analysis, the Company recorded non-cash impairment charges totaling $15,986,000 consisting of a charge of $2,660,000 against Property plant and equipment, a charge of $1,104,000 on intangible assets and a goodwill impairment charge of $12,222,000, which resulted in a zero carrying value of goodwill as of June 30, 2009.

The impairment charges do not result in current or future cash expenditures and do not affect our ability to pursue new opportunities. In addition, the reductions in Property, plant and equipment and Intangible assets will reduce depreciation and amortization expense by approximately $1,000,000 over the next year.

Operating Results



Quarter Ended June 30, 2009 compared to Quarter Ended June 30, 2008



                                             For the three months ended
                                                      June 30,                   Increase (decrease)
(in thousands)                                 2009               2008              $             %
Revenues                                  $        13,940    $       23,549   $       (9,609 )      (41 )%
Cost of products sold                              11,593            17,148           (5,555 )      (32 )%
Gross margin                                        2,347             6,401           (4,054 )      (63 )%
Gross margin percentage                                17 %              27 %              -          -
Operating costs and expenses:
Selling                                               802             1,118             (316 )      (28 )%
General and administrative                          1,651             2,422             (771 )      (32 )%
Engineering and development                           990             1,006              (16 )       (1 )%
Impairment charges                                 15,986                 -           15,986        100 %
Fire related losses                                    51                 -               51        100 %
Insurance recoveries                                  (51 )               -              (51 )     (100 )%
Amortization of intangible assets                     258               268              (10 )       (4 )%
Total operating costs and expenses                 19,687             4,814           14,873        308 %
Operating income                                  (17,340 )           1,587          (18,927 )    (1192 )%
Interest expense                                       20                40              (20 )      (50 )%
Writeoff of deferred finance costs                     86                 -               86        100 %
Other expense, net                                    125                76               49         64 %
(Loss) Income before income taxes                 (17,571 )           1,471          (19,042 )    (1294 )%
Benefit (Provision) for income taxes                5,456              (470 )          5,926       1260 %
Net (loss) income                         $       (12,115 )  $        1,001   $      (13,116 )    (1310 )%

NET (LOSS) INCOME The Company reported a net loss of $12,115,000 or $1.60 loss per diluted share for the second quarter of 2009, as opposed to net income of $1,001,000 or $.13 per diluted share for the second quarter of 2008. The net loss this quarter includes a total of $15,986,000 ($11,105,000 after tax) of asset impairment charges and $600,000 ($417,000 after tax) of additional inventory reserves - both of which are explained below.

EBITDA, BEFORE IMPAIRMENT CHARGES EBITDA, before Impairment charges, was a loss of $647,000 for the second quarter of 2009 compared to EBITDA of $2,400,000 for the same quarter last year. EBITDA, net of Impairment charges is a non-GAAP measurement that consists of income before interest expense, provision for income taxes, depreciation and amortization and impairment charges. See information included in "Non - GAAP Measures" below for a reconciliation of net income to EBITDA, net of Impairment charges.

REVENUES Revenues were $13,940,000 in the quarter ended June 30, 2009 compared to $23,549,000 for the quarter ended June 30, 2008. The 41% decrease in revenues for the second quarter of 2009 reflects the effects of the worldwide economic recession, which adversely affected nearly all markets to which we sell our products, though some were adversely affected more than others. Our vehicle, industrial and electronics markets were most affected, accounting for 36% of the 41% decrease in revenues. Other markets, such as medical, distribution and aerospace and defense were least affected, accounting for the remaining 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 technical and commercial standards we have already established.

Sales to U.S. customers accounted for 57% of our sales in the second quarter of 2009 and 55% in the second quarter of 2008, with the balance of sales to customers primarily in Europe, Canada and Asia. The strengthening of the U.S. dollar against the Euro in the second quarter of 2009 compared to the second quarter of 2008 accounted for approximately 3% of the 41% sales decrease.

ORDER BACKLOG At June 30, 2009, order backlog was approximately $24,700,000 which is down 24% from the same time last year and up 5% from the backlog at December 31, 2008. Backlog is down from the same time last year due to the current worldwide economic recession, which has had a broad impact on the markets to which we sell.

GROSS MARGINS Gross margin as a percentage of revenues was 17% and 27% for the quarters ended June 30, 2009 and 2008, respectively. The decrease in gross margin is primarily a result of declining sales that has impacted our ability to absorb manufacturing overhead costs that are part of our operations. In addition, declining inventory usage as a result of declining sales has caused an increase of $600,000 in inventory adjustments in the second quarter of 2009. This inventory adjustment decreased gross margin by approximately 4% for the second quarter of 2009 and 0% for the second quarter of 2008. The Company has made a number of changes in efforts to mitigate the negative impact of declining sales on our gross margin.

SELLING EXPENSES Selling expenses in the second quarter were $802,000 compared to $1,118,000 for the second quarter last year. The 28% decrease is primarily due to lower commissions and sales incentives as a result of lower sales.

GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses were $1,651,000 in the quarter ended June 30, 2009 compared to $2,422,000 in the quarter ended June 30, 2008. The 32% decrease is a result of reductions in discretionary expenditures and compensation expense, which includes incentive bonuses.

ENGINEERING AND DEVELOPMENT EXPENSES Engineering and development expenses were $990,000 in the second quarter of 2009 and $1,006,000 in the same quarter last year. We continue to maintain strong engineering capabilities to meet our customers' needs and to expand our product base for future opportunities.

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 and recorded $51,000 of fire related losses in the second quarter of 2009.

AMORTIZATION OF INTANGIBLE ASSETS Amortization of intangible assets expense was $258,000 in the quarter ended June 30, 2009 and $268,000 in the same quarter last year.

INTEREST EXPENSE Interest expense for the second quarter ended June 30, 2009 was $20,000 compared to $40,000 in the quarter ended June 30, 2008. The decrease in interest is directly attributable to the decrease in outstanding debt obligations and lower interest rates.

WRITEOFF OF DEFERRED FINANCE COSTS As a result of the amendment of the Company's Credit Agreement that occurred on August 3, 2009, the Company wrote off the deferred finance costs of $86,000 in the second quarter of 2009. These costs remained to be amortized from the Credit Agreement entered into in May 2007.

INCOME TAXES Benefit for income taxes was $5,456,000 for the second quarter of 2009 as opposed to a provision for income taxes of $470,000 for the second quarter last year. The tax benefit in 2009 is primarily driven by the impairment charges that were recorded in the second quarter of 2009. 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 benefit will be realized in future periods when the Company returns to profitability, and as such, has not recorded an additional valuation allowance against the deferred tax asset.

The effective rate used to record income taxes is based on projected results for the fiscal year. The effective income tax rate as a percentage of income (loss) before income taxes was 31% and 32% in the quarters ended June 30, 2009 and 2008. The effective tax rate in the current year is lower than the statutory rate primarily due to permanent differences that result from a goodwill writeoff in a foreign jurisdiction .

Six Months Ended June 30, 2009 compared to Six Months Ended June 30, 2008

                                            For the six months ended
                                                    June 30,                Increase (decrease)
(in thousands)                                 2009            2008            $              %
Revenues                                  $       29,235    $   46,861   $      (17,626 )       (38 )%
Cost of products sold                             24,099        34,295          (10,196 )       (30 )%
Gross margin                                       5,136        12,566           (7,430 )       (59 )%
Gross margin percentage                               18 %          27 %              -           -
Operating costs and expenses:
Selling                                            1,680         2,154             (474 )       (22 )%
General and administrative                         3,376         4,844           (1,468 )       (30 )%
Engineering and development                        1,985         2,002              (17 )        (1 )%
Impairment charges                                15,986             -           15,986         100 %
Fire related losses                                  107             -              107         100 %
Insurance recoveries                                (107 )           -             (107 )      (100 )%
Amortization of intangible assets                    513           533              (20 )        (4 )%
Total operating costs and expenses                23,540         9,533           14,007         147 %
Operating income                                 (18,404 )       3,033           21,437        (707 )%
Interest expense                                      35            99              (20 )       (65 )%
Writeoff of deferred finance costs                    86             -               86         100 %
Other expense, net                                   106            73               33          45 %
(Loss) Income before income taxes                (18,631 )       2,861          (21,492 )      (751 )%
Benefit (Provision) for income taxes               5,786          (936 )          6,722         718 %
Net (loss) income                         $      (12,845 )  $    1,925   $      (14,770 )      (767 )%

NET (LOSS) INCOME The Company reported a net loss of $12,845,000 or $1.71 loss per diluted share for the six months ended June 30, 2009, compared to net income of $1,925,000 or $.26 per diluted share for the six months ended June 30, 2008. The net loss for the six months ended June 30, 2009 includes a total of $15,986,000 ($11,105,000 after tax) of asset impairment charges and $600,000 ($417,000 after tax) of additional inventory reserves - both of which are explained below.

EBITDA, BEFORE IMPAIRMENT CHARGES EBITDA, before impairment charges, was a loss of $799,000 for the first six months of 2009 compared to EBITDA of $4,729,000 for the same period last year. EBITDA, net of Impairment charges is a non-GAAP measurement that consists of income before interest expense, provision for income taxes, depreciation and amortization and impairment charges. See information included in "Non - GAAP Measures" below for a reconciliation of net income to EBITDA, net of Impairment charges

REVENUES Revenues were $29,235,000 for the six months ended June 30, 2009 compared to $46,861,000 for the six months ended June 30, 2008. The 38% decrease in revenues for the first six months of 2009 reflects the effects of the worldwide economic recession, which adversely affected nearly all markets to which we sell our products, though some were adversely affected more than others. Our vehicle, industrial and electronics markets were most affected, accounting for 35% of the 38% decrease in revenues. Other markets, such as medical, distribution and aerospace and defense were least affected, accounting for the remaining 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 technical and commercial standards we have already established.

Sales to U.S. customers accounted for 58% of our sales in the first six months of 2009 and 56% in the same period last year, with the balance of sales to customers primarily in Europe, Canada and Asia. The strengthening of the U.S. dollar against the Euro for the six months ended June 30, 2009 compared to the same period of 2008 accounted for approximately 3% of the 38% sales decrease.

GROSS MARGINS Gross margin as a percentage of revenues was 18% and 27% for the six months ended June 30, 2009 and 2008, respectively. The decrease in gross margin is primarily a result of declining sales that has impacted our ability to absorb manufacturing overhead costs that are part of our operations. In addition, declining inventory usage as a result of declining sales has caused an increase in inventory reserves in 2009. This increase in inventory reserves decreased gross margin by approximately 2% for the first six months of 2009 and 0% for the same period last year. The Company has made a number of changes in efforts to mitigate the negative impact of declining sales on our gross margin.

SELLING EXPENSES Selling expenses were $1,680,000 and $2,154,000 for the six months ended June 30, 2009 and 2008 respectively. The 22% decrease is primarily due to lower commissions and sales incentives as a result of lower sales.

GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses were $3,376,000 for the six months ended June 30, 2009 compared to $4,844,000 for the six months ended June 30, 2008. The 30% decrease is a result of reductions in discretionary expenditures and compensation expense, which includes incentive bonuses.

ENGINEERING AND DEVELOPMENT EXPENSES Engineering and development expenses were $1,985,000 for the six months ended June 30, 2009 and $2,002,000 for the same period last year. We continue to maintain strong engineering capabilities to meet our customers' needs and to expand our product base for future opportunities.

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 and experienced $107,000 of fire related losses for the six months ended June 30, 2009.

AMORTIZATION OF INTANGIBLE ASSETS Amortization of intangible assets expense was $513,000 for the six months ended June 30, 2009 and $533,000 for the same period last year.

INTEREST EXPENSE Interest expense for the six months ended June 30, 2009 was $35,000 compared to $99,000 for the six months ended June 30, 2008. The decrease in interest is directly attributable to the decrease in outstanding debt obligations and lower interest rates.

WRITEOFF OF DEFERRED FINANCE COSTS As a result of the amendment of the Company's Credit Agreement that occurred on August 3, 2009, the Company wrote off the deferred finance costs of $86,000 in the second quarter of 2009. These costs remained to be amortized from the Credit Agreement entered into in May 2007.

INCOME TAXES Benefit for income taxes was $5,786,000 for the six months ended June 30, 2009 as opposed to a provision for income taxes of $936,000 for the same period last year. The tax benefit in 2009 is primarily driven by the impairment charges that were recorded in the second quarter of 2009. 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 benefit will be realized in future periods when the Company returns to profitability, and as such, has not recorded an additional valuation allowance against the deferred tax asset.

The effective rate used to record income taxes is based on projected results for the fiscal year. The effective income tax rate as a percentage of income (loss) before income taxes was 31% and 32% for the six months ended June 30, 2009 and 2008, respectively. The effective tax rate is lower than the statutory rate primarily due to permanent differences that result from a goodwill writeoff in a foreign jurisdiction.

Non-GAAP Measures

. . .