UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
  Form 10-Q
  QUARTERLY REPORT PURSUANT TO
    SECTION 13 or 15(d)
 OF THE SECURITIES EXCHANGE ACT
    OF 1934
  For the quarterly period ended March 31, 2008
   Commission File
    Number: 1-11376
  The Allied Defense Group,
    Inc.
 (Exact name of Registrant as
    specified in its charter)
   Delaware(State or other jurisdiction
    of
    incorporation or organization)

04-2281015(I.R.S. Employer
    Number)   8000 Towers Crescent Drive, Suite 260
 Vienna, Virginia 22182
 (Address of principal executive
    offices, including zip code)
   (703) 847-5268
 (Registrants telephone
    number, including area code)
   þ o
  Rule 12b-2
  Large accelerated
    filer o

Accelerated
    filer o

Non-accelerated
    filer o

Smaller reporting
    company þ(Do not check if a smaller reporting company)   Rule 12b-2 o þ




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##### 





THE
    ALLIED DEFENSE GROUP, INC.
  INDEX
  PAGENUMBERPART I. FINANCIAL INFORMATION  UNAUDITEDItem 1.


Financial Statements (Unaudited)Condensed Consolidated Balance Sheets at March 31, 2008 and
    December 31, 2007


2Condensed Consolidated Statements of Operations for the three
    months ended March 31, 2008 and 2007


3Condensed Consolidated Statements of Stockholders Equity
    and Comprehensive Income (Loss) for the three months ended
    March 31, 2008 and the year ended December 31, 2007


4Condensed Consolidated Statements of Cash Flows for the three
    months ended March 31, 2008 and 2007


5Notes to Unaudited Condensed Consolidated Financial Statements


7Item 2.


Managements Discussion and Analysis of Financial Condition
    and Results of Operations


24Item 3.


Quantitative and Qualitative Disclosures About Market Risk


36Item 4T.


Controls and Procedures


36PART II. OTHER INFORMATIONItem 1.


Legal Proceedings


37Item 1A.


Risk Factors


37Item 2.


Unregistered Sales of Equity Securities and Use of Proceeds


37Item 3.


Defaults Upon Senior Securities


37Item 4.


Submission of Matters to a Vote of Security Holders


37Item 5.


Other Information


37Item 6.


Exhibits


38Signatures


39




---



##### 



The
    Allied Defense Group, Inc.
 CONDENSED
    CONSOLIDATED BALANCE SHEETS (Unaudited)
    (Thousands of Dollars, except per share and share
    data)
  March 31,


December 31,2008


2007(a)ASSETSCurrent AssetsCash and cash equivalents

$
18,353


$
21,750Restricted cash


13,965



13,052Accounts receivable, net


8,713



9,339Costs and accrued earnings on uncompleted contracts


54,851



39,313Inventories, net


29,745



24,706Prepaid and other current assets


4,854



4,194Assets held for sale






4,599Total current assets


130,481



116,953PROPERTY, PLANT AND EQUIPMENT, NET


25,682



25,059Other AssetsIntangible assets, net


7,733



8,011Goodwill


9,932



9,932Other assets


429



296Total other assets


18,094



18,239TOTAL ASSETS

$
174,257


$
160,251CURRENT LIABILITIESCurrent maturities of senior secured convertible notes

$
20,584


$
13,610Bank overdraft facility


11,645



7,239Current maturities of long-term debt


9,950



4,133Accounts payable


21,838



16,806Accrued liabilities


19,005



15,871Belgium social security


6,396



8,307Customer deposits


25,374



26,835Income taxes


4,066



3,680Liabilities held for sale






2,051Total current liabilities


118,858



98,532LONG TERM OBLIGATIONSLong-term debt, less current maturities and unamortized discount


9,458



9,439Senior secured convertible notes, less current maturities






5,782Derivative instrument


224



183Other long-term liabilities


706



660Total long-term obligations


10,388



16,064TOTAL LIABILITIES


129,246



114,596CONTINGENCIES AND COMMITMENTSSTOCKHOLDERS EQUITYPreferred 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, 8,021,491 at
    March 31, 2008 and 8,013,161 at December 31, 2007


802



801Capital in excess of par value


55,531



55,355Retained deficit


(31,204
)


(27,909
)Accumulated other comprehensive income


19,882



17,408Total stockholders equity


45,011



45,655TOTAL LIABILITIES AND STOCKHOLDERS EQUITY

$
174,257


$
160,251     (a)
    
    Condensed consolidated balance sheet as of December 31,
    2007, has been derived from audited consolidated financial
    statements.   2




---



##### 



The
    Allied Defense Group, Inc.
 CONDENSED
    CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
    (Thousands of Dollars, except per share and share
    data)
  Three Months EndedMarch 31,2008


2007Revenue

$
30,101


$
9,439Cost and expensesCost of sales


22,739



10,487Selling and administrative


6,496



6,970Research and development


1,087



666Operating loss


(221
)


(8,684
)Other income (expenses)Interest income


168



262Interest expense


(1,800
)


(2,821
)Net loss on fair value of senior convertible notes and warrants


(1,233
)


(3,374
)Other-net


(50
)


20(2,915
)


(5,913
)Loss from continuing operations before income taxes


(3,136
)


(14,597
)Income tax expense


130



7Loss from continuing operations


(3,266
)


(14,604
)Income (loss) from discontinued operations, net of taxGain on sale of subsidiaries


113



Loss from discontinued operations


(142
)


(3,250
)(29
)


(3,250
)NET LOSS

$
(3,295
)

$
(17,854
)Loss per share  basic and diluted:Net loss from continuing operations

$
(0.41
)

$
(2.26
)Net loss from discontinued operations


(0.00
)


(0.50
)Total loss per share  basic and diluted

$
(0.41
)

$
(2.76
)Weighted average number of common shares:Basic and Diluted


8,013,156



6,469,969    3




---



##### 



The
    Allied Defense Group, Inc.
 CONDENSED
    CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
    AND COMPREHENSIVE INCOME (LOSS) (Unaudited)
    (Thousands of Dollars, except per share and share
    data)
  AccumulatedPreferred


Common Stock


Capital


Retained


Other


TotalStock, No





$.10


in Excess


Earnings


Comprehensive


StockholdersPar Value


Shares


Par value


of Par value


(Deficit)


(Loss) Income


EquityBalance at January 1, 2007

$




6,440,944


$
644


$
43,312


$
(6,631
)

$
18,022


$
55,347Common stock awards






59,986



6



710











716Retired stocks






(1,668
)






(14
)










(14
)Employee stock purchase plan purchases






47,431



4



358











362Common stock converted from Notes






150,500



15



1,392











1,407Common stock issued to noteholders






1,288,000



129



9,415











9,544Directors deferred stock compensation














(275
)










(275
)Issue of stock options














216











216Exercise of warrants






27,968



3



241











244Comprehensive loss:Net loss for the twelve months ended


















(21,278
)






(21,278
)Currency translation adjustment related to sale of The VSK Group






















(4,491
)


(4,491
)Currency translation adjustment






















3,877



3,877Total comprehensive loss


























(21,892
)Balance at December 31, 2007

$




8,013,161


$
801


$
55,355


$
(27,909
)

$
17,408


$
45,655Common stock awards






(150
)






95











95Retired stocks






(1,351
)






(9
)










(9
)Employee stock purchase plan purchases






9,831



1



57











58Issue of stock options














15











15Directors deferred stock compensation














18











18Comprehensive loss:Net loss for the three months ended


















(3,295
)






(3,295
)Currency translation adjustment






















2,474



2,474Total comprehensive loss


























(821
)Balance at March 31, 2008

$




8,021,491


$
802


$
55,531


$
(31,204
)

$
19,882


$
45,011    4




---



##### 



The
    Allied Defense Group, Inc.
  CONDENSED
    CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
    (Thousands of Dollars)
  Three Months Ended March 31,2008


2007Cash flows from operating activitiesNet loss

$
(3,295
)

$
(17,854
)Less: Gain on sale of subsidiaries


(113
)


Discontinued operations, net of tax


142



3,250Loss from continuing operations


(3,266
)


(14,604
)Adjustments to reconcile net loss from continuing operations to
    net cash used in operating activities, net of divestitures:Depreciation and amortization


1,772



1,572Amortization of debt discount and debt issue costs


29



153Loss (gain) on sale of fixed assets


217



(12
)Net loss related to fair value of notes and warrants


1,233



3,374Provision for estimated losses on contracts


(27
)


138Provision for warranty reserves, uncollectible accounts and
    inventory obsolescence


148



619Common stock and stock option awards


119



564Deferred director stock awards


18



(329
)(Increase) decrease in operating assets and increase (decrease)
    in liabilities, net of effects from discontinued businessesRestricted cash


19



(62
)Accounts receivable


1,081



2,453Costs and accrued earnings on uncompleted contracts


(12,072
)


(1,053
)Inventories


(3,519
)


(1,197
)Prepaid and other current assets


(777
)


158Accounts payable and accrued liabilities


3,559



5,744Deferred revenue


229



(1,465
)Customer deposits


(3,413
)


(1,666
)Deferred compensation


13



(24
)Income taxes


128



(351
)Net cash used in operating activities  continuing
    operations


(14,509
)


(5,988
)Net cash provided by operating activities 
    discontinued operations






1,928Net cash used in operating activities


(14,509
)


(4,060
) 5




---



##### 



Three Months Ended March 31,2008


2007Cash flows from investing activitiesCapital expenditures


(651
)


(662
)Proceeds from sale of subsidiaries


2,433



Proceeds from sale of fixed assets


14



12Net cash provided by (used in) investing activities 
    continuing operations


1,796



(650
)Net cash used in investing activities  discontinued
    operations






(450
)Net cash provided by (used in) investing activities


1,796



(1,100
)Cash flows from financing activitiesIncrease (decrease) in bank overdraft


3,678



(5,751
)Principal payments on long-term borrowing






(838
)Repayment on capital lease obligations


(296
)


(539
)Net increase (decrease) in short-term borrowings


5,092



(525
)Proceeds from employee stock purchases


49



9Retirement of stock


(9
)


Net cash provided by (used in) financing activities 
    continuing operations


8,514



(7,644
)Net cash used in financing activities  discontinued
    operations






(20
)Net cash provided by (used in) financing activities


8,514



(7,664
)Net change in cash of discontinued operations






(54
)Effects of exchange rate on cash


802



(51
)NET DECREASE IN CASH AND CASH EQUIVALENTS


(3,397
)


(12,929
)Cash and cash equivalents at beginning of period


21,750



16,397Cash and cash equivalents at end of period

$
18,353


$
3,468Supplemental Disclosures of Cash Flow informationCash paid during the period forInterest

$
1,275


$
1,806Taxes

$
37


$
441Supplemental Disclosures of Non-Cash Investing and Financing
    ActivitiesCapital leases

$



$
2    6




---



##### 



The
    Allied Defense Group, Inc.NOTES TO UNAUDITED CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTSMarch 31, 2008
    (Thousands of Dollars)
  NOTE 1 
    CONDENSED
    CONSOLIDATED FINANCIAL STATEMENTS    Form 10-K
    (Form 10-K)
    Liquidity
    and Capital Resources
         7




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##### 



The
    Allied Defense Group, Inc.
  NOTES TO
    UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    and/or
        
    The Company will be successful securing MECAR long-term
    financing.
    The Company will be successful in taking necessary steps to be
    in a position to satisfy a potential put of its
    senior secured convertible notes which may be made in December
    2008 or January 2009.
    The Company will be successful in its restructuring and
    turnaround efforts at its subsidiaries.
    The Company will be able to meet the financial debt covenants of
    its debt instruments. 8




---



##### 



The
    Allied Defense Group, Inc.
  NOTES TO
    UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Reclassification
    NOTE 2 
    PRINCIPLES
    OF CONSOLIDATION    
    ARC Europe, S.A. (ARC Europe), a Belgian company,
    Allied Research Corporation Limited (Limited), an
    inactive United Kingdom company,
    News/Sports Microwave Rental, Inc. (NSM), a
    California corporation,
    Titan Dynamics Systems, Inc. (Titan), a Texas
    corporation (Discontinued Operation),
    SeaSpace Corporation (SeaSpace), a California
    corporation (Discontinued Operation),
    MECAR USA, Inc. (MECAR USA), a Delaware corporation,
    Allied Technology, LLC (Allied Technology), a
    Maryland limited liability company (Discontinued
    Operation), and
    Global Microwave Systems, Inc (GMS), a California corporation.      Ammunition & Weapons Effects.
  Electronic Security.
  Other.
 9




---



##### 



The
    Allied Defense Group, Inc.
  NOTES TO
    UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      NOTE 3 
    ACCOUNTS
    RECEIVABLE AND COSTS AND ACCRUED EARNINGS ON UNCOMPLETED
    CONTRACTS    March 31,


December 31,2008


2007Direct and indirect receivables from governments

$
5,964


$
3,529Commercial and other receivables


3,464



6,4859,428



10,014Less:Allowance for doubtful receivables


(715
)


(675
)$
8,713


$
9,339       NOTE 4 
    INVENTORIES    March 31,


December 31,2008


2007Raw materials

$
14,962


$
13,902Work in process


15,735



11,582Finished goods


1,865



1,74932,562



27,233Less reserve for obsolescence


(2,817
)


(2,527
)$
29,745


$
24,706   NOTE 5 
    GOODWILL   10




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##### 



The
    Allied Defense Group, Inc.
  NOTES TO
    UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    NOTE 6 
    BANK
    OVERDRAFT CREDIT FACILITY       11




---



##### 



The
    Allied Defense Group, Inc.
  NOTES TO
    UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  NOTE 7 
    LONG-TERM
    OBLIGATIONS    March 31,


December 31,2008


2007Fair value of Senior secured convertible notes

$
20,584


$
19,392Note related to GMS acquisition, less unamortized discount


3,282



3,252SOGEPA loan


9,480



8,837Bank note payable


5,372



Capital leases and other


1,274



1,483Total long-term debt


39,992



32,964Less current maturities


(30,534
)


(17,743
)Long-term debt, less current maturities and unamortized discount

$
9,458


$
15,221         Senior secured convertible notes.
 12




---



##### 



The
    Allied Defense Group, Inc.
  NOTES TO
    UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    and/or and/or
      FSP 00-19-2 Accounting for Registration Payment Arrangements FSP 00-19-2, FSP 00-19-2, Accounting for Contingencies
 13




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##### 



The
    Allied Defense Group, Inc.
  NOTES TO
    UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        March 31,


December 31,2008


2007Amended Notes

$
13,936


$
13,134First Closing of New Notes


505



476Second Closing of New Notes


6,143



5,782$
20,584


$
19,392       AmountAmended Notes

$
13,763First Closing of New Notes


499Second Closing of New Notes


6,095$
20,357   Warrants EITF 00-19, Accounting for Derivative Instruments Index to, and
    Potentially Settled in, a Companys Own Stock
 14




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##### 



The
    Allied Defense Group, Inc.
  NOTES TO
    UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Loan for Global Microwave Systems
    acquisition. EITF 96-19 Debtors Accounting for a Modification or Exchange of
    Debt Instruments
  SOGEPA Loan. Société Wallonne de Gestion et de
    Participations
  Bank note payable.
  Capital lease and other.
    NOTE 8 
    FAIR
    VALUE MEASUREMENTS  Fair Value Measurements FSP 157-2.
 15




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##### 



The
    Allied Defense Group, Inc.
  NOTES TO
    UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      
    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      Quoted Prices in


SignificantActive Markets for


Other


SignificantIdentical Assets or


Observable


UnobservableLiabilities (Level 1)


Inputs (Level 2)


Inputs (Level 3)


TotalLiabilitiesSenior secured convertible notes

$



$
20,584


$



$
20,584Derivative instrument






224







224$



$
20,808


$



$
20,808    16




---



##### 



The
    Allied Defense Group, Inc.
  NOTES TO
    UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  NOTE 9 
    EARNINGS
    (LOSS) PER SHARE    Three Months Ended March 31,2008


2007Net loss from continuing operations

$
(3,266
)

$
(14,604
)Net loss from discontinued operations


(29
)


(3,250
)Net loss

$
(3,295
)

$
(17,854
)Weighted average number of basic and diluted shares


8,013,156



6,469,969Basic and diluted net loss per share from continuing operations

$
(0.41
)

$
(2.26
)Basic and diluted net earnings per share from discontinued
    operations


(0.00
)


(0.50
)Total

$
(0.41
)

$
(2.76
)     NOTE 10 
    COMPREHENSIVE
    LOSS    Three Months Ended March 31,2008


2007Net loss

$
(3,295
)

$
(17,854
)Currency Translation Adjustment


2,474



741Comprehensive loss

$
(821
)

$
(17,113
)     NOTE 11 
    SHARE-
    BASED COMPENSATION     17




---



##### 



The
    Allied Defense Group, Inc.
  NOTES TO
    UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Three Months EndedMarch 31,2008Risk free interest rate


1.53
%Expected volatility rate


92.11
%Expected life  year


1Dividend yield


       NOTE 12 
    INDUSTRY
    SEGMENTS  Three Months EndedMarch 31,2008


2007Revenues from external customersAmmunitions & Weapons Effects

$
26,795


$
5,204Electronic Security


3,306



4,235$
30,101


$
9,439Segment profit (loss) before provision for income taxesAmmunitions & Weapons Effects

$
1,408


$
(7,287
)Electronic Security


(846
)


(355
)Corporate


(3,698
)


(6,955
)$
(3,136
)

$
(14,597
)   NOTE 13 
    PROVISION
    FOR TAXES       18




---



##### 



The
    Allied Defense Group, Inc.
  NOTES TO
    UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Accounting for Income
    NOTE 14 
    COMMITMENTS
    AND CONTINGENCIES        Indemnification
    Provisions.
   19




---



##### 



The
    Allied Defense Group, Inc.
  NOTES TO
    UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          Tax
    Litigation
    Social
    Security Litigation
    NOTE 15 
    DISCONTINUED
    OPERATIONS   20




---



##### 



The
    Allied Defense Group, Inc.
  NOTES TO
    UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    SeaSpace
    Corporation
      The VSK
    Group
      CMS
    Security Systems
   21




---



##### 



The
    Allied Defense Group, Inc.
  NOTES TO
    UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Titan
    Dynamics Systems, Inc.
        December 31, 2007TitanCash

$
74Accounts receivable, net


714Inventories, net


2,219Other assets


1,592Assets held for sale

$
4,599Accounts payable

$
883Accrued liabilities


241Customer deposits


922Other liabilities


5Liabilities held for sale

$
2,051     TitanRevenues

$
668Income (loss) before taxes


(142
)Income (loss) from discontinued operations, net of tax


(142
)Discontinued operations, net of tax

$
(142
)  22




---



##### 



The
    Allied Defense Group, Inc.
  NOTES TO
    UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    For the Three Months Ended March 31, 2007The VSK


CMS SecurityGroup


Systems


SeaSpace


Titan


TotalRevenues

$
7,833


$
45


$
2,058


$
2,276


$
12,212Income (loss) before taxes


745



(153
)


(3,609
)


55



(2,962
)Income (loss) from discontinued operations, net of tax


463



(153
)


(3,610
)


50



(3,250
)Discontinued operations, net of tax

$
463


$
(153
)

$
(3,610
)

$
50


$
(3,250
)   NOTE 16 
    SUBSEQUENT
    EVENTS   23




---



##### 



The
    Allied Defense Group, Inc.MANAGEMENTS DISCUSSION AND ANALYSIS OF
    FINANCIAL CONDITION
    AND RESULTS OF OPERATIONSMarch 31, 2008
    (Thousands of Dollars)
    (Unaudited)
  Overview
      
    Ammunition & Weapons Effectssegment consists
    of MECAR, located in Belgium, and MECAR USA, located in
    Marshall, TX. MECAR develops and produces medium caliber, tank,
    mortar and other ammunition. MECAR USA became operational in
    late 2005 and pursues contracts from U.S. and foreign
    governments for ammunition and pyrotechnics devices with a focus
    on the 105MM market. More recently, MECAR USA has begun
    purchasing and selling weapon systems
    and/or
    ammunition manufactured by others, in the form of pass through
    contracts for the benefit of the U.S government and other
    foreign governments. MECAR and MECAR USA have similar products
    and services, similar production processes, similar methods to
    sell and distribute their products and operate in a similar
    regulatory environment.
    Electronic Securitysegment consists of News Sports
    Microwave (NSM) and Global Microwave Systems (GMS), both located
    near San Diego, California. NSM designs, manufactures,
    installs and services industrial and law enforcement
    surveillance products and integrated systems for the law
    enforcement community and agencies of the Department of Homeland
    Security and the Department of Defense. GMS designs and
    manufactures miniature and sub-miniature FM and digital
    transmitters, receivers, and related equipment for
    investigative, surveillance, and security applications, and live
    TV news/sports/entertainment coverage.    Liquidity
    and Capital Resources
  Form 10-K
 24




---



##### 



and/or
      and/or
     25




---



##### 




    The Company will be successful securing MECAR long-term
    financing.
    The Company will be successful in taking necessary steps to be
    in a position to satisfy a potential put of its
    senior secured convertible notes which may be made in December
    2008 and/or
    January 2009.
    The Company will be successful in its restructuring and
    turnaround efforts at its subsidiaries.
    The Company will be able to meet the financial debt covenants of
    its debt instruments.    Results
    of Operations for the Three Months Ended March 31, 2008 and
    2007
           26




---



##### 



Three Months Ended March 31,2008


2007Amount


%


Amount


%Revenue

$
30,101



100.0
%

$
9,439



100.0
%Cost and expensesCost of sales


22,739



75.5



10,487



111.0Selling and administrative


6,496



21.6



6,970



73.8Research and development


1,087



3.6



666



7.1Operating loss


(221
)


(0.7
)


(8,684
)


(91.9
)Other income (expense)Interest income


168



0.6



262



2.8Interest expense


(1,800
)


(6.0
)


(2,821
)


(29.9
)Gain (loss) from fair value of notes and warrants


(1,233
)


(4.1
)


(3,374
)


(35.7
)Other  net


(50
)


(0.2
)


20



0.0Loss from continuing opertions before income taxes


(3,136
)


(10.4
)


(14,597
)


(154.7
)Income tax expense (benefit)


130



0.4



7



0.0Net loss from continuing operations, net of tax


(3,266
)


(10.8
)


(14,604
)


(154.7
)Gain on sale of subsidiaries, net of tax


113



0.4







0.0Loss from discontinued operations, net of tax


(142
)


(0.5
)


(3,250
)


(34.4
)Loss from discontinued operations, net of tax


(29
)


(0.1
)


(3,250
)


(34.4
)Net Loss

$
(3,295
)


(10.9
)%

$
(17,854
)


(189.1
)%   Revenue.
  Revenue by SegmentThree Months Ended


Three Months EndedMarch 31, 2008


March 31, 2007Percentage





PercentageAmount


of total


Amount


of totalAmmunitions & Weapons Effects

$
26,795



89
%

$
5,204



55
%Electronic Security


3,306



11



4,235



45Total

$
30,101



100
%

$
9,439



100
%      27




---



##### 



Cost of Sales.
  Cost of Sales as a Percentage of Revenue by SegmentThree Months Ended


Three Months EndedMarch 31, 2008


March 31, 2007Percentage of





Percentage ofAmount


Segment Revenue


Amount


Segment RevenueAmmunitions & Weapons Effects

$
20,988



78
%

$
8,306



160
%Electronic Security


1,751



53



2,181



51Total

$
22,739



76
%

$
10,487



111
%         Selling and Administrative Expenses.
 28




---



##### 



Research and Development.
  Interest Income.
  Interest Expense.
  Net Loss on fair value of the senior convertible notes and
    warrants.
  Other  Net.
  Pre-Tax
    Income (Loss)
  Pre-Tax Loss by SegmentThree Months Ended


Three Months EndedMarch 31, 2008


March 31, 2007Percentage of





Percentage ofAmount


Total revenue


Amount


Total revenueAmmunitions & Weapons Effects

$
1,408



5
%

$
(7,287
)


(77
)%Electronic Security


(846
)


(3
)


(355
)


(4
)Corporate


(3,698
)


(12
)


(6,955
)


(74
)Total

$
(3,136
)


(10
)%

$
(14,597
)


(155
)%      29




---



##### 



Income Taxes. Accounting for
    Income Taxes in Interim periods
  Loss from discontinued operations, net of
    tax.
  Net Loss.
  Backlog.
  Backlog by SegmentAt March 31,


At March 31,2008


2007Percentage





PercentageAmount


of Total


Amount


of TotalAmmunitions & Weapons Effects

$
157,435



98
%

$
31,156



84
%Electronic Security


3,792



2



5,862



16Total

$
161,227



100
%

$
37,018



100
%        30




---



##### 



Balance
    Sheet
    March 31,


December 31,2008


2007ASSETSCash

$
32,318


$
34,802Accounts receivable, net


8,713



9,339Costs and accrued earnings on uncompleted contracts


54,851



39,313Inventories, net


29,745



24,706Other current assets


4,854



8,793Other Assets


43,776



43,298TOTAL ASSETS

$
174,257


$
160,251LIABILITIESBank overdraft facility

$
11,645


$
7,239Accounts payable and accrued liabilities


40,843



32,677Customer deposits


25,374



26,835Other current liabilities


15,834



14,038Senior convertible notes


20,584



19,392Long-term debt and long-term liabilities


14,966



14,415TOTAL LIABILITIES


129,246



114,596STOCKHOLDERS EQUITY


45,011



45,655TOTAL LIABILITIES AND STOCKHOLDERS EQUITY

$
174,257


$
160,251            31




---



##### 



Cash
    Flows
    For Three Months Ended March 31,2008


2007Net cash used in operating activities

$
(14,509
)

$
(4,060
)Net cash provided by (used in) investing activities


1,796



(1,100
)Net cash provided by (used in) financing activities


8,514



(7,664
)Effects of exchange rate on cash


802



(51
)   Operating Activities.
   32




---



##### 



Investing Activities.
  Financing Activities.
  Effects of Exchange Rate.
  Allied.
  MECAR.
  Other Subsidiaries.
  Stock Repurchases.
  Off-Balance Sheet Arrangements.
 33




---



##### 



Critical
    Accounting Policies
      
    Revenue recognition via the percentage of completion method
    Goodwill and intangible asset valuation
    Inventory reserves and allowance for doubtful accounts
    Foreign currency translations
    Derivative Instruments
    Valuation of deferred income taxes and income tax reserves.  Form 10-K 10-K
  Recent
    Accounting Pronouncements
  Disclosures about Derivative Instruments and Hedging
    Activities  an amendment of FASB Statement
    No. 133
  Business Combinations
 34




---



##### 



Noncontrolling Interests in Consolidated Financial
    Statements, an amendment of ARB 51
  The
    Fair Value Option for Financial Assets and Financial
    Liabilities  Including an amendment of FASB Statement
    No. 115
  Fair Value Measurements
  Forward-Looking
    Statements
     35




---



##### 



The
    Allied Defense Group, Inc.
    March 31, 2008
  ITEM 3.
    QUANTITATIVE
    AND QUALITATIVE MARKET RISK DISCLOSURE    ITEM 4T.
    DISCLOSURE
    CONTROLS AND PROCEDURES  1.
    Evaluation
    of disclosure controls and procedures  Disclosure
    Controls and Procedures
  Rule 13a-15
  2.
    Changes
    in internal controls   36




---



##### 



PART II.
    OTHER INFORMATION  Item 1.
    Legal
    Proceedings    Item 1A.
    Risk
    Factors    Item 2.
    Unregistered
    Sales of Equity Securities and Use of Proceeds    Item 3.
    Defaults
    Upon Senior Securities    Item 4.
    Submission
    of Matters to a Vote of Security Holders      Director Name

For


WithheldJ. H. Binford Peay, III


4,817,481



578,869Ronald H. Griffith


4,818,090



578,260Gilbert F. Decker


4,817,600



578,750John G. Meyer, Jr.


4,817,871



578,479Charles S. Ream


4,816,480



579,870John J. Marcello


5,313,390



82,960Frederick G. Wasserman


4,710,344



686,006Tassos Recachinas


5,314,585



81,765     For


Against


AbstainRatification of BDO Seidman as Independent Auditors


5,326,156



32,107



38,089   Item 5.
    Other
    Information   37




---



##### 



Item 6.
    Exhibits  Exhibit No.

Description of Exhibits10
.29

Consolidated EBITDA Schedule31
.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.  38




---



##### 



SIGNATURE      /s/  Deborah
    F. Ricci      39