U. S. Securities and Exchange Commission
                             Washington, D.C. 20549
                                   Form 10-KSB

            [X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE
                  SECURITIES EXCHANGE ACT OF 1934 [Fee Required]

            For the fiscal year ended December 31, 1996

             [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
                  SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]

             For the transition period from ________ to __________
                         Commission file number 0-439

                       American Locker Group Incorporated
------------------------------------------------------------------------------
                (Name of small business issuer in its charter)

               Delaware                               16-0338330
------------------------------------------------------------------------------
             (State or other jurisdiction of      (I.R.S. Employer
             incorporation or organization)       Identification No.)

        608 Allen Street, Jamestown, New York                     14702-1000
------------------------------------------------------------------------------
         Address of principal executive offices)                 (Zip Code)

Issuer's  telephone number  1-716-664-9600  Securities  registered under Section
12(b) of the Exchange Act:

Title of each class    Name of each exchange on which registered

           None

Securities registered under Section 12(g) of the Exchange Act:

                     Common Stock Par Value $1.00 Per Share
------------------------------------------------------------------------------
                                (Title of class)

      Check  whether  the issuer (1) filed all  reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 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 X No .

      Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure
will be contained, to the best of registrant's


                                       
<PAGE>
                                       

knowledge,  in  definitive  proxy  or  information  statements  incorporated  by
reference  in Part III of the Form 10-KSB or any  amendment to this Form 10-KSB.
[X]

      State issuer's revenues for its most recent fiscal year.  $22,517,589.

      Issuers  aggregate market value of the voting stock held by non-affiliates
computed by reference  to the price at which the stock was sold,  or the average
bid and asked prices of such stock, as of March 24, 1997: $5,524,853.

      State the number of shares  outstanding of each of the issuer's classes of
common equity, as of the latest  practicable  date:  796,501 shares common stock
($1.00 par value) as of March 24, 1997.

                       DOCUMENTS INCORPORATED BY REFERENCE

      Portions of the definitive  Proxy  Statement for the Annual  Stockholders'
Meeting to be held May 20, 1997, are incorporated by reference into Part III.

      Transitional Small Business Disclosure Form (check one):

          Yes  X  No

                                       2
<PAGE>


                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

      American Locker Group Incorporated (the "Company") is engaged primarily in
the sale and rental of coin, key and electronically  controlled checking lockers
and  related  locks  and  the  sale  of  plastic  centralized  mail  and  parcel
distribution  lockers.  The key  controlled  checking  lockers  are  sold to the
recreational  and  transportation  industries,  bookstores,  military posts, law
enforcement  agencies,  libraries and for export. The electronically  controlled
lockers are sold for use as secure storage in the business  environment  and the
electronically   controlled,   coin  operated   lockers  are  sold  for  use  in
transportation industry and other uses. The plastic mail and parcel distribution
lockers  are  sold to the  United  States  Postal  Service  ("USPS")  for use in
centralized mail and parcel delivery in new housing and industrial developments.

      The Company is an engineering,  assembling and marketing  enterprise which
also manufactures its own mechanical locks for use in its products.

      The Company was  incorporated on December 15, 1958, as a subsidiary of its
former  publicly-owned   parent.  In  April  1964,  the  Company's  shares  were
distributed  to  the  stockholders  of  its  former  parent,  and  it  became  a
publicly-held corporation.  From 1965 to 1989, the Company acquired and disposed
of a number of  businesses  including  the  disposition  of its original  voting
machine business.

      In October 1988, the Company sold the checking locker business at its then
remaining  major  airport  locations  and in November  1993 sold its last locker
concession in the United States.

      One of the Company's subsidiaries is a party to a Manufacturing  Agreement
with  Signore,  Inc.,  formerly a wholly owned  subsidiary  of the  Company,  to
furnish fabricating, assembly and shipping services. The Agreement, which became
effective January 1, 1990, has been extended and now is for a term expiring June
30, 2000. The Agreement provides that the cost to the Company for these services
be equal to Signore's standard cost divided by 80%.

Business Segment Information

      The Company, including its foreign subsidiary, is engaged in one business:
sale and rental of coin and key or  electronically  controlled  checking lockers
and locks  and the sale of  plastic  centralized  mail and  parcel  distribution
lockers.

      The  checking  lockers are  fabricated  by Signore and are marketed in the
United States by the Company's wholly-owned subsidiary, American Locker Security
Systems,  Inc.  ("ALSSI").  Lockers for the Canadian market are  manufactured by
Signore with locks  supplied  from ALSSI.  Lockers are marketed in Canada by the
Canadian Locker Company,  Ltd. ("Canadian Locker"),  a wholly-owned  subsidiary.
These sales are made outright,  through salaried employees and distributors,  to
customers who need storage facilities  requiring a key controlled lock system in
the  recreational,  governmental and  institutional  type  industries.  Canadian
Locker  also  owns and  



                                       3
<PAGE>

operates  coin  operated  lockers  in air,  bus and rail  terminals  and  retail
locations in Canada.  ALSSI  manufactures the lock system,  which is coin or key
controlled and operated, for use in lockers previously sold by ALSSI. ALSSI also
provides nationwide and Canadian maintenance and repair services with respect to
coin operated lockers previously sold by ALSSI. The Company has developed a coin
operated  baggage cart system and is operating the system at one major  Canadian
airport, and has sold several cart systems for use in American airports.

      The Company has developed a  polycarbonate  all-weather  parcel locker for
the United States Postal Service, and has shipped over 129,000 of the units from
March 1989 through March 24, 1997. A Cluster Box Unit, i.e.  (combination letter
box), is a plastic  parcel unit for the United  States Postal  Service which has
been  approved  and field  tested.  In November,  1994 the Company  negotiated a
contract  to sell Type  Three  CBUs in  quantity  to the  United  States  Postal
Service.  As of March 24, 1997,  Cluster Box Units with aggregate invoice prices
in excess of  $22,000,000  have  been  shipped  pursuant  to this  contract  and
subsequent contracts.  Components of these units are made by outside vendors and
the units are  assembled by ALSSI.  The units are sold  directly by ALSSI to the
United States Postal Service.

      Additional  information with respect to business  segment data,  including
significant  customers,  is  disclosed  in  Note 9 of the  financial  statements
included in Item 7 of this Form 10-KSB.

Competition

      While  the  Company  is not aware of any  reliable  trade  statistics,  it
believes  that its  subsidiaries,  ALSSI and  Canadian  Locker are the  dominant
suppliers of key  controlled  checking  lockers in the United States and Canada.
However,   the  Company  faces  more  active   competition  from  several  other
manufacturers  of locker  products sold to the United States Postal  Service and
other purchasers.

Raw Materials

      Present  sources  of  supplies  and raw  materials  incorporated  into the
Company's  metal and plastic  lockers and locks are  generally  considered to be
adequate and are currently available in the market place. The Company's supplier
of  polycarbonate  plastic which is used in the parcel lockers and CBU's entered
this market in March 1992 and is presently  supplying  this raw  material  which
meets strict specifications  imposed by the United States Postal Service. In the
event the present  supplier  declines to continue to supply this  material,  the
Company would be required to seek an alternate source of supply.

      The Company's metal lockers are  manufactured  by Signore  pursuant to the
Manufacturing Agreement, except for the locks which are manufactured by ALSSI.



                                       4
<PAGE>

Patents

      The Company owns a number of patents,  none of which it considers material
to the conduct of its business.

Employees

      The Company actively  employed 134 individuals as of December 31, 1996, in
its  businesses  of whom 40 are in Canada.  The Company  considers its relations
with its employees to be satisfactory, none of whom are represented by a union.

Research and Development

      The Company engages in research and development activities relating to new
and improved products as an incident of its normal  manufacturing  operations in
conjunction with the continuing operations.  It expended $44,634,  $148,527, and
$75,473,  in 1996,  1995  and  1994,  respectively,  for  such  activity  in its
continuing businesses, which does not include new product development costs.

Compliance with Environmental Laws and Regulations

      Based on the  information  available  to it,  except as noted  below,  the
Company believes that it is in compliance with present federal,  state and local
environmental laws and regulations.

      By letter dated June 29, 1994, counsel for Gowanda Electronics ("Gowanda")
informed the Company that Gowanda  intended to pursue claims against the Company
for costs and damages allegedly incurred by Gowanda as a result of environmental
contamination at Gowanda's property in Gowanda,  New York (the "Property").  The
Property was sold by a  predecessor  of the  Company,  the AVM  Corporation,  to
Gowanda in 1978.  According  to Gowanda,  groundwater  and soil at the  Property
exhibit  contamination with petroleum products,  solvents,  and metals.  Gowanda
stated that the Company was responsible for this contamination  and,  therefore,
is  liable  to  Gowanda  for  past  and  future   remediation  costs  under  the
Comprehensive  Environmental  Response,  Compensation and Liability Act, the New
York Navigation  Law, and various common law theories.  Gowanda also stated that
it will seek additional damages from the Company if the environmental conditions
at the Property prevent Gowanda's potential sale of the Property.

      In July 1994,  the Company was  notified by the  Department  of Law of the
State  of New York  that  the  State  of New  York  believes  that the  Company,
Bristol-Myers Squibb Company, Inc., General Electric, Inc., Pass & Seymour, Inc.
and R. E. Dietz are liable for past and  future  investigation  and  remediation
costs related to the site in Pompey,  New York,  previously  operated by Solvent
Savers, Inc. as a spent solvent recovery facility.  The defense of this suit has
been assumed by the Company's insurance carrier, with a reservation of rights.



                                       5
<PAGE>

General

      Backlog of orders is not significant in the Company's business as
shipments usually are made shortly after orders are received.  The Company's
sales do not have marked seasonal variations.

      During 1996, 1995 and 1994, one customer,  the USPS,  accounted for 61.8%,
61.2%,  and 45.8% of net sales,  respectively.  The loss of this customer  could
adversely affect the Company's operations.

Executive Officers of the Company

                                                                  Year First
                                                                  Assumed
    Name                    Age   Office Held with Company        Position
------------------------------------------------------------------------------

Harold J. Ruttenberg        82    Chairman of the Board,          1973
                                    Chief Executive Officer,
                                  and Treasurer
Roy J. Glosser              36    President and Chief             1996
                                    Operating Officer
 

      Messrs. H. J. Ruttenberg, has been employed in his positions for more
than five years, and Mr. Glosser assumed his position in May 1996. Prior to
that date, Mr. Glosser served as Vice President - Operations of the Company
since 1992 and has been employed by the Company since 1992 in operations and
product development.  Prior to that time, Mr. Glosser served as product
manager of Acu-Rite Inc., an electronic manufacturing firm.

      There are no arrangements or  understandings  pursuant to which any of the
officers were elected as officers, except for an employment contract between the
Company and Roy J. Glosser.  Except as provided in such employment contract, all
officers  hold  office for one year and until their  successors  are elected and
qualified;  provided,  however,  that any officer is subject to removal  with or
without cause, at any time, by a vote of the majority of the Board of Directors.


      There  have  been  no  events  under  any  bankruptcy   act,  no  criminal
proceedings  and no judgments or  injunctions  material to the evaluation of the
ability and integrity of any executive officer during the past five years.


                                       6
<PAGE>


ITEM 2.  DESCRIPTION OF PROPERTY

      The  location  and  approximate  floor  space of the  Company's  principal
plants,  warehouses and office  facilities  are as follows ( * indicates  leased
facility):

                                                     Approximate
                                                     Floor Space
Location           Subsidiary                        In Sq. Ft.    Products
--------           ---------                         -----------   --------

Jamestown, NY      Principal Executive Office        37,000*      Office space/
                   American Locker Company, Inc.                   Assembly and
                   and American Locker Security                    Warehouse
                     Systems, Inc.

Pittsburgh, PA     Executive Office                   1,000*      Office space

Ellicottville, NY  American Locker Security          12,800       Locks
                     Systems, Inc. - Lock Shop

Toronto,           Canadian Locker Company, Ltd.      4,000*      Coin-
  Ontario                                                           operated
                                                                    lockers and
                                                                    locks

Toronto,
  Ontario          Canadian Locker Company, Ltd.      3,000*      Warehouse

Elk Grove          American Locker Security           9,900*      Customer
  Village, IL        Systems, Inc.                                  service and
                                                                    lock repair
                                                    ----------
                                   TOTAL              67,700
                                                    ==========


       The Company  believes that its  facilities  which are of varying ages and
types of  construction  and the machinery and equipment  utilized in such plants
are in good condition and are adequate for its presently contemplated needs. All
facilities are leased except for the Ellicottville facility. The leases on these
properties terminate at various times from 1997 through 2001.

                                       7
<PAGE>

ITEM 3.  LEGAL PROCEEDINGS

       Four  female  former  employees  of the  Company  have  alleged  in suits
entitled  Derr et al.  v.  American  Locker  Group,  Inc.,  94-CV-0515S(M),  (US
District  Court for Western  District of New York) that they were the victims of
sex  discrimination  in  their  terminations  and/or  compensation  and  seeking
unspecified  damages.  The  Company  has filed an answer  denying  all  charges.
Discovery is completed  and the Company has filed a Motion for Summary  Judgment
on all  counts.  The Motion is under  consideration  by the Court.  The  Company
intends to vigorously defend this matter.

See "Item 1.  Business - Compliance with Environmental Laws and Regulations."

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

       There were no matters  submitted  to a vote of the security  holders,  by
means of  solicitation  of proxies or  otherwise,  during the fourth  quarter of
1996.



                                       8
<PAGE>

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

       The Company's  shares of Common Stock (Par Value $1.00 per share) are not
listed on any  exchange,  but are  traded  on the  over-the-counter  market  and
quotations are reported by the National  Association of Security  Dealers,  Inc.
through their Automated Quotation System (NASDAQ) on the National Market System.
The trading symbol is ALGI.  The following  table shows the range of the low and
high sale prices for each of the calendar quarters indicated.

                                Per Common Share
                                  Market Price


                                                            Dividend
   1995                  High             Low               Declared
   ----                  ----             ----              --------

First Quarter            $ 6              $5                $0.00
Second Quarter             9               8.25              0.00
Third Quarter              9.25            7.75              0.00
Fourth Quarter            13               8.50              0.00
                                                            --------
Total                                                       $0.00


                                                            Dividend
   1996                  High             Low               Declared
   ----                  ----             ----              --------

First Quarter             $13.50          $ 9.75             $0.00
Second Quarter             13.75           12.00              0.00
Third Quarter              15.75           10.75              0.00
Fourth Quarter             15.75           13.00              0.00
                                                            ---------
Total                                                        $0.00

      As of March 24, 1997, the Company had 1,527 security holders of record.

      By agreement with its principal  lender,  the Company's ability to declare
future dividends is restricted.  See Note 3 to the financial statements included
in Item 7 of this Form 10-KSB.



                                       9
<PAGE>



ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Results of Operations - 1996 Compared to 1995


1996 was an  excellent  year  for the  Company  both in  terms of sales  and net
income.  Of the five most  recent  calendar  years , 1996 was the second best in
terms of sales and  income,  with the 1995 year  being the best  year.  In 1996,
consolidated sales of $22,517,589 decreased approximately 5% as compared to 1995
sales of $23,677,940 and the Company's net income decreased by 36%. Sales of the
Company's  plastic lockers  decreased from $13,362,573 in 1995 to $12,658,767 in
1996.  Revenues from the Company's other,  non-plastic locker products decreased
4.4% from $10,315,367 in 1995 to $9,858,822 in 1996.

Consolidated cost of sales as percentage of sales increased to 70.1% compared to
68.4% in 1995,  providing a 1.7% decrease in gross margin.  The slight  decrease
relates to the lower volumes and increased  depreciation  expense resulting from
the Type One and Type Two CBU tooling.

The Company's  present  contract with the United States Postal Service  ("USPS")
covering  Outdoor  Parcel  Lockers  ("OPL's") and all three types of Cluster Box
Units  ("CBU's")  (Type One,  Type Two and Type  Three) was awarded on March 27,
1996 for a period of one year  expiring  on April 14,  1997.  Under the terms of
this contract the Company delivered  approximately  6,800 CBU's and 12,400 OPL's
through  December 31,  1996.  The USPS has notified the Company of its intent to
renew this contract for a one year period  expiring  April 15, 1998. The Company
is  authorized  and  prepared  to ship all  three  types of CBU's.  Pricing  and
quantities  under the contract renewal have not yet been finalized and are still
subject to negotiation.

Selling, administrative and general expenses of $4,989,497 during 1996 increased
2.6% from the $4,861,477 in 1995. The slight increase in selling, administrative
and general  expenses is the result of increased bad debt expense,  group health
insurance and was partially offset by lower compensation expense.

Interest  income in 1996 decreased from 1995 due to a decrease on the balance of
notes receivable during 1996.

Other  income  of  $248,605  in 1996  increased  slightly  from  the  $244,769
recorded in 1995.

Interest expense  increased 25.6% in 1996 from the $166,289 recorded in 1995 due
to increases in the average borrowings  outstanding  during the year,  resulting
from the $1,000,000  borrowing in March 1996 of long-term  debt, and the average
borrowing rate experienced during 1996.

1995 Compared to 1994

In 1995,  consolidated  sales of  $23,677,940  increased  50% over 1994 sales of
$15,766,423 and 



                                       10
<PAGE>

the Company  substantially  increased its profitability.  Sales of the Company's
plastic  lockers  increased 103% from $6,573,247 in 1994 to $13,362,573 in 1995.
Plastic lockers were sold to the USPS under a contract received in November 1994
pursuant to which the Company provides  plastic parcel lockers  ("CBU's") to the
USPS.  Revenues from the Company's other,  non-plastic locker products increased
12%, from $9,193,176 in 1994 to $10,315,367 in 1995.

Consolidated  cost of sales as a  percentage  of sales  dropped to 68.4% in 1995
compared to 69.5% in 1994,  providing a 1% increase in gross margin.  The slight
increase in gross margin relates to the sales mix which included higher sales on
plastic lockers and lower sales on metal lockers.

The Company's  contract with the USPS regarding  Type Three CBU's  terminated on
April 14, 1996. Under the terms of this contract the Company sold  approximately
2,800 and 9,200 Type Three CBU's in 1994 and 1995, respectively. As noted below,
the Company and the USPS have  entered into a new one year  contract,  effective
April 15, 1996 covering Outdoor Parcel Lockers (OPL) and Cluster Box Units (CBU)
Type Three as well as Type One and Type Two. The new contract  gives the Company
a  minimum  order of 1,424  units of the OPL's  and  6,000  units of the  CBU's.
Earnings  for  1996  may  decrease  over  1995  result  due to  the  uncertainty
concerning  the  number of units the USPS may take under the new  contract,  the
slightly  lower  margins  anticipated  on the Type Three CBU's and the increased
depreciation expense resulting from the Type One and Type Two tools.

On March 27,  1996,  the  Company  was awarded a contract by the USPS to deliver
Outdoor  Parcel  Lockers  (OPL's) and all three types of Cluster Box Units (Type
One,  Type Two and Type Three) for a period of one year  commencing on April 15,
1996.  Terms of the  contract  specify  that the Company will provide 60% of the
USPS  requirements for all four products on a nationwide  basis, with guaranteed
minimum  quantities  of 1,424 OPL's and 6,000 in the aggregate of Type One, Type
Two and Type Three CBU's during the contract period.  The contract also contains
standard  provisions allowing the USPS to extend the term of the contract for up
to four  option  years as well as  provisions  allowing  early  termination  for
convenience by the USPS. Under this contract, margins on the OPL are expected to
increase  over 1995 levels and  margins on the Type Three CBU's are  expected to
decrease compared to 1995 margins. The contracted prices are pending USPS audit.
The contract  further  provides that once a specified  number of CBU's and OPL's
are  shipped,  the  purchase  price for  additional  units  will be reduced by a
specified  amount.  The  Company  does not  expect  sales of the CBU's and OPL's
during  1996 to reach the level  where  such  price  reductions  would come into
effect,  although it is possible  that such levels could be reached  during 1997
or, if the USPS elects to exercise its renewal  options under the  contract,  in
later years.

Selling, administrative and general expenses of $4,861,477 during 1995 increased
6% from the  $4,594,679  recorded  in 1994.  The  slight  increase  in  selling,
administrative  and general  expenses is the result of the  Company's  continued
growth in sales, offset in part by the Company's  continuing efforts to downsize
its administrative  overhead costs by effectively  consolidating  administrative
job responsibilities and reducing the level of corporate staff.

Interest income in 1995 increased from 1994 due to an increase in the balance of
notes receivable during 1995.


                                       11
<PAGE>


Other income of $244,769 in 1995 increased  from the $164,814  recorded in 1994.
Other income in 1995 included an increase in cash discounts earned.

Interest expense increased slightly, $1,658 in 1995 from $164,631 in 1994 due to
an increase in the average borrowing rate experienced in 1995 compared to 1994.


                                       12
<PAGE>

Liquidity and Sources of Capital

The Company's  liquidity is reflected in the ratio of current  assets to current
liabilities or current ratio and its working capital. The current ratio was 2.47
to 1 and 1.71 to 1 at the end of 1996 and 1995,  respectively.  Working capital,
or the excess of current  assets over current  liabilities,  was  $5,165,135  at
December 31, 1996 and  $3,459,221 at December 31, 1995.  The increase in working
capital resulted  primarily from the business activity with the USPS in 1995 and
1996. The USPS accelerated  payments to the Company during 1996 causing accounts
receivable to decrease  $461,028 during 1996. In 1996, the Company's  operations
generated  $472,535 in cash from operating  activities.  Principally,  operating
cash was  utilized to fund the  increase in  inventory  $564,015,  to pay income
taxes, to meet scheduled debt payments,  to purchase equipment and to repurchase
stock. The Company also has a $3,000,000  line-of-credit  available to assist in
satisfying  future  operating  cash needs,  if  required.  However,  the Company
anticipates that it will generate positive cash flow from operations in 1997.

In 1996, the Company  continued to make  principal  payments on the term loan at
the rate of  $50,000  per  month  and the  outstanding  balance  of this loan is
$1,300,000 as of December 31, 1996.  Also at December 31, 1996,  the Company has
an outstanding balance of $1,125,000 under a $3,000,000  line-of-credit with its
principal bank.

The Company's  policy is to maintain  modern  equipment  and adequate  capacity.
During  1996,  1995 and 1994,  the  Company  expended  $234,000,  $1,232,600  an
$197,000,  respectively, for capital additions. Capital expenditures in 1996 and
1995 were  financed  principally  from  operations.  In  addition,  1997 capital
expenditures are also expected to be financed from operations.

At December 31, 1995, a valuation reserve of $74,900 existed on the deferred tax
benefit of future tax  deductions due to  limitations  on the  carryforward  and
carryback provisions of the various states in which the Company operates. During
1996, this reserve was no longer needed.

Impact of Inflation and Changing Prices

Although  inflation  has  slowed  in recent  years,  it is still a factor in the
economy and the Company  continues to seek ways to mitigate  its impact.  To the
extent  permitted by competition,  the Company passes  increased costs on to its
customers by  increasing  sales prices over time.  The Company will  continue to
find ways to control the  administrative  overhead necessary to successfully run
the  business.  By  controlling  these  costs,  the Company  can  continue to be
competitively   priced  with  other  top  quality   locker   manufacturers   and
distributors.

The Company has used the LIFO method of  accounting  for its  inventories  since
1974.  This method  matches  current  costs with current  revenues and during an
inflationary  period,  reduces  reported  income but improves cash flow due to a
reduction of taxes based on income.

Safe Harbor Statement under the Private  Securities  Litigation  Reform Act of
1995

Forward-looking   statements  in  this  report,  including  without  limitation,
statements   relating   to  the   


                                       13
<PAGE>

Company's plans, strategies, objectives,  expectations,  intentions and adequacy
of  resources,  are made  pursuant to the Safe Harbor  Provisions of the Private
Securities  Litigation  Reform Act of 1995.  Investors are  cautioned  that such
forward-looking  statements  involve risks and  uncertainties  including without
limitation  the  following:  (i) the Company's  plans,  strategies,  objectives,
expectations  and intentions are subject to change at any time at the discretion
of the  Company,  (ii) the  Company's  plans and results of  operations  will be
affected by the Company's ability to manage its growth and inventory,  and (iii)
other  risks and  uncertainties  indicated  from  time to time in the  Company's
filings with the Securities and Exchange Commission.



                                       14
<PAGE>


ITEM 7.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                                       15
<PAGE>


                         Report of Independent Auditors

Board of Directors and Stockholders
American Locker Group Incorporated

We have audited the accompanying  statements of consolidated  financial position
of American Locker Group  Incorporated  and subsidiaries as of December 31, 1996
and 1995,  and the related  statements  of  consolidated  income,  stockholders'
equity,  and cash flows for each of the three years in the period ended December
31, 1996. These financial statements are the responsibility of the management of
the  Company.  Our  responsibility  is to express an opinion on these  financial
statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the consolidated  financial position of American Locker
Group  Incorporated  and  subsidiaries  at December  31, 1996 and 1995,  and the
consolidated  results of their  operations  and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity  with generally
accepted accounting principles.



                                                         /s/ Ernst & Young LLP

Erie, Pennsylvania
February 26, 1997


                                       16
<PAGE>

                                     
             American Locker Group Incorporated and Subsidiaries

                Statements of Consolidated Financial Position


                                                          December 31
                                                       1996          1995
                                                    ---------------------------

Assets
Current assets:
  Cash and cash equivalents                        $  1,229,222   $  1,080,487
  Accounts and notes receivable, less allowance
for doubtful                                          3,363,277      3,823,118
    accounts of $386,309 in 1996 and $275,712 in
1995
  Inventories                                         3,339,668      2,775,615
  Prepaid expenses                                      97,917         143,978
                                                         
  Prepaid federal, state and foreign income taxes        28,986             -
  Deferred income taxes                                 619,096       536,319
                                                    ---------------------------
Total current assets                                  8,678,166      8,359,517

Property, plant and equipment:
  Land
                                                            500           500
  Buildings                                             505,970       496,196
  Machinery and equipment                             7,617,871      7,581,513
                                                    ---------------------------
                                                      8,124,341      8,078,209
Less allowances for depreciation and amortization     6,782,429      6,331,541
                                                    ---------------------------
                                                      1,341,912      1,746,668
                                                  =============================
Total assets                                      $10,020,078      $10,106,185
                                                  =============================




                                       17
<PAGE>


             American Locker Group Incorporated and Subsidiaries

          Statements of Consolidated Financial Position (continued)

                                                           December 31
                                                        1996          1995
                                                    --------------------------

Liabilities and stockholders' equity 
Current liabilities:
  Demand note payable                               $  1,125,000  $  1,400,000
  Accounts payable:
      Trade                                              660,202       965,432
      Related party                                      381,196       377,214
                                                    --------------------------
                                                       1,041,398     1,342,646
  Commissions, salaries, wages and taxes thereon         298,671       348,549
  Other accrued expenses                                 447,962       376,643
  Federal, state and foreign income taxes payable              -       832,458
  Current portion of long-term debt                      600,000       600,000
                                                    ---------------------------
Total current liabilities                             3,513,031     4,900,296

Deferred income taxes                                    44,580        83,609

Long-term obligations:
  Long-term debt                                         700,000       300,000
  Retirement benefits                                    271,690       232,584
  Postretirement benefits                                132,630       125,630
                                                    ---------------------------
                                                       1,104,320       658,214

Stockholders' equity:
  Common stock, $1 par value:
      Authorized shares -- 4,000,000
      Issued and outstanding shares -- 800,024
        in 1996 and 818,625 in 1995                     800,024       818,625
  Other capital                                       1,027,527     1,258,805
  Retained earnings                                   3,645,183     2,500,351
  Foreign currency translation adjustment
                                                       (114,587)     (113,715)
                                                  -----------------------------
Total stockholders' equity                            5,358,147     4,464,066
                                                  =============================
Total liabilities and stockholders' equity          $10,020,078   $10,106,185
                                                  =============================

See accompanying notes.



                                       18
<PAGE>

             American Locker Group Incorporated and Subsidiaries

                        Statements of Consolidated Income


                                               Year ended December 31
                                           1996         1995         1994
                                       ----------------------------------------

Net sales                              $22,517,589  $23,677,940  $15,766,423
Cost of products sold                    15,791,95   16,207,181   10,971,085
                                       ----------------------------------------
                                         6,725,633    7,470,759    4,795,338
Selling, administrative and general      
expenses                                 4,989,497    4,861,477    4,594,679
                                       ----------------------------------------
                                         1,736,136    2,609,282      200,659
                                                                 

Interest income                             43,270       59,716       17,997
Other income - net                         248,605      244,769      164,814
Interest expense                          (208,827)    (166,289)    (164,631)
                                       ----------------------------------------
Income before income taxes               1,819,184    2,747,478      218,839
                                                                 
Income taxes                               674,352      956,909       74,600
                                       ----------------------------------------
Net income                             $ 1,144,832  $ 1,790,569    $ 144,239
                                       ========================================




Per share of common stock:
  Net income                           $   1.41     $  2.12       $  0.17
                                       ========================================
  Dividends                            $   0.00     $  0.00       $  0.00
                                       ========================================

See accompanying notes.




                                       19
<PAGE>

             American Locker Group Incorporated and Subsidiaries

               Statements of Consolidated Stockholders' Equity

<TABLE>
<CAPTION>
                                                                           Foreign
                                                                           Currency                            Total
                                    Common       Other       Retained     Translation     Stockholders'
                                     Stock      Capital      Earnings      Adjustment        Equity
                               ------------------------------------------------------------------------
<S>                                 <C>         <C>          <C>           <C>              <C>  

Balance at January 1, 1994 .   $   871,423    $ 1,640,043    $   565,543    $46,987       $3,030,022
  Net income ...............          --             --          144,239          --         144,239
  Foreign currency
     translation ...........          --             --             --        (87,990        (87,990)   
Stock options exercised ..        10,500         15,037           --            -           25,537
  Common stock purchased
    and retired ............       (23,047)       (83,110)          --            --        (106,157)

                               ---------------------------------------------------------------------------
Balance at December 31, 1994       858,876      1,571,970        709,782      (134,977)     3,005,651
  Net income ...............          --             --        1,790,569          --        1,790,569
  Foreign currency
    translation ............          --             --             --          21,262         21,262
 Common stock purchased
    and retired ............       (40,251)      (353,416)          --            --         (313,165)  
                               ----------------------------------------------------------------------------
Balance at December 31, 1995       818,625      1,258,805      2,500,351      (113,715)     4,464,066
  Net income ...............          --             --        1,144,832          --        1,144,832

  Foreign currency
    translation ............          --             --             --            (872)          (872)
  Common stock purchased
     and retired ...........       (18,601)      (231,278)          --            --         (249,879)
                               ----------------------------------------------------------------------------

Balance at December 31, 1996   $   800,024    $ 1,027,527    $ 3,645,183   $  (114,587)   $ 5,358,147
                               ============================================================================

See accompanying notes.

</TABLE>



                                       20
<PAGE>


             American Locker Group Incorporated and Subsidiaries

                  Statements of Consolidated Cash Flows

                                                 Year ended December 31
                                              1996         1995           1994
                                        --------------------------   ----------
                                     
Operating activities                 
Net income                              $1,144,832     $1,790,569     $ 144,239
Adjustments to reconcile net income
    to net cash provided by (used in)
    operating activities:
  Depreciation and amortization            622,392        404,006       556,027

  Gain on disposition of property,
    plant and equipment                    (20,224)       (27,346)      (31,214)
  Deferred income taxes (credits)
                                          (124,245)        46,000       (36,100)
  Retirement benefits
                                            39,106         58,042        40,688
  Postretirement benefits
                                             7,000          9,120         6,065
  Change in assets and liabilities:
    Accounts and notes receivable          461,028        384,683    (1,697,432)
    Inventories                           (564,015)      (670,019)     (346,440)
    Prepaid expenses                        46,090         43,541       (55,058)
    Accounts payable and
      accrued expenses                    (280,424)      (138,984)      659,425
    Income taxes                          (859,005)       811,101       126,568
                                                                    -----------
Net cash provided by (used in)
operating activities                       472,535      2,710,713      (633,232)

Investing activities
Purchase of property,
  plant and equipment                     (234,621)    (1,232,604)     (197,028)
Proceeds from sale of property,
  plant andequipment                        43,104         32,675        41,317
                                                                    -----------
Net cash (used in) provided
  by investing activities                 (191,517)    (1,199,929)     (155,711)

Financing activities
Net (repayment) borrowings
  under line of credit                    (275,000)       200,000       400,000
Additional borrowings                    1,000,000           --       1,850,000
Debt repayments                           (600,000)      (600,000)   (1,350,000)
Common stock purchased and                (249,879)      (353,416)     (106,157)
  retired
 Stock options exercised                      --             --          25,537
                                                                    -----------
Net cash (used in) provided by
 financing activities                     (124,879)      (753,416)      819,380
Effect of exchange rate changes
  on cash                                   (7,404)         7,434       (32,377)
                                                                    -----------
Net increase (decrease) in cash            148,735        764,802        (1,940)

Cash and cash equivalents at
   beginning of year                     1,080,487        315,685       317,625
                                                                    -----------
Cash and cash equivalents at
end of year                            $ 1,229,222    $ 1,080,487   $   315,685
                                                                    ===========


                                      21
<PAGE>




Supplemental cash flow information: 
Cash paid during the year for:
    Interest                            $  208,827   $     160,60    $  168,318
                                                                  
                                        ========================================

    Income taxes paid                   $1,650,823     $   59,684        53,968
                                        ========================================
See accompanying notes.



                                       22
<PAGE>


             American Locker Group Incorporated and Subsidiaries

                  Notes to Consolidated Financial Statements

                                December 31, 1996

1.  Summary of Significant Accounting Policies

Consolidation and Business Description

The consolidated  financial  statements  include the accounts of American Locker
Group  Incorporated  and  its  subsidiaries  (the  Company),  all of  which  are
wholly-owned.  Intercompany  accounts and  transactions  have been eliminated in
consolidation.  The  Company  is  engaged  in  one  business:  coin  and  key or
electronically  controlled  metal and plastic  checking  lockers and locks.  The
Company sells to customers throughout North America.

Cash and Cash Equivalents

Cash includes currency on hand and demand deposits with financial  institutions.
Cash  equivalents  are  short-term,   highly  liquid  investments  both  readily
convertible  to known amounts of cash and have original  purchase  maturities of
three months or less.

Inventories

Inventories  are  valued  principally  at the  lower  of  cost or  market,  cost
determined by the last-in, first-out method.

Properties and Depreciation

Property,  plant and equipment are stated at cost.  Provisions for  depreciation
have  been  computed  for   accounting   purposes  by  the   straight-line   and
declining-balance  methods  based on  estimated  useful  lives.  Provisions  for
depreciation have been computed for tax purposes under accelerated tax methods.

Net Income Per Share

Net income per common  share is computed by dividing  net income by the weighted
average number of shares  outstanding,  plus,  when  dilutive,  the common stock
equivalents  which would arise from the exercise of stock options.  Total shares
used in the calculations  amount to 808,102 in 1996, 845,356 in 1995 and 862,017
in 1994.




                                       23
<PAGE>

             American Locker Group Incorporated and Subsidiaries

                  Notes to Consolidated Financial Statements

                                December 31, 1996


             American Locker Group Incorporated and Subsidiaries

                  Notes to Consolidated Financial Statements

                                December 31, 1996


1.  Summary of Significant Accounting Policies (continued)

Foreign Currency

The assets and liabilities of the Company's foreign subsidiary are translated to
U.S.  dollars at current  exchange  rates.  Revenue  and  expense  accounts  are
translated  at  weighted  average  exchange  rates  prevailing  during the year.
Foreign currency gains and losses are included in determining net income for the
period in which the exchange rate changes.

Fair Value of Financial Instruments

The  carrying  amounts  of  cash  and  cash  equivalents,   accounts  and  notes
receivable, accounts payable, and accrued liabilities approximate fair value due
to the short-term maturities of these assets and liabilities. The interest rates
on substantially all of the Company's bank borrowings are adjusted  regularly to
reflect current market rates. Accordingly, the carrying amounts of the Company's
short-term and long-term borrowings also approximate fair value.

Use of Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts  reported in the financial  statements  and the  accompanying
notes. Actual results could differ from those estimates.

2. Inventories

                                                           December 31
                                                        1996          1995
                                                    ---------------------------
                                                    ---------------------------

Finished products                                   $   982,888   $ 1,240,253
Work-in-process                                       1,742,320     1,414,994
Raw materials                                         1,625,633     1,395,058
                                                    ---------------------------
                                                    ---------------------------
                                                      4,350,841     4,050,305
Less allowance to reduce carrying value to LIFO      (1,011,173)   (1,274,690)
basis
                                                    ===========================
Net inventories                                     $3,339,668    $2,775,615
                                                    ===========================

In 1996,  inventory  quantities  were reduced  resulting in liquidations of LIFO
inventory  quantities  carried at lower costs in prior years. The effect of this
liquidation  was to decrease  cost of 

                                       24
<PAGE>


products sold and increase net income by approximately $69,000 and $43,700 ($.05
per share).



                                       25
<PAGE>

3.  Demand Note Payable and Long-Term Debt

                                                               December 31
                                                           1996          1995
                                                     ---------------------------
                                                     ---------------------------

Note payable to bank,  unsecured,  due 
February  28, 1999,  payable  $50,000 per
month with interest at prime plus 1/4%                                     
  (8.50% at December 31, 1996)                           $1,300,000    $ 900,000
Less current portion                                        600,000      600,000
                                                     ===========================
Long-term portion                                        $  700,000    $ 300,000
                                                     ===========================

The  credit  agreement   underlying  the  note  payable  to  bank  requires  the
maintenance of certain levels of net worth and working  capital and requires the
maintenance of a certain current ratio and ratio of liabilities to net worth. In
addition, the note has restrictions on the payment of dividends. The Company was
in compliance with these covenants at year end.

Required  principal  payments  on  long-term  obligations  in each of the  years
through final maturity are as follows: 1997 - $600,000,  1998 - $600,000, 1999 -
$100,000.

At December 31, 1996, the Company had outstanding  $1,125,000 under a $3,000,000
unsecured line of credit agreement with a bank. Such borrowings are repayable on
demand with interest at the prime rate.  The weighted  average  interest rate on
outstanding  short-term borrowings amounted to 8.3%, 8.8% and 6.7% in 1996, 1995
and 1994, respectively. On January 2, 1997, the Company made an $825,000 payment
on the line of credit.

Rent expense amounted to $351,222, $410,763 and $239,904 in 1996, 1995 and 1994,
respectively.

The Company leases several operating facilities and vehicles under noncancelable
operating  leases.  Future  minimum lease  payments  consist of the following at
December 31, 1996:

1997                                                   $    277,062
1998                                                        238,985
1999                                                        240,518
2000                                                        200,902
2001                                                        168,096
                                                       ==============
                                                       $  1,125,563
                                                       ==============


                                       26
<PAGE>


4.  Income Taxes

Differences  between accounting rules and tax laws cause differences between the
bases of certain assets and liabilities for financial reporting purposes and tax
purposes.  The  tax  effects  of  these  differences,  to the  extent  they  are
temporary, are recorded as deferred tax assets and liabilities.  At December 31,
1995, a valuation  reserve  existed on the deferred  state tax benefit of future
deductions due to limitations on  carryforward  and carryback  provisions of the
various states in which the Company operates. During 1996, the valuation reserve
was reversed.  Significant  components of the Company's  deferred tax assets and
liabilities at December 31 are as follows:

                                                          1996        1995
                                                       ------------------------
Deferred tax liabilities:
  Property, plant and equipment                        $178,461    $127,952
  Prepaid expenses                                       17,209      25,761
                                                       ------------------------
Total deferred tax liabilities                          195,670     153,713

Deferred tax assets:
  Postretirement benefits                                60,252      61,052
  Pension costs                                         108,676       93,033
  Allowance for doubtful accounts                       152,190     109,168
  Accrued expenses                                        52,658      10,253
  Other employee benefits                                 39,951      39,670
  Inventory costs                                        341,599     353,284
  Other                                                   14,860      14,863
                                                       ------------------------
Total deferred tax assets                                770,186     681,323
Valuation allowance for deferred tax assets                   -      (74,900)
                                                       ========================
Net deferred tax assets                                $ 574,516   $ 452,710
                                                       ========================

Current deferred tax asset                             $ 619,096   $ 536,319
Long-term deferred tax (liability)                       (44,580)    (83,609)
                                                       ========================
                                                       $ 574,516   $ 452,710
                                                       ========================

For  financial  reporting  purposes,  income  before  income taxes  includes the
following components:

                                              1996        1995        1994
                                           ------------------------------------
                                           
United States                              $1,802,858  $2,714,028  $195,836
Foreign                                        16,326      33,450    23,003
                                          

                                       27
<PAGE>

                                           ====================================
                                           $1,819,184  $2,747,478  $218,839
                                           ====================================



                                       28
<PAGE>



4.  Income Taxes (continued)

Significant components of the provision for income taxes are as follows:

                                              1996        1995        1994
                                           ------------------------------------
Current:
  Federal                                  $670,960    $834,400    $ 79,000
  State                                      118,437    117,900      19,700
  Foreign                                      9,200     33,700      12,000
  Prior year taxes                                 -    (75,091)          -
                                                   
                                           ------------------------------------
Total current                                798,597     910,909    110,700

Deferred:
  Federal                                   (105,608)     55,900    (48,100)
  State                                      (18,637)     (9,900)    12,000
                                           ------------------------------------
                                            (124,245)     46,000     (36,100)
                                           ====================================
                                            $674,352    $956,909    $ 74,600
                                           ====================================

The differences between the federal statutory rate and the effective tax rate as
a percentage of income before taxes are as follows:

                                           1996        1995        1994
                                           ------------------------------------

Statutory income tax rate                  35%         35%         35%
State and foreign income taxes              3           1          (1)
Tax credits                                 -           -          (1)
Permanent differences principally
nontaxable income in 1996 and 
in 1995, and nondeductible                              
 expenditures in 1994                       (1)         (1)          3
Other                                        -           -          (1)
                                           ---         ---         ----
                                           37%         35%         35%
                                           ===         ===         ===



                                       29
<PAGE>

5.  Pension Plans

The Company and its  subsidiaries  have several  defined  benefit  pension plans
covering  substantially all employees.  Benefits for the salaried  employees are
based on specified  percentages of the employees annual compensation.  The plans
for  hourly  employees  provide  benefits  of  stated  amounts  for each year of
service.  Effective January 1, 1995, the plans have been merged and are combined
for reporting  purposes.  The plans' assets are invested in fixed  interest rate
group annuity contracts with an insurance company.  Due to the funding status of
the plans, the Company has not had to fund the plan since 1981.

The summary of the components of net periodic pension expense are as follows:

                                              1996        1995        1994
                                           ------------------------------------
                                           ------------------------------------

Service cost-benefits earned during the     $161,276     $193,514   $192,700
period
Interest cost on projected benefit           120,169      113,188     99,287
obligation
Return on plan assets                       (127,945)    (155,711)  (133,729)
Net amortization and deferral               (114,394)     (92,949)  (117,570)
                                           ====================================
Net pension expense                        $  39,106   $   58,042     40,688
                                           ====================================

The  average  discount  rate  used in  determining  the  actuarial  value of the
projected  benefit  obligations was 7.25% in 1996 and 7.5% in 1995. The rates of
future  years'  compensation  levels  was  5.25% in 1996  and 5.5% in 1995.  The
expected  long-term  rate of return on plan assets was 7.25% in 1996 and 7.5% in
1995.


                                       30
<PAGE>




5.  Pension Plans (continued)

The following  table sets forth the funded status and amounts  recognized in the
statements of consolidated financial position at December 1996 and 1995.

                                                          1996        1995
                                                       ------------------------

Actuarial present value of benefit obligations:
  Vested benefit obligation                            $1,544,146  $1,684,386
  Non-vested benefit obligation                            28,541      35,544
                                                       ========================
Accumulated benefit obligation                         $1,572,687  $1,719,930
                                                       ========================

Projected benefit obligation for service
      rendered to date                                 $1,764,414  $1,848,946
Plan assets at fair value                               1,876,393   2,106,280
                                                       ------------------------
Plan assets in excess of projected benefit
 obligations                                              111,979     257,334
Unrecognized net loss                                     250,095     471,847
Unrecognized prior service cost                             1,330       1,597
Unrecognized net transition asset                        (635,094)   (963,362)
                                                       ========================
Net liability recognized in the statement of
consolidated financial position                        $ (271,690) $ (232,584)
                                                       ========================




                                       31
<PAGE>

6.  Postretirement Benefit Plans Other Than Pensions

In addition to the Company's  defined benefit plans, the Company provides a life
insurance  benefit to  substantially  all employees  upon  retirement.  Retirees
eligible to participate in this plan have their life insurance  premiums paid on
their behalf by the Company.  The  insurance  premiums  related to this plan are
paid annually.  The following  table presents the plan's status  reconciled with
amounts recognized in the Company's statement of financial position:

                                                             December 31
                                                          1996        1995
                                                      ------------------------

Accumulated postretirement benefit obligation:
  Retirees                                             $ (59,941) $  (56,778)
  Fully eligible active plan participants
                                                         (49,375)    (46,770)
  Other active plan participants
                                                         (17,114)    (16,211)
                                                       ------------------------
                                                       

Accumulated postretirement benefit obligation           (126,430)   (119,759)
Unrecognized net gain                                     (6,200)     (5,871)
                                                       ========================
Accrued postretirement benefit cost                    $(132,630)  $(125,630)
                                                       ========================

Net periodic postretirement benefit cost includes the following components:

                                                       December 31
                                              1996        1995        1994
                                           ------------------------------------
Service cost                               $  1,474    $  1,882    $  1,882
Interest cost                                 6,971       8,238       8,238
Net gain                                    (1,445)           -           - 
                                           ------------------------------------
Net periodic postretirement benefit cost   $  7,000     $10,120     $10,120
                                           ====================================

The  weighted   average  discount  rate  used  in  determining  the  accumulated
postretirement  benefit  obligations  was 7.25% at  December  31, 1996 and 8% at
December 31, 1995.



                                       32
<PAGE>


7.  Capital Stock and Stock Options

The Certificate of Incorporation authorizes 4,000,000 shares of common stock and
1,000,000 shares of convertible preferred stock.

In 1988, the Company adopted the American Locker Group  Incorporated  1988 Stock
Incentive Plan, permitting the Company to provide incentive  compensation of the
types  commonly  known as  incentive  stock  options,  stock  options  and stock
appreciation  rights. The price of option shares or appreciation  rights granted
under the plan shall be not less than the fair market  value of common  stock on
the date of grant, and the term of the stock option or appreciation  right shall
not exceed ten years from date of grant.  Upon exercise of a stock  option,  the
option price shall be payable to the Company in cash,  or at the  discretion  of
the committee,  in shares of common stock valued at the fair market value on the
date of payment, or a combination thereof. Upon exercise of a stock appreciation
right granted in connection  with a stock option,  the optionee shall  surrender
the option  and  receive  payment  from the  Company  of an amount  equal to the
difference  between  the option  price and the fair  market  value of the shares
applicable to the options surrendered on the date of surrender. Such payment may
be  in  shares,   cash  or  both  at  the  discretion  of  the  Company's  Stock
Option-Executive  Compensation  Committee.  At December 31, 1996, 1995 and 1994,
there were no stock appreciation rights outstanding under this plan. The Company
follows APB Opinion  No. 25,  "Accounting  for Stock  Issued to  Employees"  and
related Interpretations in accounting for its Stock Option Plan.

Statement of Financial Accounting Standard No. 123, "Accounting for
Stock-Based Compensation" ("SFAS No. 123") requires the use of option
valuation models to determine the fair value of employee stock options. The
Company's net income and earnings per share amounts as reported would not
have been significantly different if the provisions of SFAS No. 123 were used.



                                       33
<PAGE>


7.  Capital Stock and Stock Options (continued)

A summary of the Stock Incentive Plan stock options for the years ended December
31, 1996, 1995 and 1994 is as follows:

                                      Number
                                      of Shares
                                       Under              Option Price
                                                 ------------------------------
                                      Option        Per Share      Aggregate
                                     ------------------------------------------
Outstanding - January 1, 1994          36,000     $2.875-$4.25      $112,437
  Granted during the year                   -       0.00                   -    
  Exercised during the year           (10,500)     2.875             (30,188)
  Cancellations                             -      0.00                    -
                                    ----------                    -----------
Outstanding - December 31.1994         25,500     $2.875-$4.25         82,249
  Granted during the year                   -      0.00                     -
                                                                  
  Exercised during the year                 -      0.00                     -
                                                               
  Cancellations                            -       0.00                     -
                                   -----------                    -----------
Outstanding - December 31, 1995        25,500     $2.875-$4.25         82,249
  Granted during the year                  -       0.00                    -
  Exercised during the year                -       0.00                    -
  Cancellations                            -       0.00                    -
                                    -----------                   -----------
 Outstanding - December 31, 1996        25,500    $2.875-$4.25      $ 82,249
                                   ============                  ============


8. Related Party

One of the Company's  subsidiaries  has entered into a  manufacturing  agreement
with Signore, Inc. a former wholly-owned  subsidiary of the Company, under which
Signore will furnish fabricating, assembly and shipping services. The Agreement,
which expires on April 30, 2000, provides that the cost to the Company for these
services will be equal to Signore's standard cost divided by 80%. Purchases from
Signore under the Agreement  amounted to  $3,489,499,  $3,470,582 and $2,793,880
for the years ended December 31, 1996, 1995 and 1994, respectively.

Two  Directors  of the Company are  stockholders  and  directors  of Rollform of
Jamestown  Inc.,  a  rollforming  company.  One  of the  Company's  subsidiaries
purchased  $90,084,  $98,571  and $5,833 of  fabricated  parts from  Rollform of
Jamestown, Inc. in 1996, 1995 and 1994, respectively, at prices that the Company
believes are at arms length.



                                       34
<PAGE>




9.  Business Segment Data

The Company has  operations  in the United  States and  Canada.  The  geographic
distribution of sales,  operating income and identifiable  assets for 1996, 1995
and 1994 are as follows:

                                United
                                States      Canada   Eliminations    Total
                             --------------------------------------------------
            1996
--------------------------
Revenues from unaffiliated
  customers                  $20,830,473  $ 1,687,116  $       -    $22,517,589
Transfers between
  geographic areas               665,165           -     665,165              -
                             --------------------------------------------------
Total revenues               $21,495,638  $ 1,687,116  $ 665,165    $22,517,589
                             ==================================================
Operating income             $ 1,698,760$ $  37,376            -    $ 1,736,136
                             ==================================================

Identifiable assets          $ 9,978,585  $ 931,258    $ 889,765    $10,020,078
                             ==================================================
            1995
--------------------------
Revenues from unaffiliated
  customers                  $22,112,011  $1,565,929   $ 485,377    $23,677,940
                                                     
Transfers between
  geographic areas               485,377           -     485,377              -
                             ==================================================
Total revenues               $22,597,388  $1,565,929   $ 485,377    $23,677,940
                             ==================================================
Operating income             $  2,579,420 $   29,862   $       -    $ 2,609,282
                                               
                             ==================================================

Identifiable assets          $10,060,749 $   934,20    $ 888,765    $10,106,185
                             ==================================================

             1994
-----------------------------
Revenues from unaffiliated
    customers                $13,899,533   $ 1,866,890  $      -    $15,766,423
Transfers between 
  geographic areas               617,762             -   617,762              - 
                             ==================================================
Total revenues               $14,517,295   $ 1,866,890  $617,762   $15,766,423
                             ==================================================
Operating  income            $  128,037    $    72,622   $     -      $200,659
                             ==================================================


                                       35
<PAGE>


Identifiable assets          $  8,264,864$    848,768$ 888,765    $  8,224,867
                             ==================================================




                                       36
<PAGE>


9.  Business Segment Data (continued)

In 1996,  1995 and 1994, the Company had export sales of $1,123,434,  $1,730,087
and $2,009,086,  respectively.  In 1996, 1995 and 1994, export sales represented
approximately 5.0%, 7.3% and 12.7%,  respectively of the Company's  consolidated
net sales.

Sales to the U.S. Postal Service represented 61.8%, 61.2% and 45.8% of net sales
in 1996, 1995 and 1994, respectively.

At  December  31,  1996 and 1995,  the  Company  had  secured  receivables  from
customers  under time  payment  arrangements  totaling  $306,532  and  $331,087,
respectively.  At December 31, 1996, the Company had unsecured trade receivables
from customers  considered to be  distributors  of $312,709  (including a United
Kingdom  distributor of $129,932) and from governmental  agencies of $1,610,504.
At December 31, 1995, the Company had unsecured trade receivables from customers
considered  to  be  distributors   of  $351,122   (including  a  United  Kingdom
distributor of $119,249) and from governmental agencies of $1,858,497.

Other  concentrations  of credit risk with respect to trade accounts  receivable
are  limited  due to the  large  number of  entities  comprising  the  Company's
customer base and their dispersion across many different industries.


10.  Quarterly Results of Operations (Unaudited)

The following is a tabulation of the unaudited  quarterly  results of operations
for the years ended December 31, 1996 and 1995:

                                                   1996
                             --------------------------------------------------
                                            Three Months Ended
                              March 31    June 30   September 30   December 31
                             ---------------------------------------------------

Net sales                      $4,946,120   $5,961,890  $5,955,670  $5,653,909
                             ===================================================

Gross profit                   $1,447,412   $1,922,588  $1,781,680  $1,573,953
                             ===================================================

Net income                     $  192,612   $  335,955  $  364,735  $  251,530
                             
                             ===================================================

Net income per share           $      .24   $      .41  $      .45  $      .31
                             ===================================================




                                       37
<PAGE>



10.  Quarterly Results of Operations (Unaudited) - (continued)

                                                   1995
                             --------------------------------------------------
                                            Three Months Ended
                              March 31    June 30   September 30   December 31
                             ---------------------------------------------------

Net sales                    $7,080,084   $5,273,245  $5,633,832     $5,690,779
                             ===================================================
  
Gross profit                 $2,377,764   $1,699,121  $1,910,998     $1,482,876
                             ===================================================
  
Net (loss) income            $  666,765   $  242,766  $  406,332   $    474,706
                             
                             ===================================================
Net (loss) income per share  $      .78   $      .28  $      .48   $        .58
                             ===================================================

The  Company's  accounting  practice for interim  periods  provides for possible
inventory,  insurance,  pension  and income tax  adjustments.  Such  adjustments
resulted in  increasing  the 1996 fourth  quarter  pretax income by $103,791 for
inventory  costs and  $158,682  for income  tax  expense.  A decrease  in fourth
quarter pretax income in the amount of $48,141 was due to adjustments in pension
costs and receivable  reserves.  In 1995 fourth quarter adjustments  relating to
insurance,  pensions costs and income tax expense  increased  income by $229,000
while inventory costs decreased fourth quarter pretax income by $209,000.


11.  Contingencies

The  Company has been named as a defendant  by four  former  employees  alleging
discrimination  and  seeking  unspecified  damages.  The  Company has denied all
charges and it intends to  vigorously  defend this  matter.  It is  management's
opinion that the ultimate outcome of this matter will not have a material impact
on the Company's financial position or operating results.

Although no formal legal proceedings have been directed towards the Company,  it
has  been  alleged  that  the  Company  and/or  one  of  its  previously   owned
subsidiaries is a potentially  responsible  party at two sites suspected to have
some  form  of  environmental  contamination.  The  Company  believes  that  its
contributions to these sites, if any, is diminimus,  however, it is too early to
predict the ultimate outcome of these matters.



                                       38
<PAGE>


ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

      There  have  been no  changes  in or  disagreements  with  accountants  on
accounting and financial disclosures during 1996 or 1995.


                                    PART III

Item 9, 10, 11, and 12 will be contained in American Locker Group Incorporated's
Annual proxy Statement,  incorporated  herein by reference,  which will be filed
within 120 days after year end.

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-KSB

            (a)   Exhibits - Exhibits required by Item 601 of Regulation S-B are
                  submitted as a separate section herein  immediately  following
                  the "Exhibit Index".

            (b)   Reports on Form 8-KSB filed in the fourth quarter of 1995 -
      None.




                                       39
<PAGE>


In accordance  with Section 13 or 15(d) of the Exchange Act, the  registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.


                       AMERICAN LOCKER GROUP INCORPORATED

                            /s/ Harold J. Ruttenberg
                              Harold J. Ruttenberg
                            Chairman, Chief Executive
                             Officer, Treasurer and
                          Principal Accounting Officer

                                 March 27, 1997

In  accordance  with the Exchange  Act, this report has been signed below by the
following  persons on behalf of the  registrant and in the capacities and on the
dates indicated.

Signature                                       Title             Date

/s/ Harold J. Ruttenberg                  Chairman, Chief      March 27, 1997
------------------------
Harold J. Ruttenberg                      Executive Officer,
                                          Treasurer, Principal
                                          Accounting Officer
                                          and Director

/s/ Roy J. Glosser                        President, Chief     March 27, 1997
------------------
Roy J. Glosser                            Operating Officer
                                          and Director

/s/ Thomas Phillips Johnson               Director             March 27, 1997
---------------------------
Thomas Phillips Johnson

/s/ Alan H. Finegold                      Director             March 27, 1997
--------------------
Alan H. Finegold

/s/ Thomas Lynch, IV                      Director             March 27, 1997
--------------------
Thomas Lynch, IV

/s/ James E. Ruttenberg                   Director             March 27, 1997
-----------------------
James E. Ruttenberg

/s/ Edward F. Ruttenberg                  Director             March 27, 1997
------------------------
Edward F. Ruttenberg




                                       40
<PAGE>



                            EXHIBIT INDEX
                                                     Prior Filing or
                                                     Sequential Page
Exhibit No.                                          No. Herein
-----------                                          ---------------------
  3.1             Certificate of Incorporation of    Exhibits to Form 10-K
                  American Locker Group Incorporated for Year ended
                                                     December 31, 1980
  3.2             Amendment to Certificate of        Form 10-C filed May 6,
                  Incorporation changing name of     1985
                  company
  3.3             Amendment to Certificate of        Exhibit to Form 10-K for
                  Incorporation limiting liability   year ended December 31,
                  of Directors and Officers          1987
  3.4             By-laws of American Locker Group   Exhibit to Form 10-K for
                  Incorporated as amended and        year ended December 31,
                  restated                           1985
  3.5             Amendment to By-laws of American   Exhibit to Form 10-K for
                  Locker Group Incorporated dated    year ended December 31,
                  January 15, 1992                   1991
 10.1             American Locker Group              Exhibit to Form 10-K for
                  Incorporated 1988 Stock Incentive  year ended December 31,
                  Plan                               1988
 10.2             First Amendment dated March 28,    Exhibit to Form 10-K for
                  1990 to American Locker Group      year ended December 31,
                  Incorporated  1988 Stock           1989
                  Incentive Plan
 10.3             Form of Indemnification Agreement  Exhibit to Form 10-K for
                  between American Locker Group      year ended December 31,
                  Incorporated  and its directors    1987
                  and officers
 10.4             Corporate Term Loan Agreement      Exhibit to Form 10-K for
                  between American Locker Group      year ended December 31,
                  Incorporated and Manufacturers     1991
                  and Traders Trust Company
                  covering $2,400,000 loan
 10.5             Approved Line of Credit from       Exhibit to Form 10-K for
                  Manufacturers and Traders Trust    year ended December 31,
                  Company to American Locker Group   1990
                  Incorporated in the amount of
                  $1,000,000
 10.6             Amendment Agreement dated May 1,   Exhibit to Form 10-KSB
                  1994 between Manufacturing and     for year ended
                  Traders Trust Company and          December 31, 1994
                  American Locker Group
                  Incorporated [Increase in Term
                  Loan to $1,850,000]
 10.7             Amendment Agreement dated          Exhibit to Form 10-KSB
                  March 12, 1996 between             for year ended
                  Manufacturing and Traders Trust    December 31, 1995
                  Company and American Locker Group
                  Incorporated [Increase in Term
                  Loan to $1,800,000]
 10.8             Employment Agreement between       Exhibit to Form 10-GSB
                  American Locker Group              for quarter ended June
                  Incorporated and  Roy J. Glosser   30, 1996
 10.9             Manufacturing Agreement dated as   Exhibit to Form 8-K
                  of December 29, 1989 between       dated January 11, 1990
                  American Locker Security Systems
                  Inc. and Signore, Inc.
 10.10            First Amendment dated May 3, 1995  Exhibit to Form 10-KSB
                  to Manufacturing Agreement dated   for year ended December
                  as of December 29, 1989 between    31, 1995
                  American Locker Security Systems
                  Inc. and Signore Inc.
 10.11            Second Amendment dated March 15,   Exhibit to Form 10-KSB
                  1996 to Manufacturing Agreement    for the year ended
                  dated as of December 29, 1989      December 31, 1995
                  between American Locker Security
                  Systems Inc. and Signore Inc.
 10.12            Third Amendment dated May 21,      Exhibit to Form 10-QSB
                  1996 to Manufacturing Agreement    for the quarter ended
                  dated as of December 29, 1989      June 30, 1996
                  between American Locker Security
                  Systems Inc. and Signore Inc.
 10.13            Agreement dated as of May 21,      Exhibit to Form 10-QSB
                  1996 between American Locker       for the quarter ended
                  Group Incorporated and Edward F.   June 30, 1996
                  Ruttenberg
 10.14            Contract dated March 27, 1996      Exhibit to Form 10-QSB
                  between the U.S. Postal Service    for the quarter ended
                  and American Locker Security       March 31, 1996
                  Systems, Inc.
 22.1             List of Subsidiaries               Page ________
 27.1             Financial Data Schedule            Page ________


                                     
<PAGE>


                        Exhibit 22.1 List of Subsidiaries

The following  companies are subsidiaries of the Company and are included in the
consolidated financial statements of the Company:

                                                             Percentage of
NAME                                Jurisdiction of          Voting Securities
                                    Organization             Owned

American Locker Security Systems,   Delaware                 100%
Inc.
American Locker Company, Inc.       Delaware                 100%
American Locker Company of Canada,  Dominion of Canada       100% (1)
0Ltd.
Canadian Locker Company, Ltd.       Dominion of Canada       100% (2)
American Locker Security Systems    Virgin Islands           100% (1)
International

(1)   Owned by American Locker Security Systems, Inc.
(2)   Owned by American Locker Company of Canada, Ltd.