10-Q/A

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q/A

(Amendment No. 1)

QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2011

Commission File Number: 1-11376

The Allied Defense Group, Inc.

(Exact name of Registrant as specified in its charter)

Delaware	04-2281015
(State or other jurisdiction of	(I.R.S. Employer Number)
incorporation or organization)

120 E. Baltimore Street, Suite 2100
Baltimore, MD 21202
(Address of principal executive offices, including zip code)

(410) 385-8155
(Registrant’s telephone number, including area code)

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 þ 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 þ No 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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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

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

The number of shares of registrant’s Common Stock outstanding as of July 31, 2011 was 8,235,195.

Explanatory Note

The sole purpose of this Amendment No. 1 to the Quarterly Report on Form 10-Q (the “Form 10-Q”) of The Allied Defense Group, Inc. for the quarterly period ended June 30, 2011, filed with the Securities and Exchange Commission on August 12, 2011, is to furnish Exhibit 101 to the Form 10-Q in accordance with Rule 405 of Regulation S-T. Exhibit 101 to the Form 10-Q provides the financial statements and related notes from the Form 10-Q formatted in XBRL (Extensible Business Reporting Language).

No other changes have been made to the Form 10-Q. This Amendment No. 1 to the Form 10-Q speaks as of the original filing date of the Form 10-Q, does not reflect events that may have occurred subsequent to the original filing date, and does not modify or update in any way disclosures made in the original Form 10-Q.

Pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

TABLE OF CONTENTS

PART II. OTHER INFORMATION
	Item 6. Exhibits
SIGNATURE
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT

PART II. OTHER INFORMATION

Item 6. Exhibits

Exhibit No.			Description of Exhibits
	31.1	*	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2	*	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32	*	Certification Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	101	**	The following materials from The Allied Defense Group, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, formatted in XBRL (Extensible Business Reporting Language):                                         .

*	Filed with original Form 10-Q on August 12, 2011.
**	Filed herewith.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	THE ALLIED DEFENSE GROUP, INC.
	/s/ Charles S. Ream
Date: September 11, 2011	Charles S. Ream
	Director and Chief Financial Officer

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Consolidated Statements of Changes in Net Assets (Liquidation Basis) (Unaudited) (USD $) In Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2011
Consolidated Statements of Changes in Net Assets (Liquidation Basis) [Abstract]
Net assets on liquidation basis at beginning of period	$ 45,606	$ 45,629
Changes in fair value of net assets in liquidation
Adjust net assets to fair value	(248)	(461)
Adjust estimated costs to be incurred during liquidation	(917)	(727)
Net assets on liquidation basis at end of period	$ 44,441	$ 44,441

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Condensed Consolidated Statements of Operations (Going Concern Basis) (Unaudited) (USD $) In Thousands, except Share data	3 Months Ended	6 Months Ended
	Jun. 30, 2010	Jun. 30, 2010
Condensed Consolidated Statements of Operations (Going Concern Basis) [Abstract]
Revenue
Cost and expenses
Selling and administrative - corporate expenses	2,777	4,468
Operating loss	(2,777)	(4,468)
Other income (expenses)
Interest income	14	33
Net loss on fair value of senior notes and warrants	232	(17)
Other-net	5	(7)
Total other income (expenses)	251	9
Loss from continuing operations before income taxes	(2,526)	(4,459)
Income tax expense		1
Loss from continuing operations	(2,526)	(4,460)
Income (loss) from discontinued operations, net of tax
Loss on sale of subsidiaries	(250)	(250)
Loss from discontinued operations	(6,614)	(9,835)
Total income (loss) from discontinued operations, net of tax	(6,864)	(10,085)
NET LOSS	$ (9,390)	$ (14,545)
Earnings (Loss) per share - basic and diluted:
Net loss from continuing operations	$ (0.31)	$ (0.55)
Net loss from discontinued operations	$ (0.84)	$ (1.23)
Total loss per share - basic and diluted	$ (1.15)	$ (1.78)
Weighted average number of common shares:
Basic and Diluted	8,174,363	8,174,521

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Document and Entity Information (USD $)	6 Months Ended
	Jun. 30, 2011	Jul. 31, 2011	Jun. 30, 2010
Document and Entity Information [Abstract]
Entity Registrant Name	ALLIED DEFENSE GROUP INC
Entity Central Index Key	0000003952
Document Type	10-Q
Document Period End Date	Jun. 30, 2011
Amendment Flag	false
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Public Float			$ 29,471,514
Entity Common Stock, Shares Outstanding		8,235,195

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Earnings (Loss) Per Share

6 Months Ended

Jun. 30, 2011

Earnings (Loss) Per Share [Abstract]

EARNINGS (LOSS) PER SHARE

NOTE 7 — EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share excludes potential common shares and is computed by dividing net earnings (loss) by the weighted average number of common shares outstanding for the period. The computation of diluted earnings (loss) per share excludes the effects of stock options, warrants and restricted stock (unvested stock awards), if such effect is anti-dilutive. For the three and six months ended June 30, 2010, the Company has excluded warrants, unvested stock awards and stock options from the calculation of loss per share from continuing operations, discontinued operations, and total loss since their effect would be anti-dilutive. Consequently, the basic and diluted weighted average number of common shares is equal to 8,174,363 and 8,174,521 for the three and six months ended June 30, 2010, respectively. The table below shows the calculation of basic and diluted earnings (loss) per share for the three and six months ended June 30, 2010:

	Three Months Ended			Six Months Ended
	June 30, 2010			June 30, 2010
Net loss from continuing operations	$	(2,526	)	$	(4,460	)
Net loss from discontinued operations, net of tax		(6,864	)		(10,085	)
Total loss	$	(9,390	)	$	(14,545	)
Number of shares:
Weighted average shares outstanding, basic and diluted		8,174,363			8,174,521
Basic and diluted net loss per share from continuing operations	$	(0.31	)	$	(0.55	)
Basic and diluted net loss per share from discontinued operations		(0.84	)		(1.23	)
Basic and diluted net loss per share from total earnings	$	(1.15	)	$	(1.78	)

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2011

Commitments and Contingencies [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 12 — COMMITMENTS AND CONTINGENCIES

Except as set forth under the heading “Legal Proceedings” in this Note 12, there are no material pending legal proceedings to which Allied or any of its subsidiaries is a party.

The Company entered into employment agreements with certain management personnel at the Company’s subsidiaries and with certain domestic management personnel. These agreements provided for severance payments in the event of termination under certain conditions. In September 2010, the Company paid $1,650 in complete satisfaction of its severance obligations to the Company’s management personnel. Employment agreements with employees at Mecar and Mecar USA were assigned as part of the sale transactions.

The Company leases domestic office space for the former corporate offices under an operating lease which expires in early 2013. During the quarter ended June 30, 2011, the Company entered into a sublease which will offset a portion of the lease expense during the remainder of the lease.

Legal Proceedings

DOJ Subpoena

On January 19, 2010, the Company received a subpoena and communications from the U.S. Department of Justice (“DOJ”) requesting the Company produce documents relating to its dealings with foreign governments. The subpoena stated that it was issued in connection with an ongoing criminal investigation. On the same day, the Company also became aware through a press release issued by the DOJ that an employee of Mecar USA had been indicted by the DOJ for allegedly engaging in schemes to bribe foreign government officials to obtain business. The unsealed indictment of this employee and the DOJ’s press release indicate that the alleged criminal conduct was on behalf of a Decatur, Georgia company which is unrelated to the Company or Mecar USA. Mecar USA’s employment agreement with the employee provided that the employee not actively engage in any other employment, occupation or consulting activity that conflicts with the interests of the Company. In light of the employee’s breach of his employment agreement, Mecar USA terminated his employment on January 20, 2010.

According to the DOJ’s press release, the former employee was arrested on January 19, 2010, along with twenty-one other individuals, after a large-scale undercover operation that targeted foreign bribery in the military and law enforcement products industry. The indictments of the twenty-two individuals allege that the defendants conspired to violate the Foreign Corrupt Practices Act (“FCPA”), conspired to engage in money laundering and engaged in substantive violations of the FCPA.

Subsequently, the Company received notice from the DOJ that indicated that it would request additional documents and expand its review beyond matters relating to the indicted former employee of Mecar USA. The Company understood that the DOJ’s expanded review was in connection with an industry-wide review. The Company has also received inquiries from the SEC regarding this matter.

The Company is cooperating with the DOJ and SEC and complying with the DOJ’s subpoena and SEC’s request for information. The Company’s ongoing compliance with these matters is being overseen by the Company’s Board of Directors. The Board of Directors is being assisted in these matters by independent outside counsel. The Company cannot predict the outcome of these matters or the impact, if any, that they may have on our plan to return the net proceeds of the Chemring sale to our stockholders.

Litigation Initiated by Former Employee

A former executive employee of the Company has instituted a lawsuit in the Circuit Court for Fairfax County, Virginia against the Company and others alleging fraud, constructive fraud, breach of contract, unjust encroachment, tortuous interference with business expectancy and civil conspiracy, all relating to the former executive employee’s change of control severance agreement. The former executive employee seeks damages in excess of $6.0 million. The Company believes this lawsuit is without merit and is vigorously defending it.

Litigation Relating to Consulting Agreement (MECAR)

A former consultant to MECAR has initiated a lawsuit in Belgium against MECAR and the Company for unpaid consulting fees in excess of $0.75 million. The Company believes that any liability with respect to this matter will be borne by MECAR and not the Company.

Indemnification provisions

The Company has sold its SeaSpace, Titan, the VSK Group, GMS and NSM subsidiaries in separate transactions starting with the first transaction closing in 2007. In each transaction, the Company agreed to indemnify the purchaser for periods subsequent to closing for losses arising from breaches of representations, warranties and covenants. Indemnification periods varied based on the particular representation, warranty or covenant covered, the vast majority of which have all expired. As of June 30, 2011, the only remaining indemnification obligations relate to representations and warranties concerning taxes, environmental matters, breaches of title, breaches of authorization and fraud. For SeaSpace, Titan, the VSK Group, GMS and NSM, these indemnification provisions have been capped at $1,000, $950, $6,806 (€5,000), $5,200 and $863, respectively. At June 30, 2011, no amount has been accrued related to these indemnifications as a liability is not deemed probable.

On June 24, 2010, the Company signed a definitive purchase and sale agreement with Chemring Group PLC pursuant to which Chemring agreed to acquire substantially all of the assets of the Company for $59,560 in cash and the assumption of certain liabilities. The purchase and sale agreement contains certain indemnification provisions pursuant to which the Company may be required to indemnify the buyer for a period subsequent to the completion of the sale for any and all losses directly or indirectly based upon, related to, arising out of or in connection with Mecar’s completed contracts, Mecar USA liabilities retained by the Company and any failure by the Company to satisfy all transaction related expenses. The Company’s indemnification liability is limited to, and capped at, the escrowed amount of $15,000 plus the accumulated interest. The Company’s indemnification obligations expire upon the earlier of (i) June 30, 2015 or (ii) the Company’s entry into either a court or administrative order or a Chemring-approved settlement agreement, in either case, finally resolving the matters relating to the DOJ’s subpoena. In the absence of such final resolution, in certain circumstances, up to 50% of the escrowed funds may be released as early as June 24, 2013. At June 30, 2011, no amount has been accrued related to this indemnification as a liability is not deemed probable.

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Discontinued Operations

6 Months Ended

Jun. 30, 2011

Discontinued Operations [Abstract]

DISCONTINUED OPERATIONS

NOTE 3 — DISCONTINUED OPERATIONS

Mecar and Mecar USA

On June 24, 2010, the Company signed a definitive purchase and sale agreement with Chemring Group PLC pursuant to which Chemring agreed to acquire substantially all of the assets of the Company for $59,560 in cash and the assumption of certain liabilities. On September 1, 2010, the Company completed the asset sale to Chemring contemplated by the Agreement. Pursuant to the Agreement, Chemring acquired all of the capital stock of Mecar for approximately $45,810 in cash, and separately Chemring acquired substantially all of the assets of Mecar USA for $13,750 in cash and the assumption by Chemring of certain specified liabilities of Mecar USA. A portion of the purchase price was paid through the repayment of certain intercompany indebtedness owed to the Company that would otherwise have been cancelled at closing. $15,000 of the proceeds from the sale was deposited into escrow to secure the Company’s indemnification obligations under the Agreement. Such amounts are included in Funds held in escrow on the Statement of Net Assets (Liquidation Basis).

The following summarizes the results of discontinued operations for the three and six months ended June 30, 2010 for Mecar and Mecar USA:

	Three Months Ended
	June 30, 2010
	Mecar			Mecar USA			Total
Revenue	$	17,282		$	1,719		$	19,001
Income (loss) before taxes		(6,005	)		(610	)		(6,615	)
Income (loss), net of tax		(6,005	)		(609	)		(6,614	)

	Six Months Ended
	June 30, 2010
	Mecar			Mecar USA			Total
Revenue	$	31,498		$	7,672		$	39,170
Income (loss) before taxes		(9,812	)		(15	)		(9,827	)
Income (loss), net of tax		(9,812	)		(23	)		(9,835	)

NS Microwave Systems, Inc. (NSM)

On August 7, 2009, the Company entered into a Purchase Agreement to sell NSM for $400 in cash and a promissory note in the amount of $1,325 at closing. The note is due 24 months after closing and is subject to a reduction based on certain terms as defined in the Purchase Agreement. On December 31, 2009 and again on June 30, 2010, the Company wrote-off $250, for a total write-off of $500, against the receivable as it was unlikely that one of the Purchase Agreement conditions would be met. As of June 30, 2011, the outstanding amount of the note receivable was $825. The note bears interest at a rate of one-year London Interbank Offered Rate plus 5% subject to a maximum interest cap of 8%.

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Share- Based Compensation

6 Months Ended

Jun. 30, 2011

Share- Based Compensation [Abstract]

SHARE- BASED COMPENSATION

NOTE 9 — SHARE- BASED COMPENSATION

Under the going concern basis of accounting, total share-based compensation was $102 and $145 (including outside directors compensation of $89 and $108) for the three and six months ended June 30, 2010, respectively. The share-based compensation expense for the period includes costs associated with stock options, restricted stock grants, and the compensatory element of the Employee Stock Purchase Plan.

In conjunction with the Company’s signing a definitive Merger Agreement on January 18, 2010, all equity compensation plans were suspended pending the Company’s merger. Thereafter, no new equity awards were made. With the June 24, 2010 signing of the definitive Sale Agreement, the original Merger Agreement was terminated. The Company’s equity compensation plans are no longer suspended, although no new issuances have been made since June 24, 2010. As of June 30, 2011 and December 31, 2010, there are no outstanding options.

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Industry Segments

6 Months Ended

Jun. 30, 2011

Industry Segments [Abstract]

INDUSTRY SEGMENTS

NOTE 10— INDUSTRY SEGMENTS

Prior to September 2010, the Company operated within two operating segments: Mecar and Mecar USA. In September 2010, the Company completed the divesture of Mecar and Mecar USA. As a result, Allied no longer has operating segments. The Company’s continuing operations include only those expenses incurred to support the Company’s corporate headquarters and its non-operating European subsidiaries.

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Other - Net

6 Months Ended

Jun. 30, 2011

Other - Net [Abstract]

OTHER - NET

NOTE 8 — OTHER — NET

Other income (expense) included in the Company’s consolidated statements of operations for the three and six months ended June 30, 2010:

	Three Months Ended			Six Months Ended
	June 30, 2010			June 30, 2010
Net currency transaction gains	$	1		$	6
Interest expense		(4	)		(21	)
Miscellaneous — net		8			8
	$	5		$	(7	)

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Condensed Consolidated Financial Statements

6 Months Ended

Jun. 30, 2011

Principles of Consolidation/Condensed Consolidated Financial Statements [Abstract]

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Business Operations

The Allied Defense Group Inc. (“Allied” or the “Company”), a Delaware corporation, previously conducted a multinational defense business focused on the manufacture and sale of ammunition and ammunition related products for use by the U.S. and foreign governments. Allied’s business was conducted by its two wholly owned subsidiaries: MECAR sprl, formerly Mecar S.A. (“Mecar”), and ADG Sub USA, Inc., formerly Mecar USA, Inc. (“Mecar USA”).

Plan of Dissolution and Liquidation

On June 24, 2010, the Company signed a definitive purchase and sale agreement (the “Agreement”) with Chemring Group PLC (“Chemring”) pursuant to which Chemring agreed to acquire substantially all of the assets of the Company for $59,560 in cash and the assumption of certain liabilities. On September 1, 2010, the Company completed the asset sale to Chemring contemplated by the Agreement. Pursuant to the Agreement, Chemring acquired all of the capital stock of Mecar for approximately $45,810 in cash, and separately Chemring acquired substantially all of the assets of Mecar USA for $13,750 in cash and the assumption by Chemring of certain specified liabilities of Mecar USA. A portion of the purchase price was paid through the repayment of certain intercompany indebtedness owed to the Company that would otherwise have been cancelled at closing. $15,000 of the proceeds from the sale was deposited into escrow to secure the Company’s indemnification obligations under the Agreement. The $15,000 of cash plus earned interest income remains in escrow as of June 30, 2011.

In conjunction with the Agreement, the Board of Directors of the Company unanimously approved the dissolution of the Company pursuant to a Plan of Complete Liquidation and Dissolution (“Plan of Dissolution”). The Company’s stockholders approved the Plan of Dissolution on September 30, 2010. In response to concerns of certain of the Company’s stockholders, the Company agreed to delay the filing of a certificate of dissolution with the Delaware Secretary of State so that the stockholders may continue to transfer the Company’s common stock while the Company resolves the matters relating to a U.S. Department of Justice (“DOJ”) subpoena. The Company expects to file a Certificate of Dissolution with the Delaware Secretary of State on or about August 31, 2011.

On September 2, 2010, the Company received a staff determination letter (the “Staff Determination”) from NYSE Amex LLC (the “Exchange”). The Staff Determination stated that the Exchange determined that the Company no longer complied with the requirements for continued listing set forth in NYSE Amex LLC Company Guide Section 1003(c)(i) as a result of the sale of substantially all of the Company’s assets. On September 20, 2010, the Company announced that trading of shares of the Company’s common stock had been transferred from the NYSE Amex to the OTCQB™ Marketplace effective September 20, 2010. The Company’s trading symbol is now ADGI. Upon filing the Certificate of Dissolution, the Company’s shares will cease to be publicly traded.

Basis of Presentation

Liquidation Basis of Accounting

With the authorization of the Plan of Dissolution, the Company adopted the liquidation basis of accounting effective as the close of business on September 30, 2010. The liquidation basis of accounting will continue to be used by the Company until such time that the plan is terminated.

Under the liquidation basis of accounting, the carrying amounts of assets as of the close of business on September 30, 2010, the date of the authorization of the Plan of Dissolution by the Company, were adjusted to their estimated net realizable values and liabilities, including the estimated costs associated with implementing the Plan of Dissolution, were stated at their estimated settlement amounts. Such value estimates were updated by the Company as of December 31, 2010 and June 30, 2011. The majority of net assets in liquidation at December 31, 2010 and June 30, 2011 were highly liquid and did not require significant adjustment as their estimated net realizable value approximates their current book value.

Consolidated Statements of Net Assets in Liquidation and Changes in Net Assets in Liquidation are the principal financial statements presented under the liquidation basis of accounting. The valuations of assets at their net realizable value and liabilities at their anticipated settlement amounts represent estimates, based on present facts and circumstances associated with carrying out the Plan of Dissolution based on the assumptions set forth below. The actual values and costs associated with carrying out the Plan of Dissolution are expected to differ from the amounts shown herein because of the inherent uncertainty and will be greater than or less than the amounts recorded. Such differences may be material. In particular, the estimates of the Company’s costs will vary with the length of time it operates under the Plan of Dissolution. Accordingly, it is not possible to predict the aggregate amount or timing of future distributions to stockholders, as long as the Plan of Dissolution is in effect and no assurance can be given that the amount of liquidating distributions to be received will equal or exceed the estimate of net assets in liquidation presented in the accompanying Statement of Net Assets in Liquidation.

The estimated net costs to be incurred during liquidation were $3,390 as of June 30, 2011. The $3,390 in net remaining costs consists of $365 in compensation for former employees and remaining directors; $809 for compliance and other office costs, including resident filing fees and costs to settle remaining leases; $401 for insurance; $1,865 in fees for professional service providers including legal representation relating to the DOJ subpoena; and income tax payments not to exceed $150 for the repatriation of cash balances held in foreign countries; offset by $200 estimated to be received on our cash and short-term investment balances during liquidation. Such estimates are based on assumptions regarding the Company’s ability to settle outstanding obligations to creditors, resolve outstanding litigation, settle remaining leases and the ultimate timing of distributions to its stockholders, but does not include any settlement amounts, fines or penalties, if any, that the Company might incur as a result of the DOJ subpoena or any other legal proceedings. These estimates will be adjusted from time to time as projections and assumptions change.

Following the September 1, 2010 sale of substantially all of our assets, the Company’s liquidation basis accounting has been based on the assumption that the Company would conclude the DOJ/SEC inquiries and make final distributions to stockholders prior to the end of 2012. Accordingly, the estimate of net costs to be incurred during liquidation included anticipated costs to be incurred through December 31, 2012. Due to events beyond the Company’s control, including a recent mistrial in the first of several expected trials of individual defendants implicated in DOJ’s investigation, there has been a delay in the Company’s ability to resume discussions with DOJ and the SEC and the Company has had no substantive contact with either agency since early 2011. For this reason, and based on advice from independent outside counsel, the Company is now estimating that conclusion of the DOJ/SEC inquiries and final distributions to stockholders will not occur until 2013. As a result, the estimate of net costs to be incurred during liquidation now includes estimated costs for 2013.

Going Concern Basis of Accounting

For all periods preceding the authorization of the Plan of Dissolution, the Company’s financial statements are also presented on the going concern basis of accounting. Such financial statements reflect the historical results of operations and changes in cash for the period from January 1, 2010 to June 30, 2010.

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Short-Term Investments

6 Months Ended

Jun. 30, 2011

Short-Term Investments [Abstract]

SHORT-TERM INVESTMENTS

NOTE 4 — SHORT-TERM INVESTMENTS

Cash in excess of funds required for immediate use by the Company have been invested with the primary goal to preserve capital. As such, the funds are invested in short-term, high-quality, fixed-income securities and are accounted for at fair value. As of June 30, 2011 and December 31, 2010, the fair value of these investments was $31,247 and $18,801 respectively, and was included in short-term investments on the Balance Sheet. An unrealized loss of $343 and $526 was recorded for the three and six months ending June 30, 2011.

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Warrants

6 Months Ended

Jun. 30, 2011

Warrants [Abstract]

WARRANTS

NOTE 5 — WARRANTS

On March 6, 2006, in conjunction with the issuance of convertible notes, the Company issued detachable warrants to the purchasers exercisable for an aggregate of 226,800 shares of Allied common stock. At December 31, 2010, the Company determined the fair value of the warrants was $0. No warrants have been exercised. All warrants expired on March 9, 2011.

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Fair Value Measurements

6 Months Ended

Jun. 30, 2011

Fair Value Measurements [Abstract]

FAIR VALUE MEASUREMENTS

NOTE 6 — FAIR VALUE MEASUREMENTS

The Company values its assets and liabilities using the methods of fair-value as described in ASC 820, Fair Value Measurements and Disclosures. In accordance with ASC 820, the Company determines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company generally applies the income approach to determine fair value. This method uses valuation techniques to convert future amounts to a single present amount. The measurement is based on the value indicated by current market expectations about those future amounts.

ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to active markets for identical assets and liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). We classify fair value balances based on the observability of those inputs. The three levels of the fair value hierarchy are as follows:

• Level 1 — Observable inputs such as quoted prices in active markets for identical assets or liabilities.

• Level 2 — Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and amounts derived from valuation models where all significant inputs are observable in active markets.

• Level 3 — Unobservable inputs that reflect management’s assumptions.

For disclosure purposes, assets and liabilities are classified in their entirety in the fair value hierarchy level based on the lowest level of input that is significant to the overall fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the placement within the fair value hierarchy levels.

The Company believes the fair value of its financial instruments consisting of cash, cash equivalents, and short-term investments, adjusted to recognize unrealized gains and losses, approximate their carrying values due to the relatively short maturity of these instruments.

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Condensed Consolidated Statement of Cash Flows (Going Concern Basis) (Unaudited) (USD $) In Thousands	6 Months Ended
	Jun. 30, 2010
Cash flows from operating activities
Net loss	$ (14,545)
Less: Loss on sale of subsidiaries	250
Less: Discontinued operations, net of tax	9,835
Loss from continuing operations	(4,460)
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities, net of divestitures:
Depreciation and amortization	9
Net gain related to fair value of warrants	17
Common stock and stock option awards	165
Deferred director stock awards	43
(Increase) decrease in operating assets and increase (decrease) in liabilities, net of effects from discontinued businesses:
Prepaid and other current assets	273
Accounts payable, accrued liabilities and other current liabilities	(474)
Deferred compensation	3
Income taxes	(222)
Net cash used in operating activities - continuing operations	(4,646)
Net cash used in operating activities - discontinued operations	(4,006)
Net cash used in operating activities	(8,652)
Cash flows from investing activities
Net cash used in investing activities - discontinued operations	(1,181)
Net cash used in investing activities	(1,181)
Cash flows from financing activities
Increase from short-term borrowing	9,919
Repayment on capital lease obligations	(2)
Net cash provided by financing activities - continuing operations	9,917
Net cash used in financing activities - discontinued operations	(1,469)
Net cash provided by financing activities	8,448
Effects of exchange rate on cash	(852)
NET DECREASE IN CASH AND CASH EQUIVALENTS	(2,237)
Cash and cash equivalents at beginning of period	9,021
Cash and cash equivalents at end of period	6,784
Cash paid during the period for
Interest	2,578
Taxes	$ 231

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Principles of Consolidation

6 Months Ended

Jun. 30, 2011

Principles of Consolidation/Condensed Consolidated Financial Statements [Abstract]

PRINCIPLES OF CONSOLIDATION

NOTE 2 — PRINCIPLES OF CONSOLIDATION

As of June 30, 2011, the consolidated financial statements of the Company include the accounts of Allied and its wholly-owned subsidiaries, which are as follows:

• ARC Europe, a Belgian company,

• Allied Research BV (“BV”), a Dutch company,

• Allied Research Cooperative (“Coop”) and,

• ADG Sub USA, Inc. (“Mecar USA”)

On September 1, 2010, Chemring acquired the assets of Mecar USA and the stock of Mecar, a wholly owned subsidiary of ARC Europe. As a result of the acquisition, the Net Income (Loss) for Mecar and Mecar USA has been reclassified to net income (loss) from discontinued operations on the Statement of Operations for the period from January 1, 2010 to June 30, 2010.

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Provision for Taxes

6 Months Ended

Jun. 30, 2011

Provision for Taxes [Abstract]

PROVISION FOR TAXES

NOTE 11 — PROVISION FOR TAXES

The Company regularly reviews the recoverability of its deferred tax assets and establishes a valuation allowance as deemed appropriate. Realization of deferred tax assets is dependent upon generation of sufficient income by the Company in the jurisdictions in which it has operations and, in some cases, by specific location. Because the Company experienced losses in previous years and continued losses in the current year, management recorded a full valuation allowance against the Company’s net deferred tax asset as of June 30, 2011.

As of June 30, 2011 and December 31, 2010, the Company had no unrecognized tax liabilities or benefits, nor did it have any that would have an effect on the effective tax rate. Income taxes are provided based on the liability method for financial reporting purposes. For the six months ended June 30, 2011, there was no interest or penalties recorded.

In Belgium, the Company is still open to examination by the Belgian tax authorities from 2007 forward. In the United States, the Company is still open to examination from 2007 forward, although carryforward tax attributes that were generated prior to 2007 may still be adjusted upon examination by the U.S. tax authorities if they either have been or will be utilized.

Currently, the Company has significant net deferred tax assets that have a full valuation allowance in accordance with ASC 740 Accounting for Income Taxes. As of December 31, 2010, the Company provided for U.S. tax on foreign earnings of approximately $25,475 that is expected to be repatriated. As of June 30, 2011, $13,757 had been successfully repatriated. In anticipation of the repatriation, the NOL carryforwards are no longer included in the deferred tax assets. Income taxes related to repatriation of cash held in foreign countries is not expected to exceed $350 ($200 paid to date; the balance included in the estimated costs for liquidation). As of June 30, 2010, the fair value of net deferred tax assets is zero due to full valuation allowance.

The Company may undergo, or may already have undergone, an “ownership change” within the meaning of Section 382 of the Internal Revenue Code, which could affect the Company’s ability to offset gains realized in the asset sale against net operating losses and foreign tax credit carryovers. If it is determined that an ownership change has occurred, this could significantly increase the tax expense incurred from the sale transactions.

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Consolidated Statements of Net Assets (Liquidation Basis) (USD $) In Thousands, except Share data	Jun. 30, 2011	Dec. 31, 2010
ASSETS
Cash and cash equivalents	$ 737	$ 14,462
Short-term investments	31,247	18,801
Prepaid and other current assets	406	606
Notes receivable	825	875
Property and Equipment, net	0	2
Funds held in escrow	15,010	15,003
TOTAL ASSETS	48,225	49,749
LIABILITIES
Estimated net costs to be incurred during liquidation	3,390	3,564
Accounts payable	83	68
Accrued liabilities	223	399
Income taxes payable	0	2
Other liabilities	88	87
TOTAL LIABILITIES	3,784	4,120
NET ASSETS IN LIQUIDATION	$ 44,441	$ 45,629
NUMBER OF SHARES OUTSTANDING	8,235,195	8,235,195
NET ASSETS IN LIQUIDATION PER SHARE	$ 5.40	$ 5.54