EX-9.1 2 v128219_ex9-1.htm Unassociated Document
Exhibit 9.1

UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following unaudited pro forma financial statements give effect to the October 1, 2008 sale of GMS. The unaudited pro forma condensed consolidated balance sheet and statements of operations filed with this report are presented for illustrative purposes only. The unaudited pro forma condensed consolidated balance sheet as of June 30, 2008 has been prepared to reflect the sale of GMS as if such sale had taken place on such date, and is not necessarily indicative of the financial position of the Company had the sale occurred on that date. The unaudited pro forma condensed consolidated results of operations for the six months ended June 30, 2008 and the year ended December 31, 2007, have been prepared assuming that the transaction occurred on January 1, 2007 and are not necessarily indicative of the results of operations for future periods or the results that actually would have been realized had we sold GMS as of those dates. The unaudited pro forma financial statements, including notes thereto, should be read in conjunction with the historical financial statements of the Company included in our Form 10-K for the year ended December 31, 2007 and the unaudited financial statements filed in our Form 10-Q for the quarters ended March 31, 2008 and June 30, 2008.

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The Allied Defense Group, Inc.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(Thousands of Dollars, except per share and share data)
       
   
June 30, 2008
  
ASSETS
  
Historical
 
GMS Disposition
      
Pro Forma
  
Current Assets
                  
Cash and cash equivalents 
  
$
13,023
  
$
17,708
    
(1) (6)
 
$
30,731
  
Restricted cash 
    
8,687
   
-
         
8,687
 
Accounts receivable, net 
    
16,283
   
(1,327
)
  
(2)
 
  
14,956
 
Costs and accrued earnings on uncompleted contracts 
    
67,432
   
-
         
67,432
 
Inventories, net 
    
32,571
   
(3,276
)
  
(2)
 
  
29,295
 
Prepaid and other current assets 
    
8,725
   
(212
)
  
(2)
 
  
8,513
 
 Total current assets
    
146,721
   
12,893
         
159,614
 
                           
Property, Plant and Equipment, net
    
24,592
   
(431
)
  
(2)
 
  
24,161
 
                           
Other Assets
                          
Intangible assets, net 
    
7,454
   
(6,971
)
  
(2)
 
  
483
 
Goodwill 
    
9,932
   
(6,437
)
  
(2)
 
  
3,495
 
Other assets 
    
263
   
-
         
263
 
 Total other assets
    
17,649
   
(13,408
)
        
4,241
 
                           
TOTAL ASSETS
  
$
188,962
  
$
(946
)
      
$
188,016
  
                           
                           
CURRENT LIABILITIES
                          
Current maturities of senior secured convertible notes 
  
$
19,426
  
$
-
    
(6)
 
$
19,426
  
Bank overdraft facility 
    
18,143
   
-
         
18,143
 
Current maturities of long-term debt 
    
5,025
   
(3,311
)
  
(5)
 
  
1,714
 
Accounts payable 
    
20,144
   
(307
)
  
(2)
 
  
19,837
 
Accrued liabilities 
    
22,394
   
(297
)
  
(2)
 
  
22,097
 
Belgium social security 
    
5,919
   
-
         
5,919
 
Customer deposits 
    
37,765
   
(185
)
  
(2)
 
  
37,580
 
Foreign exchange contracts 
    
149
   
-
         
149
 
Income taxes 
    
4,259
   
75 
    
(3)
 
  
4,334
 
 Total current liabilities
    
133,224
   
(4,025
)
        
129,199
 
                           
LONG TERM OBLIGATIONS
                          
Long-term debt, less current maturities and unamortized discount 
    
8,802
   
-
         
8,802
 
Derivative instrument 
    
195
   
-
         
195
 
Other long-term liabilities 
    
720
   
-
         
720
 
 Total long-term obligations
    
9,717
   
-
         
9,717
 
                           
TOTAL LIABILITIES
    
142,941
   
(4,025
)
        
138,916
 
                           
CONTINGENCIES AND COMMITMENTS
                          
                           
STOCKHOLDERS' EQUITY
                          
                           
Preferred stock, no par value; authorized 1,000,000 shares; none issued 
    
-
   
-
         
-
 
Common stock, par value, $.10 per share; authorized 30,000,000 shares; issued and outstanding, 8,024,851 at June 30, 2008 and 8,013,161 at December 31, 2006 
    
802
   
-
         
802
 
Capital in excess of par value 
    
55,623
   
-
         
55,623
 
Retained deficits 
    
(30,298
)
  
3,079
   
(3)
 
    (27,219 ) 
Accumulated other comprehensive income 
    
19,894
   
-
         
19,894
 
 Total stockholders' equity
    
46,021
   
3,079
         
49,100
 
                           
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
  
$
188,962
  
$
(946
)
      
$
188,016
  

The accompanying notes are an integral part of this unaudited pro forma condensed consolidated financial data.
 
4

The Allied Defense Group, Inc.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Thousands of Dollars, except per share and share data)
                    
   
 Six months ended June 30, 2008
  
   
 Historical
 
GMS Disposition
      
Pro Forma
  
                    
Revenues
  
$
76,375
    
(5,658
)
  
(4
)
$
70,717
  
                           
Cost and expenses
                          
Cost of sales 
    
58,406
   
(1,812
)
  
(4
)
  
56,594
 
Selling and administrative 
    
13,280
   
(1,673
)
  
(4
)
  
11,607
 
Research and development 
    
2,270
   
(886
)
  
(4
)
  
1,384
 
                           
 Operating income (loss)
    
2,419
   
(1,287
)
        
1,132
 
                           
Other income (expenses)
                          
Interest income 
    
426
   
(16
)
  
(4
)
  
410
 
Interest expense 
    
(4,245
)
  
184 
      (5 )   
(4,061
)
Net loss on fair value of senior convertible notes and warrants 
    
(527
)
  
-
         
(527
)
Other-net 
    
(110
)
  
(7
)
  
(4
)
  
(117
)
     
(4,456
)
  
161
 
        
(4,295
)
                           
 Loss from continuing operations before income taxes
    
(2,037
)
  
(1,126
)
        
(3,163
)
                           
Income tax expense
    
323
   
(1
)
  
(4
)
  
322
 
                           
Loss from continuing operations
    
(2,360
)
  
(1,125
)
        
(3,485
)
                           
Income (loss) from discontinued operations, net of tax
                          
 Gain on sale of subsidiaries
    
113
   
-
         
113
 
 Loss from discontinued operations
    
(142
)
  
-
         
(142
)
     
(29
)
  
-
         
(29
)
                           
NET LOSS 
  
$
(2,389
)
  
(1,125
)
        
(3,514
)
                           
Loss per share - basic and diluted:
                          
                           
Net loss from continuing operations 
  
$
(0.29
)
              
(0.44
)
Net loss from discontinued operations 
    
-
               
-
 
 Total loss per share - basic and diluted
  
$
(0.29
)
              
(0.44
)
                           
Weighted average number of common shares:
                          
                           
Basic and diluted 
    
8,017,418
               
8,017,418
 

The accompanying notes are an integral part of this unaudited pro forma condensed consolidated financial data.
 
5

The Allied Defense Group, Inc.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Thousands of Dollars, except per share and share data)
                    
   
 Year ended December 31, 2007
  
   
 Historical
 
GMS Disposition
      
Pro Forma
  
                    
Revenues
  
$
55,618
    
(9,945
)
  
(4
)
$
45,673
  
                           
Cost and expenses
                          
Cost of sales 
    
49,949
   
(2,881
)
  
(4
)
  
47,068
 
Selling and administrative 
    
27,387
   
(3,008
)
  
(4
)
  
24,379
 
Research and development 
    
4,106
   
(1,645
)
  
(4
)
  
2,461
 
                           
 Operating income (loss)
    
(25,824
)
  
(2,411
)
        
(28,235
)
                           
Other income (expenses)
                          
Interest income 
    
728
   
(20
)
  
(4
)
  
708
 
Interest expense 
    
(11,588
)
  
697 
    
(5
)
  
(10,891
)
Net loss on fair value of senior convertible notes and warrants 
    
(6,663
)
  
-
         
(6,663
)
Other-net 
    
(550
)
  
(3
)
  
(4
)
  
(553
)
     
(18,073
)
  
674
 
        
(17,399
)
                           
 Loss from continuing operations before income taxes
    
(43,897
)
  
(1,737
)
        
(45,634
)
                           
Income tax expense
    
4
   
(1
)
  
(4
)
  
3
 
                           
Income (Loss) from continuing operations
    
(43,901
)
  
(1,736
)
        
(45,637
)
                           
Income (loss) from discontinued operations, net of tax
                          
Gain on sale of subsidiaries 
    
29,314
   
-
         
29,314
 
Loss from discontinued operations 
    
(6,691
)
  
-
         
(6,691
)
     
22,623
   
-
         
22,623
 
                           
NET LOSS 
  
$
(21,278
)
$
(1,736
)
        
(23,014
)
                           
Loss per share - basic and diluted:
                          
                           
Net loss from continuing operations 
  
$
(6.06
)
              
(6.30
)
Net loss from discontinued operations 
    
3.12
               
3.12
 
 Total loss per share - basic and diluted
  
$
(2.94
)
              
(3.18
)
                           
Weighted average number of common shares:
                          
                           
Basic and diluted 
    
7,244,983
               
7,244,983
 
 
The accompanying notes are an integral part of this unaudited pro forma condensed consolidated financial data.
 
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The Allied Defense Group, Inc.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of Dollars)
 
BASIS OF PRESENTATION

The accompanying unaudited pro forma condensed consolidated financial statements give effect to the pro forma adjustments necessary to reflect the disposition of Global Microwave Systems, Inc. as if the disposition was effective for the periods presented in the unaudited pro forma condensed consolidated statements of operations and as of June 30, 2008, in the unaudited pro forma condensed consolidated balance sheet. The Company’s historical amounts represent the Company’s consolidated balance sheet and statements of operations derived from our Annual report on Form 10-K for the year ended December 31, 2007 and quarterly report on Form 10-Q for the period ended June 30, 2008.

PRO FORMA ADJUSTMENTS

The unaudited pro forma condensed consolidated statements of operations and balance sheet reflect the effect of the following pro forma adjustments:

(1)
To record the net cash received upon the sale of GMS, as follows:
   

Gross cash proceeds^
    $
26,000
 
         
Funds held in escrow
    
(2,500
)
         
Repayment of GMS acquisition promissory note, including all accrued and unpaid interest
    
(3,392
)
         
Investment banker, legal, accounting and other transaction costs, including management incentives
    
(2,400
)
         
Net cash received
    $
17,708
 

 
^ - Total gross cash proceeds of $26,000 is subject to a final working capital adjustment which will be made within 60 days of closing.

(2)
To remove the assets and liabilities of GMS at June 30, 2008.
 
7

The Allied Defense Group, Inc.
Unaudited Pro Forma Condensed Consolidated Financial Data
(Thousands of Dollars)
   
(3)
To record the estimated gain on the sale of GMS, as follows:
         
Net cash received
    $
17,708
 
Plus: repayment of acquisition promissory note
    
3,392
 
Net proceeds received in sale of GMS
    
21,100
 
Net assets sold
    
(17,865
)
Expenses associated with repayment of the promissory note*      (81 ) 
         
Gain before income taxes
    
3,154
 
         
Income taxes
    
(75
)
         
Net gain+
    $
3,079
 

 
+ - The Asset Purchase Agreement requires a total of $2,500 be held in escrow pending the resolution of certain contingencies. Such amounts have been excluded from the net pro forma gain calculation in the table above. If these contingencies are resolved in favor of the Company, the additional consideration received will serve to increase the Company's gain on the disposal of GMS.
   
 
*- Expenses associated with the repayment include $39 of unamortized discount on the note and accrued  interest of $42.
   
(4)
To remove revenue and expenses of GMS for the six months ended June 30, 2008 and the year ended December 31, 2007.
 
 
(5)
To record the repayment of the GMS acquisition promissory note in the principal amount of $3,350 less the associated unamortized discount of $39 at June 30, 2008.
 
 
(6)
The pro forma financial statements do not reflect a potential partial redemption of the senior secured convertible notes. The note holders have the right to elect for the Company to use a portion of the net proceeds of the GMS sale to redeem a portion of the notes. The Company anticipates a maximum potential payment of $10,908 which, if elected, would thereby reduce pro forma cash and cash equivalents as well as pro forma current maturities of senior convertible notes by this amount. In addition, pro forma interest expense for the six months ended June 30, 2008 and for the year ended December 31, 2007 would be reduced by $898 and $1,416, respectively.
 
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